Edgar Filing: PUGET ENERGY INC /WA

3rd 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): November 2, 2006

	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
	10885 - N.E. 4th Street, Suite 1200
	Bellevue, Washington 98004-5591
	(425) 454-6363

1-4393	PUGET SOUND ENERGY, INC.	91-0374630
	A Washington Corporation
	10885 - N.E. 4th Street, Suite 1200
	Bellevue, Washington 98004-5591
	(425) 454-6363

___________

Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12)
o	Pre−commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b))
o	Pre−commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c))

Item 2.02 Results of Operations and Financial Condition

On November 2, 2006, the Company issued the following press release.

Puget Energy Reports Third-Quarter 2006 Earnings

·	Reports income of 14 cents per diluted share
·	Wild Horse Wind Project towers and turbines erected and on schedule for year-end operation

BELLEVUE, Wash. — Puget Energy (NYSE: PSD), the parent of Puget Sound Energy (PSE), Washington state's oldest and largest utility, today reported net income of $15.9 million, or 14 cents per diluted share, for the third quarter 2006 compared to $5.9 million, or 6 cents per diluted share, in the third quarter 2005.

“We are on track to complete our Wild Horse Wind Project and our general rate case by the end of the year,” said Stephen P. Reynolds, chairman, president and CEO of Puget Energy and PSE. “We’re in good shape to meet Puget Energy’s financial and PSE’s operational goals in 2006 and to position us to meet the growing needs of the vibrant Puget Sound region.”

Table 1: Third quarter 2006 vs. third quarter 2005 EPS reconciliation	Cents per diluted share
Puget Energy’s Third Quarter 2005 earnings	$	0.06
Increase in PSE electric margin		0.12
Increase in PSE utility operations and maintenance expense		(0.03	)
Increase in PSE depreciation and amortization expense		(0.03	)
Increase in PSE other income, net of tax		0.03
Impact of dilution from higher common shares outstanding		(0.02	)
Other and Rounding		0.01
Puget Energy's Third Quarter 2006 Earnings	$	0.14

Net income from Puget Energy's regulated electric and gas utility subsidiary, PSE, was $15.6 million, or 13 cents per share, in the third quarter of 2006. This compares to third-quarter 2005 net income of $6.2 million, or 6 cents per share.

PSE Third-Quarter 2006 Highlights:

Key components of PSE’s third-quarter financial performance are highlighted below. All items are pre-tax unless otherwise noted.

·	PSE’s third-quarter 2006 net income increased by $9.4 million, to $15.6 million, from $6.2 million in the third quarter 2005.

·	As of Sept. 30, 2006, PSE provided service to 1,033,170 electric customers and 705,222 natural gas customers in Washington, representing a 1.8 percent and 3 percent increase, respectively, in the last 12 months.

PSE's retail sales volumes of electricity increased by 3.4 percent in the third quarter of 2006 as compared to the same period a year ago, while natural gas sales were essentially unchanged. PSE's energy sales, in particular natural gas volumes, are highly seasonal, with the lowest volumes occurring during summer months.

PSE’s electric margin increased by $22.2 million before taxes in the third quarter of 2006 as compared to the same period in 2005 primarily as a result of higher retail sales volumes and favorable power costs. PSE anticipates that electric margins will decline during the fourth quarter of 2006 due to the seasonal nature of power prices in the Pacific Northwest (power prices are typically lower in the summer months and higher during the winter heating season).

PSE’s electric margin represents electric sales, net of revenue-based taxes, to retail and transportation customers less the cost of generating, purchasing and wheeling electricity.

PSE's utility operations and maintenance expense increased by $6 million in the third quarter of 2006. The increase over third-quarter 2005 levels was due to higher planned maintenance work conducted at PSE's electric generating facilities as well as infrastructure reliability work performed on utility transmission and distribution systems.

PSE’s depreciation and amortization expense increased by $5 million in the third quarter of 2006. The increase was due to additional utility plant placed in service during the last 12 months, including $2.3 million of depreciation expense related to the 150-megawatt Hopkins Ridge wind-powered electric generating facility that became operational in November 2005. PSE is fully recovering the operating and ownership costs of this facility, including depreciation expense, in its electric rates.

·	Other income, net of taxes, increased by $3 million in the third quarter of 2006 compared to the same period a year ago. The increase was primarily due to carrying costs associated with regulatory assets and lower share-based employee compensation costs.

The average number of Puget Energy fully diluted common shares outstanding in the third quarter of 2006 increased to 116.6 million compared to 101 million during the same period in 2005. The increase was primarily the result of a secondary offering of 15 million shares completed in November 2005. The impact of dilution as a result of the higher shares outstanding resulted in an earnings per share reduction of 2 cents per share in the third quarter of 2006.

