The Company's costs and expenses could increase as a result of inflationary pressures. Such inflationary pressures could result in increased labor, commodities, materials and supplies, outside services and capital costs, among others, that may not be offset by an increase in revenues, which would adversely affect the Company’s results of operations. While regulatory mechanisms exist to mitigate the impacts of inflation on commodity prices, the Company cannot assure that rising inflation will not have an adverse effect on the Company's results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The principal electric generating plants and underground natural gas storage facilities owned by PSE are described under Item 1, Business – Electric Supply and Natural Gas Supply. PSE owns its transmission and distribution facilities and various other properties. Substantially all properties of PSE are subject to the liens of PSE’s mortgage indentures. The Company’s corporate headquarters is housed in a leased building located in Bellevue, Washington.

ITEM 3. LEGAL PROCEEDINGS

Effective in November 2020, the SEC Final Rule Release No. 33-10825, "Modernization of Regulation S-K Items 101, 103, and 105" updated the disclosure threshold for environmental proceedings. Prior to this rule, environmental proceedings to which the government is a party were required to be disclosed if the proceeding was expected to result in sanctions of $100,000 or more. The rule increases the quantitative threshold to $300,000, but also permits registrants to elect a higher threshold, limited to the lesser of $1 million or 1% of consolidated current assets, if the registrant determines that such threshold is more reasonably designed to result in the disclosure of material environmental proceedings. Given the size of the Company's operations, PSE elected a threshold of $1 million. For information on litigation or legislative rulemaking proceedings, see Note 15, "Litigation" to the consolidated financial statements included in Item 8 of this report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All of the outstanding shares of Puget Energy’s common stock, the only class of common equity of Puget Energy, are held by its direct parent Puget Equico LLC (Puget Equico), which is an indirect wholly-owned subsidiary of Puget Holdings, and are not publicly traded. The outstanding shares of PSE’s common stock, the only class of common equity of PSE, are held by Puget Energy and are not publicly traded.

The payment of dividends on PSE common stock to Puget Energy is restricted by provisions of certain covenants applicable to long-term debt contained in PSE’s mortgage indentures in addition to terms of the Washington Commission merger order. Puget Energy’s ability to pay dividends is also limited by the merger order issued by the Washington Commission as well as by the terms of its credit facilities. For further discussion, see Item 1A, "Risk Factors"- Risks Relating to Puget Energy’s Corporate Structure and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in this report.

From time to time, when deemed advisable and permitted, PSE and Puget Energy pay dividends on its common stock. During ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, PSE paid dividends to its parent, Puget Energy, and Puget Energy paid dividends to its parent, Puget Equico, in the amounts shown in Puget Energy's and PSE's Consolidated Statements of Common Shareholder's Equity, included in ~~this Form 10-K.~~

~~ITEM 6. SELECTED FINANCIAL DATA~~

~~The following tables show selected financial data. This information should be read in conjunction with the audited consolidated financial statements and the related notes found in~~ Item 8, "Financial Statements and Supplementary Data" ~~along with the information included in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation"~~ of this ~~Form 10-K.~~report.

Puget Energy
Summary of Operations Year Ended December 31,
(Dollars in Thousands) 2020 2019 2018 2017 2016
Operating revenue $ 3,326,450 $ 3,401,130 $ 3,346,496 $ 3,460,276 $ 3,164,301
Operating income 507,824 519,008 554,058 739,106 765,474
Net income 182,717 210,708 235,622 175,194 312,899
Total assets at year-end $ 15,042,965 $ 14,659,863 $ 14,098,861 $ 13,690,789 $ 13,266,380
Long-term debt 5,892,440 5,920,325 5,672,491 5,207,929 5,104,073
Junior subordinated notes — — — 250,000 250,000
Finance lease obligations 795 1,480 1,315 1,129 645
Operating lease obligations 180,184 190,189 — — —

ITEM 6. [Reserved]

Puget Sound Energy
Summary of Operations Year Ended December 31,
(Dollars in Thousands) 2020 2019 2018 2017 2016
Operating revenue $ 3,326,450 $ 3,401,130 $ 3,346,496 $ 3,460,276 $ 3,164,618
Operating income 509,192 522,615 557,136 740,595 770,552
Net income 274,280 292,924 317,162 320,054 380,581
Total assets at year-end $ 13,038,425 $ 12,625,045 $ 12,097,523 $ 11,731,706 $ 11,297,080
Long-term debt 4,338,044 4,336,142 3,894,860 3,499,911 3,497,298
Junior subordinated notes — — — 250,000 250,000
Finance lease obligations 795 1,480 1,315 1,129 645
Operating lease obligations 180,184 190,189 — — —

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to promote understanding of the results of operations and financial condition, is provided as a supplement to, and should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report on Form 10-K. This section generally discusses the results of operations and changes in financial condition for 2022 compared to 2021. For discussion related to the results of operations and changes in financial condition for 2021 compared to 2020 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2021 Form 10-K, which was filed with the United States Securities and Exchange commission (SEC). The discussion contains forward-looking statements that involve risks and uncertainties, such as Puget Energy, Inc. (Puget Energy) and Puget Sound Energy, Inc. (PSE) objectives, expectations and intentions. Words or phrases such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “future,” “intends,” “may,” “might,” “plans,” “potential,” “predicts,” “projects,” “should,” “will likely result,” “will continue” and similar expressions are intended to identify certain of these forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Puget Energy’s and PSE’s actual results could differ materially from results that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Forward-Looking Statements” and “Risk Factors” included elsewhere in this report. Except as required by law, neither Puget Energy nor PSE undertakes any obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in Puget Energy’s and PSE’s other reports filed with the ~~U.S. Securities and Exchange Commission (SEC)~~SEC that attempt to advise interested parties of the risks and factors that may affect Puget Energy’s and PSE’s business, prospects and results of ~~operations, including the COVID-19 pandemic.~~operations.

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, currently under construction.~~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 ~~Canada Pension Plan Investment Board, the~~ British Columbia Investment Management Corporation (BCIMC), the Alberta Investment Management Corporation (AIMCo), Ontario Municipal Employee Retirement System (OMERS) ~~and PGGM Vermogensbeheer B.V. The sale of previous owners'~~, ~~Macquarie Infrastructure Partners and Macquarie Capital Group Limited, shares to OMERS,~~ PGGM Vermogensbeheer B.V., ~~AIMCo and BCIMC was approved by various federal and state agencies, including that of the~~Macquarie Washington ~~Utilities and Transportation Commission (Washington Commission)~~Clean Energy Investment, L.P., and ~~closed on April 17th, 2019.~~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.

~~COVID-19 Update~~

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a pandemic by the World Health Organization. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. On January 21, 2020, authorities confirmed the first COVID-19 case in Washington State, followed by the first confirmed virus-related death in Washington State on February 29, 2020, in each case, in the Company’s service territory.

In response to the outbreak and business disruption, the Company prioritized the health and safety of our customers, employees, and the communities in our service territory implementing a number of changes including the following: a) not disconnecting customers for non-payment; b) receiving Washington Commission approval to waive late fees; c) filing a motion with the Washington Commission to waive the statutory deadline for the Company’s GRC for up to 60 days, from May 20, 2020, until July 20, 2020; d) establishing a Crisis-Affected Customer Assistance Program (CACAP); and e) implementing social distancing measures for our employees and using remote workforce where possible. PSE continues to serve our customers and has implemented business continuity and emergency response plans and enhanced safety protocols to continue to provide electricity and natural gas services to customers and otherwise support the Company’s operations.

We are continuing to monitor developments involving our workforce, customers, electricity and natural gas demand, commodity costs and suppliers but cannot predict the impact of COVID-19 on our results of operations, financial condition and ongoing operations. An extended slowdown of the United States' economic growth, demand for commodities and/or material changes in governmental policy could result in lower economic growth and lower demand for electricity and natural gas in our service territory. Moreover, such extended slowdown will affect the ability of various customers, contractors, suppliers and other business partners to fulfill their obligations, which could have a material adverse effect on our results of operations, financial condition and ongoing operations.

Due to continued stay at home orders, work from home mandates, and business disruptions caused by COVID-19, electric and natural gas loads decreased 1.6% and 2.8%, respectively, during the year ended December 31, 2020. Residential electric and natural gas loads during the year ended December 31, 2020, increased 2.9% and decreased 0.9%, respectively due to COVID-19. In contrast, COVID-19 impacts on commercial electric and natural gas loads resulted in decreases of 7.4% and 10.7%, respectively, during the year ended December 31, 2020. Revenue reductions are partially offset by the effects of decoupling and reduced electric and natural gas supply costs. Decoupling revenue recognized during the year was $49.6 million and $18.9 million for electric and natural gas, respectively as compared to $15.7 million and $2.3 million in the same period of 2019 for electric and natural gas, respectively. The Company anticipates that electric and natural gas loads will continue to be impacted due to continued work place lock downs, work at home mandates, other government mandated quarantines, economic recession, and resurgence of the COVID-19 virus. Risks to these assumptions include the duration, severity, and potential resurgence of the virus, government proclamations related to managing public health, and fiscal stimulus policies to support economic recovery. Industrial customers, who represent 4.0% of the Company's total retail revenue and are generally transmission and transportation services which are not volumetric in nature, are not expected to be materially impacted.

Due to business disruptions caused by the COVID-19 pandemic, the Company has incurred increased costs and partially offsetting cost savings that have been immaterial through the period ended December 31, 2020. To the extent that the Company incurs material, unexpected expenses associated with the COVID-19 pandemic, such as increased uncollectible accounts receivable, the Company will continue to explore regulatory accounting policies and rate recovery mechanisms to address any negative impacts to financial results. On September 3, 2020, the Company filed an accounting petition with the Washington Commission, requesting authorization to defer the costs and foregone revenue net of offsets associated with the COVID-19 public health emergency. On November 6, 2020, PSE filed a revised petition which was approved on December 10, 2020 by the Washington Commission granting PSE's accounting petition in part by allowing the deferral of COVID-19 incremental costs and foregone revenue net of offsets. As of December 31, 2020, PSE deferred no costs specific to COVID-19.

On March 27, 2020, the U.S. Government enacted the CARES Act, which provided approximately $2 trillion of economic relief and stimulus to support the national economy during the COVID-19 pandemic. This package included support for individuals, large corporations, small business, and health care entities, among other affected groups. Among other provisions, the CARES Act includes modifications to corporate income tax provisions, including temporary suspension of certain payment requirements for the employer portion of social security taxes. As a result of these modifications, the Company deferred payroll taxes totaling $13.7 million as of December 31, 2020.

Factors affecting PSE's performance are set forth in this “Overview” section, as well as in other sections of the Management's Discussion and Analysis.

Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), as well as return on equity (ROE) excluding unrealized gains and losses on derivative instruments (net income plus unrealized losses and/or minus unrealized gains on derivative instruments divided by average common equity) that is considered a “non-GAAP financial ~~measure.”~~measure”. 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 ~~departure from GAAP presentation.~~presentation that is not defined by GAAP. The Company believes that its return on average of monthly averages (AMA) equity, also a non-GAAP measure, is a ~~more~~ suitable metric for comparing ROE across years and is a ~~more accurate~~relevant metric for assessing and evaluating ROE performance against the Company's authorized regulated ROE. The AMA equity is not intended to represent the regulated equity. PSE's ROE may not be comparable to other companies' ROE measures. Furthermore, this measure is not intended to replace ROE (GAAP net income divided by GAAP average common equity) as an indicator of operating performance.

The following table presents PSE’s ROE, its return on AMA equity and its authorized regulated ROE for ~~2020~~2022 and ~~2019:~~

2020 2019
(Dollars in Thousands) Earnings Average Common Equity Return on Equity Earnings Average Common Equity Return on Equity
Return on equity $274,280 $4,115,045 6.7% $292,924 $3,878,302 7.6%
Less/Plus: Unrealized gains and losses on derivative instruments, after-tax 21,178 — * 2,823 — *
Less/Plus: Equity adjustments1
— 185,638 * — 179,517 *
Plus: Impact of average of monthly average (AMA) — (3,533) * — (48,247) *
Return on AMA equity $295,458 $4,297,150 6.9% $295,747 $4,009,572 7.4%
Authorized regulated return on equity2
9.4% 9.5%
2021:


	2022			2021
(Dollars in Thousands)	Earnings	Average Common Equity	Return on Equity	Earnings	Average Common Equity	Return on Equity
Return on equity	$490,952	$4,613,257	10.6%	$336,063	$4,268,420	7.9%
Less/Plus: Unrealized gains and losses on derivative instruments, after-tax	(206,330)	—	*	(10,890)	—	*
Plus: Equity adjustments1	—	(108,984)	*	—	104,731	*
Plus: Impact of average of monthly average (AMA)	—	127,482	*	—	97,767	*
Return on AMA equity	$284,622	$4,631,755	6.1%	$325,173	$4,470,918	7.3%
Authorized regulated return on equity2			9.4%			9.4%

_______________

1.Equity adjustments are related to removing the impacts of accumulated other comprehensive income (AOCI), subsidiary retained earnings, retained earnings of derivative instruments, and decoupling 24-month revenue reserve.

2.The authorized regulated return on equity rate per the approved 2019 GRC is 9.4% for natural gas and electric effective October 1, 2020 and October 15, 2020, respectively. ~~The previously authorized regulated return on equity rate was 9.5% effective December 19, 2017.~~

*Not meaningful and/or applicable.

The Company’s ~~2020~~2022 return on AMA equity was ~~6.9%~~6.1%, which is lower than the authorized regulated ROE primarily due to the following:

•Regulated equity (rate base multiplied by equity percent) was ~~$504.9~~$589.3 million lower than AMA equity for the year ended December 31, ~~2020.~~2022. The impact on ROE for this variance was negative ~~1.1%~~1.2%. The variance was primarily driven by investment in items that do not earn a return or earn a return that is less than the authorized ROE. Such items include investment in construction work in progress and growth in rate base since the last general rate case (GRC).

•Depreciation expense was $18.0 million higher than the amount allowed in rates on an after-tax basis for the year ended December 31, 2022, for an impact on ROE of negative 0.4%.

•Operations and maintenance expense, including production operations and maintenance, was $61.5 million higher than the amount allowed in rates on an after-tax basis for the year ended December 31, 2022, for an impact on ROE of negative 1.3%.

The Company’s 2021 return on AMA equity was 7.3%, which is lower than the authorized regulated ROE primarily due to the following:

•Regulated equity (rate base multiplied by equity percent) was $630.3 million lower than AMA equity for the year ended December 31, 2021. The impact on ROE for this variance was negative 1.3%. The variance was primarily driven by investment in items that do not earn a return or earn a return that is less than the authorized ROE. Such items include investment in construction work in progress and growth in rate base since the last GRC.

•Depreciation expense was ~~$90.9~~$26.8 million higher than the amount allowed in rates on a pre-tax basis for the year ended December 31, ~~2020,~~2021, for an impact on ROE of negative ~~2.1%~~0.6%.

~~The Company’s 2019 return on AMA equity was 7.4%, which is lower than the authorized regulated ROE primarily due to the following:~~

•Regulated equity (rate base multiplied by equity percent) was $351.6 million lower than AMA equity for the year ended December 31, 2019. The impact on ROE for this variance was negative 0.8%. The variance was primarily driven by investment in items that do not earn a return or earn a return that is less than the authorized ROE. Such items include investment in construction work in progress and growth in rate base since the last GRC.

•~~Depreciation expense was $90.7 million higher than the amount allowed in rates on a pre-tax basis for the year ended December 31, 2019, for an impact on ROE of negative 2.3%.~~

Factors and Trends Affecting PSE’s Performance

PSE’s ongoing regulatory requirements and operational needs necessitated the investment of substantial capital in ~~2020~~2022 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;

•Equal sharing between PSE and its customers of earnings which exceed PSE's authorized rate of return (ROR);

•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;

•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;~~infrastructure and its impact on the supply chain and prices of goods and services; and

•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;~~defaults, concerns of safety to employees and customers, potential costs due to quarantining of employees and work-from-home ~~policies.~~policies, and the Company's and vendor staffing levels resulting from vaccination mandates.

Regulation of PSE Rates and Recovery of PSE Costs

PSE's regulatory requirements and operational needs require the investment of substantial capital in ~~2020~~2022 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 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 ~~on a regular and frequent basis in~~with the ~~foreseeable future. In addition, 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.

On May 3, 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 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 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

2022 GRC

PSE filed a GRC which includes 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 Revised Code of Washington (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 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 49.5% in common equity in 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 PGA filing. PSE is 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.

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 Climate Commitment Act’s 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. Per the order, PSE is allowed to either defer the $135.8 million in projected power costs and may submit a request for recovery of those costs either in its 90-day compliance filing for 2024 forecasted power costs or file a petition for Washington Commission review of these costs in a separate proceeding.

Natural gas rates became effective on January 7, 2023, resulting in a $70.8 million increase in natural gas base revenue in 2023 and a $19.5 million increase 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 a final base electric revenue increase of $247.0 million in 2023 and $33.1 million in 2024, which represents an increase of 10.75% and 1.33%, respectively.

2019 GRC

PSE filed a GRC with the Washington Commission on June 20, 2019, requesting an overall increase in electric and natural gas rates of 6.9% and 7.9% respectively. On July 8, 2020, the Washington Commission issued its order on PSE’s 2019 GRC. The ruling provided for a weighted cost of capital of 7.39% or 6.8% after-tax, and a capital structure of 48.5% in common equity with a return on equity of 9.4%. The order also resulted in a combined net increase to electric of $29.5 million, or 1.6%, and to natural gas of $36.5 million, or 4.0%. However, the Washington Commission extended the amortization of certain regulatory assets, PSE’s electric decoupling deferral, and PSE’s purchases gas adjustment (PGA) deferral to mitigate the impact of the rate increase in response to the economic uncertainty created by the COVID-19 pandemic. This reduced the electric revenue increase to approximately $0.9 million, or 0.1% and the natural gas increase to $1.3 million, or 0.2% and became effective October 15, 2020 and October 1, 2020, respectively.

On August 6, 2020, PSE filed a petition for judicial review with the Superior Court of the State of Washington for King County challenging the portion of the final order that requires PSE to pass back to customers the reversal of plant-related excess deferred income taxes in a manner that may deviate from the Internal Revenue Service (IRS) normalization and consistency rules.

PSE requested a Private Letter Ruling (PLR) from the IRS regarding this matter. On October 7, 2020, PSE, the Washington Commission and interveners agreed to dismiss the petition for judicial review. The agreement was based on a commitment from the Washington Commission that if the IRS ruling finds that the Washington Commission’s methodology for reversing plant-related excess deferred income taxes is impermissible, the Washington Commission would open a proceeding to review and enact the changes required by the IRS ruling. There was approximately $25.6 million in annual revenue requirement related to the 2019 GRC, which PSE requested it be allowed to track and recover.

In July 2021, PSE received a Private Letter Ruling (PLR) from the IRS which concluded that in the 2019 GRC the Washington Commission’s methodology for reversing plant-related excess deferred income taxes was an impermissible methodology under the IRS normalization and consistency rules. The PLR required adjustments to PSE's rates to bring PSE back into compliance with IRS rules. In September 2021, the Washington Commission amended its order in accordance with the PLR. The annualized overall rate impact was an increase of $15.8 million, or 0.7%, for electric and $3.1 million, or 0.3%, for natural gas for a total of $18.9 million with rates effective October 1, 2021. This led to an overall annualized net increase to electric rates of $77.1 million, or 3.7%, an increase of $17.5 million above the $59.6 million granted in the revised final order. The order also led to an overall annualized net increase to natural gas rates of $45.3 million, or 5.9%, an increase of $2.4 million above the $42.9 million granted in the revised final order. The Washington Commission maintained adjustments that mitigated the impacts of the rate increases in response to the economic instability created by the COVID-19 pandemic, which reduced the electric revenue increase to approximately $48.3 million, or 2.3%, and the natural gas increase to $4.9 million, or 0.6%.

For additional information, see Note 4, "Regulation and Rates" to the consolidated financial statements included in Item 8 of this report.

Power Cost Only Rate Case

On December 9, 2020, PSE filed its 2020 power cost only rate case (PCORC). The filing proposed an increase of $78.5 million (or an average of approximately 3.7%) in the Company's overall power supply costs with an anticipated effective date in June 2021. On February 2, 2021, PSE supplemented the PCORC to update its power costs, leading to a requested increase from $78.5 million to $88.0 million (or an average of approximately 4.1%).

On March 2, 2021, several of the parties to the PCORC reached a multiparty settlement in principle, which was unopposed. The settlement resulted in an estimated revenue increase of $65.3 million or 3.1%. On June 1, 2021, the Washington

~~General Rate Case Filing~~

PSE filed a GRC with the Washington Commission on June 20, 2019, requesting an overall increase in electric and natural gas rates of 6.9% and 7.9% respectively. PSE requested a return on equity of 9.8% with an overall rate of return of 7.62%. In addition to the traditional areas of focus (revenue requirements, cost allocation, rate design and cost of capital), the Company completed an attrition study and included a portion of the attrition revenue requirement in the overall request in order to address the expected regulatory lag in the rate year. Additionally, as the non-plant related excess deferred taxes that resulted from the Tax Cuts and Jobs Act (TCJA) remained outstanding from PSE’s Expedited Rate Filing (ERF) as discussed below, PSE requested in its GRC to pass back the amounts over four years. On September 17, 2019, PSE filed a supplemental filing in the GRC, which provided certain updates to the original filing, but did not impact the requested overall electric and natural gas rate increases, return on equity or overall rate of return as originally filed. On January 15, 2020, PSE filed rebuttal testimony which included a reduction to the requested return on equity to 9.5%, which decreased the rate of return to 7.48%. The requested rate increase for both electric and natural gas remained at 6.9% and 7.9%, respectively. For both electric and natural gas PSE did not originally request its full attrition adjustment; therefore, the decrease in return on equity led to a reduction in the electric rate increase of only $1.5 million and did not have an impact on the natural gas rate increase.

