Overview

Puget Energy is an energy services holding company and substantially all of its operations are conducted through its wholly-owned subsidiary PSE, a regulated electric and natural gas utility company. PSE is the largest electric and natural gas utility in the state of Washington, primarily engaged in the business of electric transmission, distribution and generation and natural gas distribution. Puget Energy's business strategy is to generate stable cash flows by offering reliable electric and natural gas service in a cost-effective manner through PSE. Puget Energy also has a wholly-owned non-regulated subsidiary, Puget LNG, LLC (Puget LNG), which has the sole purpose of owning, developing and financing the non-regulated activity of the Tacoma liquefied natural gas (LNG) facility. All of Puget Energy's common stock is indirectly owned by Puget Holdings, LLC (Puget Holdings). Puget Holdings is owned by a consortium of long-term infrastructure investors including the British Columbia Investment Management Corporation (BCIMC), the Alberta Investment Management Corporation (AIMCo), Ontario Municipal Employee Retirement System (OMERS), PGGM Vermogensbeheer B.V., Macquarie Washington Clean Energy Investment, L.P., and Ontario Teachers’ Pension Plan Board. Puget Energy and PSE are collectively referred to herein as “the Company.”

PSE generates revenue and cash flow primarily from the sale of electric and natural gas services to residential and commercial customers within a service territory covering approximately 6,000 square miles, principally in the Puget Sound region of the state of Washington. PSE continually balances its load requirements, generation resources, purchase power agreements, and market purchases to meet customer demand. The Company's external financing requirements principally reflect the cash needs of its construction program, its schedule of maturing debt and certain operational needs. PSE requires access to bank and capital markets to meet its financing needs.

Factors and Trends Affecting PSE's Performance

PSE’s ongoing regulatory requirements and operational needs necessitated the investment of substantial capital in 2023 and will continue to do so in future years. Because PSE intends to seek recovery of such investments through the regulatory process, its financial results depend heavily upon favorable outcomes from that process. The principal business, economic and other factors that affect PSE’s operations and financial performance include:

•The rates PSE is allowed to charge for its services;

•PSE’s ability to recover power costs that are included in rates which are based on volume;

•Weather conditions, including the impact of temperature on customer load; the impact of extreme weather events on budgeted maintenance costs; meteorological conditions such as snow-pack, stream-flow and wind-speed which affect power generation, supply and price;

•The effects of climate change, including changes in the environment that may affect energy costs or consumption, increase the Company’s costs, or adversely affect its operations;

•Regulatory decisions allowing PSE to recover purchased power and fuel costs, on a timely basis;

•PSE’s ability to supply electricity and natural gas, either through company-owned generation, purchase power contracts or by procuring natural gas or electricity in wholesale markets;

•Deferral of excess revenues if earnings exceed PSE's authorized rate of return (ROR) by more than 0.5%;

•Availability and access to capital and the cost of capital;

•Regulatory compliance costs, including those related to new and developing federal regulations of electric system reliability, state regulations of natural gas pipelines and federal, state and local environmental laws and regulations, such as the Climate Commitment Act (CCA);

•Wholesale commodity prices of electricity and natural gas;

•Increasing capital expenditures with additional depreciation and amortization;

•Failure to complete capital projects on schedule and within budget or the abandonment of capital projects, either of which could result in the Company’s inability to recover project costs;

•Tax reform, the effect of lower tax rates, and regulatory treatment of excess deferred tax balances on rate base and customer rates;

•General economic conditions, such as inflation, in PSE's service territory and its effects on customer growth and use-per-customer;

•Federal, state, and local taxes;

•Employee workforce factors, including potential strikes, work stoppages, transitions in senior management, and loss or retirement of key personnel and availability of qualified personnel;

•The effectiveness of PSE’s risk management policies and procedures;

•Cyber security attacks, data security breaches, or other malicious acts that cause damage to the Company’s generation and transmission facilities or information technology systems, or result in the release of confidential customer, employee, or Company information;

•Acts of war or terrorism locally or abroad, or the impact of civil unrest to infrastructure or preventing access to infrastructure and its impact on the supply chain and prices of goods and services;

•Natural disasters such as wildfires, earthquakes, hurricanes, floods, landslides, and windstorms, and the rise in frequency and magnitude of these extreme temperature events, and possible accidents, explosions, fires or mechanical breakdowns affecting or caused by PSE’s facilities or infrastructure may increase the Company's costs, impact our generation, transmission, and distribution systems, subject the Company to increased liability, and/or adversely affect its operations;

•Risks due to pandemics, including supply shortages, rising costs, disruption to vendor or customer relationships, the potential for reputational harm, the impact of government, business and company closure of facilities, customer or contract defaults; concerns of safety to employees and customers, potential costs due to quarantining of employees and work-from-home policies, and the Company's and vendor staffing levels resulting from vaccination ~~mandates.~~mandates; and

•Legislative, regulatory, code, and/or ordinance changes that impact natural gas availability, delivery systems, and/or restrictions.

Regulation of PSE Rates and Recovery of PSE Costs

PSE's regulatory requirements and operational needs require the investment of substantial capital in 2023 and future years. As PSE intends to seek recovery of these investments through the regulatory process, its financial results depend heavily upon outcomes from that process. The rates that PSE is allowed to charge for its services influence its financial condition, results of operations and liquidity. PSE is highly regulated and the rates that it charges its retail customers are approved by the Washington Utilities and Transportation Commission (Washington Commission). The Washington Commission has traditionally required these rates be determined based, to a large extent, on historic test year costs plus weather normalized assumptions about hydroelectric conditions and power costs in the relevant rate year. Incremental customer growth and sales typically have not provided sufficient revenue to cover general cost increases over time due to the combined effects of

regulatory lag and attrition. Absent a resolution for the impact of lag and attrition, the Company will need to seek rate relief through a rate case with the Washington Commission. The Washington Commission determines whether the Company's expenses and capital investments are reasonable and prudent for the provision of cost-effective, reliable and safe electric and natural gas service. If the Washington Commission determines that a capital investment is not reasonable or prudent, the costs (including return on any resulting rate base) related to such capital investment may be disallowed, partially or entirely, and not recovered in rates.

Washington state law also requires PSE to pursue electric conservation that is cost-effective, reliable and feasible. PSE’s mandate to pursue electric conservation initiatives may have a negative impact on the electric business financial performance due to lost margins from lower sales volumes as variable power costs are not part of the decoupling mechanism. The Washington Commission and Washington state law also set natural gas conservation achievement standards for PSE. The effects of achieving these standards will, however, have only a slight negative impact on natural gas business financial performance due to the natural gas business being almost fully decoupled.

In May 2021, the Washington Governor signed legislation passed by the state legislature that would require investor-owned utilities to file a multiyear rate plan for two, three, or four years as part of a general rate case (GRC) filed with the Washington Commission on or after January 1, 2022. For the initial rate year, the legislation requires the Washington Commission to ascertain and determine the fair value for rate-making purposes of the property in service as of the date that rates go into effect. Utilities would be bound to the first and second year of a multiyear rate plan and can file for a new rate plan in years three or four. If a company earns greater than a half percent above its authorized rate of return on a regulated basis, revenues above the level must be deferred for ~~funds~~refunds to customers or another determination by the Washington Commission in a subsequent adjudicative proceeding. The Washington Commission must also set performance measurements to assess a natural gas or electric company operating under a multiyear rate plan.

General Rate Case Filing

PSE filed a GRC which included a three-year multiyear rate plan, with the Washington Commission on January 31, 2022, requesting an overall increase in electric and natural gas rates of 13.6% and 13.0% respectively in 2023; 2.5% and 2.3%, respectively in 2024; and 1.2% and 1.8%, respectively, in 2025. PSE requested a return on equity of 9.9% in all three rate years. PSE requested an overall rate of return of 7.39% in 2023, 7.44% in 2024, and 7.49% in 2025. The filing requested recovery of forecasted plant additions through 2022 as required by RCW 80.28.425 as well as forecasted plant additions through 2025, the final year of the multiyear rate plan.

In August 2022, three separate partial multiparty settlement agreements were reached. On August 5, 2022, parties filed an

unopposed partial multiparty settlement agreement relating to the Voluntary Long Term Renewable Energy Purchase rider, known as Green Direct, resolving the method for calculating the energy credit Green Direct customers receive, among other matters. On August 26, 2022, six of the sixteen parties, including PSE, filed a partial multiparty settlement agreement with the Washington Commission determining that the regulated portion of the Tacoma LNG Facility will be included in rates, as a tracker, beginning in November 2023. Also, on August 26, 2022, twelve of the sixteen parties, including PSE, filed a partial multiparty settlement agreement with the Washington Commission for the remaining items in the GRC. The GRC settlement agreement set a two-year rate plan instead of a three-year plan as originally filed, provided a capital structure of 49.0% equity and 51.0% debt, and a return on equity of 9.4% with an overall rate of return of 7.16%.

On December 22, 2022, the Washington Commission issued an order on PSE’s 2022 GRC, which approved with conditions, three settlement agreements which cover a two-year period beginning January 1, 2023. The ruling provided for a weighted cost of capital of 7.16%, or 6.62% after-tax, and a capital structure of 49.0% in common equity in 2023 and 2024, with a return on equity of 9.4%. The order also provided for an update to power costs in 2023 and 2024 and authorizes PSE to seek recovery of the costs related to the Tacoma LNG Facility concurrent with its 2023 purchased gas adjustment (PGA) filing. The LNG rate adjustment was filed with the Washington Commission on May 25, 2023 and is pending approval. PSE was also allowed to file two additional trackers that will request to recover all rate base, depreciation, and operations and maintenance (O&M) expenses related to investments under the Company’s Clean Energy Implementation Plan (CEIP) and Transportation Electrification Plan. The Transportation Electrification Plan tariff was ~~filed and had~~approved with an effective date of March 1, 2023. On June 6, 2023, the Washington Commission approved PSE’s CEIP, subject to conditions. The CEIP tariff was filed with the Washington Commission on July 17, 2023 and is pending approval.

On December 27, 2022, PSE submitted compliance filings, including an update to power costs, and revised tariff sheets to comply with the order. On January 6, 2023, the Washington Commission rejected the compliance filing, in part, and required a revised compliance filing specific to electric rates to remove an additional $135.8 million related to PSE’s recovery of projected costs related to the modeling of the CCA impacts on PSE’s use of natural gas and coal-fired resources that had been included as part of PSE's update to power costs in the compliance filing.

Natural gas rates became effective on January 7, 2023, resulting in an overall net revenue change of $70.8 million in 2023 and $19.5 million in 2024, representing increases of 6.4% and 1.65%, respectively. On January 10, 2023, the Washington Commission accepted the revised compliance filing with electric rates going into effect on January 11, 2023. The revisions reflected an overall net revenue change of $247.0 million in 2023 and $33.1 million in 2024, which represents an increase of 10.75% and 1.33%, respectively. Per the 2022 GRC Final Order in Docket No. UE-220066, PCORC rates were set to zero as of January 11, 2023 and PSE agreed not to file a PCORC during 2023 and 2024, the two-year rate plan agreed to in the GRC settlement.

Prior rates were subject to the 2019 GRC and included a weighted cost of capital of 7.39% or 6.8% after-tax, a capital structure of 48.5% in common equity, and a return on equity of 9.4%. The annualized overall rate impacts were an electric revenue increase of $48.3 million, or 2.3%, and a natural gas increase of $4.9 million, or 0.6%, effective October 1, 2021. For further information, see Note 4, "Regulation and Rates" in the Combined Notes to Consolidated Financial Statements included in Item 8 of the Company's Form 10-K for the period ended December 31, 2022.

Climate Commitment Act Deferral

On December 29, 2022, PSE filed accounting petitions with the Washington Commission requesting authorization to defer costs and revenues associated with the Company’s compliance with the ~~Climate Commitment Act (CCA)~~CCA codified in law within Revised Code of Washington (RCW) 70A.65. On February 28, 2023, in Order 01 under Docket No. UE-220974 and UG-220975, the Washington Commission granted PSE approval to defer the cost of ~~carbon~~emission allowances to comply with the CCA and the proceeds from no-cost allowances consigned to auction beginning January 1, 2023. This accounting treatment is necessary in order for PSE to defer and seek recovery of CCA costs that are not currently included in rates. As of ~~March 31,~~June 30, 2023, PSE deferred ~~$83.3~~$129.0 million and ~~$11.3~~$69.9 million of CCA compliance costs for natural gas and electric liabilities, respectively. For further details, see Note 7, "Regulation and Rates," in the Combined Notes to Consolidated Financial Statements included in Item 1 of this report.

Revenue Decoupling Adjustment Mechanism

While fluctuations in weather conditions will continue to affect PSE's billed revenue and energy supply expenses from month to month, PSE's decoupling mechanisms assist in mitigating the impact of weather on operating revenue and net income. The Washington Commission has allowed PSE to record a monthly adjustment to its electric and natural gas operating revenues related to electric transmission and distribution, natural gas operations and general administrative costs and fixed production costs from most residential, commercial and industrial customers to mitigate the effects of abnormal weather, conservation impacts and changes in usage patterns per customer. As a result, these electric and natural gas revenues are recovered on a per customer basis regardless of actual consumption levels. PSE's energy supply costs, which are part of the power cost adjustment

(PCA) and PGA mechanisms, are not included in the decoupling mechanism. The revenue recorded under the decoupling mechanisms will be affected by customer growth and not actual consumption except for fixed production costs, which are held at the level of cost from the most recent rate proceeding and are not impacted by customer growth. Following each calendar year, PSE will recover from, or refund to, customers the difference between allowed decoupling revenue and the corresponding actual revenue during the following May to April time period.

