8k 1st Quarter Earnings Release

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


FORM 8-K



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

Date of report (Date of earliest event reported): April 23, 2003



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


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


1-4393 PUGET SOUND ENERGY, INC. 91-0374630
  A Washington Corporation  
  411 - 108th Avenue N.E.  
  Bellevue, Washington 98004-5515.  

ITEM 9. Regulation FD Disclosure

On April 23, 2003 the Company issued the following press release:

         Puget Energy reports first-quarter 2003 earnings
        Bellevue, Wash. (April 23, 2003) — Puget Energy (NYSE: PSD) today reported 2003 first-quarter income for common stock of $42.7 million, or 45 cents per diluted share compared with $24.5 million or 28 cents per diluted share for the first quarter in 2002. The improvement in first quarter 2003 results can be attributed to the increase in electric and gas rate tariffs, which took effect in 2002 and to customer growth. The first quarter of 2002 suffered from under-recovery of power-supply costs prior to electric rate relief effective in the second quarter of 2002.
        “Our financial results at March 31 reflect solid performance and the fundamentals of our business are sound. However, temperatures that were nearly 11 percent warmer-than-normal in the first quarter of 2003 lowered consumption of electricity and natural gas, reducing earnings for our regulated utility subsidiary Puget Sound Energy (PSE) by approximately 10 cents a share below the level we had expected,” said Puget Energy President and CEO Stephen P. Reynolds. “Since the exceptionally warm temperatures caused earnings to fall short of our expectations, we are taking a more cautious stand on our outlook for the full-year 2003, revising it downwards by 10 cents a share to a projection of $1.40-$1.50 a share for Puget Energy.
        In 2004, we expect our earnings to rebound strongly, given that our utility’s exposure to variability in power-supply costs will be mitigated under its Power Cost Adjustment (PCA) mechanism and the unusually warm temperatures are not expected to recur,” stated Reynolds.
        The PCA mechanism allows PSE to recover power-supply costs on a shared basis with its customers, if PSE’s costs to provide customers’ electricity increase from a normalized level established in its electric rates. All significant variable power-supply cost drivers are included in the PCA mechanism (hydroelectric generation variability, market price variability for purchased power and surplus power sales, natural gas and coal fuel price variability, generation unit forced outage risk and wheeling cost variability). Under the PCA, PSE’s cumulative maximum pre-tax earnings exposure due to power-supply cost variations over the four year period ending June 30, 2006 is limited to $40 million plus 1% of the excess. The company previously reported on January 15, 2003, that it expects to reach the $40 million cumulative cap under the PCA mechanism by the end of 2003, as a result of drought conditions in the Pacific Northwest region. The drought lowers hydroelectric production, resulting in higher power-supply costs to serve electricity to the utility’s customers. Both the updated estimate and the January estimate of Puget Energy’s full-year 2003 earnings guidance include the impact of absorbing approximately 25 cents a share of higher power-supply costs in 2003 due to the drought, before reaching the cumulative cap under the PCA mechanism.

First-quarter 2003 highlights

•   Puget Sound Energy (PSE) reported first-quarter 2003 earnings of $46.2 million, or 49 cents per share, compared with $23.7 million, or 27 cents per share, for the same period in 2002.

•   During the first three months of 2003, the number of gas customers in PSE’s service territory grew by 3.0 percent to approximately 629,000 and electric customers increased by 1.9 percent to approximately 964,000 customers over the same period in 2002.

•   PSE’s electric margin for the first quarter of 2003 increased by $48.5 million primarily due to a 4.6 percent general tariff rate increase which took effect on July 1, 2002 and customer growth of 1.9 percent compared with the first quarter in 2002. PSE’s electric margin represents electric sales to its 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. In the first quarter of 2002, electric margin was down substantially, mainly due to the under-recovery of power-supply costs for PSE, prior to rate relief effective in the second quarter of 2002.

•   PSE’s gas margin for the first quarter of 2003 declined by $0.7 million due to warm weather compared with the same period in 2002. PSE’s gas margin represents gas sales to its retail and transportation customers less the cost of gas purchased, including gas transportation costs to bring gas to PSE’s service territory.

•   Weather during the first three months of 2003 was unusually warm in PSE’s service territory, with 10.7 percent fewer heating degree days than normal. This resulted in a decline of 2.8 percent in retail kilowatt-hour sales and a 12.8 percent decline in natural gas therm sales in the first quarter of 2003 compared with the same period in 2002.

•   PSE’s cumulative variable power cost underrecovery for the PCA mechanism period which began on July 1, 2002, was $16.7 million at March 31, 2003. The company forecasts the power cost underrecovery to reach the $40 million cumulative cap in the fourth quarter of 2003.