~~On July 8, 2020, the Washington~~ Commission issued its ~~order on PSE’s GRC. The ruling provided for~~Final Order approving and adopting the settlement and authorizing and requiring a ~~weighted~~power cost ~~of capital of 7.39% or 6.80% after-tax, and~~update through a capital structure of 48.5% in common equity with a return on equity of 9.4%. The order also resulted in a combined net increase to electric of $29.5 million, or 1.6%, and to natural gas of $36.5 million, or 4.0%. However, the Washington Commission extended the amortization of certain regulatory assets, PSE’s electric decoupling deferral, and PSE’s purchased gas adjustment (PGA) deferral to mitigate the impact of the rate increase in response to the economic instability created by the COVID-19 pandemic, which reduced the electric revenue increase to approximately $0.9 million, or 0.05% and the natural gas increase to $1.3 million, or 0.15%. The Washington Commission also determined that the Company’s proposed attrition adjustment of $23.9 million for electric and $16.2 million for natural gas was not in the public interest at this time. The order also effectively ends the deferral of PSE’s advanced metering infrastructure (AMI) investment while allowing the deferral on the return on AMI investments through December 31, 2019. Additional AMI investments will be evaluated in future proceedings for deferrals of return until the AMI project is complete.compliance filing. On ~~July~~June 17, 2020, PSE filed a motion for clarification with the Washington Commission seeking clarification on several items. On July 31, 2020, the Washington Commission issued an order granting PSE’s motion for clarification. The ruling adjusted certain items from the final order issued on July 8, 2020, which led to a combined net increase to electric of $59.6 million, or 2.9%, an increase of $30.1 million above the $29.5 million granted in the final order. The order also led to a combined net increase to natural gas of $42.9 million, or 5.6%, an increase of $6.4 million above the $36.5 million granted in the final order. The Washington Commission maintained adjustments which mitigated the impacts of the rate increases in response to the economic instability created by the COVID-19 pandemic, which reduced the electric revenue increase to approximately $27.7 million, or 1.3% and the natural gas increase to $0.2 million, or 0.02%.

On August 6, 2020, PSE filed a petition for judicial review with the Superior Court of the State of Washington for King County (Superior Court) challenging the portion of the final order that requires PSE to pass back to customers the reversal of plant-related excess deferred income taxes in a manner that may deviate from the IRS normalization and consistency rules. On August 7, 2020, PSE filed a motion to stay with the Superior Court related to the portions of the final order under judicial review. On September 14, 2020, the Superior Court denied PSE's motion to stay. PSE reviewed the original Washington Commission order including the ramifications of certain tax issues and requested a Private Letter Ruling (PLR) with the IRS regarding this matter. PSE will continue to utilize the average rate assumption method (ARAM) in the turnaround of certain accelerated tax depreciation benefits on PSE assets. On September 23, 2020,2021, PSE filed a compliance filing with the Washington Commission with a revenue increase of $70.9 million or 3.3% due to the update on power costs with rates effective July 1, 2021.

~~Commission.~~ The ~~natural gas tariffs became~~2022 GRC Order in Docket No. UE-220066, set PCORC rates to zero effective ~~October 1, 2020~~January 11, 2023 and PSE agreed not to file a PCORC during 2023 and 2024, the ~~electric tariffs on October 15, 2020. On October 7, 2020, PSE, the Washington Commission and interveners~~two-year rate plan agreed to ~~dismiss~~in the petition for judicial review. The agreement is based on a commitment from the Washington Commission that if the IRS ruling finds that the Washington Commission’s methodology for reversing plant-related excess deferred income taxes is impermissible, the Washington Commission will open a proceeding to review and enact the changes required by the IRS ruling. There is approximately $25.6 million in annual revenue requirement related to the 2019 GRC ~~which PSE has requested it be allowed to track in order to allow the Washington Commission to decide if it is appropriate for PSE to recover, pending the outcome of the IRS ruling.~~

~~For further details regarding the 2019 GRC filing, see Note 4, "Regulations and Rates" to the consolidated financial statements included in Item 8 of this report.~~settlement.

~~Expedited Rate Filing~~

On November 7, 2018, PSE filed an ERF with the Washington Commission. On January 22, 2019, all parties in the proceeding reached an agreement on settlement terms. The settlement agreement was filed on January 30, 2019. On February 21, 2019, the Commission approved the settlement with one condition. PSE passed back the deferred balance associated with the tax over-collection of $34.6 million for the period January 1, 2018, through April 30, 2018, over a one-year period which ended May 1, 2020.

~~For further details regarding the 2018 ERF filing, see Note 4, "Regulations and Rates" to the consolidated financial statements included in Item 8 of this report.~~

~~Washington Commission Tax Deferral Filing~~

The TCJA was signed into law in December 2017. As a result of this change, PSE re-measured its deferred tax balances under the new corporate tax rate. PSE filed an accounting petition on December 29, 2017, requesting deferred accounting treatment for the impacts of tax reform. The deferred accounting treatment results in the tax rate change being captured in the deferred income tax balance with an offset to the regulatory liability for deferred income taxes. Additionally, on March 30, 2018, PSE filed for a rate change for electric and natural gas customers associated with TCJA to reflect the decrease in the federal corporate income tax rate from 35% to 21%. PSE began passing back protected deferred tax balances created by tax reform as determined in the ERF settlement agreement through PSE’s Schedule 141X tariff. The pass back of deferred tax balances was continued with the GRC final order which also created PSE’s Schedule 141Z tariff, in addition to Schedule 141X, to pass-back additional deferred tax balances. Further details of the outcomes associated with PSE’s tax deferral filing are discussed in the ERF and GRC disclosures.

~~The Washington Commission approved the following PSE requests to change rates to reflect the new corporate tax rates:~~

Effective Date Average Percentage Increase (Decrease) in Rates

Increase (Decrease) in Revenue (Dollars in Millions)
Electric:

May 1, 2018

(3.4)%

$(72.9)
Natural Gas:

May 1, 2018

(2.7)

(23.6)

~~For further details regarding the Washington Commission Tax Deferral Filing, see Note 4, "Regulations and Rates" to the consolidated financial statements included in Item 8 of this report.~~

Revenue Decoupling ~~Filings~~Adjustment Mechanism

On December ~~5, 2017,~~23, 2020, the Washington Commission approved PSE’s ~~request within the 2017 GRC~~filing to extend the decoupling mechanism with several changes to the methodology that took effect on December 19, 2017. Electric and natural gas delivery revenues continue to be recovered on a per customer basis and electric fixed production energy costs are now decoupled and recovered on the basis of a fixed monthly amount. The allowed decoupling revenue for electric and natural gas customers will no longer increase annually each January 1 as occurred prior to December 19, 2017. Approved revenue per customer costs can only be changed in a GRC or ERF. Approved electric fixed production energy costs can only be changed in a GRC or a power cost only rate case. Other changes to the decoupling methodology approved by the Washington Commission include regrouping of electric and natural gas non-residential customers and the exclusion of certain electric schedules from the

decoupling mechanism going forward. The rate test, which limits the amount of revenues PSE can collect in its annual filings, increased from 3.0% to 5.0% for natural gas customers but will remain at 3.0% for electric customers. The decoupling mechanism is to be reviewed again in PSE's first GRC filed in or after 2021, or in a separate proceeding, if appropriate. PSE’s decoupling mechanism over- and under- collections will still be collectible or refundable after this effective date even if the decoupling mechanism is not extended.

On February 21, 2019, the Washington Commission approved the multi-party settlement agreement which was filed within PSE’s ERF filing. As part of this settlement agreement, electric and natural gas allowed delivery revenue per customer was updated to reflect changes in the approved revenue requirement. For electric, there were no changes to the annual allowed fixed power cost revenue. The changes took effect on March 1, 2019.

On July 8, 2020, the Washington Commission issued the final order in Dockets UE-190529 and UG-190530, which instructed PSE to extend the collection of amortization balances for electric decoupling delivery and fixed power cost sections originally filed through the annual May 2020 decoupling filing. The extension required PSE to move amortization balances for electric decoupling as of August 31, 2020 to new decoupling amortization accounts to be collected from customers for a two-year period, instead of the originally approved one-year period. Additionally, through approving the electric cost of service, the final order approved the re-allocation of decoupling balances from Schedule 40 to the remaining electric decoupling groups.

~~On December 1, 2020, PSE made a tariff correction filing for~~update Schedule 142 decoupling amortization rates, with ~~a proposed~~an effective date of January 1, 2021, ~~where it proposed to zero~~by zeroing out rates still effective past October 15, 2020 on tariff sheet Schedule 142-H, , which was replaced by rates on tariff sheet Schedule 142-I effective October 15, 2020. ~~This resulted in an over-collection from electric decoupled customers of approximately $4.3 million at year-end. As part of this filing,~~ PSE ~~has proposed to~~included a true up of the over-collection amounts for the period of October 15, 2020 through December 31, 2020 in PSE’s annual May 2021 decoupling filing.

On June 1, 2021, the Washington Commission approved a multi-party settlement agreement in PSE's PCORC that was originally filed on December 9, 2020. As part of this settlement agreement, the electric annual fixed power cost allowed revenue was updated to reflect changes in the approved revenue requirement. The changes took effect on July 1, 2021.

On September 28, 2021, the Washington Commission approved 2019 GRC filing updated to PLR changes. As part of this filing, the annual electric and gas delivery cost allowed revenue was updated to reflect changes in the approved revenue requirement. The changes took effect on October 1, 2021.

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 December 31, ~~2020,~~2022, 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 ~~Accounting Standards Codification (ASC)~~ASC 980. If not, for GAAP purposes only, PSE would need to record a reserve against the decoupling revenue and ~~a 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 ~~$8.0 million of~~ electric ~~deferred revenue will not be collected within 24 months of the annual period, therefore, a reserve adjustment was booked to 2020 electric decoupling revenue. Natural~~and natural gas deferred revenue will be collected within 24 months of the annual period; therefore, no reserve adjustment was booked to ~~2020~~2022 electric or natural gas decoupling revenue.

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:

January 1. 2021 (1.0)% $(20.6)
October 15, 2020 (0.5) (10.2)
May 1, 20202
0.2 2.0
May 1, 2019 0.9 20.6
May 1, 2018

(1.1)

(25.2)
Natural Gas:

May 1, 2020 (0.5)% $(4.8)
May 1, 2019 (5.3) (45.9)
May 1, 2018

1.7

15.9


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)1
Electric:
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)
May 1, 2020	0.2	2.0
Natural Gas:
May 1, 2022	(0.7)%	$(7.4)
May 1, 2021	1.5	15.0
May 1, 2020	(0.5)	(4.8)

___________________

1.For electric and natural gas rates effective May 1, 2022, May 1, 2021 and May 1, 2020, there were no excess earnings that impacted the approved revenue change.

2.For the electric ~~and natural gas~~ rates effective May 1, ~~2019,~~2022, there ~~were no~~was $8.0 million of excess ~~earnings that impacted~~deferred revenues for delivery and fixed power costs which could not be set in rates until May 1, 2023 due to the ~~approved revenue change.~~ 3% rate cap.

3.For the electric ~~and natural gas~~ rates effective May 1, ~~2018,~~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 ~~approved revenue change is net of reductions from excess earnings of $10.0 million for electric and $4.9 million for natural gas.~~3% rate cap.

2.4.The 2019 GRC final order lengthened the recovery period from the original one-year recovery to a two-year recovery toof 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

Colstrip Adjustment Rider

This schedule implements surcharges and/or credits to collect or pass back the costs incurred or benefits realized associated with Colstrip Power Plant Units 1 & 2 and 3 & 4 as authorized in Washington Commission Docket No. UE-220066. Beginning in 2026, only decommissioning and remediation related costs will be included in this Schedule in compliance with the Clean Energy Transformation Act.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 11, 2023

2.2%

$50.3

Energy Charge Credit Recovery Adjustment

This schedule implements a surcharge to recover certain costs incurred under the electric Schedule 139 Voluntary Long Term Renewable Energy Purchase Rider as authorized in Washington Commission Docket No. UE-220066. The surcharge in this schedule will be updated with each filing that revises the Schedule 139 Energy Charge Credit.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 11, 2023

1.5%

$35.3

Rates Not Subject to Refund Rate Adjustment

The purpose of this schedule is to recover costs approved during a multiyear rate plan period that are not subject to refund and that are above the level of base rates set in the multiyear rate plan as authorized in Washington Commission Docket No. UE-220066.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 11, 2023

7.9%

$182.5

Rates Subject to Refund Rate Adjustment

The purpose of this schedule is to charge customers the provisionally approved rates subject to refund approved in a multiyear rate plan, for property granted provisional approval for recovery as authorized in Washington Commission Docket No. UE-220066. PSE will file an annual review March 31st of each year, which will be reviewed by the Washington Commission.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 11, 2023

4.0%

$91.7

Transportation Electrification Plan Adjustment Rider

This schedule implements surcharges to collect costs incurred associated with the implementation of the Company’s Transportation Electrification Plan, and specifically the products and services offered under Schedules 551, 552, 553, 554, 555, 556, 557, 558, 559 and 583 as authorized in Washington Commission Docket No. UE-230040.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

March 1, 2023

0.2%

$6.0

Conservation Service Rider

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, 2022	1.0%	$21.6
May 1, 2021	(0.6)	(12.3)
May 1, 2020	0.9	17.8

Federal Incentive Tracker

The following table sets forth the federal incentive tracker tariff revenue requirement 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 from prior year	Total credit to be passed back to eligible customers (Dollars in Millions)
January 1, 20231	1.3%	$1.0
January 1, 2022	0.1	(28.2)
January 1, 2021	0.3	(29.5)
January 1, 2020	(0.04)	(37.8)

____________________

1.The 2022 rate period represented the final year of the ten year period used to pass back the Treasury Grants included in Schedule 95A (Federal Incentive Tracker). The overall rate now represents a surcharge as amounts from the 2022 filing are expected to be over-distributed.

Low Income Program

The following table sets forth the low income program funding 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)
October 1, 2022	1.1%	$25.8
October 1, 2021	0.3	5.8

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 2020. The surcharging of deferrals can be triggered by the Company when the balance in the deferral account is a credit of $20.0 million or more. During 2020, actual power costs were higher than baseline power costs, thereby creating an under-recovery of $76.1 million. Under the terms of the PCA’s sharing mechanism for under-recovered power costs, PSE absorbed $32.1 million of the under-recovered amount, and customers were responsible for the remaining $44.0 million, or $46.0 million including interest. PSE filed to recover the deferred balance in Docket No. UE-210300, and the Washington Commission allowed the recovery effective December 1, 2021.

Additionally, PSE exceeded the $20.0 million cumulative deferral balance in its PCA mechanism in 2021. During 2021, 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. On 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
October 15, 2020	(0.2)	(3.3)
July 3, 20202	1.2	23.9

______________

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. As of October 27, 2022 in UE-220308 Final Order, the Washington Commission approved to extend PCA imbalance rates to recover the PCA imbalance attributable to 2021 from January 1, 2023 to November 30, 2023.

2. The rates for the Electric Special Contract were zeroed out effective July 3, 2020 following the July 2019 through June 2020 period. The actual residual amount resulting at July 31, 2020 were included in the electric Schedule 129 Low Income Program rates that became effective October 1, 2020.

Power Cost Adjustment Mechanism

PSE currently has a power cost adjustment (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 year ended December 31, ~~2020,~~2022, in its PCA mechanism, PSE under recovered its allowable costs by ~~$75.4~~$110.1 million of which ~~$43.3~~$74.6 million was apportioned to customers and ~~$2.0~~$1.5 million of interest was accrued on the deferred customer balance. This compares to an under recovery of allowable costs of ~~$67.2~~$68.0 million for the year ended December 31, ~~2019,~~2021, of which ~~$36.0~~$36.7 million was apportioned to customers and accrued ~~$1.0~~$1.7 million interest on the total deferred customer balance.

~~Power Cost Adjustment Clause Filing~~

On July 1, 2019, 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 Microsoft Special Contract. Additionally, Schedule 95 rates also include portions of fixed power cost adjustments per the allowed decoupling rate re-allocation effective April 1, 2019, resulting from Microsoft becoming a transportation customer as well as small variable power cost adjustments.

On July 8, 2020, the Washington Commission issued the final order in Dockets UE-190529 and UG-190530, which instructed PSE to remove Schedule 95 collection on decoupling allowed rates for Microsoft Special Contracts, which will be included in allowed rates under the Decoupling Schedule 142 effective October 15, 2020.

PSE exceeded the $20.0 million cumulative deferral balance in its PCA mechanism in 2019. The surcharging of deferrals can be triggered by the Company when the balance in the deferral account is a credit of $20.0 million or more. Due to concerns about the economic impact of the COVID-19 pandemic on customers, PSE voluntarily, with Washington Commission Staff support, delayed filing an increase to its Schedule 95 rates in its annual PCA report filing in Docket UE-200398, which was approved on July 30, 2020. Subsequently, PSE filed to recover the deferred balance in Docket UE-200893, effective December 1, 2020, and the Washington Commission approved PSE’s request on November 24, 2020. During 2019, actual power costs were higher than baseline power costs, thereby creating an under-recovery of $67.2 million. Under the terms of the PCA’s sharing mechanism for under-recovered power costs, PSE absorbed $31.2 million of the $67.2 million under-recovered amount, and customers were responsible for the remaining $36.0 million, or $37.0 million including interest. As PSE had an approved balance owing from customers including interest at the start of 2019 totaling $4.7 million, the approved cumulative deferral balance for the PCA as of December 2019 is $41.7 million. As previously stated, this filing is set to collect the customer’s share of the cumulative 2019 imbalance in PSE’s PCA mechanism.

~~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, 2020 2.1% $43.9
October 15, 2020 (0.2) (3.3)
July 3, 2020 1.2 23.9
July 1, 20191
(1.2) (24.9)
May 1, 2019 0.1 3.3

~~______________~~

1.The rates for Microsoft Special Contracts portion was zeroed out effective July 3, 2020 following the July 2019 through June 2020 period. The actual residual amount resulting at July 31, 2020 were included in the electric Schedule 129 Low Income Program rates that become effective October 1, 2020.

~~Electric Conservation Rider~~

~~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, 2020 0.9% $17.8
May 1, 2019 (0.9) (17.5)
May 1, 2018

(0.8)

(18.0)

~~Electric~~ Property Tax Tracker ~~Mechanism~~

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, 2020 0.07% $1.4
May 1, 2019 (0.2) (5.1)
May 1, 2018

(0.1)

(1.3)


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
May 1, 2022	(0.3)%	$(5.8)
May 1, 2021	(0.1)	(1.7)
May 1, 2020	0.07	1.4

~~Federal Incentive Tracker Tariff~~

~~The following table sets forth the federal incentive tracker tariff revenue requirement approved by the Washington Commission~~Residential and ~~the corresponding expected annual impact on PSE’s revenue based on the effective dates:~~

Effective Date

Average
Percentage
Increase (Decrease)
in Rates from prior year

Total credit to be passed back to eligible customers
(Dollars in Millions)
January 1, 2021 0.3% $(29.5)
January 1, 2020 (0.04) (37.8)
January 1, 2019

0.1

(38.7)
May 1, 2018

0.4

(40.1)
January 1, 2018

0.2

(48.2)

~~Residential~~Farm Exchange Benefit

The following table sets forth residential and farm exchange benefit adjustments approved by the Washington Commission and the corresponding expected annual impact on ~~PSE’s~~PSE's revenue based on the effective dates:

Effective Date

Average
Percentage
Increase (Decrease)
in Rates

Total credit to be passed back to eligible customers
(Dollars in Millions)
October 12, 2019 0.01% $(81.8)
October 1, 2017

(0.6)

(80.8)

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Total credit to be passed back to eligible customers

(Dollars in Millions)

November 1, 2021

0.4%

$(75.7)

Natural Gas Rates

~~Natural Gas Cost~~Distribution Pipeline Provisional Recovery ~~Mechanism~~Adjustment

~~The following table sets forth CRM rate adjustments approved by~~This schedule implements surcharges in order to defer the revenues associated with the provisional recovery of $30.0 million for the four miles of distribution pipe to support proper allocation of the investments in a later filing as authorized in 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)
November 1, 2020 1.2% $10.6
November 1, 2019 0.8 7.0
November 1, 2018

0.5

5.0
Docket No. UG-220067.

~~Purchased Gas~~

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 7, 2023

0.3%

$3.0

Rates Not Subject to Refund Rate Adjustment

~~On April 25, 2019,~~The purpose of this schedule is to recover costs approved during a multiyear rate plan period that are not subject to refund and that are above the level of base rates set in the multiyear rate plan as authorized in Washington Commission Docket No. UG-220067.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 7, 2023

(0.1)%

$(1.6)

Rates Subject to Refund Rate Adjustment

The purpose of this schedule is to charge customers the provisionally approved ~~PSE’s request~~rates subject to refund approved in a multiyear rate plan, for an out-of-cycle change to PGA rates with the rate change taking effect May 1, 2019. The out-of-cycle PGA filing was needed to begin amortizing a large PGA commodity deferral balance that had grown due to higher than projected commodity costs during the 2018/19 winter. These higher than projected commodity costs were primarily due to an October 9, 2018, rupture and subsequent explosion on Westcoast Pipeline which is one of the major pipelines feeding PSE’s distribution system. The pipeline was repairedproperty granted provisional approval for recovery as authorized in October 2018, however supply capacity on the pipeline was limited over the 2018/19 winter leading to higher prices. February weather was also much colder than normal which also increased the demand for natural gas. The out-of-cycle PGA rates were effective from May 1, 2019 through April 30, 2020 and on May 1, 2020 the out-of-cycle PGA rates were set to zero. At the end of the recovery period, an unamortized balance of $4.9 million remained which PSE requested to be amortized in its annual PGA filing for rates effective November 1, 2020.

~~On October 24, 2019, the~~ Washington Commission approved PSE’s request for November 2019 PGA rates, with the rate change taking effect on November 1, 2019. As part of that filing, PSE requested PGA rates increase annual revenue by $17.8 million, while the new tracker rates increased by annual revenue of $100.6 million; this was in addition to continuing theDocket No. UG-220067.