On January 6, 2023, the Washington Commission approved the natural gas 2022 GRC filing. As part of this filing, the annual gas delivery allowed revenue was updated to reflect changes in the approved revenue requirement. Additionally, the Commission approved the removal of the earnings test from the decoupling mechanism in accordance with RCW 80.28.425(6). The changes took effect on January 7, 2023.

On January 10, 2023, the Washington Commission approved the electric 2022 GRC filing. As part of this filing, the annual electric delivery and fixed power cost allowed revenue was updated to reflect changes in the approved revenue requirement. Additionally, the Commission approved the removal of the earnings test from the decoupling mechanism in accordance with RCW 80.28.425(6). The changes took effect on January 11, 2023.

On ~~March 31,~~June 30, 2023, PSE performed an analysis to determine if electric and natural gas decoupling revenue deferrals would be collected from customers within 24 months of the annual period, per ASC 980. If not, for ~~U.S. Generally Accepted Accounting Principles (GAAP)~~GAAP purposes only, PSE would need to record a reserve against the decoupling revenue and corresponding regulatory asset balance. Once the reserve is probable of collection within 24 months from the end of the annual period, the reserve can be recognized as decoupling revenue. ~~The analysis indicated that electric and natural gas deferred revenue will be collected within 24 months of~~Based on the ~~annual period; therefore,~~analyses, no reserve adjustment was ~~booked to~~recorded as of June 30, 2023 ~~electric or natural gas decoupling revenue. At March 31, 2022, the analysis indicated that electric~~ and natural gas deferred revenue was estimated to be collected within 24 months of the annual period in 2022; therefore, no reserve adjustment was booked to 2022 electric or natural gas decoupling revenue.

2022.

The Washington Commission approved the following PSE requests to change rates for prior deferrals under its electric and natural gas decoupling mechanisms:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)1
Electric:
May 1, 2023	(1.5)%	$(37.6)
May 1, 20222	(1.0)	(23.5)
May 1, 20213	1.0	21.4
January 1, 2021	(1.0)	(20.6)
October 15, 20204	(0.5)	(10.2)
Natural Gas:
May 1, 2023	(1.3)%	$(16.4)
May 1, 2022	(0.7)	(7.4)
May 1, 2021	1.5	15.0

__________________

1 For electric and natural gas rates effective May 1, 2023, May 1, 2022 and May 1, 2021, there were no excess earnings that impacted the approved revenue change.

2 For the electric rates effective May 1, 2022, there was $8.0 million of excess deferred revenues for delivery and fixed power costs which could not be set in rates until May 1, 2023 due to the 3% rate cap.

3 For the electric rates effective May 1, 2021, there was $24.1 million of excess deferred revenues for delivery and fixed power costs which could not be set in rates until May 1, 2022 due to the 3% rate cap.

4 The 2019 GRC final order lengthened the recovery period from the original one-year recovery to a two-year recovery of April 2022. The remaining decoupling amortization balances for delivery and fixed power costs of $1.7 million were included in electric decoupling mechanism tariff rates, effective May 1, 2022.

Electric Rates

The following electric rate schedules were filed with the Washington Commission or approved by the Washington Commission after the Form 10-K for the period ended December 31, 2022 was filed on February 23, 2023 along with the comparison period, if applicable. ~~Additionally, the following electric rate schedules include details for three months ended March 31, 2023 as compared to 2022.~~ For further information on prior filings, see Management's Discussion and Analysis, ~~"Regulation~~

"Regulation of PSE Rates and Recovery of PSE Costs" included in Item 7 of the Company's Form 10-K for the period ended December 31, 2022.

Conservation Service Rider

The electric conservation rider collects revenue to cover the costs incurred in providing services and programs for conservation. Rates change annually on May 1 to collect the annual budget that started the prior January and to true-up for actual compared to forecast conservation expenditures from the prior year, as well as actual compared to the forecasted load set in rates.

The following table sets forth conservation rider rate adjustments approved by the Washington Commission and the corresponding expected annual impact on PSE’s revenue based on the effective dates:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
May 1, 2023	(0.2)%	$(6.3)
May 1, 2022	1.0	21.6

Power Cost Adjustment Clause

PSE updated its Schedule 95 rates in the Power Cost Adjustment Clause tariff to reflect the transition fee as required by Section 12 of the Special Contract, a non-prescribed commercial/industrial rate contract. Additionally, Schedule 95 rates also

include portions of fixed power cost adjustments per the allowed decoupling rate re-allocation resulting from a Special Contract customer becoming a transportation customer as well as small variable power cost adjustments.

PSE exceeded the $20.0 million cumulative deferral balance in its PCA mechanism in 2022. During 2022, actual power costs were higher than baseline power costs, thereby, creating an under-recovery of $110.1 million.Under the terms of the PCA’s sharing mechanism for under-recovered power costs, PSE absorbed ~~$35.5~~$39.0 million of the under-recovered amount, and customers were responsible for the remaining ~~$74.6~~$71.1 million, or ~~$76.1~~$76.4 million including ~~interest.~~interest and adjusted for revenue sensitive items. On April 28, 2023, PSE filed the 2022 PCA report under Docket No. UE-230313 that proposed a recovery of the deferred balance, which included a revenue requirement increase of 0.9% in overall bill for all customers, with ~~the Washington Commission and~~rates proposed to ~~recover the 2022 deferred balance~~go into effect from December 1, 2023 through December 31, 2024.

PSE also exceeded the $20.0 million cumulative deferral balance in its PCA mechanism in ~~2021. During~~ 2021, as actual power costs were higher than baseline power costs, thereby, creating an under-recovery of $68.0 million. ~~Under the terms of the PCA’s sharing mechanism for under-recovered power costs,~~ PSE absorbed $31.3 million of the under-recovered amount, and customers were responsible for the remaining $36.7 million, or $38.4 million including interest. OnIn October ~~27,~~ 2022, the Washington Commission approved PSE's 2021 PCA report that proposes to recover the deferred balance for 2021 PCA period by keeping the current rates and allowing recovery from January 1, 2023 through November 30, 2023.

The following table sets forth power cost adjustment clause filing approved by the Washington Commission and the corresponding expected annual impact on PSE’s revenue based on the effective dates:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
December 1, 20201	2.1%	$43.9

______________

1 The Schedule 95 PCA mechanism rates from the prior year that recover the 2019 imbalance (effective December 1, 2020) have been extending through December 31, 2022 to recover the imbalance attributable to 2020. PSE filed the PCA imbalance rate extension with the Washington Commission to recover PCA imbalance attributable to 2021 from January 1, 2023 to November 30, 2023.

Power Cost Adjustment Mechanism

PSE currently has a PCA mechanism that provides for the deferral of power costs that vary from the “power cost baseline” level of power costs. The “power cost baseline” levels are set, in part, based on normalized assumptions about weather and hydroelectric conditions. Excess power costs or savings are apportioned between PSE and its customers pursuant to the graduated scale set forth in the PCA mechanism and will trigger a surcharge or refund when the cumulative deferral trigger is reached.

Effective January 1, 2017, the following graduated scale is used in the PCA mechanism:


	Company's Share		Customers’ Share
Annual Power Cost Variability	Over	Under	Over	Under
Over or under collected by up to $17 million	100%	100%	—%	—%
Over or under collected by between $17 million - $40 million	35	50	65	50
Over or under collected beyond $40 + million	10	10	90	90

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, in its PCA mechanism, PSE over recovered its allowable costs by ~~$12.9~~$12.1 million of which zero was apportioned to customers and ~~$1.1~~$2.4 million of interest was accrued on the deferred customer balance. This compares to an under recovery of allowable costs of ~~$10.6~~$26.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, of which ~~zero~~$4.8 million was apportioned to customers and ~~$0.3~~$0.6 million of interest was accrued on the total deferred customer balance.

Property Tax Tracker

The purpose of the property tax tracker is to pass through the cost of all property taxes incurred by the Company. The mechanism acts as a tracker rate schedule and collects the total amount of property taxes assessed. The tracker is adjusted each year in May based on that year's assessed property taxes and true-up from the prior year.

The following table sets forth property tax tracker mechanism rate adjustments approved by the Washington Commission and the corresponding expected annual impact on PSE’s revenue based on the effective dates:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
May 1, 2023	(0.2)%	$(4.4)
May 1, 2022	(0.3)	(5.8)

Natural Gas Rates

The following natural gas rate schedules were filed with the Washington Commission or approved by the Washington Commission after the Form 10-K for the period ended December 31, 2022 was filed on February 23, 2023 along with the comparison period, if applicable. ~~Additionally, the following natural gas rate schedules include details for the three months ended March 31, 2023 as compared to 2022.~~ For further information on prior filings, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in Item 7 of the Company's Form 10-K for the period ended December 31, 2022.

Conservation Service Rider

The natural gas conservation rider collects revenue to cover the costs incurred in providing services and programs for conservation. Rates change annually on May 1 to collect the annual budget that started the prior January and to true-up for actual compared to forecast conservation expenditures from the prior year, as well as actual compared to the forecasted load set in rates.

The following table sets forth conservation rider rate adjustments approved by the Washington Commission and the corresponding expected annual impact on PSE's revenue based on the effective dates:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)



May 1, 2023	0.4%	$4.7
May 1, 2022	0.3	3.2

Climate Commitment Act - Greenhouse Gas Emissions Cap and Invest Adjustment

This schedule is to implement a surcharge to recover the costs and to provide benefits through credits to certain customers from the Company’s implementation of Washington State greenhouse gas (GHG) emission cap and invest program as prescribed by the CCA and codified in law within RCW 70A.65.

On June 9, 2023, PSE filed with the Washington Commission under Docket No. UG-230470 a proposal to recover the estimated ongoing allowance costs during the period of August through December 2023. Concurrently, PSE is proposing to pass back credits to customers from estimated auction proceeds to be received in 2023, proportionally over the same period. Overall, the proposal included a new revenue requirement of $104.7 million related to the Washington state carbon reduction charge, mitigated by a new revenue requirement decrease of $87.9 million related to the Washington state carbon reduction credit, with an effective date of August 1, 2023.

The following table sets forth the GHG emissions cap and invest adjustment approved by the Washington Commission and the corresponding expected annual impact on PSE's revenue based on the effective dates:

Effective Date

Average
Percentage
Increase (Decrease)
in Rates

Increase (Decrease)
in Revenue
(Dollars in Millions)

October 1, 2023

3.2%

$16.8

Property Tax Tracker

The purpose of the property tax tracker mechanism is to pass through the cost of all property taxes incurred by the Company. The mechanism removed property taxes from general rates and included those costs for recovery in an adjusting tariff rate. After the implementation, the mechanism acts as a tracker rate schedule and collects the total amount of property taxes assessed. The tracker is adjusted each year in May based on that year's assessed property taxes and true-up from the prior year.

The following table sets forth property tax tracker mechanism rate adjustments approved by the Washington Commission and the corresponding impact on PSE's revenue based on the effective dates:


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
May 1, 2023	(0.02)%	$(0.2)
May 1, 2022	0.02	0.2

Purchased Gas Adjustment

PSE has a PGA mechanism that allows PSE to recover expected natural gas supply and transportation costs and defer, as a receivable or liability, any natural gas supply and transportation costs that exceed or fall short of this expected natural gas cost amount in PGA mechanism rates, including accrued interest. PSE is authorized by the Washington Commission to accrue carrying costs on PGA receivable and payable balances. A receivable or payable balance in the PGA mechanism reflects an under recovery or over recovery, respectively, of natural gas cost through the PGA mechanism. Rates typically change annually on November 1, although out-of-cycle rate changes are allowed at other times of the year if needed.

OnIn October ~~28,~~ 2021, the Washington Commission approved PSE's request for November 2021 PGA rates in Docket No. UG-210721, effective November 1, 2021. As part of that filing, PSE requested an annual revenue increase of $59.1 million; where PGA rates, under Schedule 101, increase annual revenue by $80.6 million, and the tracker rates under Schedule 106, decrease annual revenue by $21.5 million. The annual 2021 PGA rate increases were in addition to continuing the collection on the remaining balance of $69.4 million under Supplemental Schedule 106B, which were set, in effect, through September 30, 2023 per the 2019 GRC.

OnIn October ~~27,~~ 2022, the Washington Commission approved PSE's request for PGA rates in Docket No. UG-220715, effective November 1, 2022. As part of that filing, PSE requested an annual revenue increase of $155.3 million; where PGA rates, under Schedule 101, increase annual revenue by $142.1 million, and the tracker rates under Schedule 106, increase annual revenue by $13.2 million.

OnIn November ~~15,~~ 2022, the Federal Energy Regulatory Commission (FERC) approved a settlement of a counterparty, FERC Docket No. RP17-346. Under the terms, PSE was allocated $24.2 million related to PSE natural gas services, which was

recorded on December 31, 2022 and included in the table below. The 2022 GRC order requires PSE to amortize the refund in 2023 as a credit against natural gas costs and therefore pass back the refund to customers through the PGA mechanism.

