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

 

 

 

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))

 

·	First quarter 2007 income of 68 cents per diluted share

·	Puget Sound Energy first quarter income of 67 cents per diluted share

·	Calendar year 2007 guidance of $1.50 to $1.65 per diluted share re-affirmed

·	As of March 31, 2007, PSE provided service to 1,043,300 electric customers and 718,000 natural gas customers, representing a 2.3 percent and 2.7 percent increase, respectively, in the last 12 months, reflecting favorable economic conditions in the Pacific Northwest.

·	Retail electric and natural gas sales volumes increased by 2.9 percent and 3.9 percent, respectively, reflecting customer growth and colder average temperatures during first quarter 2007 compared to 2006. First quarter 2007 heating degree days were near historic averages for the Pacific Northwest.

·

Electric margin declined by $5.2 million in the first quarter 2007 compared to 2006. Higher electric sales volumes and increased rate recovery were offset by under-recovery of power costs totaling $13.6 million. PSE is allowed to recover power costs through the Power Cost Adjustment (PCA) mechanism on a shared basis with customers if actual costs are higher than the normalized level established in rates once certain thresholds are met. Power cost recovery is seasonal, with under-recovery normally in the first and fourth quarters and over-recovery in the second and third quarters. Power cost under-recovery did not impact first quarter 2006 electric margin because PSE’s maximum exposure under the PCA mechanism was limited to a cap in effect during the period.

·	Natural gas margin increased in the first quarter 2007 by $10.2 million. The increase was primarily due to a 3.9 percent increase in natural gas sales volumes and the impact of a 2.8 percent rate increase that became effective Jan. 13, 2007.

·

Utility operations and maintenance expense in the first quarter 2007 increased by $10.8 million over prior year levels largely due to the addition of PSE's electric generating Wild Horse Wind Facility (Wild Horse) placed in-service in December 2006 and the higher expenses related to operating and maintaining PSE’s energy delivery system. Wild Horse operations and maintenance expense is fully recovered in rates.

·	Depreciation and amortization expense in the first quarter 2007 increased by $5.7 million compared to prior year levels due to additional utility plant placed in service over the last twelve months.

·

In February 2007, PSE acquired the Goldendale Generation Station (Goldendale) through a bankruptcy auction process from a subsidiary of the Calpine Corporation for $120 million. Placed in service on Feb. 21, 2007, Goldendale is a 277 megawatt (MW) combined cycle natural gas-fired facility located in Washington State.

·	First quarter 2007 financial results reflect net income of $5.7 million from PSE's non-utility real estate investment and development business compared to $2.2 million in the first quarter of 2006.

·

First quarter 2007 interest expense, net of the debt portion of Allowance for Funds During Construction (AFUDC), increased by $7.2 million compared to prior year levels due to higher debt outstanding. At March 31, 2007 debt outstanding totaled $3.2 billion compared to March 31, 2006 levels of $2.5 billion reflecting additional borrowings related to Wild Horse and Goldendale, a pre-payment associated with a long-term power purchase agreement, and system restoration expense incurred as a result of a severe December 2006 wind storm.

·

PSE recorded an unrealized pre-tax gain of $5.8 million or 3 cents per share resulting from the reversal of a loss reserve related to a natural gas fuel supply contract for one of PSE's electric generating facilities. This natural gas fuel supply contract will be marked-to-market on a quarterly basis until the contract terminates in June 2008.

·

Puget Energy's effective federal income tax rate in the first quarter 2007 was 30.0 percent compared to 35.3 percent in 2006. The company's 2007 federal income tax expense was reduced by higher tax credits associated with the production of wind-powered energy. These additional credits were made available due to the addition of Wild Horse, placed in service in December 2006. PSE's electric customers receive the benefit of these tax credits through lower rates.

 

 

 

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	PUGET ENERGY, INC.
	PUGET SOUND ENERGY, INC.
	By: /s/ James W. Eldredge
Dated: April 26, 2007	James W. Eldredge Vice President, Corporate Secretary and Chief Accounting Officer