•   In 2004, PSE should not be impacted by any increases in variable power-supply costs, whether stemming from adverse hydrological conditions, changes in market prices, higher fuel costs, forced outages or other causes, given that it expects to reach the $40 million cumulative cap under its PCA mechanism by the end of 2003.

•   Utility operations and maintenance expenses for the first quarter of 2003 reflect approximately $1.6 million of increased electric-service restoration costs related to storm damage and $2.7 million of low-income program pass-through costs.

•   Interest expense declined $2.7 million for the first quarter of 2003 reflecting lower short-term and long-term debt outstanding compared with the same period in 2002.

•   PSE’s common equity ratio increased to 37.0 percent at Mar. 31, 2003 from 36.1 percent at Dec. 31, 2002. PSE is well ahead of the requirement in its rate settlement to rebuild its common equity ratio to at least 39 percent over a 3½- year period, with milestones of 34 percent, 36 percent and 39 percent at the end of 2003, 2004 and 2005 respectively.

•   InfrastruX Group (InfrastruX), which provides new construction, maintenance and repair services to electric and natural gas utilities, incurred a loss of $3.4 million net of minority interest, or 4 cents per share, for the first of quarter 2003. This compares with earnings of $1.0 million, or $0.01 per share, for the same period in 2002. In the first quarter of 2002, InfrastruX benefited from overhead power line restoration work due to ice-storms in the Southwest. The higher than expected loss in the first quarter of 2003 is attributable to severe winter weather and snow accumulation in the Northeast and Midwest and to extremely wet winter conditions in the South, resulting in a significant slowdown in utility construction work. The construction services business is seasonal, with highest revenues in the second and third quarters of the year.

FIRST-QUARTER 2003 EARNINGS ANALYST TELECONFERENCE
        A conference call for analysts to discuss with management the first-quarter results and the outlook for future performance is scheduled at 10 a.m. EDT (7 a.m. PDT) Thursday, April 24, 2003. The call will be broadcast live through a Web cast at www.pse.com by accessing the Investors section of the Web site. The Web cast will be archived and available for replay following the live call. A recorded replay of the conference call also will be available two hours after completion of the conference on April 24 through midnight (EDT) Monday, April 28, 2003. To access the recording, dial 1-888-286-8010, and enter the conference I.D. number 69582192.
        Puget Energy is an energy services holding company that conducts all of its operations through its subsidiaries, Puget Sound Energy (PSE) and InfrastruX Group. PSE is a regulated utility company that generates, purchases and sells electricity and purchases, transports and sells natural gas. The service territory of PSE covers approximately 6,000 square miles, principally in the Puget Sound region of Washington state. InfrastruX specializes in contracting services to other gas and electric utilities primarily in the Midwest, Texas and the eastern United States.

_________________

Certain statements contained in this news release are “forward-looking statements” within the meaning of the federal securities laws. Although Puget Energy and Puget Sound Energy believe that the expectations reflected in such statements are reasonable, there can be no assurance that the expected results will be achieved. For additional information concerning certain assumptions, risks, and uncertainties involved in the forward-looking statements contained herein, please refer to Puget Energy’s reports on file with the SEC.

PUGET ENERGY -- SUMMARY INCOME STATEMENT
(In thousands, except per-share amounts) 		                           
  Unaudited Unaudited
  Three months ended 3/311 Twelve months ended 3/31
        2003     20022     2003     20022  
Operating revenues   
    Electric   $ 416,997   $ 363,249   $ 1,419,633   $ 1,559,098  
    Gas    187,788    314,491    570,453    825,292  
    Other    71,176    61,320    339,102    216,995  
       Total operating revenues    675,961    739,060    2,329,188    2,601,385  
Operating expenses   
    Purchased electricity    240,436    181,987    703,820    806,076  
    Purchased gas    86,954    204,798    287,173    525,619  
    Electric generation fuel    15,074    65,180    63,431    244,201  
    Residential exchange    (52,679 )  (42,747 )  (159,902 )  (101,870 )
    Unrealized (gain) loss on derivative instruments    (477 )  (11,497 )  (592 )  (49,145 )
    Utility operations & maintenance    70,055    65,941    290,334    270,550  
    Other operations & maintenance    70,521    54,621    289,051    181,212  
    Depreciation & amortization    57,944    55,949    230,688    220,361  
    Conservation amortization    7,722    2,165    23,059    7,057  
    Taxes other than income taxes    57,660    65,157    207,972    207,994  
    Income taxes    31,366    20,935    69,671    46,177  
       Total operating expenses    584,576    662,489    2,004,705    2,358,232  
Operating income     91,385    76,571    324,483    243,153  
Other income (net of tax)    704    384    5,778    12,968  
Income before interest charges & minority interest     92,089    76,955    330,261    256,121  
Interest charges    47,665    50,398    193,643    195,023  
Minority interest    (332 )  79    456    79  
Net income before cumulative effect of   
    accounting change     44,756    26,478    136,162    61,019  
FAS-143 transition adjustment loss (net of tax)    169    --    169    --  
Net Income     44,587    26,478    135,993    61,019  
Less preferred stock dividend accruals    1,867    2,012    7,686    8,267  
Income for common stock    $ 42,720   $ 24,466   $ 128,307   $ 52,752  
Common shares outstanding     93,740    87,175    89,906    86,729  
Diluted shares outstanding     94,172    87,408    90,328    86,958  
Basic earnings per common share before  
    cumulative effect of accounting change   $ 0.46   $ 0.28   $ 1.43   $ 0.61  
Cumulative effect of accounting change    --    --    --    --  
Basic earnings per common share    $ 0.46   $ 0.28   $ 1.43   $ 0.61  
Diluted earnings per common share before  
    cumulative effect of accounting change   $ 0.45   $ 0.28   $ 1.42   $ 0.61  
Cumulative effect of accounting change    --    --    --    --  
Diluted earnings per common share3    $ 0.45   $ 0.28   $ 1.42   $ 0.61  