The following table presents the PGA mechanism balances and activity at ~~March 31,~~June 30, 2023 and December 31, 2022:


(Dollars in Thousands)	(Dollars in Thousands)	March 31,		December 31,		(Dollars in Thousands)	June 30,		December 31,
PGA receivable balance and activity	PGA receivable balance and activity	2023		2022		PGA receivable balance and activity	2023		2022
PGA receivable beginning balance	PGA receivable beginning balance	$	(3,536)	$	57,935	PGA receivable beginning balance	$	(3,536)	$	57,935
Actual natural gas costs	Actual natural gas costs	138,178		457,950		Actual natural gas costs	218,066		457,950
Allowed PGA recovery	Allowed PGA recovery	(234,372)		(496,879)		Allowed PGA recovery	(347,969)		(496,879)
Interest	Interest	(348)		1,674		Interest	(2,220)		1,674
Refund/interest from counterparty settlement	Refund/interest from counterparty settlement	(2,836)		(24,216)		Refund/interest from counterparty settlement	(3,337)		(24,216)
PGA (liability)/ receivable ending balance	PGA (liability)/ receivable ending balance	$	(102,914)	$	(3,536)	PGA (liability)/ receivable ending balance	$	(138,996)	$	(3,536)

For additional information, see Note 7, "Regulation and Rates" in the Combined Notes to Consolidated Financial Statements included in Item 1 of this report.

Access to Debt Capital

PSE relies on access to bank borrowings and short-term money markets as sources of liquidity and longer-term capital markets to fund its utility construction program, to meet maturing debt obligations and other capital expenditure requirements not satisfied by cash flow from its operations or equity investment from its parent, Puget Energy. Neither Puget Energy nor PSE have any debt outstanding whose maturity would accelerate upon a credit rating downgrade. However, a ratings downgrade could adversely affect the Company's ability to refinance existing or issue new long-term debt, obtain access to new or renew existing credit facilities and increase the cost of issuing long-term debt and maintaining credit facilities. For example, under Puget Energy's and PSE's credit facilities, the borrowing costs increase as their respective credit ratings decline due to increases in credit spreads and commitment fees. If PSE is unable to access debt capital on reasonable terms, its ability to pursue improvements or generating capacity acquisitions, which may be relied on for future growth and to otherwise implement its strategy, could be adversely affected. PSE monitors the credit environment and expects to continue to be able to access the capital markets to meet its short-term and long-term borrowing needs.

Regulatory Compliance Costs and Expenditures

PSE's operations are subject to extensive federal, state and local laws and regulations. These regulations cover electric system reliability, natural gas pipeline system safety and energy market transparency, among other areas. Environmental laws and regulations related to air and water quality, including climate change and endangered species protection, waste handling

and disposal (including generation by-products such as coal ash), remediation of contamination and siting new facilities also impact the Company's operations. PSE must spend significant resources to fulfill requirements set by regulatory agencies, many of which have greatly expanded mandates on measures including resource planning, remediation, monitoring, pollution control equipment and emissions-related abatement and fees.

In 2021, the Washington Legislature adopted the CCA, which establishes a ~~greenhouse gases (GHG)~~GHG emissions cap-and-invest program that caps GHG emissions beginning on January 1, 2023 and makes further reductions to the cap annually through 2050. The Washington Department of Ecology (WDOE) published final regulations to implement the program on September 29, 2022, which became effective on October 30, 2022. WDOE also indicated that it will have subsequent rulemakings that will build off initial rulemaking as program implementation gets underway and progress with Washington State carbon goals are evaluated. For further details on the CCA see Part I Item 1 "Recent and Future Environmental Law and Regulation" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Based on the rules passed in 2022, there is potential for PSE’s compliance with the CCA to result in increased costs to customers or amounts that PSE may not be able to recover through electric and natural gas rates. Potential risks associated with CCA compliance could include: the evolving nature of the CCA rulemaking as indicated by WDOE, market uncertainty based on rule interpretation during implementation, unresolved recovery methodology for CCA’s impact on energy costs, company costs, customer rate impacts, and cash, liquidity and credit volatility. Such risks associated with the CCA are evaluated by Management for potential impacts to the estimated liability to comply with the program as well as the likelihood that may make a loss contingency both probable and reasonably estimable. Management’s assessment to determine whether a loss is probable or reasonably possible and to whether a loss or range of losses is estimable often involves judgement.

Compliance with these or other future regulations, such as those pertaining to climate change, could require significant capital expenditures by PSE and may adversely affect PSE's financial position, results of operations, cash flows and liquidity.

Other Challenges and Strategies

Competition

PSE’s electric and natural gas utility retail customers generally do not have the ability to choose their electric or natural gas supplier; therefore, PSE’s business has historically been recognized as a natural and regulated monopoly. However, PSE faces competition from public utility districts and municipalities or efforts by citizens organizing to form such entities that want to establish their own government-owned utility, as a result of which PSE may lose a number of customers. PSE also faces increasing competition for sales to its retail customers through alternative methods of electric energy generation, including solar and other self-generation methods. In addition, PSE’s natural gas customers may elect to use heating oil, propane or other fuels instead of using and purchasing natural gas from PSE.

Results of Operations

Puget Sound Energy

The following discussion should be read in conjunction with the unaudited consolidated financial statements and the related notes included elsewhere in this document. The following discussion provides the significant items that impacted PSE’s results of operations for the three months and six months ended ~~March 31,~~June 30, 2023 and ~~March 31,~~June 30, 2022.

Non-GAAP Financial Measures - Electric and Natural Gas Margins

The following discussion includes financial information prepared in accordance with GAAP, as well as two other financial measures, electric margin and natural gas margin, that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that includes adjustments that result in a presentation that is not defined by GAAP. The presentation of electric margin and natural gas margin is intended to supplement an understanding of PSE’s operating performance. Electric margin and natural gas margin are used by PSE to determine whether PSE is collecting the appropriate amount of revenue from its customers in order to provide adequate recovery of operating costs, including interest and equity returns. PSE’s electric margin and natural gas margin measures may not be comparable to other companies’ electric margin and natural gas margin measures. Furthermore, these measures are not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

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The following table presents operating income and a reconciliation of utility electric and natural gas margins to the most directly comparable GAAP measure, operating income:

Puget Sound Energy
(Dollars in Thousands) Three Months Ended
March 31,
2023 2022
Operating income (loss) $ 80,976 $ 374,138
Electric operating revenue 1,010,160 756,377
Purchased electricity (339,816) (238,203)
Electric generation fuel (150,254) (60,644)
Residential exchange 23,531 23,070
Electric margin (non-GAAP) $ 543,621 $ 480,600
Natural gas operating revenue 517,258 426,348
Purchased natural gas (235,482) (177,333)
Natural gas margin (non-GAAP) $ 281,776 $ 249,015
Other operating revenue 9,233 10,677
Unrealized gain (loss) on derivative instruments, net (192,123) 131,921
Utility operation and maintenance (194,991) (170,300)
Non-utility expense and other (8,014) (12,814)
Depreciation and amortization (225,262) (193,845)
Taxes other than income taxes (133,264) (121,116)
Operating income (loss) $ 80,976 $ 374,138


Puget Sound Energy
(Dollars in Thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating income (loss)	$	51,737	$	49,612	$	132,713	$	423,750
Electric operating revenue	680,639		594,331		1,690,799		1,350,708
Purchased electricity	(227,539)		(212,391)		(567,355)		(450,594)
Electric generation fuel	(64,147)		(46,498)		(214,401)		(107,142)
Residential exchange	16,181		16,783		39,712		39,853
Electric margin (non-GAAP)	$	405,134	$	352,225	$	948,755	$	832,825
Natural gas operating revenue	270,140		236,054		787,398		662,402
Purchased natural gas	(114,917)		(92,452)		(350,399)		(269,785)
Natural gas margin (non-GAAP)	$	155,223	$	143,602	$	436,999	$	392,617
Other operating revenue	6,105		11,991		15,338		22,668
Unrealized gain (loss) on derivative instruments, net	(30,802)		(9,273)		(222,925)		122,648
Utility operation and maintenance	(174,497)		(160,933)		(369,488)		(331,233)
Non-utility expense and other	(6,720)		(11,842)		(14,734)		(24,656)
Depreciation and amortization	(212,074)		(189,915)		(437,336)		(383,760)
Taxes other than income taxes	(90,632)		(86,243)		(223,896)		(207,359)
Operating income (loss)	$	51,737	$	49,612	$	132,713	$	423,750

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Electric Margin

Electric margin represents electric sales to retail and transportation customers less the cost of generating and purchasing electric energy sold to customers, including transmission costs, to bring electric energy to PSE's service territory.

The following chart displays the details of PSE's electric margin changes for the three months ended ~~March 31, 2022~~June 30, 2023 and ~~2023:~~2022:

______________

* Includes decoupling cash collections, ROR excess earnings, and decoupling 24-month revenue reserve.

Three Months Ended ~~March 31,~~June 30, 2023 Compared to 2022

Electric Operating Revenue

Electric operating revenues increased ~~$253.8~~$86.3 million from the prior year primarily due to an increase in electric retail sales of $52.3 million, an increase in sales to other utilities of ~~$127.9~~$38.7 million, an increase in ~~electric retail sales of $93.6 million, an increase in transportation and other~~decoupling revenue of ~~$46.2~~$12.4 million, and an increase in other decoupling revenue of ~~$4.8~~$7.1 million, partially offset by a decrease in ~~decoupling~~transportation and other revenue of ~~$18.8~~$24.3 million. These items are discussed in detail below.

•Electric retail sales increased ~~$93.6~~$52.3 million due to an increase of ~~$80.3~~$64.3 million in rates compared to the prior year and ~~$13.3~~partially offset by $12.0 million from ~~an increase~~a decrease in retail electricity usage of ~~1.7%~~1.9%. The increase in rates is primarily due to the tariffs filed pursuant to the Company's most recent GRC effective January 11, 2023. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report and Part II, Item 7, Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in the Company's Annual Report on Form 10-K for the period ended December 31, 2022 for electric rate changes. The ~~increase~~decrease in retail usage was due to ~~an increase~~a decrease in residential and ~~commercial~~industrial usage of ~~2.1%~~3.6% and ~~1.1%~~6.5%, respectively. Customer usage ~~increased~~decreased due to ~~an increase in retail customers of 1.1% and~~ a ~~slight increase~~decrease in heating degree days of ~~1.0% due to lower than normal~~27.8% from higher temperatures in the three months ended ~~March 31,~~June 30, 2023 as compared to 2022.

•Sales to other utilities increased ~~$127.9~~$38.7 million primarily due to a ~~229.0%~~120.6% increase in wholesale sales volume and a ~~161.3%~~30.6% increase in electric wholesale sales price. Higher wholesale sales volumes were the result of increased volume from ~~PSE~~natural gas-fired generation, which increased ~~149.6% in~~153.2% for the three months ended June 30, 2023 compared to ~~2022, particularly in March 2023, driven~~

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~~by greater value in the market. The increase in~~2022. Higher wholesale ~~sales price was driven by increases in~~market power prices combined with lower natural gas fuel prices ~~that fuel~~made natural gas-fired ~~electric~~ generation ~~following constrained supply along with increased demand.~~more economic to dispatch for the three months ended June 30, 2023 compared to 2022.

•Decoupling revenue ~~decreased $18.8~~increased $12.4 million primarily attributable to ~~a $16.1~~$2.4 million and ~~$2.7~~$10.0 million ~~decrease~~increases in delivery and fixed production cost (FPC) deferral revenues, respectively. This was driven primarily by decreased usage and higher allowed rates ~~and usage~~per customer in the current period compared to the same period in 2022. This resulted in actual electric revenues being higher than allowed decoupling deferral revenues by a ~~greater~~smaller margin in the current ~~year~~period compared to the same period in the prior year.

•Other decoupling revenue increased ~~$4.8~~$7.1 million primarily due to changes in amortization rates. In the current period, overcollections from residential customers were amortized ~~whereas~~at a higher rate compared to the same period in 2022. Decreased usage for certain non-residential schedules also decreased the rate at which prior-year undercollections were amortized.

•Transportation and other revenue decreased $24.3 million primarily due to a $27.7 million decrease in non-core natural gas financial hedging gains comprised of a $53.1 million decrease in wholesale sales driven by an average natural gas sales price that was 63.4% lower in 2023 compared to 2022. This was partially offset by a $46.5 million decrease in the cost of natural gas sold due to a lower average cost. Further, natural gas financial hedging costs increased $21.0 million. The decrease was partially offset by an increase of $3.8 million due to an Internal Revenue Service Private Letter Ruling in 2022, which included amortization to offset recovery through rates in 2022.

Electric Power Costs

Electric power costs increased $33.3 million primarily due to an increase of $15.1 million of purchased electricity costs and an increase of electric generation fuel costs of $17.6 million. These items are discussed in detail below.

•Purchased electricity expense increased $15.1 million primarily due to increased wholesale purchase prices, which were 13.8% higher than in the same period in 2022, driven by open market purchases as well as PPA contracts added after March 31, 2022. The increase from wholesale purchase prices were partially offset by a 5.9% decrease in wholesale electricity purchase volumes.

•Electric generation fuel increased $17.6 million primarily due to a $16.0 million increase in natural gas fuel costs as a result of increased production from PSE natural gas-fired generation. Higher costs from increased production were partially offset by lower natural gas prices, which drove a 43.1% decrease in lower average unit production costs.

The following chart displays the details of PSE's electric margin changes for the six months ended June 30, 2023 and 2022:

______________

*Includes decoupling cash collections, ROR excess earnings, and decoupling 24-month revenue reserve.

Six Months Ended June 30, 2023 Compared to 2022

Electric Operating Revenue

Electric operating revenues increased $340.1 million from the prior year primarily due to an increase in sales to other utilities of $166.6 million, an increase in electric retail sales of $145.9 million, an increase in transportation and other revenue of $22.2 million and an increase in other decoupling revenue of $11.9 million, partially offset by a decrease in decoupling revenue of $6.4 million. These items are discussed in detail below.