Effective Date

Average

Percentage

Increase (Decrease)

in Rates

Increase (Decrease)

in Revenue

(Dollars in Millions)

January 7, 2023

4.1%

$45.5

collection on the remaining balance of $54.0 million from the out-of-cycle PGA. The tracker rates include deferral balances for the three separate amounts: (i) $114.4 million of under collected commodity balances deferred in February and March; (ii) a $10.8 million balance of over-collected commodity costs for the 2018 PGA, and (iii) a $4.1 million remaining balance from the $54.7 million credit to customers, caused by the 2017 over-collection, established in the 2018 tracker. The high commodity deferral balances for winter months through March 2019 were the result of three noteworthy events last winter experienced by PSE: the Enbridge pipeline rupture, unusually low temperatures in February and March, and a compressor failure in February at the Jackson Prairie storage facility. Additionally, to reduce customer impact, as part of the approved PGA filing, PSE will be collecting $114.4 million commodity deferrals and related interest over a two year period, instead of the historic one year period, from November 2019 through October 2021.

On July 8, 2020, the Washington Commission issued the final order in Dockets UE-190529 and UG-190530, which instructed PSE to extend the collection of amortization balances for the portion of PGA amortization balances originally filed through annual November 1, 2019 PGA filing under Supplemental Schedule 106B. The extension requires PSE to move amortization balances for PGA Schedule 106B as of August 31, 2020 to be collected from customers for a three-year period, instead of originally approved two-year period.

On October 29, 2020, the Washington Commission approved PSE’s request for November 2020 PGA rates in Docket UG-200832, effective November 1, 2020. As part of that filing, PSE requested PGA rates increase annual revenue by $32.6 million, while the new tracker rates increased annual revenue by $37.4 million; this was in addition to continuing the collection on the remaining balance of $69.4 million under Supplemental Schedule 106B.

~~The following table presents the PGA mechanism balances and activity at December 31, 2020 and December 31, 2019:~~

Puget Energy and
Puget Sound Energy
(Dollars in Thousands) At December 31, At December 31,
PGA receivable balance and activity 2020 2019
PGA receivable beginning balance $ 132,766 $ 9,921
Actual natural gas costs 314,792 406,162
Allowed PGA recovery (363,886) (289,876)
Interest 3,983 6,559
PGA receivable ending balance $ 87,655 $ 132,766

~~The following table sets forth the PGA 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)
November 1, 2020 7.7% $70.0
October 1, 2020 (3.9) (35.5)
November 1, 20192
13.4 118.3
May 1, 20191
6.3 54.0
November 1, 2018

(10.9)

(98.4)

~~_______________~~

1.The rate for out of the cycle May 2019 PGA (Supplemental A) filing was set to zero effective May 1, 2020, The actual residual amount resulting was included in annual PGA filling effective November 1, 2020.

2.~~The 2019 GRC final order lengthened the recovery period from two to three years.~~

~~Natural Gas Property Tax Tracker Mechanism~~

~~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, 2020 (0.3)% $(2.8)
May 1, 2019 (0.2) (1.6)
May 1, 2018

(0.2)

(2.2)

~~Natural Gas~~ Conservation Service Rider

The following table sets forth conservation rider rate adjustments approved by the Washington Commission and the corresponding annual impact on ~~PSE’s~~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, 2020 0.4% $3.5
May 1, 2019 0.1 1.1
May 1, 2017

(0.1)

(1.0)


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
May 1, 2022	0.3%	$3.2
May 1, 2021	(0.2)	(1.5)
May 1, 2020	0.4	3.5

Cost Recovery Mechanism for Pipeline Replacement

The following table sets forth cost recovery mechanism (CRM) 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)
January 7, 20231	(2.0)%	$(22.6)
November 1, 2022	0.4	4.6
November 1, 2021	0.5	4.9
November 1, 2020	1.2	10.6

____________________

1.Per 2022 GRC Final Order in Docket No. UG-220067, CRM rates on Schedule 149 were set to zero as of January 7, 2023.

Low Income Program


Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
October 1, 2022	(0.04)%	$(0.4)
October 1, 2021	(0.3)	(3.0)

Property Tax Tracker

The following table sets forth property tax tracker 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, 2022	0.02%	$0.2
May 1, 2021	0.3	3.2
May 1, 2020	(0.3)	(2.8)

Purchased Gas Adjustment

On 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.

On 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.

On November 15, 2022, the 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 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 December 31, 2022 and December 31, 2021:


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	December 31,		December 31,
PGA receivable balance and activity	2022		2021
PGA receivable beginning balance	$	57,935	$	87,655
Actual natural gas costs	457,950		364,775
Allowed PGA recovery	(496,879)		(396,236)
Interest	1,674		1,741
Refund from counterparty settlement	(24,216)		—
PGA (liability)/receivable ending balance	$	(3,536)	$	57,935

The following table sets forth the PGA rate 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)
November 1, 2022	14.9%	$155.3
November 1, 2021	5.8	59.1
November 1, 2020	7.7	70.0
October 1, 2020	(3.9)	(35.5)

Other Proceedings

~~Microsoft Special Contract~~

Following discussions between PSE, the Microsoft Corporation, and others, and after completing a negotiated regulatory process, the Washington Commission issued an order in July 2017 approving a special contract between PSE and Microsoft relating to retail access for Microsoft loads currently being served under PSE’s electric Schedule 40. The special contract includes the following conditions: (i) Microsoft must exceed Washington State’s current renewable portfolio standards, (ii) the remainder of power sold to Microsoft must be carbon free, (iii) there will be no reduction in Microsoft's funding of PSE’s conservation programs, (iv) Microsoft paid a transition fee that was a straight pass-through to customers and (v) Microsoft will fund enhanced low-income support. Microsoft began taking service under the special contract on April 1, 2019, after meeting the eligibility requirements under the special contract.

Voluntary Long-Term Renewable Energy

Effective September 2016, the Washington Commission approved PSE's tariff revision to create an additional voluntary renewable energy product. This provides customers with electric generation resource options to help them meet their sustainability goals. Incremental costs of the program will be allocated to the voluntary participants of the program as is the case with PSE’s existing Green Power programs. PSE ~~offered this service,~~offers Green Direct to larger customers (aggregated annual loads greater than ~~10,000 MWh)~~10,000-megawatt hours (MWh)) and government customers. The initial resource option offered under this rate schedule is a ~~new~~ wind generation facility with the capacity of approximately 136.8 MW, which went into operation on November 7, 2020. The project is fully subscribed and the twenty-one customers under ~~Phase~~phase 1 of the program began taking service in November 2020.

~~In July 2018, the~~The Washington Commission approved a second phase of the Green Direct ~~product.~~product in 2018. The phase ~~two~~2 project is the 150 MW ~~solar~~Lund Hill Solar facility ~~to be~~ located in Klickitat County, ~~WA. It is expected~~Washington. The solar facility declared full commercial operations on October 19, 2022 and will serve an additional twenty customers who enrolled in 2018. On March 1, 2021, the associated power purchase agreement went into effect under an interim supply agreement for renewable energy delivered to ~~achieve commercial operation in 2021~~PSE’s system; and ~~serve twenty customers. The~~thus, the phase 2 ~~offering will be~~customers began receiving renewable energy under their agreement on March 1, 2021. All

Green Direct customers are now receiving a blend of the phase 1 wind and the ~~solar facility. Phase 1 customers will receive wind through 2020 and then are expected to receive~~renewable energy delivered under the ~~blended energy later in 2021.~~phase 2 power purchase agreement.

Crisis Affected Customer Assistance Program

On April 6, 2020, PSE filed with the Washington Commission revisions to its currently effective ~~Tariff WN U-60.~~electric and natural gas service tariffs. The purpose of this filing iswas to incorporate into PSE’s low-income tariff a new temporary bill assistance program, Crisis Affected Customer Assistance Program ~~(CACAP)~~(CACAP-1) (Dockets No. UE-200331 and UG-200332), to mitigate the economic impact of the COVID-19 pandemic on PSE’s customers. CACAP ~~would allow~~allowed PSE customers facing financial hardship due to COVID-19 to receive up to $1,000 in bill assistance. The program ~~puts to immediate use~~made available $11.0 million in unspent low income funds from prior years, therefore resulting in no rate impact, and ~~supplements~~supplemented other forms of financial assistance. ~~The program does not require an increase~~CACAP-1 ran from April 13, 2020, to ~~rates and is fully compatible with other low income programs. Based on the COVID-19 pandemic and resulting state of emergency,~~September 30, 2020.

On March 28, 2021, the Washington Commission ~~allowed~~approved PSE’s CACAP-2 (Dockets No. UE-210137 and UG-210138). With a program budget of $20.0 million for electric customers and $7.7 million for natural gas customers, CACAP-2, which ran from April 12, 2021, to March 29, 2022, provided up to $2,500 per year in bill assistance for arrearages for each qualifying low-income household.

On October 15, 2021, PSE submitted for the ~~tariff revisions~~Washington Commission’s review and approval a Supplemental CACAP (Dockets No. UE-210792 and UG-210793) filing to ~~become~~continue assistance for PSE customers facing financial hardship due to COVID-19. The Washington Commission approved the Supplemental CACAP program to be effective on ~~April 13, 2020.~~November 15, 2021. The Supplemental CACAP utilized carry-over funds not expended in any prior years under PSE’s Schedule 129 Home Energy Lifeline Program (HELP), with a combined total budget of $34.5 million for both electric and natural gas residential customers (capped at $23.7 million and $10.8 million, respectively). Supplemental CACAP benefits offered to cover a qualifying residential customer’s past due balance, up to $2,500. PSE ~~made~~applied the Supplemental CACAP benefits automatically, with an ~~additional filing on July 21, 2020 to increase the amount of electric funds available for distribution by $4.5 million under the CACAP program. The program ended on September 30, 2020.~~

opt-out option, in December 2021.

For additional information, see Note 4, "Regulation and Rates" in the Combined Notes to ~~the consolidated financial statements~~Consolidated Financial Statements included in Item 8 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 could 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. For additional information, see "Financing Program" included in Item 7 of this report.

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 a significant amount of 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 Climate Commitment Act (CCA), which establishes a greenhouse gases (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 they will have subsequent rulemakings that will build off initial rulemaking as program implementation gets underway and progress with Washington State carbon goals are evaluated. See Part I Item 1 "Recent and Future Environmental Law and Regulation" in this report for further details on the CCA. 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.

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; ~~and~~ 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 ~~municipal-owned~~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 audited 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 years ended December 31, ~~2020,~~2022, and December 31, ~~2019.~~2021.

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~~“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 ~~departure from GAAP presentation.~~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.

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)	Year Ended December 31,
	2022		2021
Operating income (loss)	$	792,462	$	580,147
Electric utility revenue	2,961,457		2,671,623
Purchased electricity	(1,038,728)		(784,565)
Electric generation fuel	(348,159)		(282,254)
Residential exchange	77,715		82,225
Utility electric margin (non-GAAP)	$	1,652,285	$	1,687,029
Natural gas operating revenue	$	1,209,636	$	1,067,418
Purchased natural gas	(500,849)		(398,553)
Utility natural gas margin (non-GAAP)	$	708,787	$	668,865
Other revenue	$	45,080	$	66,620
Unrealized gain (loss) on derivative instruments, net	261,177		13,785
Other operation and maintenance expenses	(665,259)		(629,864)
Non-utility expense and other	(47,194)		(56,242)
Depreciation and amortization	(774,291)		(807,519)
Taxes other than income tax expense	(388,123)		(362,527)
Operating income (loss)	$	792,462	$	580,147

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 changes in PSE’s electric margin for the years ended December 31, ~~2019,~~2021, to December 31, ~~2020:~~2022:

_______________

*Includes decoupling cash collections, rate of return excess earnings, and decoupling 24-month revenue reserve.

~~2019~~2021 compared to ~~2020~~2022

Electric Operating Revenue

Electric operating revenues ~~decreased $177.6~~increased $289.8 million primarily due to ~~decreased transportation and other revenue~~increased retail sales of ~~$130.5~~$150.9 million, sales to other utilities and marketers of ~~$40.9~~$175.1 million, and other decoupling revenue of ~~$20.2 million and by lower retail sales of $20.0~~$5.4 million; partially offset by ~~an increase~~a decrease in decoupling revenue of ~~$34.0~~$25.0 million and transportation and other revenue of $16.5 million. These items are discussed in detail below:

•Electric retail sales ~~decreased $20.0~~increased $150.9 million due to ~~a decrease~~an increase of ~~$70.2~~$85.2 million in rates compared to the prior year and an increase of $65.7 million from ~~reduced~~an increase in retail electricity usage of ~~3.6%; partially offset by an~~2.7%. The increase in rates ~~of $50.2 million compared~~is primarily due to the ~~prior year. The reduction in usage was due~~tariffs filed pursuant to ~~a decrease of commercial~~the Company's 2021 PCORC effective July 1, 2021 and industrial customer usage of 10.1% and 5.6%, respectively, primarily driven by business shut downs resulting from COVID-19 and a decrease in heating degree days of 2.0% compared to 2019; partially offset by an increase in residential sales of 2.0%.the conservation service rider effective May 1, 2022. See Management's Discussion and Analysis, "Regulation of PSE Rates and ~~Rates"~~Recovery of PSE Costs" included in Item 7 of this report for rate changes. The increase in retail usage was due to an increase in residential and commercial usage of 2.4% and 3.3%, respectively. Residential usage increased due to a 5.5% increase in heating degree days due to lower than normal temperatures, primarily in the 2nd quarter of 2022 and a 6.6% increase in cooling degree days due to higher than normal temperatures, primarily in the 3rd quarter of 2022. The increase in commercial usage was driven by employees returning to work after business shut downs and lack of staffing in 2021 due to COVID-19.

•Sales to other utilities and marketers ~~decreased $40.9~~increased $175.1 million primarily due to a ~~combination of lower sales volumes and lower market prices. Volumes were 15.8% below 2019 volumes due to lower market heat rates~~109.6% increase in ~~2020, higher temperatures and lower~~electric wholesale sale price driven by a nationwide increase in natural gas price, that fuel natural gas-fired electric generation, following worldwide natural gas supply constraints along with increased demand from ~~impacts of COVID-19. Prices were 25.7% below 2019 prices due to higher than~~

~~normal power prices in the first quarter of 2019 when~~overseas markets. Additionally, wholesale ~~prices reached an 18-year high driven by record-breaking natural gas prices.~~sale volumes increased 1.8%.

•Decoupling revenue ~~increased $34.0~~decreased $25.0 million, ~~the combination of~~primarily attributable to a ~~$20.2~~$7.7 million ~~increase~~and $17.3 million decrease in delivery ~~deferral revenues~~ and a $13.7 million increase in PCA fixed cost deferral revenues. The increase in delivery decoupling revenues was driven by decreased actual usage, as noted above in the retail revenue section, and an increase of 5.6% in allowed delivery revenues. The year-over-year decrease of 3.1% in allowed fixed production cost (FPC) deferral revenues, respectively. This was ~~outpaced~~driven mainly by lower allowed revenue per customer and increased usage for delivery deferral revenues as well as increased usage for FPC deferral revenues. This resulted in allowed revenues being lower than actual decoupling deferral revenues by a greater margin in the ~~decrease in actual usage, resulting in an increase in FPC decoupling revenue recognized during 2020~~current year compared to ~~2019.~~the prior year.

•Other decoupling revenue ~~decreased $20.2~~increased $5.4 million, primarily due to the following: i) an $8.8 million increase in the 24-month revenue reserve resulting from $0.8 million of decoupling revenue that was deferred in 2018 and recognized as revenue in the first quarter of 2019, as well as the deferral of $8.0 million of decoupling revenue which will not be collected within 24 months from the end of 2020; ii) a $7.9 million decrease year-over-year related to an increase in current year amortization of ~~previous years' decoupling deferrals resulting from higher amortization rates,~~prior year residential delivery overcollections beginning in May 2022. This was partially offset by ~~decreased usage; and iii) $3.5~~a $2.0 million decrease related to ~~earnings~~GAAP alternative revenue program recognition guidelines. As of the year ended December 31, 2021, there were $8.0 million of deferred 2020 GAAP alternative decoupling revenues that were recognized, which was partially offset by $3.0 million in ~~excess~~deferred 2021 GAAP alternative decoupling revenues. As of ~~allowed rate~~the year ended December 31, 2022, there were $3.0 million of ~~return (ROR). In 2019, earnings in excess of allowed ROR of $3.5 million was returned to customers. There~~deferred 2021 GAAP alternative decoupling revenues that were ~~no such returns to customers in 2020.~~recognized.

•Transportation and other revenue decreased ~~$130.5~~$16.5 million primarily due to ~~a decrease in net wholesale non-core gas sales of $95.6 million and a decrease in~~no production tax credit (PTC)s deferral revenue ~~of $28.9 million~~ for the re-purpose of the ~~PTCs.~~PTCs in 2022 compared to $45.6 million in 2021 and a decrease of $32.6 million related to the IRS PLR which includes revenue recognition in 2021, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in Item 7 of this report. The ~~decrease~~decreases were partially offset by an increase in net wholesale non-core natural gas sales of $62.1 million, which was primarily due to a $130.8 million increase in wholesale sales driven by a 2.8% increase in gas sales volume at an average price that was 71.8% higher in 2022 compared to 2021 and a $107.7 million increase in the cost of gas sold, which was also due to a higher average price and increased volumes. Additionally, the increase in the net whole non-core gas sales was due to an approximately 55% decrease in the average price of the non-core gas sold year ended December 31, 2020 compared to the same period in the prior year and a 7% decrease in sales volume. This was offsetalso driven by a ~~$36.3~~$39.0 million ~~decrease~~increase in ~~the total cost of the non-core~~ gas sold, primarily due to an approximately 20% decrease in the average price of non-core gas purchases and to the aforementioned decrease in non-core gas sales volume. Additionally, there was a $3.7 million decrease in natural gasfinancial hedging costs. Natural gas prices decreased compared to 2019 due to a combination of high natural gas production, mild weather and surplus storage in the first part of the year, plus a decrease in demand due to the effects of COVID-19. By comparison, natural gas prices were high in early 2019 due to the continuing effects of the late 2018 Enbridge pipeline rupture that decreased pipeline capacity in the region, compressor issues at a gas storage facility that limited gas deliverability, and higher than expected load due to cold weather.gains.

Electric Power Costs

Electric power costs ~~decreased $143.7~~increased $324.6 million primarily due to ~~a decrease~~an increase of ~~$83.8~~$254.2 million of purchased electricity costs, $65.9 million of electric generation fuel costs and ~~$58.8 million~~a decrease in residential exchange credits of ~~purchased electricity costs.~~$4.5 million. These items are discussed in detail below:

•Purchased electricity expense ~~decreased $58.8~~increased $254.2 million ~~primarily~~ due to a 13.7% decrease in wholesale prices due to natural gas prices that trended down in 2020 compared to 2019 natural gas prices due to the effect of the Enbridge pipeline rupture in late 2018; partially offset by a 5.6%17.0% increase in wholesale ~~electricity~~electric purchase volumes and a 13.0% increase in average wholesale purchase prices. The increase in volume was driven by a 25.8% increase in Mid-Columbia hydro, increased wind purchase volumes from Golden Hills and Clearwater, which commenced operations in 2022, and Powerex energy purchases that were added in 2022. Purchase volumes increased due to ~~the retirement~~a combination of ~~Colstrip Units 1 and 2~~an increase in load of 1.8% and a decrease in ~~combustion turbine (CT)~~natural gas-fired generation ~~discussed below.~~volume of 17.5%, due to lower market heat rates as natural gas prices increased at a higher rate than power prices. The increase in wholesale purchase prices of 13.0% was primarily due to the aforementioned increase in nationwide natural gas prices, which led to increases in all power prices.

•Electric generation fuel expense ~~decreased $83.8~~increased $65.9 million ~~primarily~~driven by an $8.1 million increase in Colstrip Units 3 and 4 variable fuel expense due to a ~~$46.7 million decrease~~6.1% increase in ~~Colstrip related to the retirement of Units 1 and 2~~coal fuel burned and a ~~$30.0 million decrease in CT generation costs primarily driven by the cost of natural gas and~~12.0% increase in ~~wholesale purchases. As stated above in transportation and other revenue,~~the average price per ton. Additionally, natural gas-fired generation fuel costs increased $57.6 million as unit production costs were 51.2% higher due to higher natural gas prices, ~~trended down~~as discussed above in ~~2020 compared~~sales to ~~2019~~other utilities. This increase was partially offset by a 17.5% reduction in natural ~~gas prices which were higher~~gas-fired generation volumes driven by lower market heat rates.

•Residential exchange credits decreased by $4.5 million due to a 0.4% change in the ~~effect~~amount of ~~the Enbridge pipeline rupture~~credits to be passed back to customers effective November 1, 2021, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in ~~late 2018.~~Item 7 of this report; partially offset by an increase in residential usage of 2.4% as discussed above in electric retail sales.

~~For additional information on prior years, please see discussion in Item 7, "Non-GAAP Financial Measures - Electric Margin" of Form 10-K for period ended December 31, 2019.~~

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 of natural gas costs included in baseline PGA rates are deferred and either refunded or collected from customers, respectively, in future periods.

The following chart displays the changes in PSE’s natural gas margin for the years ended December 31, ~~2019,~~2021, to December 31, ~~2020:~~2022:

_______________

* Includes decoupling cash collections, rate of return excess earnings, and decoupling 24-month revenue reserve.