1 Partial-year results may not accurately predict full-year performance, as earnings are significantly affected by weather.
2Certain amounts previously reported have been reclassified to conform with current year presentations with no effect on net income.
3Diluted earnings per common share include the dilutive effect of securities related to employee compensation plans.


PUGET SOUND ENERGY1--UTILITY OPERATING DATA
  Three months ended 3/31 Twelve months ended 3/31
        2003     2002     2003     2002  
Energy sales revenues ($ in thousands; unaudited)                    
    Electricity   
     Residential   $ 190,671   $ 203,706   $ 609,465   $ 600,785  
     Commercial    147,548    143,400    545,033    512,775  
     Industrial    23,135    23,632    91,423    195,460  
     Other retail sales2     (13,618 )  (15,849 )  7,797    (9,685 )
       Subtotal, retail sales    347,736    354,889    1,253,718    1,299,335  
     Transportation2     3,174    3,563    15,162    6,100  
     Sales to other utilities & marketers3    57,219    17,913    127,594    310,321  
     Other4     8,868    (13,116 )  23,159    (56,658 )
       Total electricity sales    416,997    363,249    1,419,633    1,559,098  
    Gas   
     Residential    124,492    200,288    352,773    498,629  
     Commercial    49,631    95,100    164,047    256,243  
     Industrial    7,223    13,368    28,975    48,190  
       Subtotal, retail sales    181,346    308,756    545,795    803,062  
     Transportation    3,511    2,931    13,431    11,887  
     Other    2,931    2,804    11,227    10,343  
       Total gas sales    187,788    314,491    570,453    825,292  
    Total energy sales revenues    $ 604,785   $ 677,740   $ 1,990,086   $ 2,384,390  
Energy sales volumes (Unaudited)   
    Electricity (in mWh)   
     Residential    3,101,106    3,234,835    9,711,797    9,640,944  
     Commercial    2,113,957    2,110,029    8,016,467    7,916,510  
     Industrial    344,520    346,042    1,414,584    2,147,556  
     Other2     (219,923 )  (198,840 )  (33,054 )  54,020  
       Subtotal, retail sales    5,339,660    5,492,066    19,109,794    19,759,030  
     Transportation2     491,578    553,874    2,244,785    917,700  
     Sales to other utilities & marketers3     1,281,010    568,483    4,179,098    4,151,220  
       Total mWh    7,112,248    6,614,423    25,533,677    24,827,950  
    Gas (in 000's of therms)   
     Residential    187,568    217,621    470,619    517,807  
     Commercial    91,696    113,630    266,286    302,386  
     Industrial    13,863    15,684    48,861    56,704  
     Transportation    57,281    54,743    210,390    193,970  
       Total gas volumes    350,408    401,678    996,156    1,070,867  
Margins5 ($ in thousands; unaudited)   
    Electric    $ 172,536   $ 124,065   $ 662,788   $ 487,001  
    Gas     81,629    82,359    224,365    226,211  
Customers served6 (Unaudited)   
    Electricity   
     Residential    850,389    837,663    842,908    830,169  
     Commercial    107,309    101,992    105,767    100,353  
     Industrial    3,937    3,949    3,948    3,989  
     Other    2,027    1,866    1,972    1,808  
     Transportation    16    15    16    11  
       Total electricity customers    963,678    945,485    954,611    936,330  
    Gas   
     Residential    578,636    561,065    569,296    552,360  
     Commercial    47,088    46,514    46,682    46,756  
     Industrial    2,728    2,793    2,753    2,819  
     Transportation    137    110    128    111  
       Total gas customers    628,589    610,482    618,859    602,046  
Weather (Unaudited)   
    Actual heating degree days    1,794    2,095    4,645    5,109  
    Normal heating degree days    2,008    2,008    4,905    4,905  

1Puget Sound Energy is the electric and natural gas utility subsidiary of Puget Energy.