•Electric retail sales increased $145.9 million due to an increase of $144.6 million in rates compared to the prior year and an increase of $1.3 million due to load, as retail electricity usage was marginally higher in the six months ended June 30, 2023 compared to 2022. The increase in rates is primarily due to the tariffs filed pursuant to the Company's most recent GRC effective January 11, 2023. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report and Part II, Item 7, Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in the Company's Annual Report on Form 10-K for the period ended December 31, 2022 for electric rate changes.

•Sales to other utilities increased $166.6 million primarily due to a 173.9% increase in wholesale sales volume and a 99.0% increase in the average electric wholesale sales price. Higher wholesale sales volumes were the result of increased volume from PSE natural gas-fired generation, which increased 158.2% in the six months ended June 30, 2023 compared to 2022. Higher wholesale market power prices combined with lower natural gas fuel prices made natural gas-fired generation more economic to dispatch in the six months ended June 30, 2023 compared to 2022.

•Decoupling revenue decreased $6.4 million primarily attributable to a $13.7 million decrease and a $7.3 million increase in delivery and FPC deferral revenues, respectively. The decrease in delivery deferral revenue was primarily driven by higher actual rates, which outweighed the decreased usage that caused FPC deferral revenues to be higher. Higher actual rates caused actual delivery revenue to be higher than allowed revenue by a greater margin in the current period compared to the same period in 2022. Decreased usage caused actual FPC revenue to be higher than allowed revenue by a smaller margin in the current period compared to the same period in 2022.

•Other decoupling revenue increased $11.9 million primarily due to changes in amortization rates. In the current period, overcollections from residential customers were amortized at a higher rate compared to the same period in 2022. Decreased usage for certain non-residential schedules also decreased the ~~prior period.~~rate at which prior-year undercollections were amortized. This was partially offset by a $3.0 million decrease related to GAAP alternative revenue program recognition guidelines. As of the ~~three months~~period ended ~~March 31,~~June 30, 2022, there were $3.0 million of deferred 2021 GAAP alternative decoupling revenues that were ~~recognized, whereas none~~recognized. There were no such revenues recognized in ~~the current period.~~2023.

•Transportation and other revenue increased ~~$46.2~~$22.2 million primarily due to a ~~$39.8~~$12.1 million increase in non-core natural gas financial hedging gains comprised of a $5.7 million increase in wholesale sales driven by anincreased natural gas sales volume and a marginal increase in the average price of natural gas wholesale sales. Further, the cost of natural gas sold ~~that was 85.4% higher~~decreased $11.4 million due to a 9.8% decrease in the average cost in the six months ended June 30, 2023 compared to ~~2022,~~2022. This was partially offset by a ~~total $35.1 million increase in the cost of the natural gas sold due to higher natural gas prices. Also contributing to the change in the net whole non-core gas sales was a $16.1~~$5.0 million increase in natural gas financial hedging ~~gains.~~costs. Additionally, an increase of ~~$4.8~~$8.6 million was due to an Internal Revenue Service Private Letter Ruling in 2022, which included amortization to offset recovery through rates in 2022. The increases were partially offset by a ~~$2.6~~$2.5 million deferral for over recovery of 2023 Green Direct energy credits approved in the 2022 GRC.

Electric Power Costs

Electric power costs increased ~~$190.8~~$224.2 million primarily due to an increase of ~~$101.6~~$116.8 million of purchased electricity costs and an increase of electric generation fuel costs of ~~$89.6~~$107.3 million. These items are discussed in detail below.

•Purchased electricity expense increased ~~$101.6~~$116.8 million primarily due to increased wholesale purchase prices, which were ~~59.2%~~37.3% higher ~~than~~in the six months ended June 30, 2023 compared to the same period in 2022, driven by open market purchases as well as PPA contracts added after March 31, 2022. The increase from wholesale purchase prices were partially offset by ~~a 10.4%~~an 8.3% decrease in wholesale electricity purchase volumes.

•Electric generation fuel increased ~~$89.6~~$107.3 million primarily due to a ~~$89.0~~$105.0 million increase in natural ~~gas-fired generation~~gas fuel costs ~~due to increased~~as a result of a 158.2% increase in PSE natural gas-fired ~~generation, which increased 149.6% in 2023 compared to 2022 and 13.6% higher unit production~~generation. Higher costs from ~~higher~~increased production were partially offset by lower natural gas prices ~~as discussed above~~which drove an 11.4% decrease in ~~sales to other utilities~~

average unit production costs.

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Natural Gas Margin

Natural gas margin is natural gas sales to retail and transportation customers less the cost of natural gas purchased, including transportation costs to bring natural gas to PSE’s service territory. The PGA mechanism passes through increases or decreases in the natural gas supply portion of the natural gas service rates to customers based upon changes in the price of natural gas purchased from producers and wholesale marketers or changes in natural gas pipeline transportation costs. PSE's margin or net income is not affected by changes under the PGA mechanism because over- and ~~under- recoveries~~under-recoveries of natural gas costs included in baseline PGA rates are deferred and either refunded to or collected from customers in future periods.

The following chart displays the details of PSE's natural gas margin changes for the three months ended ~~March 31, 2022~~June 30, 2023 and ~~2023:~~

2022:

______________

* Includes decoupling cash collections, ROR excess earnings, and decoupling 24-month revenue reserve.

Three Months Ended ~~March 31,~~June 30, 2023 Compared to 2022

Natural Gas Operating Revenue

Natural gas operating revenue increased ~~$90.9~~$34.0 million due to increases in retail sales of ~~$91.7~~$22.2 million, decoupling revenue of $9.9 million, and other decoupling revenue of ~~$2.7 million and~~$2.5 million. These increases were partially offset by transportation and other revenue of ~~$1.9 million, partially offset by a decrease in decoupling revenue of $5.4~~$0.5 million. These items are discussed in detail below.

•Natural gas retail sales revenue increased ~~$91.7~~$22.2 million primarily due to an increase in rates of ~~$78.3~~$67.4 million ~~and an increase~~partially offset by a decrease of ~~$13.3~~$45.2 million ~~due to an increase~~driven by a decrease in natural gas load of ~~2.5%~~13.5%. The increase in rates is primarily due to the tariffs filed pursuant to the Company's most recent PGA and GRC effective ~~and~~ November 1, 2022 and January 7, 2023, respectively. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report and Part II, Item 7, Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in the Company's Annual Report on Form 10-K for the period ended December 31, 2022 for natural gas rate changes. The ~~increase~~decrease in load is primarily driven by a ~~1.9%~~17.4% and ~~2.8% increase~~8.0% decrease in residential and commercial usage, respectively. Customer usage ~~increased~~decreased due to ~~an increase in retail customers of 0.7% and an increase~~a decrease in heating degree days of ~~1.0% due to lower than normal~~27.8% from higher temperatures in the three months ended ~~March 31,~~June 30, 2023 as compared to 2022.

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•Decoupling revenue ~~decreased $5.4~~increased $9.9 million primarily attributable to ~~higher rates~~lower usage in the current period compared to the same period in 2022. This resulted in actual natural gas revenues being ~~higher~~lower than allowed natural gas revenues in the current period, whereas in the same period in 2022, actual revenues were ~~lower~~higher than allowed revenues.

•Other decoupling revenue increased ~~$2.7~~$2.5 million due to a decrease in current period amortization of prior year decoupling revenues compared to the same period in 2022. This is attributable to decreased usage and decreased amortization rates, which decreases the rate at which deferral revenues are passed back to customers.

Natural Gas Energy Costs

•Purchased natural gas expense increased ~~$58.1~~$22.5 million due to an increase in the PGA rates in November 2022 ~~and an increase~~partially offset by a decrease in natural gas usage of ~~2.5%~~13.5% as stated in the natural gas retail sales section above. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report for natural gas rate changes and details on the PGA.

Natural Gas Margin

The following chart displays the details of PSE's natural gas margin changes for the six months ended June 30, 2023 and 2022:

______________

*Includes decoupling cash collections, ROR excess earnings, and decoupling 24-month revenue reserve.

Six Months Ended June 30, 2023 Compared to 2022

Natural Gas Operating Revenue

Natural gas operating revenue increased $125.0 million due to increases in retail sales of $113.8 million, other decoupling revenue of $5.3 million, decoupling revenue of $4.5 million and transportation and other revenue of $1.4 million. These items are discussed in detail below.

•Natural gas retail sales revenue increased $113.8 million primarily due to an increase in rates of $139.9 million partially offset by a decrease of $26.1 million due to a decrease in natural gas load of 3.0%. The increase in rates is primarily due to the tariffs filed pursuant to the Company's most recent PGA and GRC effective November 1, 2022 and January 7, 2023, respectively. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report and Part II, Item 7, Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in the Company's Annual Report on Form 10-K for the period ended December 31, 2022 for natural gas rate changes. The decrease in load is primarily driven by a 4.5% and 1.1% decrease in residential and commercial usage, respectively. Customer usage decreased due to a decrease in heating degree days of 9.2% due to higher temperatures in the six months ended June 30, 2023 as compared to 2022.

•Decoupling revenue increased $4.5 million primarily due to decreased usage in the current period compared to the same period in 2022. This resulted in actual natural gas revenues being higher than allowed natural gas revenues by a smaller margin in the current period compared to 2022.

•Other decoupling revenue increased $5.3 million due to a decrease in current period amortization of prior year decoupling revenues compared to the same period in 2022. This is attributable to decreased usage and amortization rates, which decreases the rate at which deferral revenues are passed back to customers.

Natural Gas Energy Costs

•Purchased natural gas expense increased $80.6 million due to an increase in the PGA rates in November 2022 partially offset by a decrease in natural gas usage of 3.0% as stated in the natural gas retail sales section above. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report for natural gas rate changes and details on the PGA.

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Other Operating Expenses and Other Income (Deductions)

The following chart displays the details of PSE's operating expenses and other income (deductions) for the three months ended ~~March 31, 2022~~June 30, 2023 and ~~2023:~~2022:

Three Months Ended ~~March 31,~~June 30, 2023 Compared to 2022

•Net unrealized (gain) loss on derivative instruments ~~decreased $324.0~~increased $21.5 million to a net loss of ~~$192.1~~$30.8 million for the three months ended ~~March 31,~~June 30, 2023. The primary driver was the change in the weighted average forward prices for electric and natural gas. Specifically, electric prices decreased ~~22.1%~~23.2% resulting in ~~an $84.1~~a $36.7 million loss for electric. Natural gas prices decreased ~~63.3%~~9.6% resulting in a ~~$130.3~~$22.7 million loss for natural gas. ~~The other driver is related to~~These losses were offset by the net settlements of electric trades previously recorded as ~~$48.4~~$8.3 million in ~~gain~~loss and settlements of natural gas trades previously recorded at a ~~$61.2~~$29.6 million ~~in gain.~~loss. For further details, see Note 4, "Accounting for Derivative Instruments and Hedging" in the Combined Notes to Consolidated Financial Statements included in Item 1 of this report.

•Utility operations and maintenance expense increased ~~$24.7~~$13.6 million primarily due to increases in the following: (i) ~~$6.9~~$4.8 million ofin customer service ~~expenses~~expense due to increased low-income assistance, (ii) ~~$3.5~~$2.8 million in outside consulting fees related to corporate strategic planning, ~~and execution of management's initiatives,~~ (iii) $2.5 million ~~of injuries~~in credit card processing fees and ~~damages expense,~~call center expenses, (iv) ~~$2.4 million in electric first response, safety, and training expenses, (v) $2.0 million in Colstrip decommissioning expenses, (vi)~~ $1.8 million ofin pension related expenses ~~(vii) $1.5~~and (v) $1.0 million in administrative and general expenses related to the CEIP and other strategic projects. These increases were partially offset by a decrease of $2.9 million in overhead line maintenance due to less storm ~~related activities, (viii) $1.3 million of other generation maintenance costs due~~activity in the three months ended June 30, 2023 as compared to ~~higher wind turbine maintenance and (ix) $1.2 million of steam plant maintenance costs due to higher major maintenance amortization expense.~~2022.

•Non-utility expense and other expense decreased ~~$4.8~~$5.1 million primarily due to a decrease of ~~$2.3~~$3.8 million in biogas purchase expense driven by a decrease in biogas volume purchased as well as the average biogas price in the three months ended June 30, 2023 compared to 2022.

•Depreciation and amortization expense increased $22.2 million due to: (i) $11.4 million increase in electric amortization from 2022. This increase is primarily driven by a $4.9 million increase in the Lower Snake River treasury grant amortization and a $3.1 million increase from 2022 storm cost amortization, (ii) $6.8 million increase in natural gas distribution depreciation from 2022, which is driven by $219.5 million in net additions in natural gas distribution assets and (iii) $2.7 million increase in electric distribution depreciation from 2022, which is driven by $294.5 million in net additions of electric distribution assets and (iv) $2.3 million increase in electric production depreciation from 2022 due to $19.7 million in net additions of electric production assets.

•Taxes other than income taxes increased $4.4 million primarily due to an increase of $4.1 million in municipal taxes and an increase of $2.8 million in state excise tax, both of which were driven by the increase in retail revenue in the three months ended June 30, 2023 as compared to 2022. The increases were partially offset by a decrease of $2.4 million in property taxes.