~~2019~~2021 compared to ~~2020~~2022

Natural Gas Operating Revenue

Natural gas operating revenue increased ~~$105.5~~$142.2 million primarily due to higher retail sales of ~~$69.1~~$149.7 million ~~increased other decoupling revenue of $23.3 million, increased decoupling revenue of $16.6 million~~ and ~~partially offset by decreased~~ transportation and other revenue of ~~$3.5~~$10.6 million. This increase was partially offset by decreased decoupling revenue of $14.3 million and other decoupling revenue of $3.8 million. These items are discussed in the following details:

•Natural gas retail sales increased ~~$69.1~~$149.7 million due to an increase in rates of ~~$103.5~~$92.8 million ~~primarily from~~and an increase ~~in rates for PGA partially offset by a decrease~~ in natural gas load of ~~4.3%,~~5.2% or ~~$34.4~~$56.9 million of natural gas sales. ~~Natural gas load decreased primarily~~The increase in rates is due to ~~a 2.1%, 9.7%,~~the tariffs filed pursuant to the Company's most recent CRM and ~~4.2% decrease in average therms used by residential customers, commercial firm~~PGA effective November 1, 2021 and industrial firm customers, respectively partially driven by a decrease in heating degree days of 2.0%. Commercial and industrial firm customers decrease was primarily driven by business shut downs resulting from COVID-19. SeeConservation rider effective May 1, 2022, see Management's Discussion and Analysis, "Regulation of PSE Rates and ~~Rates" and "Overview"~~Recovery of PSE Costs" included in Item 27 of this report for natural gas rate ~~changes~~changes. The increase in load is driven by an increase of commercial and ~~COVID-19 updates.~~residential usage of 9.2% and 3.5%, respectively. The increase in commercial usage was largely due to employees returning to work after business shut downs and lack of staffing in 2021 due to COVID-19. Residential usage

increased due to an 5.5% increase in heating degree days due to lower than normal temperatures, primarily in the 2nd quarter of 2022.

•Decoupling revenue ~~increased $16.6 million. This is~~decreased $14.3 million, primarily attributable to ~~an increase of 9.3%~~increased usage in 2022 and lower allowed ~~natural gas revenues and decreased usage, as noted above in the retail~~ revenue ~~section.~~per customer compared to 2021. This resulted in ~~allowed~~actual natural gas revenues being ~~greater~~higher than ~~actual~~allowed natural gas revenues in the current ~~year,~~period, whereas in ~~the prior year allowed~~2021, actual revenues were ~~closer to actual~~lower than allowed revenues.

•Other decoupling revenue ~~increased $23.3~~decreased $3.8 million due to ~~a $25.4 million decrease~~an increase in current ~~year~~period amortization of prior year ~~undercollection, which was driven by decreased usage and a decrease in rates of 5.3% and 0.5% effective May 2019 and May 2020, respectively.~~revenues compared to 2021. This is ~~partially offset by a $2.2 million decrease related~~attributable to ~~earnings~~increased usage in ~~excess~~2022 as well as increased amortization rates, both of ~~allowed ROR. In 2019, earnings in excess of allowed ROR of $2.2 million was returned to~~which increase the rate at which deferral revenues are recovered from customers. ~~There were no such returns to customers in 2020.~~

•Transportation and other revenue ~~decreased $3.5~~increased $10.6 million primarily due to LNG return deferral revenue of $18.9 million which started in 2022; partially offset by a ~~$2.9~~decrease of $6.2 million ~~decrease~~related to the IRS PLR which included revenue recognition in ~~entitlement constraint revenues for interruptible customers that have agreements~~2021 and amortization of the PLR to offset recovery through rates in ~~place to curtail their natural gas usage when the natural gas distribution system is constrained due to demand that was recognized~~2022, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in ~~2019.~~Item 7 of this report.

Natural Gas Energy Costs

Purchased natural gas expense increased ~~$71.9~~$102.3 million due to an increase in the PGA rates in November ~~2019~~2021 and the addition of two supplemental gas commodity costs amortization rates in 2019 which were added in order to recover the large amount of gas costs that PSE incurred in late 2018 and early 2019 due to the Enbridge pipeline explosion partially offset by a decreasean increase in natural gas usage of ~~4.3%~~5.2% as stated in the natural gas retail sales section above.

~~For additional information on prior years, please see discussion in Item 7, "Non-GAAP Financial Measures - Natural Gas Margin" of Form 10-K for period ended December 31, 2019.~~

5556

Other Operating Expenses and Other Income (Deductions)

The following chart displays the details of PSE's other operating expenses and other income (deductions) for the years ended December 31, ~~2019,~~2021, to December 31, ~~2020:~~2022:

~~2019~~2021 compared to ~~2020~~2022

Other Operating Expenses

•Net unrealized (gain) loss on derivative instruments increased ~~$23.2~~$247.4 million to a net ~~loss~~gain of ~~$26.8~~$261.2 million for the year ended December 31, ~~2020. One of the drivers is related to~~2022. The primary driver was the change in the weighted average forward prices for electric and natural gas. Specifically, electric prices ~~decreased 22.1%~~increased 128.1% resulting in ~~a $75.4~~$236.3 million ~~loss~~in gain for electric. Natural gas prices ~~decreased 4.1%~~increased 5.3% resulting in ~~a $17.0~~$117.1 million ~~loss~~in gain for natural gas. ~~The other driver is related to~~These gains were partially offset by the net ~~settlements~~settlement of electric trades that were previously recorded as $24.0 million in gain and natural gas trades previously recorded as ~~$63.6 million and $5.6~~$82.0 million in ~~losses, respectively, that settled~~gain.

•Utility Operations and ~~are recorded~~Maintenance expense increased $35.4 million primarily due to increases of (i) $9.8 million in ~~purchased electricity or~~customer service expenses primarily driven by increased low income assistance; (ii) $6.2 million increase in the non-service cost component of the qualified pension net periodic benefit cost in 2022 compared to 2021; (iii) $5.3 million of other generation maintenance costs due to increased wind turbine maintenance; (iv) $5.0 million in administrative and general expenses due to additional vice presidents, incentive and merit increases and IT costs related to technology growth and resumption of training and travel expenses in 2022 compared to 2021; (v) $4.8 million in Washington Commission filing fees related to GRC filings; and (vi) $2.4 million in miscellaneous distribution operations expenses due to training costs specific to electric generation fuel which results in a gain for unrealized gains and losses on derivative instruments. For further details, see Note 10, "Accounting for Derivative Instruments and Hedging" to the consolidated financial statements included in Item 8 of this report.operations.

•Non-utility and other expense decreased ~~$2.0~~$9.0 million primarily due to $12.9 million expenses associated with a 2021 PWI land sale, which was comprised of $11.0 million for the cost of the sale and $1.9 million of selling expenses. This decrease ~~in long term incentive plan costs of $16.0 million;~~was partially offset by ~~a one-time $7.0 million biogas payment and~~ an increase ~~in supplemental executive retirement plan (SERP) costs~~ of ~~$7.2 million.~~$3.9 million related to biogas purchase expense.

•Depreciation and amortization expense decreased ~~$5.7~~$33.2 million primarily driven ~~by an~~by: (i) electric amortization ~~decrease of $31.8~~decreased by $45.5 million or ~~35.3%,~~51.7% from 2021, primarily driven by $45.6 million less Production Tax Credit (PTC) amortization in 2022 as PSE fully utilized its PTC balance in 2021; (ii) common amortization decreased by $18.4 million or 20.6% from 2021, primarily driven by $25.1 million in net retirements of common technology assets. The Company invested heavily in technology solutions from 2017 - 2019, ~~due to~~with a ~~$28.9~~majority of useful lives between 3-5 years; and (iii) natural gas amortization decreased by $6.9 million ~~change~~or 41.6% from 2021, primarily driven by the $5.5 million LNG depreciation expense deferral combined with net retirements of $20.1 million in ~~the PTCs amortization due to lower taxable income year over year.~~natural gas technology assets. The ~~decrease was~~decreases were partially offset by (i) ~~an increase~~conservation amortization increased by $13.8 million due to conservation rider rates effective May 1, 2022, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in Item 7 of this report; (ii) natural gas distribution depreciation increased by $10.7 million or 8.5% from 2021, primarily due to $242.0 million in LNG net additions combined with $175.2 million in net additions in gas distribution assets; (iii) electric distribution depreciation increased a net of ~~$8.6~~$6.4 million or ~~6.2%,~~4.2% from ~~2019~~2021, primarily due to ~~$179.2~~$267.1 million in net additions of electric distribution assets; ~~(ii) natural gas distribution~~(iv) electric production depreciation increased ~~by $8.3~~a net of $3.3 million or ~~7.4%,~~2.4% from ~~2019~~2021, primarily due to ~~$231.9~~$19.2 million in net additions ~~in natural gas distribution~~of electric production assets; ~~(iii) natural gas amortization~~and (v) common general plant depreciation increased ~~by $3.6~~a net of $2.7 million or ~~41.9%~~9.6% from ~~2019~~2021, primarily due to ~~the final accounting for the AMI deferrals provided~~$42.1 million in general plant additions offset by ~~the results of the 2019 GRC and net additions of $24.3 million; and (iv) conservation amortization increased by $3.0~~$45.0 million ~~due to an increase~~ in ~~rates effective May 1, 2020.~~retirements.

•Taxes other than income taxes ~~decreased $5.3~~increased $25.6 million primarily due to ~~a decrease~~an increase of $13.8 million related to municipal taxes driven by the increase in ~~Montana property taxes of $4.1~~retail revenue in 2022 as compared to 2021 and $10.1 million ~~primarily due~~related to the ~~retirement of Colstrip 1 & 2 in Montana and $2.4 million of property tax tracker due to load.~~state excise tax.

Other Income, Interest Expense and Income Tax Expense

•Other income/expense ~~increased $15.0~~decreased $14.9 million from net other income of $32.0 million in 2021 to $17.1 million in 2022. The decrease was primarily driven by (i) $7.1 million other income decrease due to ~~$6.3~~a change in AMI return deferral per the 2022 GRC; (ii) $6.8 million ~~of SmartBurn plant investment at~~other income decrease related to the deferred return for Puget LNG, per Washington Commission Docket No. UG-210918; (iii) $3.2 million other expense increase in non-utility write-offs driven by the Colstrip ~~Units 3 & 4 which~~dry ash facilities exclusion from recovery ~~was disallowed~~in rate base per the 2022 GRC; and (iv) $3.1 million other income decrease in Washington Commission allowance for funds used during construction (AFUDC) due to a decrease in Washington Commission AFUDC rates in the ~~2019 GRC, write-offs~~first nine months of ~~$4.8~~2022 compared to 2021. These increases were partially offset by (i) a decrease of $6.2 million in the non-service cost component of ~~asset costs, and an increase in strategic initiative costs of $3.1 million.~~the qualified pension net periodic benefit cost for 2022 compared to 2021.

•Interest expenseincreased ~~$3.1~~$6.4 million primarily due to ~~$9.7~~an increase of $9.2 million ~~of interest expense~~related to the PSE $450.0 million

senior secured notes issued on ~~the $450.0 million senior note issued in 2019, increased PTCs interest expense of $4.9 million in 2020,~~September 15, 2021. This increase was partially offset by a decrease of ~~$7.9~~$2.9 million ~~of other~~related to interest expense ~~attributed to lower commercial paper borrowing~~recognized in ~~2020.~~conjunction with PSE's deferred compensation liability.

•Income tax expense ~~decreased $12.9~~increased $36.0 million primarily driven by ~~a decrease of 9.5% of income before income taxes and a 26.3% decrease~~an increase in ~~the effective tax rate to 8.7% in 2020 from 11.8% in 2019. For further details, see Note 14, "Income Taxes" to the consolidated financial statements included in Item 8 of this report.~~pre-tax book income.

~~For additional information on prior years, please see discussion in Item 7, "Other Operating Expenses and Other Income (Deductions)" of Form 10-K for period ended December 31, 2019.~~

5758

Puget Energy

Substantially all the operations of Puget Energy are conducted through its regulated subsidiary, PSE. Puget Energy’s results of operation for the years ended December 31, ~~2019,~~2021, and December 31, ~~2020,~~2022, were as follows:

~~2019~~2021 compared to ~~2020~~2022

Summary Results of Operations

Puget Energy’s net income ~~decreased~~increased by ~~$27.9~~$153.6 million, which is primarily attributable to ~~a decrease~~an increase in PSE's net income of ~~$18.6~~$154.9 million and ~~an increase~~a decrease in interest expense of ~~$13.8 million. The increase in~~$20.1 million which is a result of lower interest ~~expense was primarily due to a $13.5~~rates on outstanding debt as Puget Energy repaid $500.0 million ~~loss from the redemption~~of 6.00% notes and issued $500.0 million of senior secured notes at an interest rate of 2.379% in June ~~2020,~~2021; and Puget Energy repaid $450.0 million 5.625% notes in April 2022 and issued $450.0 million 4.224% notes in March 2022. Additionally, Puget Energy repaid a ~~$200~~$210.0 million ~~net additional issuance of $650 million issued in May 2020 and $450 million redeemed~~term loan in June ~~2020.~~2021. For ~~the discussion of redemption,~~further details, see Note 7, "Long-Term Debt" to the consolidated financial statements included in Item 8 of this report.

~~For~~ These increases were partially offset by an increase in net loss of $16.0 million at PLNG due to additional ~~information on prior years, please see discussion~~operational expenses as PLNG commenced commercial operations in ~~Item 7, "Puget Energy Summary Results~~February 2022 and a decrease in income tax benefit of ~~Operation" of Form 10-K for period ended December 31, 2019.~~$3.5 million due to an increase in taxable income.

5859

Capital Resources and Liquidity

Capital Requirements

Contractual Obligations and Commercial Commitments

The following are ~~PSE’s~~PSE's and Puget ~~Energy’s~~Energy's aggregate contractual obligations as of December 31, ~~2020:~~2022:

Payments Due Per Period
(Dollars in Thousands) Total 2021 2022-2023 2024-2025 Thereafter
Contractual obligations:
Energy purchase obligations1
$ 6,610,450 $ 1,046,399 $ 1,630,182 $ 1,274,587 $ 2,659,282
Long-term debt including interest2
5,735,238 229,109 453,394 453,394 4,599,341
Short-term debt including interest 373,800 373,800 — — —
Service contract obligations 545,199 75,199 155,512 159,832 154,656
Non-cancelable operating leases3
253,074 23,170 45,130 39,862 144,912
PSE finance leases3
885 508 377 — —
Pension and other benefits funding and payments 69,859 25,760 7,578 16,373 20,148
Total PSE contractual cash obligations 13,588,505 1,773,945 2,292,173 1,944,048 7,578,339
Long-term debt including interest2
2,531,168 610,535 770,723 473,260 676,650
Total Puget Energy contractual cash obligations $ 16,119,673 $ 2,384,480 $ 3,062,896 $ 2,417,308 $ 8,254,989


	Payments Due Per Period
(Dollars in Thousands)	Total		2023		2024-2025		2026-2027		Thereafter
Contractual obligations:
Energy purchase obligations1	$	8,193,734	$	2,184,488	$	2,180,363	$	1,084,780	$	2,744,103
Long-term debt including interest2	9,014,396		239,716		496,376		774,979		7,503,325
Short-term debt including interest	357,000		357,000		—		—		—
Service contract obligations	416,055		84,095		165,553		86,752		79,655
Non-cancelable operating leases3	284,283		23,676		45,119		42,519		172,969
PSE finance leases3	142,468		6,383		12,942		13,261		109,882
Pension and other benefits funding and payments	59,961		22,444		11,249		14,960		11,308
Total PSE contractual cash obligations	18,467,897		2,917,802		2,911,602		2,017,251		10,621,242
Long-term debt including interest2	2,591,430		156,453		535,066		149,406		1,750,505
Total Puget Energy contractual cash obligations	$	21,059,327	$	3,074,255	$	3,446,668	$	2,166,657	$	12,371,747

____________________

1.Energy purchase contracts were entered into as part of PSE’s obligation to serve retail electric and natural gas customers’ energy requirements. As a result, costs are generally recovered either through base retail rates or adjustments to retail rates as part of the power and natural gas cost adjustment mechanisms. Total energy purchase obligation as of December 31, 2022 does not include the Chelan PUD power purchase agreement that was executed on February 7, 2023. For additional information, see Note 16, "Commitments and Contingencies" to the consolidated financial statements included in Item 8 of this report.

2.For individual long-term debt maturities, see Note 7, "Long-Term Debt," to the consolidated financial statements included in Item 8 of this report. For Puget Energy, the amount above excludes the fair value adjustments related to the merger.

3.For additional information, see Note 9, "Leases" to the consolidated financial statements included in Item 8 of this report.

5960

The following are PSE’s and Puget Energy’s aggregate availability under commercial commitments as of December 31, ~~2020:~~

Amount of Available Commitments Expiration Per Period
(Dollars in Thousands) Total 2021 2022-2023 2024-2025 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
785,300 — 785,300 — —
Less: Inter-company short-term debt elimination2
(30,000) — — — (30,000)
Total Puget Energy commercial commitments $1,585,300 $— $1,585,300 $— $—
2022:


	Amount of Available 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	681,400		—		—		681,400		—
Less: Inter-company short-term debt elimination2	(30,000)		—		—		—		(30,000)
Total Puget Energy commercial commitments	$	1,481,400	$	—	$	—	$	1,481,400	$	—

_______________

1.As of December 31, ~~2020,~~2022, 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 ~~October 2023.~~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 December 31, ~~2020,~~2022, no loans or letters of credit were outstanding under the credit facility and ~~$373.8~~$357.0 million was outstanding under the commercial paper program. The credit agreement is syndicated among numerous lenders. Outside of the credit agreement, PSE has a ~~$2.7~~$2.3 million letter of credit in support of a long-term transmission contract and had $28.0 million issued under a ~~$1.0 million~~standby letter of credit in support of natural gas ~~purchases in Canada.~~purchases.

2.As of December 31, ~~2020,~~2022, 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 December 31, ~~2020,~~2022, Puget Energy had a revolving senior secured credit facility totaling $800.0 million, which matures in ~~October 2023.~~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 December 31, ~~2020,~~2022, there was ~~$14.7~~$118.6 million drawn and outstanding under the Puget Energy credit ~~facility.~~facility,of which $34.3 million was classified as long-term debt and $84.3 million was classified as short-term debt.

Off-Balance Sheet Arrangements

As of December 31, ~~2020,~~2022, 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 to improve energy system reliability. ~~Due to business disruptions caused by the COVID-19 pandemic, the Company closely monitored and adjusted~~The Company's capital expenditures ~~resulting in a decrease of $83.1~~were $18.6 million ~~compared to~~higher than forecasted amounts for ~~2020.~~2022. The increase was primarily due to (i) higher storm and weather related outage & emergent response; (ii) accelerated thermal generation maintenance and (iii) technology expenditures related to compliance with the Climate Commitment Act, project management, and check-processing software. Construction expenditures, excluding equity allowance for funds used during construction (AFUDC), totaled ~~$908.1 million~~$1.0 billion in ~~2020.~~2022. Presently planned utility construction expenditures, excluding equity AFUDC, are as follows:


Capital Expenditure Projections	Capital Expenditure Projections				Capital Expenditure Projections
(Dollars in Millions)	(Dollars in Millions)	2021	2022	2023	(Dollars in Millions)	2023	2024	2025
Total energy delivery, technology and facilities expenditures	Total energy delivery, technology and facilities expenditures	$967.6	$985.0	$1,146.8	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.

6061

Capital Resources

Cash from Operations


Puget Sound Energy	Puget Sound Energy	Year Ended December 31,						Puget Sound Energy	Year Ended December 31,
(Dollars in Thousands)	(Dollars in Thousands)	2020		2019		Change		(Dollars in Thousands)	2022		2021		Change
Net income	Net income	$	274,280	$	292,924	$	(18,644)	Net income	$	490,952	$	336,063	$	154,889
Non-cash items1	Non-cash items1	724,650		677,261		47,389		Non-cash items1	476,696		691,953		(215,257)
Changes in cash flow resulting from working capital2	Changes in cash flow resulting from working capital2	(57,578)		(107,355)		49,777		Changes in cash flow resulting from working capital2	(64,749)		21,379		(86,128)
Regulatory assets and liabilities	Regulatory assets and liabilities	(152,417)		(79,173)		(73,244)		Regulatory assets and liabilities	(90,335)		(126,625)		36,290
Purchased gas adjustment	Purchased gas adjustment	45,111		(132,766)		177,877		Purchased gas adjustment	37,256		29,720		7,536
Other non-current assets and liabilities3	Other non-current assets and liabilities3	(9,236)		(26,967)		17,731		Other non-current assets and liabilities3	(32,359)		(32,097)		(262)
Net cash provided by operating activities		$	824,810	$	623,924	$	200,886
Net cash (used in)/provided by operating activities								Net cash (used in)/provided by operating activities	$	817,461	$	920,393	$	(102,932)

_______________

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

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

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

Year Ended December 31, ~~2020,~~2022, compared to ~~2019~~2021

Cash generated from operations ~~for the year ended December 31, 2020, increased~~decreased by ~~$200.9~~$102.9 million, including a net income ~~decrease~~increase of ~~$18.6~~$154.9 million. The following are significant factors that impacted PSE's cash flows from operations:

•Cash flow adjustments resulting from non-cash items ~~increased $47.4~~decreased $215.3 million primarily due toto: (i) a ~~$28.9 million change in PTC utilization, a $23.2~~$247.4 million change from a net unrealized ~~loss~~gain on derivative instruments of ~~$3.6~~$13.8 million to a net unrealized ~~loss~~gain on derivative instruments of ~~$26.8~~$261.2 million, ~~a loss of $6.3 million due to writing off Smart Burn project at Colstrip,~~(ii) a decrease ~~of amortization of TCJA related income tax expense over-collection of $6.0 million and increased conservation amortization of $3.0 million, partially offset by decreases~~ in depreciation and amortization of ~~$8.7~~$47.0 million, ~~equity AFUDC~~and (iii) a deferral of ~~$7.4~~return and depreciation expenses for PSE's share of Tacoma LNG investment of $12.1 million. The decreases were partially offset by: (i) a $45.6 million change in PTC utilization, (ii) a $24.5 million change related to recognition of regulatory asset in 2021 as a result of the IRS PLR that concluded the EDIT methodology included in rates following the 2019 GRC order was impermissible, (iii) increased conservation amortization of $13.8 million, and (iv) deferred taxes of ~~$5.2~~$6.5 million. For further discussion, see "Other Operating Expenses" in Item 7, Management's Discussion and ~~Analysis and Note 14, "Income Taxes" in Item 8.~~Analysis.