Puget Energy 2006 Outlook:

Puget Energy re-affirms calendar-year 2006 guidance for PSE of $1.40 to $1.55 per fully diluted share. Puget Energy earnings guidance assumes normal weather patterns occur in PSE's Pacific Northwest service area in the fourth quarter of 2006.

Puget Energy Discontinued Operations

Puget Energy’s results from discontinued operations for the nine months ended both Sept. 30, 2006, and Sept. 30, 2005, reflect the company’s former utility construction services subsidiary, InfrastruX Group (InfrastruX). Puget Energy sold InfrastruX to Tenaska Power Fund on May 7, 2006.

Conference Call:

Puget Energy will provide additional information regarding its third-quarter 2006 results during a conference call for analysts scheduled at 10 a.m. ET (7 a.m. PT) on Friday, Nov. 3, 2006. The call will be broadcast live through a Webcast at www.pugetenergy.com. The Webcast will be archived and available for replay following the call. A tape-recorded replay of the call will be available two hours after completion of the conference call through midnight (ET) on Nov. 17, 2006, by dialing 888-286-8010 and entering the conference identification number: 90553841.

Form 10-Q Quarterly Report for the Third Quarter of 2006

Puget Energy will file its Form 10-Q for the third quarter of 2006 with the Securities and Exchange Commission (SEC) on Nov. 3, 2006, a copy of which will be available through the SEC’s Web site at www.sec.gov or the company’s Web site at www.pugetenergy.com. Investors are encouraged to read the financial statements and disclosures that will be contained in the Form 10-Q filing.

About Puget Energy

Puget Energy (NYSE:PSD) is the parent company of Puget Sound Energy (PSE), a regulated utility providing electric and natural gas service to the growing Puget Sound region of western Washington.

About Puget Sound Energy

Washington state’s oldest and largest energy utility, with a 6,000-square-mile service area stretching across 11 counties, Puget Sound Energy (PSE) serves more than 1 million electric customers and 700,000 natural gas customers, primarily in western Washington. PSE meets the energy needs of its growing customer base through incremental, cost-effective energy efficiency, low-cost procurement of sustainable energy resources, and far-sighted investment in the energy-delivery infrastructure.

CAUTIONARY STATEMENT: Certain statements contained in this news release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, among which include Puget Sound Energy’s (PSE’s) plans relating to utility plant additions and expenses, and factors that could impact Puget Energy’s earnings guidance for the year-end 2006. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect actual results include, among others, governmental policies and regulatory actions, including those of the Washington Utilities and Transportation Commission, and weather conditions. More information about these and other factors that potentially could affect the company’s financial results is included in Puget Energy's and PSE's most recent annual report on Form 10-K, quarterly report on Form 10-Q and in their other public filings filed with the Securities and Exchange Commission. Except as required by law, Puget Energy and PSE undertake no obligation to update any forward-looking statements.

####

PUGET ENERGY -- SUMMARY INCOME STATEMENT
(In thousands, except per-share amounts)
	Unaudited						Unaudited
	Three months ended 9/30¹						Nine months ended 9/30¹
	2006			2005			2006			2005

Operating revenues
Electric	$	399,246		$	375,035		$	1,247,650		$	1,140,545
Gas		119,610			111,042			718,655			594,737
Other		607			4,306			5,115			6,866
Total operating revenues		519,463			490,383			1,971,420			1,742,148
Operating expenses
Purchased electricity		183,723			200,861			623,793			587,983
Electric generation fuel		36,282			21,058			72,158			54,400
Residential exchange		(35,923	)		(34,525	)		(131,226	)		(126,676	)
Purchased gas		68,294			59,151			453,335			359,037
Unrealized net (gain) on derivative instruments		(611	)		477			214			395
Utility operations & maintenance		87,687			81,645			258,653			240,299
Other operations & maintenance		494			745			2,038			2,045
Depreciation & amortization		65,530			60,550			193,959			178,284
Conservation amortization		7,127			5,633			22,638			16,746
Goodwill impairment ⁵		---			---			---			---
Taxes other than income taxes		46,325			44,784			180,236			165,005
Income taxes		8,281			2,476			64,004			54,649
Total operating expenses		467,209			442,855			1,739,802			1,532,167
Operating income		52,254			47,528			231,618			209,981
Other income (deductions):
Charitable foundation funding		---			---			(15,000	)		---
Other income		5,242			1,350			13,453			5,071
Income taxes		(841	)		72			3,956			(887	)
Interest Charges:
AFUDC		5,189			2,680			10,238			6,183
Interest expense		(45,900	)		(45,695	)		(134,129	)		(130,307	)
Mandatorily redeemable securities interest expense		(23	)		(23	)		(68	)		(68	)
Net income from continuing operations		15,921			5,912			110,068			89,973
Income from discontinued operations, net of tax		1			(1	)		51,903			908
Net income before cumulative effect of
accounting change		15,922			5,911			161,971			90,881
Cumulative effect of accounting change		---			---			(89	)		---
Net Income	$	15,922		$	5,911		$	162,060		$	90,881
Common shares outstanding		116,101			100,371			115,910			100,160
Diluted shares outstanding		116,568			100,964			116,311			100,754
Basic earnings per common share before cumulative effect
of accounting change from continuing operations	$	0.14		$	0.06		$	0.95		$	0.90
Basic earnings from discontinued operations		---			---			0.45			0.01
Cumulative effect from accounting change		---			---			---			---
Basic earnings per common share	$	0.14		$	0.06		$	1.40		$	0.91