Other Income, Interest Expense and Income Tax Expense

•Other income/expense increased$6.5 million from net other income of $6.4 million in 2022 to net other income of $12.9 million in 2023, due to an increase of $5.4 million in other income and a decrease of ~~$3.1~~$1.1 million in other expense. The increase in other income was primarily due to: (i) $3.4 million increase in taxable interest and dividend income driven by increases to PCA customer interest and interest earned on short-term investments from the May 2023 PSE bond proceeds, (ii) $2.8 million increase in allowance for funds used during construction (AFUDC) due to an increase in eligible CWIP and (iii) $1.8 million in non-service cost component of the qualified pension net periodic benefit cost for the three months ended June 30, 2023 compared to 2022. The increase in other income was partially offset by a decrease of $2.7 million in Advanced Metering Infrastructure (AMI) due to a change in AMI return deferral per the 2022 GRC.

•Interest expense increased $5.4 million primarily due to: (i) an increase of $2.6 million in interest expense due to the May 2023 PSE bond issuance, (ii) an increase of $2.4 million related to interest expense recognized on the PGA liability and (iii) an increase of $1.3 million related to interest expense recognized in conjunction with PSE's deferred compensation liability.

•Income tax expense decreased $4.6 million primarily driven by a decrease in pre-tax book income.

Other Operating Expenses and Other Income (Deductions)

The following chart displays the details of PSE's operating expenses and other income (deductions) for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30, 2023 Compared to 2022

•Net unrealized (gain) loss on derivative instruments decreased $345.6 million to a net loss of $222.9 million for the six months ended June 30, 2023. The primary driver was the change in the weighted average forward prices for electric and natural gas. Specifically, electric prices decreased 57.4% resulting in $120.9 million in loss for electric. Natural gas prices decreased 58.9% resulting in $153.1 million in loss for natural gas. Further, the net settlement of electric trades previously recorded as gains resulted in a $40.1 million decrease and the net settlement of natural gas trades previously recorded as gains resulted in a $31.5 million decrease. For further details, see Note 4, "Accounting for Derivative Instruments and Hedging" in the Combined Notes to Consolidated Financial Statements included in Item 1 of this report.

•Utility operations and maintenance expense increased $38.3 million primarily due to increases in the following: (i) $11.7 million in customer service expense due to increased low-income assistance, (ii) $6.3 million in outside consulting fees related to corporate strategic planning, (iii) $3.7 million in pension related expenses, (iv) $3.3 million in electric safety, training, crew standby, and other administrative expenses, (v) $2.6 million related to injuries and damages expense, (vi) $2.5 million in credit card processing fees and call center expenses, (vii) $2.2 million in maintenance costs primarily at the Goldendale, Colstrip, and Ferndale generating stations and (viii) $2.1 million in administrative and general expenses related to the CEIP and other strategic projects in the six months ended June 30, 2023 as compared to 2022.

•Non-utility expense and other expense decreased $9.9 million primarily due to a decrease of $6.1 million in biogas purchase expense, driven by a decrease in both biogas volume purchased and average biogas price; and a decrease of $3.7 million in the long-term incentive plan, as compared to 2022, due to an increase in 2022 funding as of ~~March 31,~~June 30, 2022.

4655

•Depreciation and amortization expense increased ~~$31.4~~$53.6 million due to: (i) ~~$12.5~~$23.9 million increase in electric amortization ~~primarily due to~~from 2022 driven by a ~~$6.2~~$11.1 million ~~reduction~~increase in the Lower Snake River ~~treasury grant~~Treasury Grant amortization, ~~from 2022 to 2023 and~~ a ~~$2.8~~$5.9 million ~~addition of~~increase from 2022 storm cost amortization, and a $3.3 million increase in Get To Zero (GTZ) electric tranche amortization, (ii) ~~$8.1~~$13.3 million increase in natural gas distribution depreciation, primarily due to $219.5 million in net additions in natural gas distribution assets, (iii) $8.4 million increase in conservation amortization due to an increase in conservation rider rates effective May 1, 2022, (see "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 2 of this report), (iii) $6.5 million increase in natural gas distribution depreciation primarily due to $211.2 million in net additions to natural gas distribution assets and due to the increase in depreciation rates per the 2022 GRC, (iv) ~~$2.7~~$5.3 million increase in electric distribution depreciation ~~primarily~~ due to ~~$278.1~~$294.5 million in net additions of electric distribution assets, ~~and due to the increase in depreciation rates per the 2022 GRC and~~ (v) ~~$2.1~~$4.3 million increase in electric production depreciation, ~~primarily due to $27.8~~driven by an increase of $19.7 million in net additions of electric production assets and (vi) $2.7 million increase in natural gas amortization due to ~~the~~a $2.2 million increase in ~~depreciation rates per the 2022 GRC. The~~GTZ natural gas tranche amortization. These increases were partially offset by a $2.6 million decrease in electric general plant and other depreciation ~~of $1.2 million primarily~~from 2022, due to ~~decreased~~$13.4 million in additions offset by $11.9 million in retirements and $2.5 million in asset retirement costs.

•Taxes other than income taxes increased ~~$12.1~~$16.5 million primarily due to a ~~$7.3~~$10.3 million increase in ~~state excise tax~~municipal taxes and an increase of ~~$6.3~~$10.1 million in ~~municipal~~state excise taxes, both of which were driven by the increase in retail revenue in 2023 as compared to 2022. The increases were partially offset by a decrease of ~~$1.4~~$3.8 million in property taxes.

Other Income, Interest Expense and Income Tax Expense

•Other income/expense ~~changed~~increased $~~2.5~~9.0 million from net other income of ~~$7.8~~$14.3 million in 2022 to net other income of ~~$10.3~~$23.3 million in ~~2023. Other expenses decreased $0.6~~2023, due to an increase of $7.1 million ~~and~~in other income ~~increased $1.9~~and a decrease of $1.8 million ~~which~~in other expense. The increase in other income was primarily due to (i) ~~$2.2~~$5.6 million in taxable interest and dividend income due to an increase in PCA customer interest and interest earned on short-term investments from the May 2023 PSE bond proceeds, (ii) ~~$1.8~~$3.7 million in the non-service cost component of the qualified pension net periodic benefit cost for 2023 compared to 2022, (iii) $3.4 million of AFUDC due to an increase in eligible CWIP and ~~(iii) $1.4~~(iv) $2.3 million in gain on corporate life insurance policies. The increase in other income was partially offset by a decrease of ~~$2.5~~$5.1 million in ~~Advanced Metering Infrastructure (AMI)~~AMI due to a change in AMI return deferral per the 2022 GRC.

•Interest expense increased ~~$2.4~~$7.7 million primarily due toto: (i) an increase of ~~$1.6~~$3.1 million related to interest expense recognized on the PGA liability, (ii) an increase of $2.6 million in interest expense due to the May 2023 PSE bond issuance, (iii) an increase of $2.5 million related to interest expense recognized in conjunction with PSE's deferred compensation liability and (iv) an increase of $2.0 million in common interest expense due to an increase in interest rates on commercial paper borrowings in the six months ended June 30, 2023 compared to ~~2022, and an increase of $1.2 million related to interest expense recognized in conjunction with PSE's deferred compensation liability.~~2022.

•Income tax expense decreased ~~$32.4~~$37.0 million primarily driven by a decrease in pre-tax book income.

Puget Energy

Primarily, all operations of Puget Energy are conducted through PSE. Puget Energy's net income (loss) for the three months ended ~~March 31,~~June 30, 2023 and 2022 ~~and 2023~~ is as follows:

Three Months Ended ~~March 31,~~June 30, 2023 compared to 2022

Summary Results of Operation

Puget Energy’s net income decreased by ~~$278.3~~$3.4 million. This is primarily attributable to an increase in income tax expense of $11.9 million driven by changes in the effective tax rate. The 2023 effective tax rate was adversely impacted by an increase in pre-tax book income caused by changes in unrealized gains and losses from electric and natural gas trades, which decreased Puget Energy's effective tax rate more in 2022 compared to 2023. This decrease was partially offset by an increase in PSE's net income of $7.8 million.

Puget Energy's net income (loss) for the six months ended June 30, 2023 and 2022 is as follows:

Six Months Ended June 30, 2023 compared to 2022

Summary Results of Operation

Puget Energy’s net income decreased by $281.7 million, which is primarily attributable to (i) a decrease in PSE's net income of ~~$260.5~~$252.8 million, (ii) ~~a decrease~~an increase in income tax ~~benefit~~expense of ~~$16.0~~$27.9 million ~~due to~~driven by an increase in pre-tax book income and the ~~timing~~unrealized gains and losses of net settlements on electric and natural gas trades, which decreased Puget Energy's effective tax rate more in 2022 compared to 2023, and (iii) an increase in net loss of ~~$4.2~~$4.7 million at Puget LNG due to additional operational expenses as Puget LNG commenced commercial operations in February 2022. These decreases were partially offset by ~~less~~a decrease in interest expense of ~~$3.6 million.~~$6.6 million due to an increase of $6.3 million of Puget LNG interest expense, which is eliminated in the consolidated results for Puget Energy.

Capital Requirements

Contractual Obligations and Commercial Commitments

In addition to the contractual obligations and consolidated commercial commitments disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, during the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company entered into new Electric Portfolio and Electric Wholesale Market Transaction contracts with estimated payment obligations totaling ~~$3.3~~$4.0 billion through 2051.

For further information, see Part II, Item 8, Note 16, "Commitments and Contingencies" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

~~The following are the Company's aggregate commercial commitments as of March 31, 2023:~~

Puget Energy and
Puget Sound Energy Amount of Commitments
Expiration Per Period
(Dollars in Thousands) Total Less than 1 Year 1-3 Years 3-5 Years Thereafter
Commercial commitments:
PSE revolving credit facility1
$ 800,000 $ — $ — $ 800,000 $ —
Inter-company short-term debt2
30,000 — — — 30,000
Total PSE commercial commitments 830,000 — — 800,000 30,000
Puget Energy revolving credit facility3
800,000 — — 800,000 —
Less: Inter-company short-term debt elimination (30,000) — — — (30,000)
Total Puget Energy commercial commitments $ 1,600,000 $ — $ — $ 1,600,000 $ —

~~_______________~~

1.As of March 31, 2023, PSE had a credit facility which provides $800.0 million of short-term liquidity needs and includes a backstop to the Company's commercial paper program. The credit facility matures in May 2027. The credit facility also includes a swingline feature allowing same day availability on borrowings up to $75.0 million and an expansion feature that, upon the banks' approval, would increase the total size of the facility to $1.4 billion. As of March 31, 2023, no loans or letters of credit were outstanding under the credit facility and $137.0 million was outstanding under the commercial paper program. The credit agreement is syndicated among numerous lenders. Outside of the credit agreement, PSE has a $2.3 million letter of credit in support of a long-term transmission contract and had $6.0 million issued under a standby letter of credit with TD Bank in support of natural gas purchases.

2.~~As of March 31, 2023, PSE had a revolving credit facility with Puget Energy in the form of a promissory note to borrow up to $30.0 million.~~

3.As of March 31, 2023, Puget Energy had a revolving senior secured credit facility totaling $800.0 million, which matures in May 2027. The revolving senior secured credit facility is syndicated among numerous lenders. The revolving senior secured credit facility also has an expansion feature that, upon the banks' approval, would increase the size of the facility to $1.3 billion. As of March 31, 2023, there was $135.0 million drawn and outstanding under the Puget Energy credit facility,~~of which $34.3 million was classified as long-term debt and $100.7 million was classified as short-term debt.~~

Off-Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2023, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a material effect on the Company's financial condition.

Utility Construction Program

The Company’s construction programs for generating facilities, the electric transmission system, the natural gas and electric distribution systems and the Tacoma LNG facility are designed to meet regulatory requirements, support customer growth and improve energy system reliability. The Company had adjusted capital expenditures, resulting in a decrease of ~~$47.6~~$56.1 million compared to forecasted amounts for the ~~three~~six months ended ~~March 31,~~June 30, 2023. The decrease was primarily due to (i) permitting delays with the Energize Eastside substation and transmission upgrade project, (ii) timing of thermal and wind generation maintenance, and (iii) timing of technology expenditures offset by higher gas new customer construction and public improvement work. Construction expenditures, excluding equity AFUDC, totaled ~~$229.0~~$536.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023. Presently planned utility construction expenditures, excluding equity AFUDC, are as follows:


Capital Expenditure Projections
(Dollars in Millions)	2023	2024	2025
Total energy delivery, technology and facilities expenditures	$1,146.7	$1,311.9	$1,304.2

The program is subject to change based upon general business, economic and regulatory conditions. Utility construction expenditures and any new generation resource expenditures may be funded from a combination of sources, which may include cash from operations, short-term debt, long-term debt and/or equity. PSE’s planned capital expenditures may result in a level of spending that will exceed its cash flow from operations. As a result, execution of PSE’s strategy is dependent in part on continued access to capital markets.