•Cash flows resulting from changes in working capital ~~increased $49.8~~decreased $86.1 million primarily ~~due~~due: (i) a cash outflow of $155.8 million in account receivable as its balance increased $252.3 million in the twelve months ended December 31, 2022 compared to ~~decreased~~an increase of $96.5 million during the same period of 2021; the increase was related to higher wholesale sales of natural gas in November and December of 2022 driven by lower temperatures and higher wholesale prices, (ii) higher balances in materials and supplies and fuel and natural gas inventory increased cash ~~outflow~~outflows by $23.9 million and $23.1 million respectively, and (iii) increased tax payments of $43.1 million as the result of higher profit in 2022 compared to 2021 and increased Washington state property and utility taxes. The cash outflows were partially offset by (i) an increase in accounts payable ~~by $132.9~~of $136.6 million, which was ~~mainly due to 2019 includes payments~~driven by higher sales volumes and increased wholesale energy prices, (ii) higher accrued salary and wages of ~~significant power~~$7.2 million, (iii) higher short-term accrual for the Supplemental Executive Retirement Plan of $4.7 million, (iv) increased annual Washington Commission filing fee payables of $5.9 million, and ~~natural gas costs accrued at December 31, 2018 that were paid in 2019. The decrease~~(v) lower prepayment balances of cash outflow in accounts payable was partially offset by cash outflow increases in accounts receivable of $41.5 million, SERP liability of $32.2 million, as well as short-term purchased gas adjustment receivables of $9.9$5.2 million.

•Cash flows resulting from regulatory assets and liabilities ~~decreased $73.2~~increased $36.3 million primarily due to: (i) a $19.6 million cash inflow was related to ~~increases~~changes in ~~decoupling deferrals~~deferral of ~~$67.0~~storm excess costs, (ii) a $26.1 million increase in low income program as result of accrued higher cost in 2021 to assist pandemic (COVID-19) affected families, (iii) lower expenses and ~~major maintenance at Colstrip 3 & 4~~higher amortization led to an increase of ~~$5.0~~$14.5 million cash inflow in property tax tracker, (iv) amortizing IRS PLR deferral balances contributed an addition of $14.3 million cash inflow, see Management's Discussion and Analysis, "Regulation of PSE Rates and Recovery of PSE Costs" included in Item 7 of this report. The cash inflows were partially offset by a year-over-year change in power cost adjustment receivable, which was relatively flat in 2021, ($3.3 million), and $32.6 million higher in 2022, resulting in a net cash outflow of $35.9 million.

•Cash flow resulting from purchased gas adjustment ~~(long-term)~~ increased $177.9 million. Affected by three events experienced by PSE in 2019 winter: (1) the Enbridge pipeline rupture, (2) unusually low temperatures in February and March, and (3) a compressor failure in February at the Jackson Prairie storage facility, actual natural gas cost went above natural gas baseline rates in the PGA mechanism, caused the total purchased gas adjustment receivable to increase from $9.9 million to $132.8 million in 2019, which led to $122.9 million cash outflow. In contrast, both price of natural gas and actual gas consumption decreased during 2020. Combined with higher PGA rates taking effect on November 1, 2019, total purchase gas adjustment receivable decreased from $132.8 million to $87.7 million in 2020, resulting in a $45.1 million cash inflow. A change from $122.9 million cash outflow to $45.1 million cash inflow led to an increase of cash flow of $168.0$7.5 million, which ~~includes~~was driven by an increase in allowed PGA ~~long-term~~recovery that exceeded the increase in actual gas cost in 2022 compared to 2021. Increased natural gas prices and higher sales volume led to a $93.1 million increase in actual gas costs in 2022 compared to 2021. Meanwhile, the total amount of ~~$177.9~~allowed PGA recovery in 2022 increased $100.6 million ~~and a decrease in PGA short-term of $9.9 million. For further details, see "Natural Gas Margin" in Item 7, Management's Discussion and Analysis.~~

•~~Cash flow resulting from changes in other non-current assets and liabilities~~ ~~increased $17.7 million primarily due~~compared to ~~$13.7 million payroll taxes deferral, partially offset with other changes in long-term assets and liabilities.~~2021. The combined effect led to year-over-year cash inflow.


Puget Energy	Puget Energy	Year Ended December 31,						Puget Energy	Year Ended December 31,
(Dollars in Thousands)	(Dollars in Thousands)	2020		2019		Change		(Dollars in Thousands)	2022		2021		Change
Net income	Net income	$	(91,563)	$	(82,216)	$	(9,347)	Net income	$	(76,607)	$	(75,214)	$	(1,393)
Non-cash items1	Non-cash items1	2,841		(2,381)		5,222		Non-cash items1	36,689		18,312		18,377
Changes in cash flow resulting from working capital2	Changes in cash flow resulting from working capital2	3,415		(4,800)		8,215		Changes in cash flow resulting from working capital2	1,355		(26,229)		27,584
Regulatory assets and liabilities		—		(60)		60

Other non-current assets and liabilities3	Other non-current assets and liabilities3	(11,935)		(7,131)		(4,804)		Other non-current assets and liabilities3	(9,280)		(10,664)		1,384
Net cash provided by operating activities		$	(97,242)	$	(96,588)	$	(654)
Net cash (used in)/provided by operating activities								Net cash (used in)/provided by operating activities	$	(47,843)	$	(93,795)	$	45,952

______________

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

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

Year Ended December 31, ~~2020,~~2022, compared to ~~2019~~2021

Cash generated from operations for the year ended December 31, ~~2020,~~2022, in addition to the changes discussed at PSE above, ~~decreased~~increased by ~~$0.7~~$46.0 million compared to the same period in ~~2019,~~2021, which includes a net income decrease of ~~$9.3~~$1.4 million. The remaining change was primarily impacted by the factors explained below:

•Non-cash items increased ~~$5.2~~$18.4 million primarily ~~caused by the cash outflow of $13.5 million~~ due to ~~extinguishment~~an increase of ~~debt reflected in financing activities, partially offset by a decrease in cash outflow of $8.6~~$12.6 million ~~due to changes~~ in deferred ~~taxes.~~taxes and an increase in amortization and depreciation of $5.5 million.

•Changes in cash flow resulting from working capital increased ~~$8.2~~$27.6 million primarily due toto: (i) a ~~$5.3~~$13.8 million increase ~~related~~due to ~~changes~~the change in ~~eliminations of~~ PSE's intercompany account receivable and account payable balances with Puget LNG and Puget Energy, ~~a $3.6 million increase~~which are eliminated upon consolidation of Puget Energy, (ii) changes in tax payable added $15.1 million cash inflow, (iii) cash inflow of $3.5 million driven by reduction of accrued interest expense as result of lower interest rates on debt, as Puget Energy repaid $500.0 million of 6.00% notes and issued $500.0 million of senior secured notes at an interest rate of 2.379% in June, 2021. Additionally, Puget Energy used an equity contribution from Puget Equico to pay off a $210.0 million term loan in June, 2021. The cash inflows were partially offset ~~with decreases~~by cash outflow of $3.9 million as result of Puget LNG commenced commercial operations in ~~other~~February 2022 and accrued ~~expenses.~~

•~~Other non-current assets and liabilities~~ ~~decreased $4.8~~$3.9 million ~~primarily due to change~~in account receivable as of ~~the valuation of pension liability compared to the prior year.~~December 31, 2022.

Financing Program

The Company’s external financing requirements principally reflect the cash needs of its construction program, its schedule of maturing debt and certain operational needs. The Company anticipates refinancing the redemption of bonds or other long-term borrowings with its credit facilities and/or the issuance of new long-term debt. Access to funds depends upon factors such as Puget Energy’s and PSE’s credit ratings, prevailing interest rates and investor receptivity to investing in the utility industry, Puget Energy and PSE. The Company believes it has sufficient liquidity through its credit facilities and access to capital markets to fund its needs over the next twelve months.

Proceeds from PSE’s short-term borrowings and sales of commercial paper are used to provide working capital and the interim funding of utility construction programs. Puget Energy and PSE continue to have reasonable access to the capital and credit markets. As a result of the prolonged economic stresses of the COVID-19 pandemic and ~~its impact on~~recent inflationary pressures, the ~~economy and capital markets, the Company~~company continues to ~~carefully~~closely monitor cash receipts from customers and any impacts on the Company’s liquidity which may affect its ability to fund safe, reliable, and dependable service for our customers. ~~Our initiative to suspend disconnections of customers for non-payment and the receipt of the Washington Commission approval to waive late fees will impact future cash receipts.~~

As a result of the 2019 GRC outcome and the continuing negative impacts of tax reform on the Company's cash flows, Puget Energy and PSE's credit rating metrics were negatively impacted. In response to the 2019 GRC order, Moody's released an issuer comment stating the GRC outcome was credit negative but took no formal credit rating action. On July 23, 2020, S&P placed Puget Energy and PSE on CreditWatch with negative implications due the rate case outcome, ~~and~~but later revised to negative outlook. Fitch affirmed Puget Energy and PSE ratings but changed its outlook from stable to negative. ~~Subsequently,~~On May 27, 2021, S&P ~~removed~~revised Puget ~~Energy~~Energy’s and PSE’s ratings from negative to stable outlook. On June 1, 2021, Fitch also revised its outlook for PE and PSE ~~from CreditWatch negative. All three credit~~to stable. Both actions were a result of the passage and signing into law of Washington Senate Bill 5295 which allows for multi-year rate plans and reduction of regulatory lag, as well as other actions taken by management to increase revenue via available rate recovery methods and management of internal expenses. Despite these actions, the rating agencies ~~indicated~~noted that ~~continued stress on credit metrics and/or~~a lack of sufficient regulatory rate relief over the relative near term could result in ~~additional~~ negative ratings ~~implications, including a credit rating downgrade. A consistent credit rating downgrade by the three credit agencies would lower~~implications. Although neither Puget Energy ~~from investment grade to non-investment grade, however,~~nor PSE have any debt whose maturity would ~~remain at investment grade, assuming~~be accelerated upon a ~~one notch credit adjustment. Additionally,~~ratings downgrade, a credit rating downgrade ~~would~~may increase the cost of borrowing for Puget Energy and PSE in future long-term

financings ~~and impact the terms~~or under their existing credit facilities. Any increase in the cost of borrowing ~~would~~may negatively impact Puget Energy and PSE's future results of operations and could negatively impact their future liquidity, access to debt capital resources and financial condition. Additionally, a ratings downgrade could impact the Company's ability to issue dividends, see Dividend Payment Restriction below for further details. A downgrade to Puget Energy and PSE's credit ratings would not impact debt covenants under our existing credit facilities nor would it impact other contracts, as neither include credit rating triggering event clauses. A credit rating decrease for PSE could result in increased cash collateral required for commodity contracts, which would adversely affect PSE's liquidity. Management continually monitors the credit rating environment for both Puget Energy and PSE, but cannot predict with certainty the actions credit agencies may take, if any, in response to weaker near term credit metrics, regulatory and rate recovery uncertainties, and management's efforts to contain the growth of capital and operating expenditures. Containing the growth of capital and operating expenditures will be limited, over the near ~~to medium~~ term, due to continuing strategic and risk mitigation imperatives and the necessity of providing safe, reliable and resilient service levels to customers, particularly in the context of the COVID-19 pandemic.

Commercial paper markets were significantly impacted for a period of time due to COVID-19, which limited commercial paper borrowings so therefore the Company drew short term funding from its credit facility. The Company created a minimum cash reserve of $100 million on April 1, 2020, which was intended to be utilized to cover cash disbursements in the event of illiquid markets. As a result of significantly improved commercial paper markets and steady cash collection over the second quarter of 2020, the Company reduced its cash reserve requirement to $20 - $25 million. Evolving factors that we cannot accurately predict, including the duration and scope of the COVID-19 pandemic, and any relevant governmental, business and customers’ actions that have been and continue to be taken in response to the COVID-19 pandemic, could negatively impact the Company’s liquidity.

For information on Puget Energy and PSE dividends, long-term debt and credit facilities, see Note 5, “Dividend Payment Restrictions, Note 7, “Long-term Debt” and Note 8, “Liquidity Facilities and Other Financing Arrangements” to the consolidated financial statements included in Item 8 of this report.

Debt Restrictive Covenants

The type and amount of future long-term financings for PSE may be limited by provisions in PSE's electric and natural gas mortgage indentures.

PSE’s ability to issue additional secured debt may also be limited by certain restrictions contained in its electric and natural gas mortgage indentures. Under the most restrictive tests, at December 31, ~~2020,~~2022, PSE could issue:

•Approximately ~~$2.1~~$1.9 billion of additional first mortgage bonds under PSE’s electric mortgage indenture based on approximately ~~$3.5~~$3.2 billion of electric bondable property available for issuance, subject to an interest coverage ratio limitation of 2.0 times net earnings available for interest (as defined in the electric utility mortgage), which PSE exceeded at December 31, ~~2020;~~2022; and

•Approximately ~~$838.0 million~~$1.0 billion of additional first mortgage bonds under PSE’s natural gas mortgage indenture based on approximately ~~$1.4~~$1.7 billion of natural gas bondable property available for issuance, subject to a combined natural gas and electric interest coverage test of 1.75 times net earnings available for interest and a natural gas interest coverage test of 2.0 times net earnings available for interest (as defined in the natural gas utility mortgage), both of which PSE exceeded at December 31, ~~2020~~2022.

At December 31, ~~2020,~~2022, PSE had approximately ~~$8.0~~$8.6 billion in electric and natural gas rate base to support the interest coverage ratio limitation test for net earnings available for interest.

Shelf Registrations

~~Other~~On March 10, 2022, Puget Energy filed an S-3 Registration statement under which it may issue up to $1.0 billion aggregate principal amount of senior notes secured by Puget Energy's assets. As of the date of this report, $550.0 million was available to be issued. The shelf registration will expire in March 2025.

In August 2022, PSE filed an S-3 shelf registration statement under which it may issue up to $1.4 billion aggregate principal amount of senior notes secured by first mortgage bonds. As of the date of this report, $1.4 billion was available to be issued. The shelf registration will expire in August 2025.

Critical Accounting ~~Policies and~~ Estimates

The preparation of financial statements in conformity with GAAP requires that management apply accounting policies and make estimates and assumptions that affect results of operations and the reported amounts of assets and liabilities in the financial statements. Management believes the following accounting policies are particularly important to the financial statements and require the use of estimates, assumptions and judgment to describe matters that are inherently uncertain.

Revenue Recognition

Operating utility revenue is recognized when the basis of service is rendered, which includes estimated unbilled revenue. PSE's estimate of unbilled revenue is based on a calculation using meter readings from its automated meter reading system. The estimate calculates unbilled usage at the end of each month as the difference between the customer meter readings on the last day of the month and the last customer meter readings billed during the month less unbilled revenues recorded in the prior month. The "current" month unbilled usage is then priced at published rates for each schedule to estimate the unbilled revenues by customer.

Certain revenues from PSE's electric and natural gas operations are subject to a revenue decoupling mechanism under which PSE's actual energy delivery revenues related to electric transmission and distribution, natural gas operations and general administrative costs are compared with authorized revenues allowed under the mechanism. The mechanism mitigates volatility in revenue due to weather and gross margin erosion related to energy efficiency. Any differences are deferred to a regulatory asset for under recovery or a regulatory liability for over recovery. Revenues associated with power costs under the PCA mechanism and PGA rates are excluded from the decoupling mechanism.

As defined by ASC 980, “Regulated Operations” (ASC 980), the decoupling mechanism is an alternative revenue program that allows billings to be adjusted for the effects of weather abnormalities, conservation efforts or other various external factors. PSE adjusts these billings in the future in response to these effects to collect additional revenues provided under the decoupling mechanism. Once billing of additional revenues under the decoupling mechanism is permitted, the additional revenue can be recognized when the following criteria specified by ASC 980 are met: (i) the program is established by an order from the Washington Commission that allows for automatic adjustment of future rates, (ii) the amount of additional revenues for the period is objectively determinable and is probable of recovery and (iii) the additional revenues will be collected within 24 months following the end of the annual period in which they are recognized. PSE meets the criteria to recognize revenue under the decoupling mechanism. The Company will not record any decoupling revenue that is expected to take longer than 24 months to collect following the end of the annual period in which the revenues would have otherwise been recognized. Once determined to be collectible within 24 months, any previously non-recorded amounts will be recorded.

For further discussion regarding revenue recognition, see Note 3, "Revenue", to the consolidated financial statements included in Item 8 of this report.

Regulatory Accounting

As a regulated entity of the Washington Commission and the FERC, PSE prepares its financial statements in accordance with the provisions of ASC 980. The application of ASC 980 results in differences in the timing and recognition of certain revenue and expenses in comparison with businesses in other industries. The rates that are charged by PSE to its customers are based on cost base regulation reviewed and approved by the Washington Commission and the FERC. Under the authority of these commissions, PSE has recorded certain regulatory assets and liabilities at December 31, ~~2020,~~2022, in the amount of ~~$918.1~~$896.4 million and ~~$1,685.2~~$1,961.1 million, respectively, and regulatory assets and liabilities at December 31, ~~2019,~~2021, of ~~$847.5~~$952.5 million and ~~$1,676.6~~$1,709.5 million, respectively. Such amounts are amortized through a corresponding liability or asset account, respectively, with no impact to earnings. PSE expects to fully recover its regulatory assets and liabilities through its rates. If future recovery of costs ceases to be probable, PSE would be required to write off these regulatory assets and liabilities. In addition, if PSE determines that it no longer meets the criteria for continued application of ASC 980, PSE could be required to write off its regulatory assets and liabilities related to those operations not meeting ASC 980 requirements.

Also encompassed by regulatory accounting and subject to ASC 980 are the PCA and PGA mechanisms. The PCA and PGA mechanisms mitigate the impact of commodity price volatility upon the Company and are approved by the Washington Commission. The PCA mechanism provides for a sharing of costs that vary from baseline rates over a graduated scale. For further discussion regarding the PCA mechanism, see Management's Discussion and Analysis, "Regulation of PSE Rates and ~~Rates"~~Recovery of PSE Costs" included in Item 7 of this report. The increases and decreases in the cost of natural gas supply are reflected in customer bills through the PGA mechanism. PSE expects to fully recover/refund these regulatory balances through its rates. However, both mechanisms are subject to regulatory review and approval by the Washington Commission on a periodic basis.

Derivatives

ASC 815 requires that all contracts considered to be derivative instruments be recorded on the balance sheet at their fair value unless the contracts qualify for an exception. The Company enters into derivative contracts to manage its energy resource portfolio and interest rate exposure including forward physical and financial contracts and swaps. Some of PSE’s physical electric supply contracts qualify for the normal purchase normal sale (NPNS) exception to derivative accounting rules. Generally, NPNS applies to contracts with creditworthy counterparties, for which physical delivery is probable and in quantities that will be used in the normal course of business. Power purchases designated as NPNS must meet additional criteria to determine if the transaction is within PSE’s forecasted load requirements and if the counterparty owns or controls energy resources within the ~~western region~~Western Interconnection to allow for physical delivery of the energy. PSE may enter into financial fixed contracts to economically hedge the variability of certain index-based contracts. Those contracts that do not meet the NPNS exception are marked-to-market to current earnings in the statements of income. Natural gas derivative contracts qualify for deferral under ASC 980 due to the PGA mechanism.

PSE values derivative instruments based on daily quoted prices from an independent external pricing service. The Company regularly confirms the validity of pricing service quoted prices (e.g. Level 2 in the fair value hierarchy) used to value commodity contracts to the actual prices of commodity contracts entered into during the most recent quarter. When external

quoted market prices are not available for derivative contracts, PSE uses a valuation model that uses volatility assumptions relating to future energy prices based on specific energy markets and utilizes externally available forward market price curves. All derivative instruments are sensitive to market price fluctuations that can occur on a daily basis. The Company is focused on commodity price exposure and risks associated with volumetric variability in the natural gas and electric portfolios. PSE is not engaged in the business of assuming risk for the purpose of speculative trading. The Company economically hedges open natural gas and electric positions to reduce both the portfolio risk and the volatility risk in prices. The exposure position is determined by using a probabilistic risk system that models 250 simulations of how the Company’s natural gas and power portfolios will perform under various weather, hydrological and unit performance conditions.

For additional information, see Item 7A, "Quantitative and Qualitative Disclosures about Market ~~Risk"~~Risk," Note 10, "Accounting for Derivative Instruments and Hedging Activities" and Note 11, "Fair Value Measurements" to the consolidated financial statements included in Item 8 of this report.

Environmental Remediation

The Company is subject to federal and state requirements for protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. A potentially responsible party has joint and several liability under existing U.S. environmental laws. In instances where we have been designated a potentially responsible party by the Environmental Protection Agency or state environmental agency, we are potentially liable for the cost of remediating contamination at current work sites and former work sites. Such sites include former manufactured gas plants operated by PSE predecessors, such as Gas Works Park on the shore of Lake Union in Seattle, or contaminated facilities with other connections to PSE predecessors, such as the location of a long-defunct creosote manufacturer which had purchased waste products from PSE predecessors, the Quendall Terminals site on Lake Washington in Renton, Washington. In each case, PSE assesses, based on in-depth studies, expert analyses and legal reviews, our environmental remediation obligations related to contaminated sites, including assessments of ranges and probabilities of recoveries from other responsible parties and/or insurance carriers. PSE develops a range of reasonably estimable costs that includes a low and high end of a range for all remediation sites for which we have sufficient information. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. Liabilities are recorded based on the best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites. It’s possible that costs are incurred in excess of the recorded amounts because of changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. The Company believes a significant portion of its past and future environmental remediation costs are recoverable from insurance companies, from third parties or from customers under a Washington Commission order.

For additional information see Note 4, "Regulation and Rates" to the consolidated financial statements included in Item 8 of this report.

Fair Value

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). However, as permitted under ASC 820, the Company utilizes a mid-market pricing convention (the mid-point price between bid and ask prices) as a practical expedient for valuing the majority of its assets and liabilities measured and reported at fair value. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company primarily applies the market approach for recurring fair value measurements as it believes that

this approach is used by market participants for these types of assets and liabilities. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. For further discussion on market risk, see Item 7A, "Quantitative and Qualitative Disclosures about Market Risk". in this report.