2 Includes change in unbilled revenues.

3 Includes optimization transactions reported net in the income statement as required by EITF 02-03, effective after June 30, 2002. Prior periods have been reclassified to conform with the presentation.

4Includes Conservation Trust collection and sales of non-core gas supplies.

5Electric margin is 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. Gas margin is gas sales to retail and transportation customers less the cost of gas purchased, including gas transportation costs, to bring gas to PSE’s service territory.

6 Quarterly data represents average served during March; Twelve months ended data represents average for the 12 months ended.


PUGET ENERGY -- SEGMENT RESULTS
(In thousands) 		                           
 
Three months ended 3/31/03 (Unaudited) 		     Puget Sound
Energy 		     
InfrastruX 		     
Other1 		    Puget Energy
Total 		 
Revenues     $ 604,785   $ 70,677   $ 499   $ 675,961  
Depreciation and amortization       54,532     3,359     53     57,944  
Income taxes       34,497     (3,096 )   (35 )   31,366  
Operating income       93,815     (2,479 )   49     91,385  
Interest charges, net of AFUDC       46,356     1,309     --     47,665  
Net income       47,981     (3,443 )   49     44,587  
Goodwill, net       --     125,405     --     125,405  
Total assets       5,206,704     311,721     127,824     5,646,249  
Three months ended 3/31/02 (Unaudited)   
Revenues   $ 677,740   $ 60,761   $ 559   $ 739,060  
Depreciation and amortization       53,674     2,271     4     55,949  
Income taxes       20,089     635     211     20,935  
Operating income     74,474    1,986    111    76,571  
Interest charges, net of AFUDC     49,343    1,055    --    50,398  
Net income     25,619    1,005    (146 )  26,478  
Twelve months ended 3/31/03 (Unaudited)   
Revenues     $ 1,990,086   $ 329,444   $ 9,658   $ 2,329,188  
Depreciation and amortization       215,954     14,514     220     230,688  
Income taxes       64,142     2,932     2,597     69,671  
Operating income       308,853     11,130     4,500     324,483  
Interest charges, net of AFUDC       187,873     5,770     --     193,643  
Net income       126,407     5,086     4,500     135,993  
Twelve months ended 3/31/02 (Unaudited)   
Revenues     $ 2,384,390   $ 206,007   $ 10,988   $ 2,601,385  
Depreciation and amortization       210,897     9,449     15     220,361  
Income taxes       39,526     4,134     2,517     46,177  
Operating income       230,400     10,243     2,510     243,153  
Interest charges, net of AFUDC       190,253     4,602     168     195,023  
Net income       45,337     4,090     11,592     61,019  
Goodwill at 12/31/02     $ --   $ 125,555   $ --   $ 125,555  
Total assets at 12/31/02       5,208,487     319,248     129,756     5,657,491  

1 Includes the non-regulated subsidiaries of Puget Sound Energy and miscellaneous holding company expenses. The principal non-regulated subsidiary of PSE is a real estate development company.


PUGET SOUND ENERGY-CAPITALIZATION
(In thousands) (Unaudited)
At March 31,
2003 		At December 31,
2002
  Amount % Amount %
Short-term debt   $ 34,269 0.9 % $ 30,340 0.7 %
Long-term debt, including current maturities     2,067,296 52.6 %   2,093,832 53.0 %
Preferred stock     95,662 2.4 %   103,162 2.6 %
Corporation obligated, madatorily redeemable
  securities of subsidiary trust holding solely
  junior subordinated debentures of the corporation		     280,250


 7.1


 %


   300,000


 7.6


 %


Common equity     1,455,960 37.0 %   1,426,121 36.1 %
Total capitalization including short-term debt   $ 3,933,437 100.0 % $ 3,953,455 100.0 %
PUGET SOUND ENERGY
Unrestricted cash 		  $ 145,138     $ 161,475    

SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

  PUGET ENERGY, INC.

  PUGET SOUND ENERGY, INC.


  /s/ James W. Eldredge
  James W. Eldredge
  Corporate Secretary and Chief Accounting Officer
Date: April 23, 2003