Capital Resources

Cash from Operations


Puget Sound Energy	Puget Sound Energy	Three Months Ended March 31,						Puget Sound Energy	Six Months Ended June 30,
(Dollars in Thousands)	(Dollars in Thousands)	2023		2022		Change		(Dollars in Thousands)	2023		2022		Change
Net income	Net income	$	27,535	$	288,081	$	(260,546)	Net income	$	29,000	$	281,763	$	(252,763)
Non-cash items1	Non-cash items1	342,478		60,595		281,883		Non-cash items1	546,459		233,641		312,818
Changes in cash flow resulting from working capital2	Changes in cash flow resulting from working capital2	(91,399)		35,638		(127,037)		Changes in cash flow resulting from working capital2	(45,228)		30,235		(75,463)

Regulatory assets and liabilities	Regulatory assets and liabilities	38,162		4,470		33,692		Regulatory assets and liabilities	19,201		9,939		9,262
Purchased gas adjustment	Purchased gas adjustment	123,594		13,915		109,679		Purchased gas adjustment	159,676		3,401		156,275

GHG emission allowances								GHG emission allowances	(60,231)		—		(60,231)
Other non-current assets and liabilities3	Other non-current assets and liabilities3	(16,498)		(5,558)		(10,940)		Other non-current assets and liabilities3	(7,163)		(6,523)		(640)
Net cash provided by operating activities	Net cash provided by operating activities	$	423,872	$	397,141	$	26,731	Net cash provided by operating activities	$	641,714	$	552,456	$	89,258

_______________

1 Non-cash items include depreciation, amortization, deferred income taxes, net unrealized (gain) loss on derivative instruments, AFUDC-equity, production tax credits (PTCs) and other miscellaneous non-cash items.

2 Changes in working capital include receivables, unbilled revenue, materials/supplies, fuel/gas inventory, income taxes, prepayment, PGA, accounts payable and accrued expenses.

3 Other non-current assets and liabilities include funding of pension liability.

~~Three~~Six Months Ended ~~March 31,~~June 30, 2023 compared to 2022

Cash generated from operations for the ~~three~~six months ended ~~March 31,~~June 30, 2023 increased by ~~$26.7~~$89.3 million including a net income decrease of ~~$260.5~~$252.8 million. The following are significant factors that impacted PSE's cash flows from operations:

•Cash flow adjustments resulting from non-cash items increased ~~$281.9~~$312.8 million primarily due to: (i) a ~~$324.0~~$345.6 million change from a net unrealized gain on derivative instruments of ~~$131.9~~$122.6 million to a net unrealized loss on derivative instruments of ~~$192.1~~$222.9 million, (ii) an increase in depreciation and amortization of ~~$23.3~~$45.1 million, (iii) an increase of $8.4 million in conservation amortization and (iv) a ~~$10.8~~$2.6 million increase due to deferral of energy exchange ~~cost and (iv) an increase of $8.1 million in conservation amortization.~~cost. The increases were partially offset by a decrease in deferred income taxes of ~~$82.8~~$89.5 million. For further details, see "Other Operating Expenses" in this Item 2 of this report.

•Cash flows resulting from changes in working capital decreased ~~$127.0~~$75.5 million primarily due toto: (i) accounts payable decreased faster than the same period last year that led to increased cash outflows of ~~$207.6~~$308.9 million, ~~and~~(ii) an increased cash outflow of ~~$8.5~~$9.6 million related to higher incentive ~~payments. The~~payments, and (iii) cash flow associated with

prepayments decreased primarily due to $10.6 million cash inflow in 2022 related to major inspections completed in 2022. Cash outflows were partially offset by: (i) an increase of ~~$42.9~~$40.3 million due to higher tax payable balance, (ii) higher balances in fuel inventory added cash inflows of ~~$25.0~~$40.5 million, and (iii) a cash inflow of ~~$22.6~~$175.0 million due to the timing of accounts receivable collections, as the balance of account receivable decreased ~~$60.8~~$336.0 million in the ~~three~~six months ended ~~March 31,~~June 30, 2023 compared to a decrease of ~~$38.2~~$161.0 million during the same period ofin 2022.

•Cash flows resulting from regulatory assets and liabilities increased ~~$33.7~~$9.3 million, which was primarily ~~due to: (i) lower decoupling deferrals~~related to major maintenance and major inspections at several generation stations in 2022 that led to higher ~~decoupling~~ cash ~~collection~~outflow in the ~~first three~~six months ~~of 2023~~ended June 30, 2022 compared to the same period in 2022, which resulted in $11.1 million cash inflow together, (ii) rate collection for recovery of prior distribution in COVID-19 bill assistance program brought in $10.3 million cash inflow, and (iii) lower expenses and higher amortization led to an increase of $11.1 million cash inflow in property tax tracker.2023.

•Cash flow resulting from purchased gas adjustment increased ~~$109.7~~$156.3 million, which was mainly driven by a decrease in actual natural gas cost and an increase in allowed PGA recovery in the six months ended June 30, 2023 compared to 2022. Decreased natural gas prices led to a ~~$24.2~~$48.3 million, or ~~14.9%~~18.3%, decrease in actual natural gas costs in the six months ended June 30, 2023 compared to 2022. Meanwhile, the total amount of allowed PGA recovery in the six months ended June 30, 2023 increased ~~$58.4~~$80.5 million, or ~~33.2%~~30.1%, compared to 2022. In addition, there was a $27.2 million refund and interest from a counterparty settlement received in January 2023.

•Cash flow resulting from ~~other non-current assets and liabilities~~GHG emission allowances ~~increased $10.9~~decreased $60.2 million which was driven by ~~cash inflows~~obtaining Washington emission allowances for GHG emissions associated with the company's electric and gas business activities in compliance with the CCA. For further details, see Management's Discussion and Analysis, "Other" in Item 2 of ~~$2.6 million due a Puget Western, Inc. land sale in 2023. Further increases were due to changes in accrual of other long-term expenses.~~this report.


Puget Energy	Puget Energy	Three Months Ended March 31,						Puget Energy	Six Months Ended June 30,
(Dollars in Thousands)	(Dollars in Thousands)	2023		2022		Change		(Dollars in Thousands)	2023		2022		Change
Net income	Net income	$	(27,566)	$	(9,786)	$	(17,780)	Net income	$	(65,941)	$	(36,964)	$	(28,977)
Non-cash items1	Non-cash items1	10,169		(6,085)		16,254		Non-cash items1	45,422		17,604		27,818
Changes in cash flow resulting from working capital2	Changes in cash flow resulting from working capital2	2,029		3,449		(1,420)		Changes in cash flow resulting from working capital2	(1,339)		4,200		(5,539)

Other non-current assets and liabilities3	Other non-current assets and liabilities3	(879)		(2,333)		1,454		Other non-current assets and liabilities3	(1,258)		(4,556)		3,298
Net cash provided by operating activities	Net cash provided by operating activities	$	(16,247)	$	(14,755)	$	(1,492)	Net cash provided by operating activities	$	(23,116)	$	(19,716)	$	(3,400)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A


		Page
Definitions		3
Filing Format		4
Forward-Looking Statements		4

Part I.	Financial Information	5

Item 1.	Financial Statements	5
	Puget Energy, Inc.
	Consolidated Statements of Income – Three and Six Months Ended ~~March 31,~~June 3 0 , 2023 and 2022	5
	Consolidated Statements of Comprehensive Income – Three and Six Months Ended ~~March 31,~~June 30, 2023 and 2022	6
	Consolidated Balance Sheets – ~~March 31,~~ ~~202~~3 June 30, 2023 and December 31, 20202222	7
	Consolidated Statements of Common Shareholder's Equity - ~~March 31,~~June 30, 2023 and December 31, 2022	8
	Consolidated Statements of Cash Flows – Three and Six Months Ended ~~March 31,~~June 3 0 , 2023 and 2022	9

	Puget Sound Energy, Inc.
	Consolidated Statements of Income – Three and Six Months Ended ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and 20202222	12
	Consolidated Statements of Comprehensive Income – Three and Six Months Ended ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and 20202222	11
	Consolidated Balance Sheets – ~~March~~ 3 1 ~~, 202~~3 June 30, 2023 and December 31, 20202222	12
	Consolidated Statements of Common Shareholder's Equity - ~~March~~ 3 1 ~~, 202~~3 , June 30, 2023 and December 31, ~~202~~22022	13
	Consolidated Statements of Cash Flows – Three and Six Months Ended ~~March 31,~~June 30, 2023 and 2022	14

	Notes
	Combined Notes to Consolidated Financial Statements	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3234

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	5665

Item 4.	Controls and Procedures	5766

Part II.	Other Information	5766

Item 1.	Legal Proceedings	5766

Item 1A.	Risk Factors	5767

Item 5.	Other Information	67

Item 6.	Exhibits	5767

Exhibit Index		5868

Signatures		5969


ASU			Accounting Standards Update
ASC			Accounting Standards Codification
EBITDA			Earnings Before Interest, Tax, Depreciation and Amortization
FASB			Financial Accounting Standards Board
GAAP			U.S. Generally Accepted Accounting Principles
GHG			Greenhouse gas
GRC			General Rate Case
IBEW			International Brotherhood of Electrical Workers
ISDA			International Swaps and Derivatives Association
LIBOR			London Interbank Offered Rate
LNG			Liquefied Natural Gas
MMBtu			One Million British Thermal Units
MWh			Megawatt Hour (one MWh equals one thousand kWh)
NAESB			North American Energy Standards Board
NPNS			Normal Purchase Normal Sale
PCA			Power Cost Adjustment
PCORC			Power Cost Only Rate Case
PGA			Purchased Gas Adjustment
PTCs			Production Tax Credits
PSE			Puget Sound Energy, Inc.
Puget Energy			Puget Energy, Inc.
Puget Holdings			Puget Holdings LLC
Puget LNG			Puget LNG, LLC
SERP			Supplemental Executive Retirement Plan
UA			The United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada
Washington Commission			Washington Utilities and Transportation Commission
WSPP			WSPP, Inc.


●			Governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC) and the Washington Utilities and Transportation Commission (Washington Commission), that may affect our ability to recover costs and earn a reasonable return, including but not limited to disallowance or delays in the recovery of capital investments and operating costs and discretion over allowed return on investment;
●			Changes in, adoption of and compliance with laws and regulations, including decisions and policies concerning the environment, climate change, greenhouse gas or other emissions or by-products of electric generation (including coal ash or other substances), natural resources, and fish and wildlife (including the Endangered Species Act) as well as the risk of litigation arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures;
●			Changes in tax law, related regulations or differing interpretation, or enforcement of applicable law by the Internal Revenue Service (IRS) or other taxing jurisdiction; and PSE's ability to recover costs in a timely manner arising from such changes;
●			Inability to realize deferred tax assets and use production tax credits (PTCs) due to insufficient future taxable income;
●			Accidents or natural disasters, such as hurricanes, windstorms, earthquakes, floods, landslides, fires and wildfires (either affecting or caused by PSE's facilities or infrastructure), extreme weather conditions ~~landslides,~~ and other acts of God, terrorism, asset-based or cyber-based attacks, pandemic or similar significant events, which can interrupt service and lead to lost revenue, cause temporary supply disruptions and/or price spikes in the cost of fuel and raw materials, ~~and~~ impose extraordinary ~~costs;~~
●			~~The impact of widespread health developments, including~~costs, and can subject the ~~global Coronavirus Disease 2019 (COVID-19) pandemic, and responses~~Company to such developments (such as voluntary and mandatory quarantines, government stay at home orders, restrictions on travel, commercial, social and other activities, and the impact of vaccination mandates on employee and vendor staffing levels) could materially and adversely affect, among other things, electric and natural gas demand, customers’ ability to pay, supply chains, availability of skilled work-force, contract counterparties, liquidity and financial markets;liability;
●			Commodity price risks associated with procuring natural gas and power in wholesale markets from creditworthy counterparties;
●			Wholesale market disruption, which may result in a deterioration of market liquidity, increase the risk of counterparty default, affect the regulatory and legislative process in unpredictable ways, negatively affect wholesale energy prices and/or impede PSE's ability to manage its energy portfolio risks and procure energy supply, affect the availability and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers;
●			Financial difficulties of other energy companies and related events, which may affect the regulatory and legislative process in unpredictable ways, adversely affect the availability of and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers;
●			The effect of wholesale market structures (including, but not limited to, regional market designs or transmission organizations) or other related federal initiatives;
●			PSE electric or natural gas distribution system failure, blackouts or large curtailments of transmission systems (whether PSE's or others'), or failure of the interstate natural gas pipeline delivering to PSE's system, all of which can affect PSE's ability to deliver power or natural gas to its customers and generating facilities;
●			Electric plant generation and transmission system outages, which can have an adverse impact on PSE's expenses with respect to repair costs, added costs to replace energy or higher costs associated with dispatching a more expensive generation resource;
●			The ability to restart generation following a regional transmission disruption;
●			The ability of a natural gas or electric plant to operate as intended;
●			PSE's resource adequacy needs to meet the Clean Energy Transformation Act (CETA) and the Climate Commitment Act (CCA) requirements, through a combination of owned or contracted resources, may significantly increase ~~purchased~~ power and gas costs if pricing pressures and supply constraints on resource acquisitions increase;
●			Changes in climate, weather conditions, or sustained extreme weather events in the Pacific Northwest, which could have effects on customer usage and PSE's revenue and expenses;
●			Regional or national weather, which could impact PSE's ability to procure adequate supplies of natural gas, fuel or purchased power to serve its customers and the cost of procuring such supplies;
●			Variable hydrological conditions, which can impact streamflow and PSE's ability to generate electricity from hydroelectric facilities;
●			Variable wind conditions, which can impact PSE's ability to generate electricity from wind facilities;
●			The ability to renew contracts for electric and natural gas supply and the price of renewal;
●			Industrial, commercial and residential growth and demographic patterns in the service territories of PSE;
●			General economic conditions in the Pacific Northwest, such as inflation, which may impact customer consumption or affect PSE's accounts receivable;
●			The loss of significant customers, changes in the business of significant customers or the condemnation of PSE's facilities as a result of municipalization or other government action or negotiated settlement, which may result in changes in demand for PSE's services;
●			The failure of information systems or the failure to secure information system data, which may impact the operations and cost of PSE's customer service, generation, distribution and transmission;
●			Opposition and social activism that may hinder PSE's ability to perform work or construct infrastructure;
●			Capital market conditions, including changes in the availability of capital and interest rate fluctuations;
●			Employee workforce factors including strikes; work stoppages; retirements; absences due to pandemics, accidents, natural disasters or other significant, unforeseeable events; availability of qualified employees or the loss of a key executive;
●			PSE's service territory operates within a region of high demand for skilled workers resulting in significant competition and inflated wages, which puts pressure on PSE's ability to attract, retain and compensate employees;
●			The ability to obtain insurance coverage, the availability of insurance for certain specific losses, including those arising from catastrophic events such as wildfires and the cost of such insurance;
●			Changes in Puget Energy's or PSE's credit ratings, which may have an adverse impact on the availability and cost of capital for Puget Energy or PSE generally;
●			Deteriorating values of the equity, fixed income and other markets which could significantly impact the value of investments of PSE's retirement plan, post-retirement medical benefit plan trusts and the funding of obligations thereunder; and
●			Recent laws proposed or passed by various municipalities in PSE's service territory, including Seattle, seek to reduce or eliminate the use of natural gas in various contexts, such as for space, cooking, and water heating in new commercial and multifamily buildings. Such laws may impact operations due to costs and delays from incremental permitting and other requirements that are outside PSE's control.