Pension and Other Postretirement Benefits

PSE has a qualified defined benefit pension plan covering substantially all employees of PSE. PSE recognized qualified pension expense of ~~$17.1~~$14.7 million and ~~$12.6~~$21.4 million for the years ended December 31, ~~2020,~~2022, and ~~2019,~~2021, respectively. Of these amounts, approximately ~~50.6%~~48.3% and ~~49.0%~~48.7% were included in utility operations and maintenance expense in ~~2020~~2022 and ~~2019,~~2021, respectively, and the remaining amounts were capitalized. For the years ended December 31, ~~2020,~~2022, and ~~2019,~~2021, Puget Energy recognized incremental qualified pension income of ~~$11.3~~$8.7 million and ~~$12.1~~$10.4 million, respectively. In 2023, it is expected that PSE and Puget Energy will recognize pension income of $0.4 million and incremental qualified pension income of $3.5 million, respectively.

PSE has a SERP and recognized pension and other postretirement benefit expenses of $4.7 million and $4.3 million for the years ended December 31, 2022, and 2021, respectively. For the years ended December 31, 2022, and 2021, Puget Energy recognized incremental income of $0.2 million and $0.2 million, respectively. In 2023, it is expected that PSE and Puget Energy will recognize pension expense of ~~$20.6 million and incremental qualified pension income of $10.3 million, respectively.~~

PSE has a Supplemental Executive Retirement Plan (SERP). PSE recognized pension and other postretirement benefit expenses of $5.0 million and $5.4 million for the years ended December 31, 2020, and 2019, respectively. For the years ended December 31, 2020, and 2019, Puget Energy recognized incremental income of $0.3 million and $0.4 million, respectively. In 2021, it is expected that PSE and Puget Energy will recognize pension expense of $4.5$2.4 million and incremental pension income of ~~$0.2~~$0.1 million, respectively.

PSE also has other limited postretirement benefit plans. PSE recognized income of $0.1 million and ~~$0.5~~$0.1 million for the years ended December 31, ~~2020,~~2022, and ~~2019,~~2021, respectively. For the years ended December 31, ~~2020,~~2022, and ~~2019,~~2021, Puget Energy recognized incremental expense of $0.1 million ~~and $0.2 million, respectively.~~in both years. In ~~2021,~~2023, it is expected that PSE and Puget Energy will recognize expense of $0.1 million and incremental expense of $0.1 million, respectively.

The Company’s pension and other postretirement benefits income or expense depend on several factors and assumptions, including plan design, timing and amount of cash contributions to the plan, earnings on plan assets, discount rate, expected long-term rate of return, mortality and health care cost trends. Changes in any of these factors or assumptions will affect the amount of income or expense that the Company records in its financial statements in future years and its projected benefit obligation. The Company has selected an expected return on plan assets based on a historical analysis of rates of return and the Company’s investment mix, market conditions, inflation and other factors. The Company’s accounting policy for calculating the market-related value of assets is based on a five-year smoothing of asset gains or losses measured from the expected return on market-related assets. This is a calculated value that recognizes changes in fair value in a systematic and rational manner over five years. The same manner of calculating market-related value is used for all classes of assets and is applied consistently from year to year. During ~~2020,~~2022, the Company made cash contributions of $18.0 million to the qualified defined pension plan. Management is closely monitoring the funding status of its qualified pension plan. At December 31, ~~2020,~~2022, and ~~2019,~~2021, the Company’s qualified pension plan was ~~$14.7~~$69.3 million ~~underfunded~~overfunded and ~~$21.3~~$63.6 million ~~underfunded~~overfunded as measured under GAAP, or ~~98.3%~~111.8% and ~~97.3%~~107.6% funded, respectively. As of January 1, ~~2021,~~2023, the plan's estimated funded ratio, as calculated under guidelines from The Pension Protection Act of 2006 and considering temporary interest rate relief measures approved by

Congress, was more than 100%. The aggregate expected contributions and payments by the Company to fund the pension plan, SERP and other postretirement plans for the year ending December 31, ~~2021,~~2023, are expected to be at least $18.0 million, ~~$6.8~~$3.5 million and $0.3 million, respectively.

The discount rate used in accounting for pension and other benefit obligations ~~decreased~~increased from ~~3.35%~~3.00% in ~~2019~~2021 to ~~2.70%~~5.60% in ~~2020.~~2022. The discount rate used in accounting for pension and other benefit expense ~~decreased~~increased from ~~4.40%~~2.70% in ~~2019~~2021 to ~~3.35%~~3.00% in ~~2020.~~2022. The rate of return on plan assets for qualified pension benefits ~~decreased from 7.50%~~remains unchanged at 6.50% in ~~2019 to 7.15% in 2020.~~both 2021 and 2022. The rate of return on plan assets for other benefits was 7.00% in both ~~2019~~2021 and ~~2020.~~2022.

The ~~following~~follow tables reflect the estimated sensitivity associated with a change in certain significant actuarial assumptions (each assumption change is presented mutually exclusive of other assumption changes):


Puget Energy and Puget Sound Energy	Puget Energy and Puget Sound Energy	Change in Assumption	Impact on Projected Benefit Obligation Increase /(Decrease)						Puget Energy and Puget Sound Energy	Change in Assumption	Impact on Projected Benefit Obligation Increase /(Decrease)
(Dollars in Thousands)	(Dollars in Thousands)		Pension Benefits		SERP		Other Benefits		(Dollars in Thousands)		Pension Benefits		SERP		Other Benefits
Increase in discount rate	Increase in discount rate	50 basis points	$	(50,098)	$	(1,398)	$	(559)	Increase in discount rate	50 basis points	$	(29,451)	$	(795)	$	(306)
Decrease in discount rate	Decrease in discount rate	50 basis points	55,751		1,493		611		Decrease in discount rate	50 basis points	32,186		840		330

ITEM 9A. CONTROLS AND PROCEDURES

Puget Energy

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of Puget Energy’s management, including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, Puget Energy has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, ~~2020,~~2022, the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer of Puget Energy concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no changes in Puget Energy’s internal control over financial reporting during the quarter ended December 31, ~~2020,~~2022, that have materially affected, or are reasonably likely to materially affect, Puget Energy’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Puget Energy’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Under the supervision and with the participation of Puget Energy’s President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, Puget Energy’s management assessed the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, Puget Energy’s management concluded that its internal control over financial reporting was effective as of December 31, ~~2020.~~2022.

Puget Energy’s effectiveness of internal control over financial reporting as of December 31, ~~2020,~~2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Puget Sound Energy

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of PSE’s management, including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, PSE has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, ~~2020,~~2022, the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer of PSE concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no changes in PSE’s internal control over financial reporting during the quarter ended December 31, ~~2020,~~2022, that have materially affected, or are reasonably likely to materially affect, PSE’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

PSE’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Under the supervision and with the participation of PSE’s President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, PSE’s management assessed the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, PSE’s management concluded that its internal control over financial reporting was effective as of December 31, ~~2020.~~2022.

PSE’s effectiveness of internal control over financial reporting as of December 31, ~~2020,~~2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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ITEM 9B. OTHER INFORMATION

None.

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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

As of February ~~25, 2021,~~23, 2023, twelve directors constitute Puget Energy’s Board of Directors and thirteen directors currently constitute PSE’s Board of Directors, as set forth below. The directors are selected in accordance with the Amended and Restated Bylaws of each of Puget Energy and PSE, pursuant to which, the investor-owners of Puget Holdings (the indirect parent company of both Puget Energy and PSE) are entitled to select individuals to serve on the boards of Puget Energy and PSE.

Scott Armstrong, age ~~61,~~63, has been a director on the boards of PSE since June of 2015 and on the board of Puget Energy since November 2017. Mr. Armstrong ~~is currently the~~previously served as Chief Executive Officer of Concure Oncology ~~a position he has held since~~from March ~~2020.~~2020 to November 2021. Prior to that Mr. Armstrong was President and CEO of Group Health Cooperative of Seattle, Washington, a health insurance and medical care provider, positions he had held since January 2005, until its acquisition by Kaiser Permanente on February 1, 2017. An independent director not affiliated with any of the Company’s investors, Mr. Armstrong’s executive leadership experience in a heavily regulated industry that has undergone extensive change, along with his involvement in civic affairs in the Pacific Northwest, are among the reasons for his appointment to the ~~PSE board.~~

~~Kenton Bradbury, age 51, has been a director on the boards of both~~ Puget Energy and PSE since April 17, 2019. He is currently the Managing Director of OMERS Infrastructure Management Inc. a position he has held since 2015. Prior to that, Mr. Bradbury served as a director of Infracapital, the infrastructure investment arm of M&G Investments, and served as Senior Vice President of Infrastructure and Regulation at E.ON in Germany. Mr. Bradbury will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.boards.

Richard Dinneny, age ~~58,~~60, has been a director on the boards of both Puget Energy and PSE since April 17, 2019. Mr. Dinneny ~~is currently the~~previously served as Senior Portfolio Manager, Infrastructure and Renewable Resources for British Columbia Investment Management Corporation (BCI) where he ~~has~~had the responsibility for all aspects of investing in infrastructure ~~transactions.~~transactions from 2015 to May 31, 2021. Mr. Dinneny isserves on the boards of Puget Energy and PSE as a ~~director~~representative of ~~Vier Gas Services GmbH & Co. KG, Essen, the owner of Open Grid Europe, German’s leading natural gas transport company and Czech Grid Holdings. Mr. Dinneny was selected by BCI and~~BCI’s ownership interests, pursuant to the ~~Amended and Restated Bylaws of each~~terms of the ~~Companies, will serve as an Owner Director on their respective Boards of Directors.Mr. Dinneny will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.~~Puget Energy and PSE bylaws.

Barbara Gordon, age ~~62,~~64, has been a director on the board of PSE since November ~~2017.~~2017 and on the board of Puget Energy since August 2022. Ms. Gordon previously served as a Vice President of the board of directors for Seattle-King County Habitat for Humanity, a non-profit organization (2016-2018). Prior to that time, Ms. Gordon served as Executive Vice President and Chief Customer Officer of Bellevue-based Apptio, a developer of technology business management software (2016-2017), Senior Vice President and Chief Operating Officer of Isilon/EMC, a digital storage systems company (2013-2016), and as Corporate Vice President of Worldwide Customer Service and Support at Microsoft (2003-2013). An independent director not affiliated with any of the Company's investors, Ms. Gordon brings to the Board her expertise in customer-facing technology initiatives and enterprise level management of customer service and support.

~~Christopher Hind~~Chris Parker, age ~~51,~~52, has been a director ~~on the boards~~ of both Puget Energy and PSE since February ~~28, 2018. He~~22, 2022. Mr. Parker is currently a member of the ~~Senior Principal, Private Infrastructure with Canada~~Ontario Teachers’ Pension Plan ~~Investment Board (CPPIB), an investment~~North America Infrastructure team where he focuses on origination, execution and management ~~organization, which position he~~of infrastructure investments. He joined Ontario Teachers’ Pension Plan in 2011 and has ~~held since January 2016. Prior to that, Mr. Hind~~ served ~~as a Managing Director, Investment Banking, at CIBC, a financial institution, from October 1997 to January 2016. Mr. Hind also~~on the board of directors of Northern Star Generation, Intergen, Express Pipeline, Ontario Teachers' New Zealand Forest Investments and Sydney Desalination Plant. He currently serves on the board of directors of ~~Pattern Energy Group LP that develops, owns~~Chicago Skyway. Prior to joining Ontario Teachers', Chris worked on power and ~~operates~~ utility ~~scale wind and solar power facilities that is headquartered in San Francisco, CA.~~investments at Brookfield Asset Management. Mr. ~~Hind~~Parker was selected by ~~CPPIB~~Clean Energy JV Sub 2, LP and pursuant to the Amended and Restated Bylaws of each of the Companies, will serve as an Owner

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Director on their respective Boards of Directors. Mr. ~~Hind~~Parker will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

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Grant Hodgkins, age ~~45,~~47, has been a director on the boards of both Puget Energy and PSE since December 31, 2020. Mr. Hodgkins is currently the Portfolio Manager, Infrastructure and Renewable Resources Group, for British Columbia Investment Management Corporation (BCI), which position he has held since September 2017, where he has responsibility for all aspects of investing in infrastructure transactions. Mr. Hodgkins is a director of Corix Infrastructure Inc., a water and wastewater utility and contract energy company based in Vancouver, ~~B.C.~~British Columbia. Mr. Hodgkins was selected by BCI and pursuant to the Amended and Restated Bylaws of each of the Companies, will serve as an Owner Director on their respective Boards of Directors. Mr. Hodgkins will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

~~Steven W. Hooper~~, age 67, has been a director on the boards of both Puget Energy and PSE since January 2015. Mr. Hooper is currently co-founder and partner of Ignition Partners, a venture capital firm that focuses on technology based in Bellevue, Washington, which position he has held since 2000. Previously, Mr. Hooper was the co-CEO of Teledesic (1998-2000) and CEO of Nextlink (1997-1998) and AT&T Wireless (1994-1997). Mr. Hooper also currently serves on the boards of directors of Recreational Equipment, Inc. (REI), an outdoor equipment company, and Airbiquity, Inc., an automotive telematics company, as well as on the boards of various Ignition Partners portfolio companies. An independent director not affiliated with any of the Company’s investors, Mr. Hooper’s leadership skills, experience with the challenges facing regulated businesses, and involvement with regional educational and civic organizations are some of the reasons that led to his appointment to the Puget Energy and PSE boards.

Tom King, age ~~59,~~61, has been a director on the boards of both Puget Energy and PSE since April 17, 2019. Mr. King is currently the Interim CEO of Woodway Energy Infrastructure, an Intra State Pipeline, which position he has held since December 2022. He is also an Operating Executive with AEA investors, a middle market private equity firm, which position he has held since 2017. Mr. King served as Chairman and President of National Grid U.S. from 2007-2015. Prior to that, he was president of PG&E Corporation and Chairman and CEO of Pacific Gas and Electric from 2003-2007. Mr. King serves on the board of Entregado Group and Allied Power Group. Mr. King serves on the boards of Puget Energy and PSE as a joint representative of ~~CPPIB’s~~Macquarie Washington Clean Energy Investment, L.P. and Ontario Teachers’ Pension Plan ownership interests, pursuant to the terms of the Puget Energy and PSE bylaws. Mr. King’s experience as an executive officer of regulated utilities and his extensive familiarity with managing operational change are among the reasons for his continuing service as a member of the Puget Energy and PSE boards.

Mary Kipp, age ~~53,~~55, has been a director on the boards of both Puget Energy and PSE since January 3, 2020. Ms. Kipp has ~~also been elected~~served as President and Chief Executive officer since January 3, 2020, and was President of Puget Energy and PSE from August 2019 to December 2019. Prior to that time Ms. Kipp served as President, Chief Executive Officer and Director of El Paso Electric Company (El Paso) from May 2017 to August 2019. ~~Prior to that she~~Ms. Kipp also serves on the board of Hawaiian Electric Industries, Inc., owner of a provider of electric utility services in Hawaii, and Boston Properties, Inc., a publicly traded developer, owner and manager of Class A office properties.

Jean-Paul Marmoreo, age 47, has been a director on the boards of both Puget Energy and PSE since September 3, 2021. Mr. Marmoreo is currently the Director Asset Management of OMERS Infrastructure Management Inc., since January 2019. He is currently on the boards of Calumet Concession Partners Inc., CannAmm GP Inc., and Commodore US Holding Corporation. Mr. Marmoreo previously served as ~~Chief Executive Officer~~Director of OMERS Infrastructure Management Inc. from February 2018 to January 2019 and Secretary of Airports Worldwide from April 2017 to August 2018. Mr. Marmoreo was selected by OMERS and pursuant to the Amended and Restated Bylaws of each of the Companies, will serve as an Owner Director on their respective Boards of Directors. Mr. Marmoreo will not receive any director ~~of El Paso~~compensation from ~~December 2015 to May 2017, and President of El Paso from 2014 to 2015.~~the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

Paul McMillan, age ~~66,~~68, has been a director on the boards of both Puget Energy and PSE since April 23, 2015. Mr. McMillan is currently principal of Tidal Shift Capital Inc. of Toronto, Ontario, Canada, which provides consulting and project development services to energy and infrastructure clients, he has held the position since July 2009. He served as Senior Vice President of EPCOR Energy Division of Edmonton, Alberta, Canada, from May 2005 to July 2009 and President of EPCOR Merchant and Capital LP from September 2000 to May 2005. Mr. McMillan serves on the boards of Puget Energy and PSE as a representative of Aimco’s ownership interests, pursuant to the terms of the Puget Energy and PSE bylaws, and brings to this service his experience in energy and gas operations and trading as well as renewable and gas project development.

~~Mary McWilliams~~Diana Birkett Rakow, age ~~72,~~45, has been a director on the board of PSE since May 5, 2022. Ms. Rakow is currently the Senior Vice President of Public Affairs and Sustainability of Alaska Air Group, Inc., since November 2021. She previously served as Vice President of External Relations at Alaska Airlines from September 2017 to February 2021. Ms. Rakow also currently services as the current board chair for the Alaska Airlines Foundation, and serves on the boards of Philanthropy Northwest, the Bay Area Council, and the Pacific Science Center. An independent director not affiliated with any of the Company's investors, Ms. Rakow brings to the Board her expertise in ESG and climate strategy, governance and regulation.

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Aaron Rubin, age 45, has been a director on the boards of both Puget Energy and PSE since ~~March 1, 2011. Ms. McWilliams was most recently~~February 22, 2022. Mr. Rubin is currently responsible for Macquarie Asset Management’s Real Assets investment team that focuses on sustainable energy investments in the ~~Executive Director at Washington Health Alliance, a health care organization, which position she held from~~Americas. Since joining Macquarie in 2008, ~~to 2014. She also served as President~~Mr. Rubin has had responsibility for investment origination and ~~Chief Executive Officer at Regence BlueShield from 2000 to 2008. Her civic commitments have included Seattle Rotary, Seattle Symphony, YWCA~~execution and the ~~Greater Seattle Chamber~~management of ~~Commerce. Ms. McWilliams’ significant experience managing consumer-focused organizations with challenging regulatory~~portfolio companies. Mr. Rubin currently serves on the board of directors of Cyrq Energy, Cleco Corporation and ~~compliance regimes, her civic involvement in~~Lordstown Energy Center. Mr. Rubin was selected by Clean Energy JV Sub 1, LP and pursuant to the ~~community, as well as her extensive knowledge~~Amended and Restated Bylaws of each of the ~~western Washington economy, generally, are some~~Companies, will serve as an Owner Director on their respective Boards of Directors. Mr. Rubin will not receive any director compensation from the ~~reasons that led to her appointment to~~Companies for his service as an Owner Director on the ~~Puget Energy and PSE boards on behalf of the CPPIB.~~Boards, but will be reimbursed for out-of-pocket expenses.

Martijn Verwoest, age ~~44,~~46, has been a director on the boards of both Puget Energy and PSE since April 17, 2019. Mr. Verwoest is currently the Head of Energy & Utilities at Stichting Pensioenfonds Zorg en Welzijn (PGGM), and is a member of their Infrastructure Investment Committee since 2007. From 2001 to 2007, he worked in PGGM’s public equity department. Mr. Verwoest will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

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Steven Zucchet, age ~~55,~~57, has been a director on the boards of both Puget Energy and PSE since April 17, 2019. Mr. Zucchet is currently the Managing Director at Ontario Municipal Employees Retirement System Infrastructure Management (OMERS)., which position he has held since January 2019. Since joining OMERS in 2003, Mr. Zucchet has led numerous transactions and had asset management responsibilities at a number of utility and generation companies in Canada and the United States. He is currently on the board of Oncor and Bruce Power Inc. Mr. Zucchet will not receive any director compensation from the Companies for his service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

Executive Officers

The information required by this item with respect to Puget Energy and PSE is incorporated herein by reference to the material under “Executive Officers of the Registrants” in Part I of this report.

Audit Committee

The Puget Energy and PSE Boards of Directors have both established an Audit Committee. Directors ~~Kenton Bradbury,~~ Richard Dinneny, ~~Steven Hooper,~~ Paul McMillan, ~~and~~ Tom King, Jean-Paul Marmoreo and Diana Rakow are the members of the Audit Committee. The Board has determined that Paul McMillan meets the definition of “Audit Committee Financial Expert” under United States Securities and Exchange Commission (SEC) rules. Puget Energy and PSE currently do not have any outstanding stock listed on a national securities exchange and, therefore, there are no independence standards applicable to either company in connection with the independence of its Audit Committee members.

Procedures by which Shareholders may recommend Nominees to the Board of Directors

There have been no material changes to the procedures by which shareholders may recommend nominees to the Boards of Directors of Puget Energy and PSE. Members of the Boards of Directors of Puget Energy and PSE are nominated and elected in accordance with the provisions of their respective Amended and Restated Bylaws.

Code of Conduct

Puget Energy and PSE have adopted a Corporate Ethics and Compliance Code applicable to all directors, officers and employees and a Code of Ethics applicable to the Chief Executive Officer and senior financial officers, which are available on the website www.pugetenergy.com. If any material provisions of the Corporate Ethics and Compliance Code or the Code of Ethics are waived for the Chief Executive Officer or senior financial officers, or if any substantive changes are made to either code as they relate to any director or executive officer, we will disclose that fact on our website within four business days. In addition, any other material amendments of these codes will be disclosed.

Communications with the Board

Interested parties may communicate with an individual director or the Board of Directors as a group via U.S. Postal mail directed to: Chairman of the Board of Directors, c/o Corporate Secretary, Puget Energy, Inc., P.O. Box 97034, EST-11, Bellevue, Washington 98009-9734. Please clearly specify in each communication the applicable addressee or addressees you wish to contact. All such communications will be forwarded to the intended director or Board as a whole, as applicable.

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ITEM 11. EXECUTIVE COMPENSATION

~~Puget Energy~~

Puget Sound Energy

Executive Compensation

Compensation and Leadership Development Committee Interlocks and Insider Participation

The members of the Compensation and Leadership Development Committee (referred to as the Committee) of the Boards of Directors (referred to as the Board) of Puget Energy and PSE (referred to as the Company) are named in the Compensation and Leadership Development Committee Report. No members of the Committee were officers or employees of the Company or any of its subsidiaries during ~~2020,~~2022, nor were they formerly Company officers or had any relationship otherwise requiring disclosure. Each member meets the independence requirements of the SEC and the New York Stock Exchange (NYSE).