Diluted earnings per common share before cumulative effect
of accounting change from continuing operations	$	0.14		$	0.06		$	0.95		$	0.89
Diluted earnings from discontinued operations		---			---			0.44			0.01
Cumulative effect from accounting change		---			---			---			---
Diluted earnings per common share²	$	0.14		$	0.06		$	1.39		$	0.90

¹	Partial-year results may not accurately predict full-year performance, as earnings are significantly affected by weather.
²	Diluted earnings per common share include the dilutive effect of securities related to employee compensation plans.

PUGET SOUND ENERGY -- UTILITY OPERATING DATA
	Three months ended 9/30				Nine months ended 9/30
	2006		2005		2006			2005
*Energy sales revenues* ($ in thousands; unaudited)
Electricity
Residential	$	150,168	$	131,719	$	559,277		$	496,517
Commercial		174,670		153,138		516,922			461,073
Industrial		25,963		23,667		76,429			68,902
Other retail sales, including change in unbilled		12,465		6,810		(8,939	)		(7,584	)
Subtotal, retail sales		363,266		315,334		1,143,689			1,018,908
Transportation, including change in unbilled		3,404		1,654		8,779			6,741
Sales to other utilities & marketers		24,309		40,626		56,863			73,818
Other¹		8,267		17,421		38,319			41,078
Total electricity sales		399,246		375,035		1,247,650			1,140,545
Gas
Residential		60,915		57,260		436,023			360,659
Commercial		41,776		37,252		221,000			178,878
Industrial		9,995		9,221		39,399			32,247
Subtotal, retail sales		112,686		103,733		696,422			571,784
Transportation		3,092		3,332		9,807			9,944
Other		3,832		3,977		12,426			13,009
Total gas sales		119,610		111,042		718,655			594,737
Total energy sales revenues	$	518,856	$	486,077	$	1,966,305		$	1,735,282
*Energy sales volumes* (unaudited)
Electricity (in mWh)
Residential		2,007,384		1,957,275		7,810,169			7,515,907
Commercial		2,253,699		2,168,625		6,714,507			6,432,238
Industrial		352,479		352,808		1,036,673			1,014,948
Other, including change in unbilled		69,787		51,992		(272,436	)		(229,002	)
Subtotal, retail sales		4,683,349		4,530,700		15,288,913			14,734,091
Transportation, including change in unbilled		551,214		516,588		1,603,624			1,516,519
Sales to other utilities & marketers		443,440		705,593		1,549,405			1,498,527
Total mWh		5,678,003		5,752,881		18,441,942			17,749,137
Gas (in 000's of therms)
Residential		41,086		43,750		339,576			322,792
Commercial		36,023		36,551		196,740			183,012
Industrial		9,348		10,052		36,914			34,897
Transportation		46,637		44,306		152,096			145,869
Total gas volumes		133,094		134,659		725,326			686,570
*Margins²($ in thousands; unaudited)*
Electric	$	171,798	$	149,627	$	547,767		$	503,605
Gas		37,537		38,793		190,633			171,971
*Weather* (unaudited)
Actual heating degree days		174		212		2,720			2,811
Normal heating degree days³		238		238		3,068			3,068
*Customers served at September 30⁴(unaudited)*
Electricity
Residential		912,354		896,158
Commercial		114,270		112,691
Industrial		3,785		3,898
Other		2,743		2,479
Transportation		18		17
Total electricity customers		1,033,170		1,015,243
Gas
Residential		650,836		630,911
Commercial		51,606		50,671
Industrial		2,659		2,673
Transportation		121		130
Total gas customers		705,222		684,385

Includes sales of non-core gas supplies.

Electric 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.

Seattle-Tacoma Airport statistics reported by NOAA which are based on a 30-year average, 1971-2000. Heating degree days measure how far the daily average temperature falls below 65 degrees.

⁴

Customers represents average served at month end.

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.

	By: /s/ James W. Eldredge
Dated: November 2, 2006	James W. Eldredge Vice President, Corporate Secretary and Chief Accounting Officer