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Operating revenue:	Operating revenue:					Operating revenue:
Electric	Electric	$	1,010,160	$	756,377	Electric	$	680,639	$	594,331	$	1,690,799	$	1,350,708
Natural gas	Natural gas	517,258		426,348		Natural gas	270,140		236,054		787,398		662,402
Other	Other	13,769		10,712		Other	12,849		11,991		26,618		22,703
Total operating revenue	Total operating revenue	1,541,187		1,193,437		Total operating revenue	963,628		842,376		2,504,815		2,035,813
Operating expenses:	Operating expenses:					Operating expenses:
Energy costs:	Energy costs:					Energy costs:
Purchased electricity	Purchased electricity	339,816		238,203		Purchased electricity	227,539		212,391		567,355		450,594
Electric generation fuel	Electric generation fuel	150,254		60,644		Electric generation fuel	64,147		46,498		214,401		107,142
Residential exchange	Residential exchange	(23,531)		(23,070)		Residential exchange	(16,181)		(16,783)		(39,712)		(39,853)
Purchased natural gas	Purchased natural gas	235,482		177,333		Purchased natural gas	114,917		92,452		350,399		269,785
Unrealized (gain) loss on derivative instruments, net	Unrealized (gain) loss on derivative instruments, net	192,123		(131,921)		Unrealized (gain) loss on derivative instruments, net	30,802		9,273		222,925		(122,648)
Utility operations and maintenance	Utility operations and maintenance	194,991		170,300		Utility operations and maintenance	174,497		160,933		369,488		331,233
Non-utility expense and other	Non-utility expense and other	16,046		15,419		Non-utility expense and other	13,858		15,299		29,904		30,718
Depreciation & amortization	Depreciation & amortization	188,717		164,576		Depreciation & amortization	187,491		165,676		376,208		330,252
Conservation amortization	Conservation amortization	38,219		30,141		Conservation amortization	26,259		25,906		64,478		56,047
Taxes other than income taxes	Taxes other than income taxes	133,690		121,377		Taxes other than income taxes	92,150		86,544		225,840		207,921
Total operating expenses	Total operating expenses	1,465,807		823,002		Total operating expenses	915,479		798,189		2,381,286		1,621,191
Operating income (loss)	Operating income (loss)	75,380		370,435		Operating income (loss)	48,149		44,187		123,529		414,622
Other income (expense):	Other income (expense):					Other income (expense):
Other income	Other income	13,698		13,164		Other income	17,294		13,231		30,992		26,395
Other expense	Other expense	(2,477)		(3,154)		Other expense	(3,427)		(4,538)		(5,904)		(7,692)
Interest charges:	Interest charges:					Interest charges:
AFUDC	AFUDC	5,608		4,129		AFUDC	5,874		3,974		11,482		8,103
Interest expense	Interest expense	(90,042)		(86,468)		Interest expense	(93,391)		(86,194)		(183,433)		(172,662)
Income (loss) before income taxes	Income (loss) before income taxes	2,167		298,106		Income (loss) before income taxes	(25,501)		(29,340)		(23,334)		268,766
Income tax (benefit) expense	Income tax (benefit) expense	2,198		19,811		Income tax (benefit) expense	11,409		4,156		13,607		23,967
Net income (loss)	Net income (loss)	$	(31)	$	278,295	Net income (loss)	$	(36,910)	$	(33,496)	$	(36,941)	$	244,799


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


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


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


1-16305			PUGET ENERGY, INC. A Washington Corporation 355 110th Ave NE Bellevue, Washington 98004 (425) 454-6363			91-1969407


1-4393			PUGET SOUND ENERGY, INC. A Washington Corporation 355 110th Ave NE Bellevue, Washington 98004 (425) 454-6363			91-0374630


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Utility plant (at original cost, including construction work in progress of $943,177 and $861,801 respectively):
Utility plant (at original cost, including construction work in progress of $1,068,267 and $861,801 respectively):						Utility plant (at original cost, including construction work in progress of $1,068,267 and $861,801 respectively):
Electric plant	Electric plant	$	10,431,708	$	10,300,895	Electric plant	$	10,585,124	$	10,300,895
Natural gas plant	Natural gas plant	4,778,660		4,721,982		Natural gas plant	4,837,939		4,721,982
Common plant	Common plant	1,098,813		1,103,783		Common plant	1,013,304		1,103,783
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(4,448,520)		(4,341,789)		Less: Accumulated depreciation and amortization	(4,414,522)		(4,341,789)
Net utility plant	Net utility plant	11,860,661		11,784,871		Net utility plant	12,021,845		11,784,871
Other property and investments:	Other property and investments:					Other property and investments:
Goodwill	Goodwill	1,656,513		1,656,513		Goodwill	1,656,513		1,656,513
Other property and investments	Other property and investments	318,265		328,535		Other property and investments	314,098		328,535
Total other property and investments	Total other property and investments	1,974,778		1,985,048		Total other property and investments	1,970,611		1,985,048
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	110,974		105,740		Cash and cash equivalents	253,144		105,740
Restricted cash	Restricted cash	20,329		63,045		Restricted cash	36,504		63,045
Accounts receivable, net of allowance for doubtful accounts of $44,228 and $41,962, respectively		603,944		673,236
Accounts receivable, net of allowance for doubtful accounts of $42,666 and $41,962, respectively						Accounts receivable, net of allowance for doubtful accounts of $42,666 and $41,962, respectively	408,215		673,236
Unbilled revenue	Unbilled revenue	263,420		284,022		Unbilled revenue	182,961		284,022

Materials and supplies, at average cost	Materials and supplies, at average cost	136,745		132,172		Materials and supplies, at average cost	141,268		132,172
Fuel and natural gas inventory, at average cost	Fuel and natural gas inventory, at average cost	56,562		94,075		Fuel and natural gas inventory, at average cost	83,849		94,075
Unrealized gain on derivative instruments	Unrealized gain on derivative instruments	125,377		587,029		Unrealized gain on derivative instruments	95,490		587,029
Prepaid expense and other	Prepaid expense and other	42,208		41,940		Prepaid expense and other	55,669		41,940
Power contract acquisition adjustment gain	Power contract acquisition adjustment gain	16,807		16,736		Power contract acquisition adjustment gain	17,033		16,736
Total current assets	Total current assets	1,376,366		1,997,995		Total current assets	1,274,133		1,997,995
Other long-term and regulatory assets:	Other long-term and regulatory assets:					Other long-term and regulatory assets:

Power cost adjustment mechanism	Power cost adjustment mechanism	101,577		112,207		Power cost adjustment mechanism	93,762		112,207

Regulatory assets related to power contracts	Regulatory assets related to power contracts	7,621		7,904		Regulatory assets related to power contracts	6,905		7,904
Other regulatory assets	Other regulatory assets	827,659		784,231		Other regulatory assets	930,731		784,231
Unrealized gain on derivative instruments	Unrealized gain on derivative instruments	64,498		94,621		Unrealized gain on derivative instruments	53,978		94,621
Power contract acquisition adjustment gain	Power contract acquisition adjustment gain	42,525		46,924		Power contract acquisition adjustment gain	39,555		46,924
Operating lease right-of-use asset	Operating lease right-of-use asset	190,640		193,509		Operating lease right-of-use asset	187,508		193,509
Other	Other	196,464		180,204		Other	171,456		180,204
Total other long-term and regulatory assets	Total other long-term and regulatory assets	1,430,984		1,419,600		Total other long-term and regulatory assets	1,483,895		1,419,600
Total assets	Total assets	$	16,642,789	$	17,187,514	Total assets	$	16,750,484	$	17,187,514


		Common Stock			Additional Paid-in Capital								Accumulated Other Comprehensive Income (Loss)									Common Stock							Additional Paid-in Capital								Accumulated Other Comprehensive Income (Loss)
		Shares	Amount				Retained Earnings								Total Equity				Shares					Amount							Retained Earnings								Total Equity
Balance at December 31, 2021	Balance at December 31, 2021	200	$	—			$	3,523,532			$	1,067,216			$	(27,432)				$	4,563,316		Balance at December 31, 2021	200			$	—			$	3,523,532			$	1,067,216			$	(27,432)			$	4,563,316
Net income (loss)	Net income (loss)	—	—		—				278,295				—				278,295			Net income (loss)		—			—				—				278,295				—				278,295
Common stock dividend paid	Common stock dividend paid	—	—		—				(939)				—				(939)			Common stock dividend paid		—			—				—				(939)				—				(939)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—				—				1,831				1,831			Other comprehensive income (loss)		—			—				—				—				1,831				1,831
Balance at March 31, 2022	Balance at March 31, 2022	200	$	—	$	3,523,532			$	1,344,572			$	(25,601)			$	4,842,503		Balance at March 31, 2022		200			$	—			$	3,523,532			$	1,344,572			$	(25,601)			$	4,842,503
Net income (loss)																				Net income (loss)		—			—				—				(33,496)				—				(33,496)
Common stock dividend paid																				Common stock dividend paid		—			—				—				(294)				—				(294)
Other comprehensive income (loss)																				Other comprehensive income (loss)		—			—				—				—				1,831				1,831
Balance at June 30, 2022																				Balance at June 30, 2022		200			$	—			$	3,523,532			$	1,310,782			$	(23,770)			$	4,810,544
Balance at December 31, 2022	Balance at December 31, 2022	200	$	—	$	3,523,532			$	1,465,331			$	(24,774)			$	4,964,089		Balance at December 31, 2022		200			$	—			$	3,523,532			$	1,465,331			$	(24,774)			$	4,964,089
Net income (loss)	Net income (loss)	—	—		—				(31)				—				(31)			Net income (loss)		—			—				—				(31)				—				(31)
Common stock dividend paid	Common stock dividend paid	—	—		—				(28,133)				—				(28,133)			Common stock dividend paid		—			—				—				(28,133)				—				(28,133)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—				—				(658)				(658)			Other comprehensive income (loss)		—			—				—				—				(658)				(658)
Balance at March 31, 2023	Balance at March 31, 2023	200	$	—	$	3,523,532			$	1,437,167			$	(25,432)			$	4,935,267		Balance at March 31, 2023		200			$	—			$	3,523,532			$	1,437,167			$	(25,432)			$	4,935,267
Net income (loss)																				Net income (loss)		—			—				—				(36,910)				—				(36,910)
Common stock dividend paid																				Common stock dividend paid		—			—				—				(14,292)				—				(14,292)
Other comprehensive income (loss)																				Other comprehensive income (loss)		—			—				—				—				(7,085)				(7,085)
Balance at June 30, 2023																				Balance at June 30, 2023		200			$	—			$	3,523,532			$	1,385,965			$	(32,517)			$	4,876,980


Puget Energy and Puget Sound Energy	Three Months Ended March 31,
(Dollars in Thousands)	2023		2022
Allowance for credit losses:
Beginning balance	$	41,962	$	34,958
Provision for credit loss expense 1	9,482		9,767
Receivables charged-off	(7,216)		(3,492)

Total ending allowance balance	$	44,228	$	41,233


Puget Energy and Puget Sound Energy	Six Months Ended June 30,
(Dollars in Thousands)	2023		2022
Allowance for credit losses:
Beginning balance	$	41,962	$	34,958
Provision for credit loss expense	17,334		15,727
Receivables charged-off	(16,630)		(8,343)

Total ending allowance balance	$	42,666	$	42,342


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	Six Months Ended June 30, 2023
Revenue from contracts with customers:	Electric		Natural Gas		Other1		Total
Retail
Residential	$	797,207	$	521,064	$	—	$	1,318,271
Commercial	539,693		234,062		—		773,755
Industrial	62,368		17,283		—		79,651
Other	10,720		—		—		10,720
Wholesale	202,152		—		—		202,152
Transmission and transportation	25,114		10,954		—		36,068
Miscellaneous	10,975		(418)		26,618		37,175
Total revenue from contracts with customers	$	1,648,229	$	782,945	$	26,618	$	2,457,792
Total other revenue2	42,570		4,453		—		47,023
Total operating revenue	$	1,690,799	$	787,398	$	26,618	$	2,504,815