Compensation Discussion and Analysis

This section provides information about the compensation program for the Company’s ~~Named~~named executive officers (Named Executive ~~Officers~~Officers) who are included in the Summary Compensation Table below. For ~~2020,~~2022, the Company’s Named Executive Officers and titles were:

•Mary E. Kipp, President ~~effective August 30, 2019, and President~~ and Chief Executive Officer (CEO)~~, effective January 3, 2020;~~;

•~~Daniel A. Doyle, Senior~~Kazi Hasan, Executive Vice President and Chief Financial Officer (CFO);

•~~Kimberly J. Harris, former Chief~~Allan (Wade) Smith, Executive ~~Officer (CEO) who retired effective January 2, 2020;~~

•~~Steve R. Secrist, Senior Vice President, General Counsel, Chief Ethics and Compliance Officer;~~

•~~Booga K. Gilbertson, Senior~~ Vice President and Chief ~~Operations Officer;~~Operating Officer, effective July 18, 2022;

•Margaret F. Hopkins, Senior Vice President Shared Services and Chief Information Officer; ~~and~~

•~~David E. Mills, former~~Andy Wappler, Senior Vice President and Chief ~~Strategy~~Customer Officer; and

•Steve R. Secrist, former Senior Vice President, General Counsel, Chief Ethics and Compliance Officer who retired effective ~~November 9, 2020~~December 1, 2022.

This section also includes a discussion and analysis of the overall objectives of our compensation program and each element of compensation the Company provides to its Named Executive Officers.

Compensation Program Objectives

The Company’s executive compensation program has two main objectives:

•Support sustained Company performance by attracting, retaining and motivating talented people to run the business.

•Align incentive compensation payments with the achievement of short and long-term Company goals.

The Committee is responsible for developing and monitoring an executive compensation program and philosophy that achieves the foregoing objectives. In performing its duties, the Committee obtains information and advice on various aspects of the executive compensation program from its independent executive compensation consultant, Meridian Compensation Partners, LLC (Meridian). The Committee recommends to the Board for approval both the salary level for our CEO, based on information provided by Meridian and other relevant factors described below, and the salary levels for the other executives, based on recommendations from our CEO. The Committee also recommends to the Board for approval the annual and long-term incentive compensation plans for the executives, the setting of performance goals and the determination of target and actual awards under those plans, based on the compensation ~~philosophy~~ information provided by Meridian and other relevant factors.

In ~~2020,~~2022, the Company used the following strategies to achieve the objectives of our executive compensation program:

•Design and deliver a competitive total compensation opportunity. To attract, retain and motivate a talented executive team, the Company believes that total pay opportunity should be competitive with companies of similar size, revenue, industry and scope of operations. As described below in the discussion of ~~Compensation Program Elements (Role~~Role of Market ~~Data),~~Data, the Committee, with the support of Meridian, annually compares executive compensation levels to external market data from similar companies in our industry and generally targets each element of target total direct compensation (base salary and target annual and long-term incentive award opportunities) to the 50th percentile of the market data with variations by individual executive, as appropriate. ~~During 2019, the Committee worked with~~

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~~Meridian to develop a compensation package for Ms. Kipp who became CEO in January 2020.~~The Company also recognizes the importance of providing retirement income. As such, the Committee reviews our retirement programs and provides benefits that are competitive with our peers.

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•Place a significant portion of each executive’s target incentive compensation at risk to align executive compensation with Company financial and operating performance. Under its “pay for performance” philosophy, the Company maintains an incentive compensation program that supports the Company’s business strategy and aligns executive interests with those of investors and customers. The Committee believes that a significant portion of each executive’s compensation should be “at risk” and earned based on achievement relative to annual and long-term performance goals. For example, ~~78%~~77% of the target 2022 compensation of our CEO, Ms. ~~Kipp’s target 2020 compensation~~Kipp, was considered “at risk” compensation. By establishing goals, monitoring results, and rewarding achievement of goals, the Company seeks to focus executives on actions that will improve Company performance and enhance investor value, while also retaining key talent. The Committee annually evaluates and establishes the performance goals and targets for our annual and long-term incentive ~~programs~~programs.

•Oversee the Company’s talent management process to ensure that executive leadership continues uninterrupted by executive retirements or other personnel changes. The CEO leads talent reviews for leadership succession planning through meetings and discussions with her executive team. Each executive conducts talent reviews of senior employees that report to him or her and who have high potential for assuming greater responsibility in the Company. Utilizing evaluations and assessments, the Committee and the Board annually review these assessments of executive readiness, the plans for development of the Company’s key executives, and progress made on these succession plans. The Committee and the Board directly participate in discussion of succession plans for the position of CEO.

Compensation Philosophy

The target total compensation package is designed to provide executives with appropriate incentives that are competitive with the comparator ~~group~~groups described below and motivate the achievement of current operational performance and customer service goals as well as the long-term objective of enhancing investor value. The Company does not have a specific policy regarding the mix of compensation elements, although long-term incentive awards consistently comprise the largest portion of each executive’s incentive pay.

As a matter of philosophy, all three components of target total direct compensation are generally targeted atwithin a competitive range of the 50th percentile of industry practice, ~~with deviations~~recognizing that the Company operates in a highly competitive regional market. Individual executive pay position may vary from the 50th percentile as influenced by ~~individual~~the factors below. Actual executive ~~as described below. If~~compensation depends significantly on Company performance results, ~~are~~and can result in below ~~expectations, actual compensation is expected to be below this~~or above targeted ~~level. If Company performance exceeds target, actual compensation is expected to be above this targeted level.~~levels.

Individual pay adjustments are reviewed annually relative to the 50th percentile of national peer market pay, while also considering other factors, such as the executive’s recent performance, experience level, company performance, competitive pay in our region, retention of top talent and internal pay equity. Notwithstanding the median philosophy, the Company may choose to target an executive’s compensation above or below the 50th percentile of national peer market pay when that individual has a role with greater or lesser responsibility than the best comparison job, in response to regional market pressures, or when our executive’s experience ~~and performance differ~~differs from ~~those~~that typically found in the market.

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Role of Market Data

The Company uses market data compiled by Meridian to inform its pay decisions on base salary, target annual incentives and target long-term incentive awards. Market data is obtained from both industry-specific surveys and proxy statements of public companies selected for inclusion in the Company’s custom executive compensation peer group. The market survey data were sourced from a select cut from the Willis Towers Watson ~~2019~~2021 Energy Services Survey, comprised of utility and other companies similar in size and scope of operations to PSE. Based on Meridian's evaluation and its discussion with the Committee, five companies of similar scope were added to the 2021 peer group, while one was removed to ensure a broad comparison group. The 2326 companies in the custom market survey cut ~~used to inform target compensation~~for 2022 pay decisions ~~for 2020~~ are shown below:


Custom Survey Peer Group	Custom Survey Peer Group						Custom Survey Peer Group
1.	1.	Allete	10.	Evergy	19.	Portland General Electric	1.	Allete*	10.	Evergy	19.	PNM Resources
2.	2.	Alliant Energy	11.	Eversource Energy	20.	Southwest Gas	2.	Alliant Energy	11.	Eversource Energy	20.	Portland General Electric
3.	3.	Ameren	12.	Hawaiian Electric Industries, Inc.	21.	Spire, Inc.	3.	Ameren	12.	Hawaiian Electric Industries, Inc.	21.	PPL*
4.	4.	Atmos Energy	13.	NiSource	22.	UGI	4.	Atmos Energy	13.	NiSource	22.	South Jersey Industries
5.	5.	Avangrid	14.	Oncur	23.	WEC Energy Group	5.	Avista	14.	Northwestern Energy*	23.	Southwest Gas
6.	6.	Avista	15.	OGE Energy			6.	Black Hills*	15.	Oncor	24.	Spire
7	7	Black Hills	16.	ONE Gas			7	CenterPoint*	16.	OGE Energy	25.	UGI
8	8	Cleco	17.	Pinnacle West Capital			8	Cleco	17.	ONE Gas	26.	WEC Energy Group
9.	9.	CMS Energy	18.	PNM Resources			9.	CMS Energy	18.	Pinnacle West Capital

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*Added to the 2021 peer group. Avangrid was removed from the 2021 peer group.

The market survey data from the companies above were supplemented with proxy statement data for select positions in the Company’s executive compensation peer group, which was comprised of 15 companies, all but one of which overlapped with companies included in the market survey data. ~~The 2019~~At the time of the benchmarking study, the median revenue of the executive compensation peers was ~~$3.6~~$3.5 billion, which was comparable to PSE’s annual revenues of ~~$3.4 billion at the time the peer group was developed.~~$3.5 billion. The proxy peer group was reviewed by Meridian to assess the continued relevancy of the ~~companies.Based on Meridian’s evaluation, as well as discussion with the Committee, six~~ companies ~~were removed due to either non-regulated business operations or because of being acquired.Five new revenue-size appropriate regulated utilities were added to the group.~~and did not change from last year.


Proxy Peer Group	Proxy Peer Group						Proxy Peer Group
1.	1.	Alliant Energy	7.	Eversource Energy	13.	Portland General Electric	1.	Alliant Energy	7.	Eversource Energy	13.	Portland General Electric
2.	2.	Ameren	8.	Idacorp	14.	Spire, Inc.	2.	Ameren	8.	Idacorp	14.	Spire
3.	3.	Atmos Energy	9.	NiSource	15.	WEC Energy	3.	Atmos Energy	9.	NiSource	15.	WEC Energy Group
4.	4.	Avista	10.	ONE Gas			4.	Avista	10.	ONE Gas
5.	5.	CMS Energy	11.	Pinnacle West Capital			5.	CMS Energy	11.	Pinnacle West Capital
6.	6.	Evergy	12.	PNM Resources			6.	Evergy	12.	PNM Resources

Compensation Program Elements

The Company’s executive compensation program encompasses a mix of base salary, annual and long-term incentive compensation, retirement programs, health and welfare benefits and a limited number of perquisites. Since the Company is not publicly listed and does not grant equity awards to its executives, it relies on a mix of fixed and variable cash-based compensation elements to achieve its compensation objectives.

Base Salary

We recognize that it is necessary to provide executives with a fixed amount of regularly paid compensation that provides a balance to other at-risk pay ~~elements that are at risk.~~elements. Base salaries are reviewed annually by the Committee based on its ~~median~~compensation philosophy, internal pay equity considerations and considerations specific to an individual such as an executive’s expertise, level of performance, experience in the role and contribution relative to others in the organization.

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Base Salary Adjustments for ~~2020~~2022

The Committee reviewed the base salaries of the Named Executive Officers in early ~~2020~~2022 and recommended base salary adjustments to the ~~Board.~~Board, except for Mr. Smith, whose salary was approved at hire in July 2022. The Committee also reviewed salaries during 2022 based on market pressures and the promotion of Mr. Hasan to Executive Vice President and recommended base salary increases. The Board approved the Committee’s salary recommendations as shown in the table below. The adjustments were effective March 1, ~~2020.~~2022 except for Ms. Kipp’s and Mr. Hasan’s who also received additional adjustments effective August 2022. Base salaries for ~~2020~~2022 generally remained at the 50th percentile of market among the comparator group. The annual salary for Ms. Kipp was adjusted to reflect her promotion to President and CEO and aligns with the market median. The salary increase percentages approved by the Board for Mr. Doyle, Mr. Secrist and Mr. Mills were similar to salary increases for other non-represented employees, and the salary increases for Ms. Gilbertson and Ms. Hopkins were adjusted to reflect their expanded roles in 2020.~~Ms. Harris did not receive an increase in 2020 salary.~~

Name

2019 Base Salary

2020 Base Salary

% Change
Mary E. Kipp $860,000 $900,000 5%
Daniel A. Doyle 531,420 547,363 3
Steve R. Secrist 462,800 483,626 4.5
Booga K. Gilbertson 391,000 428,145 9.5
Margaret F. Hopkins 327,540 350,000 6.9
David E. Mills 392,700 404,481 3

~~2020~~


Name	2021 Base Salary	2022 Base Salary	% Change1
Mary E. Kipp	$930,000	$1,043,250	12%
Kazi Hasan	510,000	570,257	12
Allan (Wade) Smith	N/A	630,000	—
Margaret F. Hopkins	414,000	426,482	3
Andrew Wappler	390,326	402,036	3
Steve R. Secrist	500,553	515,570	3

1.Percentages are rounded.

2022 Annual Incentive Compensation

All PSE employees, including the Named Executive Officers, are eligible to participate in an annual incentive program referred to as the “Goals and Incentive ~~Plan.”~~Plan”. The plan is designed to incent our employees to achieve both (i) desired annual financial results, measured by EBITDA, and (ii) pre-established goals based on both a service quality commitment to customers ~~a reliability measure (based on non-storm outage duration—System Average Interruption Disruption Index-- or “SAIDI”)~~ and an

~~149~~

employee safety measure. EBITDA was selected as a performance goal because it provides a financial measure of cash flows generated from the Company’s annual operating performance.

For ~~2020,~~2022, the Company’s service quality commitment was measured by performance against ~~eight~~nine Service Quality Indicators (SQIs) covering three broad categories, set forth below. These are the same SQIs for which the Company is accountable to the Washington Commission. The Company's annual report to the Washington Commission and our customers describes each SQI, how it is measured, the Company’s required level of achievement, and performance results. The Company’s service quality report cards are available at ~~http://~~www.PSE.com/PerformanceReportCards.

The SQIs for ~~2020~~2022 were the same as those in ~~2019~~2021 and were as follows:

•Customer Satisfaction (3 SQIs) - Customer satisfaction with the customer care center, natural gas field services and number of Washington Commission complaints.

•Customer Service (1 SQI) - Calls answered “live” within 60 seconds by the customer care center.

•Operations Services (4(5 SQIs) - Gas emergency response, electric emergency response, non-storm outage duration as measured by the System Average Interruption Disruption Index (SAIDI), non-storm outage frequency, and on-time appointments.

~~In 2019, the Company began measuring SAIDI according to a scale based on improvement compared to a five-year average, with the measure for 2020 being 155 minutes.~~

The employee safety performance measure reflects the Company’s continued commitment to employee safety. The safety performance measure contains three targets which must all be satisfied for the safety measure to be treated as met. The three employee safety targets for ~~2020~~2022 were:

•All employees attend a monthly safety “meeting in a box” presentation, or complete the same content ~~online.~~online, featuring employees from across PSE discussing their jobs and efforts to ensure the health and safety of themselves, their coworkers and our customers. The target completion rate is no less than 95%.

•All employees complete ~~a safety conversation with their supervisor or manager.~~training videos to help reduce musculoskeletal injuries in the field, officer and at home. The target completion rate is no less than 95%.

•All employees complete an online mental health training course. The target completion rate is no less than 95%.

Annual incentive funding is decreased if a SQI is not achieved. The employee safety measure ~~and SAIDI function~~functions similarly to the ~~eight~~nine SQIs in determining the funding of the annual incentive plan. That is, if the safety measure ~~or SAIDI~~ is not achieved, annual incentive funding will be decreased by 10%, in the same way as a missed SQI.

In ~~2020,~~2022, 100% funding for the annual incentive plan required (i) achievement of 10 out of 10 customer service and safety measures (all ~~eight~~nine SQIs ~~SAIDI~~ and achievement of the safety measure) and (ii) target EBITDA performance. Eight of the ten

148

~~All~~

customer service and safety measures were ~~met for 2020, but the SAIDI measure was not~~ met, and EBITDA finished at ~~90.1%~~98.4% of target, so funding was less than 100%, as described further below.

Individual awards may be adjusted upward or downward based on an evaluation of an executive officer’s performance against individual and team goals that align with the corporate goals described below.

~~2020 Corporate Goals~~

In 2020, the Company continued using the Integrated Strategic Plan (ISP) to summarize for employees, including the Named Executive Officers, the direction and overall goals of the Company. The plan has five objectives which capture our 2020 corporate goals and which have been communicated to our employees. Each employee has specific individual and team goals linked to driving strategies that meet one or more of the following ISP objectives:

•~~Safety~~ - ~~Our safety objective is our foundation: If nobody gets hurt today, we will feel safe and secure and be able to perform at our best.~~

•~~People~~ - When we’re safe, we can achieve our people objective of being a great place to work, with engaged employees who live our values, embrace an ownership culture and are motivated to drive results for our company and our customers.

•~~Process and Tools~~ - Engaged employees achieve our process and tools objective where results start with achieving operational excellence, with continuous improvement of our internal processes and tools so that we can increase efficiency, eliminate waste, improve reliability and enhance customer service.

•~~Customer- We now have the fundamentals to achieve our customer objective of delivering greater value and being our customer’s energy partner of choice in a competitive marketplace.~~

~~150~~

•~~Financial~~ - ~~Being our customer’s energy partner of choice takes us to our financial objective of increasing our financial strength, allowing us to sustain further improvement.~~

~~2020~~2022 Annual Incentive Plan Results

For ~~2020,~~2022, achievement of the corporate goals under the annual incentive plan was at ~~90.1%~~98.4% of target for EBITDA. PSE EBITDA was ~~$1,291.1~~$1,293.6 million, and SQI ~~SAIDI~~ and safety achievement was 98 out of 10, leading to a funding level for ~~2020~~2022 of ~~45.6%~~73.5% for the annual incentive plan for the ~~named executive officers.~~Named Executive Officers.

Funding levels for ~~2020~~2022 at maximum, target, and threshold are shown in the table below:

Annual Incentive Performance Payout Scale and Actual Performance
Performance Measure (Dollars in Millions)
2020 EBITDA

SQI, SAIDI& Safety*

Funding Level
Maximum $ 1,933.2

10/10

200%
Target 1,432.0

10/10

100
Threshold 1,288.8

6/10

30
2020 Actual Performance $ 1,291.1

9/10

45.6%


Annual Incentive Performance Payout Scale and Actual Performance
Performance Measure (Dollars in Millions)	2022 EBITDA			SQI, SAIDI& Safety*	Funding Level
Maximum		$	1,775.3	10/10	200%
Target		1,315.0		10/10	100
Threshold		1,183.5		6/10	30
2022 Actual Performance		1,293.6		8/10	73.5

_______________

* Combined SQI ~~SAIDI &~~and Safety results of 6/10 or better and minimum EBITDA of ~~$1,288.8~~$1,183.5 million are required for any annual incentive pay out funding

SQI ~~SAIDI~~ and Safety results below 10/10 reduce funding (e.g., 9/10=90%, 8/10=80%, 7/10=70%)

For 2020, individual target incentive levels for the annual incentive plan varied by executive officer as a percentage of 2020 base salary as shown in the table below, based on the executive’s level of responsibility within the Company and informed by market data. Target annual incentive opportunities as a percentage of base salary for the Named Executive Officers were unchanged from 2019 levels, except for Ms. Kipp whose target annual incentive opportunity was increased to 100% of base salary as part of her promotion to President and CEO. Ms. Harris, who retired in January 2020 was not eligible for a 2020 annual incentive award. No bonus is earned unless at least the threshold EBITDA and SQI ~~SAIDI~~ and safety goals are achieved. The achievement of threshold performance results in a 30% of target bonus payout. The maximum incentive payable for exceptional performance in this plan is two times each Named Executive Officer's target incentive.

An executive’s individual award amount can be increased or decreased based on an assessment by the CEO (or the Board in the case of the CEO) of the executive’s individual and team performance results. After considering performance on individual and team goals, adjustments were made by the CEO for individual performance of certain Named Executive Officers below CEO in ~~2020.~~2022. The adjustments for individual performance are noted in the "Bonus" column onof the Summary Compensation table and did not materially change the amounts resulting from ~~2020~~2022 achievement of the corporate goals. The Board approved the incentive amounts shown below (inclusive of adjustments for performance for each Ms. Kipp and Mr. Hasan), which will be paid in March ~~2021:~~2023:


Name	Name	Target Incentive (% of Base Salary)	2020 Actual Incentive Paid		2020 Actual Incentive (% of Base Salary)	Name	Target Incentive (% of Base Salary)	2022 Actual Incentive Paid		2022 Actual Incentive (% of Base Salary)
Mary E. Kipp	Mary E. Kipp	100%	$	492,480	54.7%	Mary E. Kipp	115%	$	1,058,168	101.0%
Daniel A. Doyle		65	194,686		36
Kazi Hasan*						Kazi Hasan*	80	352,109		62
Allan (Wade) Smith*						Allan (Wade) Smith*	80	179,895		29
Margaret F. Hopkins						Margaret F. Hopkins	65	193,565		45
Andrew Wappler						Andrew Wappler	65	182,469		45
Steve R. Secrist	Steve R. Secrist	65	157,681		33	Steve R. Secrist	65	246,314		48
Booga K. Gilbertson		65	145,938		34
Margaret F. Hopkins		62.5*	104,810		30
David E. Mills		65**	77,139		19

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a)Documents filed as part of this report:

1) Financial Statements

2) Financial Statement Schedules. Financial Statement Schedules of the Company, as required for the years

ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, consist of the following:

I. Condensed Financial Information of Puget Energy

II. Valuation of Qualifying Accounts and Reserves

3) Exhibits

ITEM 16. FORM 10-K SUMMARY

None.

~~170~~167

EXHIBIT INDEX

Certain of the following exhibits are filed herewith. Certain other of the following exhibits have heretofore been filed with the SEC and are incorporated herein by reference.