Puget Energy
(Dollars in Thousands)	2024		2025		2026		2027		2028		Thereafter		Total
Remaining performance obligations	$	15,359	$	19,710	$	19,454	$	19,454	$	19,454	$	102,135	$	195,566


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	At March 31, 2023						At December 31, 2022
	Fair Value1		Posted		Contingent		Fair Value1		Posted		Contingent
Contingent Feature	Liability		Collateral		Collateral		Liability		Collateral		Collateral
Credit rating2	$	1,878	$	—	$	1,878	$	3,157	$	—	$	3,157
Requested credit for adequate assurance	28,717		—		—		4,157		—		—
Forward value of contract3	976		6,284		N/A		5,661		56,200		N/A
Total	$	31,571	$	6,284	$	1,878	$	12,975	$	56,200	$	3,157


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	At June 30, 2023						At December 31, 2022
	Fair Value1		Posted		Contingent		Fair Value1		Posted		Contingent
Contingent Feature	Liability		Collateral		Collateral		Liability		Collateral		Collateral
Credit rating2	$	1,229	$	—	$	1,229	$	3,157	$	—	$	3,157
Requested credit for adequate assurance	27,424		—		—		4,157		—		—
Forward value of contract3	5,887		21,891		N/A		5,661		56,200		N/A
Total	$	34,540	$	21,891	$	1,229	$	12,975	$	56,200	$	3,157


Puget Energy	Puget Energy		March 31, 2023				December 31, 2022				Puget Energy		June 30, 2023				December 31, 2022
(Dollars in Thousands)	(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value		(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:	Liabilities:										Liabilities:
Long-term debt (fixed-rate), net of discount1	Long-term debt (fixed-rate), net of discount1	2	$	6,632,116	$	6,377,432	$	6,629,073	$	6,149,797	Long-term debt (fixed-rate), net of discount1	2	$	7,030,528	$	6,601,133	$	6,629,073	$	6,149,797
Long-term debt (variable-rate)	Long-term debt (variable-rate)	2	34,300		34,300		34,300		34,300		Long-term debt (variable-rate)	2	—		—		34,300		34,300
Total liabilities	Total liabilities		$	6,666,416	$	6,411,732	$	6,663,373	$	6,184,097	Total liabilities		$	7,030,528	$	6,601,133	$	6,663,373	$	6,184,097


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	Six Months Ended June 30, 2022
Revenue from contracts with customers:	Electric		Natural Gas		Other1		Total
Retail
Residential	$	713,515	$	451,796	$	—	$	1,165,311
Commercial	483,589		193,254		—		676,843
Industrial	57,784		13,206		—		70,990
Other	9,257		—		—		9,257
Wholesale	37,208		—		—		37,208
Transmission and transportation	21,855		10,534		—		32,389
Miscellaneous	5,169		362		22,703		28,234
Total revenue from contracts with customers	$	1,328,377	$	669,152	$	22,703	$	2,020,232
Total other revenue2	22,331		(6,750)		—		15,581
Total operating revenue	$	1,350,708	$	662,402	$	22,703	$	2,035,813



Puget Energy and Puget Sound Energy	At December 31, 2022
	Gross Amount Recognized in the Statement of Financial Position1		Gross Amounts Offset in the Statement of Financial Position		Net of Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
(Dollars in Thousands)							Commodity Contracts		Cash Collateral Received/Posted		Net Amount
Assets:
Energy derivative contracts	$	681,650	$	—	$	681,650	$	(125,334)	$	—	$	556,316
Liabilities:
Energy derivative contracts	$	143,342	$	—	$	143,342	$	(125,334)	$	(5,661)	$	12,347


Puget Energy and Puget Sound Energy	Puget Energy and Puget Sound Energy	Fair Value At March 31, 2023						Fair Value At December 31, 2022						Puget Energy and Puget Sound Energy	Fair Value At June 30, 2023						Fair Value At December 31, 2022
(Dollars in Thousands)	(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total		(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Assets:	Assets:													Assets:
Electric derivative instruments	Electric derivative instruments	$	53,252	$	82,391	$	135,643	$	218,610	$	119,093	$	337,703	Electric derivative instruments	$	39,846	$	74,436	$	114,282	$	218,610	$	119,093	$	337,703
Natural gas derivative instruments	Natural gas derivative instruments	53,322		910		54,232		342,988		959		343,947		Natural gas derivative instruments	34,502		684		35,186		342,988		959		343,947
Total assets	Total assets	$	106,574	$	83,301	$	189,875	$	561,598	$	120,052	$	681,650	Total assets	$	74,348	$	75,120	$	149,468	$	561,598	$	120,052	$	681,650
Liabilities:	Liabilities:													Liabilities:
Electric derivative instruments	Electric derivative instruments	$	64,525	$	12,657	$	77,182	$	84,105	$	3,015	$	87,120	Electric derivative instruments	$	70,094	$	16,529	$	86,623	$	84,105	$	3,015	$	87,120
Natural gas derivative instruments	Natural gas derivative instruments	49,233		695		49,928		55,136		1,086		56,222		Natural gas derivative instruments	44,031		580		44,611		55,136		1,086		56,222
Compliance obligations	Compliance obligations	79,203		—		79,203		—		—		—		Compliance obligations	138,676		—		138,676		—		—		—
Total liabilities	Total liabilities	$	192,961	$	13,352	$	206,313	$	139,241	$	4,101	$	143,342	Total liabilities	$	252,801	$	17,109	$	269,910	$	139,241	$	4,101	$	143,342


Puget Energy and Puget Sound Energy	Three Months Ended June 30,
(Dollars in Thousands)	2023						2022
Level 3 Roll-Forward Net Asset/(Liability)	Electric		Natural Gas		Total		Electric		Natural Gas		Total
Balance at beginning of period	$	69,734	$	215	$	69,949	$	(6,010)	$	(1,212)	$	(7,222)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings1	(16,296)		—		(16,296)		4,814		—		4,814
Included in regulatory assets / liabilities	—		135		135		—		70		70
Settlements	4,469		(246)		4,223		7,018		271		7,289
Transferred into Level 3	—		—		—		—		—		—
Transferred out of Level 3	—		—		—		94		154		248
Balance at end of period	$	57,907	$	104	$	58,011	$	5,916	$	(717)	$	5,199


Puget Energy and Puget Sound Energy	Six Months Ended June 30,
(Dollars in Thousands)	2023						2022
Level 3 Roll-Forward Net Asset/(Liability)	Electric		Natural Gas		Total		Electric		Natural Gas		Total
Balance at beginning of period	$	116,078	$	(127)	$	115,951	$	(42,752)	$	(2,120)	$	(44,872)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings2	(35,063)		—		(35,063)		43,633		—		43,633
Included in regulatory assets / liabilities	—		44		44		—		485		485
Settlements	(23,325)		17		(23,308)		4,766		595		5,361
Transferred into Level 3	—		—		—		—		—		—
Transferred out of Level 3	217		170		387		269		323		592
Balance at end of period	$	57,907	$	104	$	58,011	$	5,916	$	(717)	$	5,199


Puget Energy and Puget Sound Energy	Three Months Ended March 31,
(Dollars in Thousands)	2023						2022
Level 3 Roll-Forward Net Asset/(Liability)	Electric		Natural Gas		Total		Electric		Natural Gas		Total
Balance at beginning of period	$	116,078	$	(127)	$	115,951	$	(42,752)	$	(2,120)	$	(44,872)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings1	(18,766)		—		(18,766)		38,820		—		38,820
Included in regulatory assets / liabilities	—		(91)		(91)		—		415		415
Settlements	(27,795)		263		(27,532)		(2,254)		324		(1,930)
Transferred into Level 3	—		—		—		—		—		—
Transferred out of Level 3	217		170		387		176		169		345
Balance at end of period	$	69,734	$	215	$	69,949	$	(6,010)	$	(1,212)	$	(7,222)


Puget Energy and Puget Sound Energy	Puget Energy and Puget Sound Energy	Fair Value						Range						Puget Energy and Puget Sound Energy	Fair Value						Range
(Dollars in Thousands)	(Dollars in Thousands)	Assets1		Liabilities1		Valuation Technique	Unobservable Input	Low		High		Weighted Average		(Dollars in Thousands)	Assets1		Liabilities1		Valuation Technique	Unobservable Input	Low		High		Weighted Average
Electric	Electric	$	82,391	$	12,657	Discounted cash flow	Power prices (per MWh)	$	50.46	$	232.35	$	118.08	Electric	$	74,436	$	16,529	Discounted cash flow	Power prices (per MWh)	$	58.45	$	198.55	$	113.50
Natural gas	Natural gas	$	910	$	695	Discounted cash flow	Natural gas prices (per MMBtu)	$	1.33	$	7.58	$	3.91	Natural gas	$	684	$	580	Discounted cash flow	Natural gas prices (per MMBtu)	$	1.14	$	6.63	$	2.57


Puget Energy	Puget Energy	Qualified Pension Benefits				SERP Pension Benefits				Other Benefits				Puget Energy	Qualified Pension Benefits				SERP Pension Benefits				Other Benefits
		Three Months Ended March 31,													Three Months Ended June 30,
(Dollars in Thousands)	(Dollars in Thousands)	2023		2022		2023		2022		2023		2022		(Dollars in Thousands)	2023		2022		2023		2022		2023		2022
Components of net periodic benefit cost:	Components of net periodic benefit cost:													Components of net periodic benefit cost:
Service cost	Service cost	$	4,632	$	6,797	$	71	$	139	$	47	$	55	Service cost	$	4,633	$	6,378	$	71	$	139	$	47	$	55
Interest cost	Interest cost	7,929		6,087		424		313		115		81		Interest cost	8,259		6,044		424		313		115		81
Expected return on plan assets	Expected return on plan assets	(12,652)		(12,777)		—		—		(79)		(99)		Expected return on plan assets	(12,668)		(12,730)		—		—		(79)		(99)
Amortization of prior service cost	Amortization of prior service cost	—		—		73		72		7		6		Amortization of prior service cost	—		—		72		72		7		6
Amortization of net loss (gain)	Amortization of net loss (gain)	(862)		1,628		—		618		(51)		(4)		Amortization of net loss (gain)	(360)		1,563		—		618		(51)		(4)
Net periodic benefit cost	Net periodic benefit cost	$	(953)	$	1,735	$	568	$	1,142	$	39	$	39	Net periodic benefit cost	$	(136)	$	1,255	$	567	$	1,142	$	39	$	39


	Company’s Share				Customers' Share
Annual Power Cost Variability	Over		Under		Over		Under
Over or under collected by up to $17 million	100	%	100	%	—	%	—	%
Over or under collected by between $17 million - $40 million	35		50		65		50
Over or under collected beyond $40 + million	10		10		90		90


Puget Energy and Puget Sound Energy	Amount of Commitments Expiration Per Period
(Dollars in Thousands)	Total		Less than 1 Year		1-3 Years		3-5 Years		Thereafter
Commercial commitments:
PSE revolving credit facility1	$	800,000	$	—	$	—	$	800,000	$	—
Inter-company short-term debt2	30,000		—		—		—		30,000
Total PSE commercial commitments	830,000		—		—		800,000		30,000
Puget Energy revolving credit facility3	800,000		—		—		800,000		—
Less: Inter-company short-term debt elimination	(30,000)		—		—		—		(30,000)
Total Puget Energy commercial commitments	$	1,600,000	$	—	$	—	$	1,600,000	$	—


3(i).1			Amended Articles of Incorporation of Puget Energy , In c .Inc. (incorporated herein by reference to Exhibit 3.1 to Puget Energy’s Current Report on Form 8-K, dated February 6, 2009, Commission File No. 1-16305).
3(i).2			Amended and Restated Articles of Incorporation of Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit 3.2 to Puget Sound Energy’s Current Report on Form 8-K, dated February 6, 2009, Commission File No. 1-4393).
3(ii).1			Amended and Restated Bylaws of Puget Energy, Inc. (i ~~ncorporated~~(incorporated herein by reference to Exhibit 3.3 to Puget Energy's Annual Report on Form 10-K, dated February 25, 2022, Commission File No. 001-16305).
3(ii).2			Amended and Restated Bylaws of Puget Sound Energy, Inc. (i ~~ncorporated~~(incorporated herein by reference to Exhibit 3.4 to Puget Sound Energy's Annual Report on Form 10-K dated February 25, 2022, Commission File No. 001-04393).
22.1*			Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize Securities of the Registrant.
31.1*			Chief Executive Officer certification of Puget Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Principal Financial Officer certification of Puget Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*			Chief Executive Officer certification of Puget Sound Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*			Principal Financial Officer certification of Puget Sound Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			Financial statements from the Quarterly Report on Form 10-Q of Puget Energy, Inc. and Puget Sound Energy, Inc. for the quarter ended ~~March 31,~~June 30, 2023 filed on ~~May 10,~~August 2, 2023 formatted in Inline XBRL: (i) the Consolidated Statement of Income (Unaudited), (ii) the Consolidated Statements of Comprehensive Income (Unaudited), (iii) the Consolidated Balance Sheets (Unaudited), (iv) the Consolidated Statements of Cash Flows (Unaudited), (v) the Consolidated Statements of Common Shareholder's Equity (Unaudited), and (vi) the Notes to Consolidated Financial Statements
104			Cover Page Interactive Data File (embedded within the Inline XBRL document).


		PUGET ENERGY, INC. PUGET SOUND ENERGY, INC.
		/s/ Stacy Smith
		Stacy Smith Controller & Principal Accounting Officer
Date:	~~May 10,~~August 2, 2023