	~~2.1~~	Agreement and Plan of Merger, dated October 25, 2007, by and among Puget Energy, Inc. Padua Holdings LLC, Padua Intermediate Holdings Inc. and Padua Merger Sub Inc. (incorporated herein by reference to Exhibit 2.1 to Puget Energy’s Current Report on Form 8-K, dated October 25, 2007, Commission File No. 1-16305).
	~~3(i).1~~3.1	Amended Articles of Incorporation of Puget Energy (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~~3.2	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~~3.3	Amended and Restated Bylaws of Puget Energy, Inc ., as amended by the First Amendment to the Amended and Res tated Bylaws of Puget Energy Inc ., dated ~~February~~January 6, ~~2009 (incorporated~~2022 (incorporated herein by reference to ~~Exhibit 3.3~~Exhi bit 3.3 to Puget ~~Energy’s~~Energy's Current ~~Report~~Rep ort on Form ~~8-K,~~10-K, dated Febr uary 25, 2022, Commission File No. 1-16305).
	~~3(ii).2~~3.4	Amended and Restated Bylaws of Puget Sound Energy, Inc., as amended by the F irst Amendment to the Amended and Restated Bylaws of Pu get Sound Energy, Inc. dated ~~February~~January 6, ~~2009 (incorporated~~2022 (incorporated herein by reference to Exhibit 3.4 to Puget Sound ~~Energy’s~~Energy's Current Report on ~~Form 8-K,~~F orm 10-K, dated Feb ruary 25, 2022, Commission File No. ~~1-4393)~~1-04393).
***	4.1	Indenture between Puget Sound Energy, Inc. and U.S. Bank National Association (as successor to State Street Bank and Trust Company) defining the rights of the holders of Puget Sound Energy’s senior notes (incorporated herein by reference to Exhibit 4-a to Puget Sound Energy’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, Commission File No. 1-4393).
	4.2	First, Second, Third, Fourth, and Fifth Supplemental Indentures defining the rights of the holders of Puget Sound Energy’s senior notes (incorporated herein by reference to Exhibit 4-b to Puget Sound Energy’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (Exhibit originally filed with the Securities and Exchange Commission in paper format and as such, a hyperlink is not available.), Commission File No. 1-4393; Exhibit 4.26 to Puget Sound Energy’s Current Report on Form 8-K, dated March 4, 1999 (Exhibit originally filed with the Securities and Exchange Commission in paper format and as such, a hyperlink is not available.), Commission File No. 1-4393; Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated November 2, 2000 (Exhibit originally filed with the Securities and Exchange Commission in paper format and as such, a hyperlink is not available.), Commission File No. 1-4393; Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated May 28, 2003, Commission File No. 1-4393 and Exhibit 4.1 to Puget Sound Energy's Current Report on Form 8-K, dated May 23, 2018, Commission File No. 1-4393.)
	4.3	Fortieth through Sixtieth Supplemental Indentures defining the rights of the holders of Puget Sound Energy’s Electric Utility First Mortgage Bond (incorporated herein by reference to Puget Sound Energy’s Registration Statement on Form S-3, filed March 13, 2009, Registration No. 333-157960).
		Exhibits 4.3 through and including 4.23: 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9. 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23.
***	4.4	Sixty-first through Eighty-seventh Supplemental Indentures defining the rights of the holders of Puget Sound Energy’s Electric Utility First Mortgage Bonds (incorporated herein by reference to Exhibit (4)-j-1 to Registration No. 2-72061; Exhibit (4)-a to Registration No. 2-91516; Exhibit (4)-b to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 1985, (Exhibit originally filed with Securities and Exchange Commission File No. 1-4393; Exhibits (4)(a) and (4)(b) to Puget Sound Energy’s Current Report on Form 8-K, dated April 22, 1986, Commission File No. 1-4393; Exhibit (4)(b) to Puget Sound Energy’s Current Report on Form 8-K, dated September 5, 1986, not available). Commission File No. 1-4393; Exhibit (4)-b to Puget Sound Energy’s Report on Form 10-Q for the quarter ended September 30, 1986, Commission File No. 1-4393; Exhibit (4)-c to Registration No. 33-18506; Exhibit (4)-b to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-4393; Exhibit (4)-b to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-4393; Exhibits (4)-d and (4)-e to Registration No. 33-45916; Exhibit (4)-c to Registration No. 33-50788; Exhibit (4)-a to Registration No. 33-53056; Exhibit 4.3 to Registration No. 33-63278; Exhibit 4-c to Puget Sound Energy’s Report on Form 10-Q for the quarter ended June 20, 1998.
		Commission File No. 1-4393; Exhibit 4.27 to Puget Sound Energy’s Current Report on Form 8-K, dated March 4, 1999.
		Commission File No. 1-4393; Exhibit 4.2 to Puget Energy's Current Report on Form 8-K, dated November 2, 2000.
		Commission File ~~No.~~ 1-4393; Exhibit 4.2 to Puget Sound ~~Energy’s~~Energy's Current Report on Form 8-K, dated May ~~28, 2003.~~28,2003
		Commission File No. 1-4393; Exhibit 4.28 to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 2004.
		Commission File No. 1-4393; Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated May 23, 2005.
		Commission File No. 1-4393; Exhibit 4.30 to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 2005.
***		Commission File No. 1-4393); Exhibit 4.4 to Post-Effective Amendment No. 2 to Puget Sound Energy’s Registration Statement on Form S-3, filed February 9, 2009.

~~171~~


						Registration No. 333-132497-01; Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated September 13, 2006.

168


***		Commission File No. 1-4393; Exhibit 4.1 to Puget Sound Energy’s Report on Form 10-K for the fiscal year ended December 31, 2007. Commission File No. 1-4393; and Exhibit 4.5 to Post-Effective Amendment No. 2 to Puget Sound Energy’s Registration Statement on Form S-3, filed February 9, 2009.
		Registration No. 333-132497-01); Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated September 8, 2009, Commission File No. 1-4393.
		Commission File No. 1-4393; Exhibit 4.28 to Puget Sound Energy's Current Report on 10-K for fiscal year ended December 31, 2004.
	4.5	Eighty-eighth, Eighty-ninth and Ninetieth Supplemental Indentures defining the rights of the holders of Puget Sound Energy's Electric Utility First Mortgage Bonds (incorporated herein by reference to Exhibits 4.1 through 4.3 to Puget Sound Energy's Report on Form 10-Q for the quarter ended March 31, 2012, Commission File No. 1-4393).
		Exhibits 4.1 through 4.3: 4.1, 4.2, 4.3.
	4.6	Ninety-first and Ninety-second supplemental Indentures defining the rights of the holders of Puget Sound Energy’s Electric Utility First Mortgage Bonds (incorporated herein by reference to Exhibit 4.6 to Puget Sound Energy’s Registration Statement on Form S-3, filed January 24, 2014. Registration No. 333-193555 and to Exhibit 4.4 to Puget Sound Energy’s Current Report on Form 8-K filed May 29, 2013).
	4.7	Indenture of First Mortgage, dated as of April 1, 1957, defining the rights of the holders of Puget Sound Energy’s Gas Utility First Mortgage Bonds (incorporated herein by reference to Puget Sound Energy’s Registration Statement on Form S-3ASR, filed March 13, 2009, Registration No. 333-157960).
	4.8	First, Sixth, Seventh, Sixteenth and Seventeenth Supplemental Indenture to the Gas Utility First Mortgage, dated as of April 1, 1957, August 1, 1966, February 1, 1967, June 1, 1977, and August 9, 1978, respectively (incorporated herein by reference to Exhibits 4.26 through and including 4.30 to Puget Sound Energy's Registration Statement on Form S-3, filed March 13, 2009, Registration No. 333-157960).
		Exhibits 4.26 through 4.30: 4.26, 4.27, 4.28, 4.29, 4.30.
***	4.9	Twenty-second Supplemental Indenture to the Gas Utility First Mortgage, dated as of July 15, 1986 (incorporated herein by reference to Exhibit 4-B.20 to Washington Natural Gas Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1986, Commission File No. 0-951).
***	4.10	Twenty-seventh Supplemental Indenture to the Gas Utility First Mortgage, dated as of September 1, 1990 (incorporated herein by reference to Exhibit 4.12 to Post-Effective Amendment No. 2 to Puget Sound Energy’s Registration Statement on Form S-3, filed February 9, 2009, Registration No. 333-132497-01).
***	4.11	Twenty-eighth through Thirty-sixth Supplemental Indentures to the Gas Utility First Mortgage (incorporated herein by reference to Exhibit 4-A to Washington Natural Gas Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, Commission File No. 0-951; Exhibit 4-A to Washington Natural Gas Company’s Registration Statement on Form S-3, Registration No. 33-49599; Exhibit 4-A to Washington Natural Gas Company’s Registration Statement on Form S-3, Registration No. 33-61859; Exhibit 4.30 to Puget Sound Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, Commission File No. 1-4393; Exhibits 4.22 and 4.23 to Puget Sound Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Commission File No. 1-4393; Exhibits 4.22 and 4.23 to Puget Sound Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, Commission File No. 1-4393; and Exhibit 4.14 to Post-Effective Amendment No. 2 to Puget Sound Energy’s Registration Statement on Form S-3, filed February 9, 2009, Registration No. 333-132497-01).
	4.12	Unsecured Debt Indenture, dated as of May 18, 2001, between Puget Sound Energy, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One Trust Company, N.A.) defining the rights of the holders of Puget Sound Energy’s unsecured debentures (incorporated herein by reference to Exhibit 4.3 to Puget Sound Energy’s Current Report on Form 8-K, dated May 18, 2001, Commission File No. 1-4393).
	4.13	Second Supplemental Indenture to the Unsecured Debt Indenture, dated June 1, 2007, between Puget Sound Energy, Inc. and The Bank of New York Mellon Trust Company, N.A. defining the rights of Puget Sound Energy’s Series A Enhanced Junior Subordinated Notes due June 1, 2067 (incorporated herein by reference to Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated May 30, 2007, Commission File No. 1-4393).
	4.14	Third Supplemental Indenture to the Unsecured Debt Indenture, dated March 19, 2018, between Puget Sound Energy, Inc. and The Bank of New York Mellon Trust Company, N.A. defining the rights of Puget Sound Energy’s Series A Enhanced Junior Subordinated Notes due June 1, 2067 (incorporated herein by reference to Exhibit 4.1 to Puget Sound Energy’s Current Report on Form 8-K, dated March 26, 2018, Commission File No. 1-4393).
	4.15	Form of Replacement Capital Covenant of Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit 4.2 to Puget Sound Energy’s Current Report on Form 8-K, dated May 30, 2007, Commission File No. 1-4393).
	4.16	Indenture and First Supplemental Indenture between Wells Fargo Bank, National Association and Puget Energy, Inc. dated as of December 6, 2010 (incorporated by reference to Exhibits 4.1 and 4.2 to Puget Energy's Current Report on Form 8-K, filed December 7, 2010, Commission File No. 1-16305).

~~172~~169


	4.17	First Supplemental Indenture to the Indenture dated December 6, 2010 between Puget Energy, Inc. and Wells Fargo Bank, National Association defining the rights of Puget Energy’s Senior Secured Notes due December 15, 2020 (incorporated by reference to Exhibit 4.2 to Puget Energy's Current Report on Form 8-K, filed December 7, 2010, Commission File No. 1-16305).
	~~4.17~~4.18	Second Supplemental Indenture to the Indenture dated December 6, 2010 between Puget Energy, Inc. and Wells Fargo Bank, National Association defining the rights of Puget Energy’s Senior Secured Notes due September 1, 2021 (incorporated herein by reference to Exhibit 4.1 to Puget Energy’s Current Report on Form 8-K, filed June 6, 2011, Commission File No. 1-16305).
	~~4.18~~4.19	Third Supplemental Indenture between Wells Fargo Bank, National Association and Puget Energy, Inc. dated as of June 15, 2012 (incorporated by reference to Exhibits 4.1 to Puget Energy's Current Report on Form 8-K, filed June 18, 2012, Commission File No. 1-16305).
	~~4.19~~4.20	Trust Indenture, dated as of May 1, 2013 (the “Indenture”), by and between the City and Wells Fargo Bank, National Association, as trustee. (incorporated herein by reference to Exhibit 4.1 to Puget Sound Energy's Current Report on Form 8-K, dated May 30, 2013, Commission File No. 1-04393).
	~~4.20~~4.21	Loan Agreement, dated as of May 1, 2013, between Puget Sound Energy, Inc. and the City of Forsyth, Rosebud County, Montana. (incorporated herein by reference to Exhibit 4.2 to Puget Sound Energy's Current Report on Form 8-K, dated May 30, 2013, Commission File No. 1-04393).
	~~4.21~~4.22	Pledge Agreement, dated as of May 1, 2013, between Puget Sound Energy, Inc. and Wells Fargo Bank, National Association, as trustee. (incorporated herein by reference to Exhibit 4.3 to Puget Sound Energy's Current Report on Form 8-K, dated May 30, 2013, Commission File No. 1-04393).
	~~4.22~~4.23	Fourth Supplemental Indenture dated as of May 12, 2015, between Puget Energy, Inc. and Wells Fargo Bank, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to Puget Energy’s Current Report on Form 8-K, dated May 13, 2015, Commission File No. 1-16305).
	~~4.23~~4.24	F i ~~fth~~Fifth Supplemental Indenture dated May 19, 2020 relating to Puget Energy's 4.1% Senior Secured Notes due 2030 (Incorporated herein by reference to E ~~xhibit~~Exhibit 4.1 to Puget Energy's Current Report on Form 8-K Filed May 19, 2020,, Commission File No. ~~1-16~~1-16305).
	~~305)~~4.25	Sixth Supplemental Indenture dated June 14, 2021 relating to Puget Energy's 2.379% Senior Secured Notes due 2028 (incorporated herein by reference to Exhibit 4.1 to Puget Energy's Current Report on Form 8-K Filed June 21, 2021, Commission File No. 1-16305).
	4.26	Seventh Supplemental Indenture dated March 17, 2022 relating to Puget Energy's 4.224% Senior Secured Notes due 2032 (incorporated herein by reference to Exhibit 4.1 to Puget Energy's Current Report on Form 8-K Filed March 18, 2022, Commission File No. 1-16305).
***	10.1	First Amendment dated as of October 4, 1961 to Power Sales Contract between Public Utility District No. 1 of Chelan County, Washington and Puget Sound Energy, Inc., relating to the Rocky Reach Project (incorporated herein by reference to Exhibit 10.1 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.2	First Amendment dated February 9, 1965 to Power Sales Contract between Public Utility District No. 1 of Douglas County, Washington and Puget Sound Energy, Inc., relating to the Wells Development (incorporated herein by reference to Exhibit 10.2 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.3	Contract dated November 14, 1957 between Public Utility District No. 1 of Chelan County, Washington and Puget Sound Energy, Inc., relating to the Rocky Reach Project (incorporated herein by reference to Exhibit 10.3 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.4	Power Sales Contract dated as of November 14, 1957 between Public Utility District No. 1 of Chelan County, Washington and Puget Sound Energy, Inc., relating to the Rocky Reach Project (incorporated herein by reference to Exhibit 10.4 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.5	Power Sales Contract dated May 21, 1956 between Public Utility District No. 2 of Grant County, Washington and Puget Sound Energy, Inc., relating to the Priest Rapids Project (incorporated herein by reference to Exhibit 10.5 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.6	First Amendment to Power Sales Contract dated as of August 5, 1958 between Puget Sound Energy, Inc. and Public Utility District No. 2 of Grant County, Washington, relating to the Priest Rapids Development (incorporated herein by reference to Exhibit 10.6 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.7	Power Sales Contract dated June 22, 1959 between Public Utility District No. 2 of Grant County, Washington and Puget Sound Energy, Inc., relating to the Wanapum Development (incorporated herein by reference to Exhibit 10.7 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).

170


***	10.8	Agreement to Amend Power Sales Contracts dated July 30, 1963 between Public Utility District No. 2 of Grant County, Washington and Puget Sound Energy, Inc., relating to the Wanapum Development (incorporated herein by reference to Exhibit 10.8 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.9	Power Sales Contract executed as of September 18, 1963 between Public Utility District No. 1 of Douglas County, Washington and Puget Sound Energy, Inc., relating to the Wells Development (incorporated herein by reference to Exhibit 10.9 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.10	Construction and Ownership Agreement dated as of July 30, 1971 between The Montana Power Company and Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit 10.10 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).

~~173~~


***	10.11	Operation and Maintenance Agreement dated as of July 30, 1971 between The Montana Power Company and Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit 10.11 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.12	Contract dated June 19, 1974 between Puget Sound Energy, Inc. and P.U.D. No. 1 of Chelan County (incorporated herein by reference to Exhibit 10.12 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-4393).
***	10.13	Transmission Agreement dated April 17, 1981 between the Bonneville Power Administration and Puget Sound Energy, Inc. (Colstrip Project) (incorporated herein by reference to Exhibit (10)-55 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.14	Transmission Agreement dated April 17, 1981 between the Bonneville Power Administration and Montana Intertie Users (Colstrip Project) (incorporated herein by reference to Exhibit (10)-56 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.15	Ownership and Operation Agreement dated as of May 6, 1981 between Puget Sound Energy, Inc. and other Owners of the Colstrip Project (Colstrip 3 and 4) (incorporated herein by reference to Exhibit (10)-57 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.16	Colstrip Project Transmission Agreement dated as of May 6, 1981 between Puget Sound Energy, Inc. and Owners of the Colstrip Project (incorporated herein by reference to Exhibit (10)-58 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.17	Common Facilities Agreement dated as of May 6, 1981 between Puget Sound Energy, Inc. and Owners of Colstrip 1 and 2, and 3 and 4 (incorporated herein by reference to Exhibit (10)-59 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.18	Amendment dated as of June 1, 1968, to Power Sales Contract between Public Utility District No. 1 of Chelan County, Washington and Puget Sound Energy, Inc. (Rocky Reach Project) (incorporated herein by reference to Exhibit (10)-66 to Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-4393).
***	10.19	Transmission Agreement dated as of December 30, 1987 between the Bonneville Power Administration and Puget Sound Energy, Inc. (Rock Island Project) (incorporated herein by reference to Exhibit (10)-74 to Report on Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-4393).
***	10.20	Amendment No. 1 to the Colstrip Project Transmission Agreement dated as of February 14, 1990 among The Montana Power Company, The Washington Water Power Company (Avista), Portland General Electric Company, PacifiCorp and Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit (10)-91 to Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-4393).
***	10.21	Amendment of Seasonal Exchange Agreement, dated December 4, 1991 between Pacific Gas and Electric Company and Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit (10)-107 to Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-4393).
***	10.22	Capacity and Energy Exchange Agreement, dated as of October 4, 1991 between Pacific Gas and Electric Company and Puget Sound Energy, Inc. (incorporated herein by reference to Exhibit (10)-108 to Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-4393).
***	10.23	General Transmission Agreement dated as of December 1, 1994 between the Bonneville Power Administration and Puget Sound Energy, Inc. (BPA Contract No. DE-MS79-94BP93947) (incorporated herein by reference to Exhibit 10.115 to Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File No. 1-4393).
***	10.24	PNW AC Intertie Capacity Ownership Agreement dated as of October 11, 1994 between the Bonneville Power Administration and Puget Sound Energy, Inc. (BPA Contract No. DE-MS79-94BP94521) (incorporated herein by reference to Exhibit 10.116 to Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File No. 1-4393).
	10.25	Amendment to Gas Transportation Service Contract dated July 31, 1991 between Washington Natural Gas Company and Northwest Pipeline Corporation (incorporated herein by reference to Exhibit 10-E.2 to Washington Natural Gas Company’s Form 10-K for the fiscal year ended September 30, 1995, Commission File No. 1-11271).

171


			10.26			Firm Transportation Service Agreement dated January 12, 1994 between Northwest Pipeline Corporation and Washington Natural Gas Company for firm transportation service from Jackson Prairie (incorporated herein by reference to Exhibit 10-P to Washington Natural Gas Company’s Form 10-K for the fiscal year ended September 30, 1994, Commission File No. 1-11271).
			10.27			Product Sales Contract dated December 13, 2001 and Amendment No. 1 thereto, between Public Utility District No. 2 of Grant County, Washington, and Puget Sound Energy, Inc., relating to the Priest Rapids Project (incorporated herein by reference to Exhibit 10-1 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-4393).
			10.28			Reasonable Portion Power Sales Contract dated December 13, 2001 and Amendment No. 1 thereto, between Public Utility District No. 2 of Grant County, Washington, and Puget Sound Energy, Inc., relating to the Priest Rapids Project (incorporated herein by reference to Exhibit 10-2 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 1-4393).

~~174~~


	10.29	Additional Products Sales Agreement dated December 13, 2001, and Amendment No. 1 thereto, between Public Utility District No. 2 of Grant County, Washington, and Puget Sound Energy, Inc., relating to the Priest Rapids Project (incorporated herein by reference to Exhibit 10.3 to Puget Sound Energy’s Report on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 1-4393).
**	10.30	Form of Executive Employment Agreement with Executive Officers (incorporated herein by reference to Exhibit 10.1 to Puget Energy's and Puget Sound Energy's Current Report on Form 8-K, dated April 3, 2009, Commission file Nos. 1-16305 and 1-4393).
**	10.31	Puget Sound Energy Inc. Amended and Restated Supplemental Executive Retirement Plan effective January 1, 2009 (incorporated herein by reference to Exhibit 10.39 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305 and 1-4393).
**	10.32	Puget Sound Energy, Inc. Amended and Restated Supplemental Executive Retirement Plan effective January 1, 2013. (incorporated herein by reference 10.35 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2012, Commission File Nos. 1-16305 and 1-4393).
**	10.33	Puget Sound Energy, Inc. Amended and Restated Deferred Compensation Plan for Key Employees effective January 1, 2009. (incorporated herein by reference to Exhibit 10.40 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 20018, Commission File No. 1-6305).
**	10.34	Puget Sound Energy, Inc. Amended and Restated Deferred Compensation Plan for Nonemployee Directors effective January 1, 2009 (incorporated herein by reference to Exhibit 10.41 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305 and 1-4393)
**	10.35	Summary of Director Compensation (incorporated herein by reference to Exhibit 10.38 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File No. 1-16305 and 1-4393.)
**	10.36	Puget Sound Energy, Inc. Supplemental Death Benefit Plan for Executive Employees, effective October1, 2000, as amended (incorporated herein by reference to Exhibit 10.45 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305).
**	10.37	Amendment to Puget Sound Energy, Inc. Supplemental Death Benefit Plan for Executive Employees, effective January 1, 2002, as amended (incorporated herein by reference to Exhibit 10.46 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305 and 1-4393).
**	10.38	Puget Sound Energy, Inc. Supplemental Disability Plan for Executive Employees, effective October 1, 2000 as amended (incorporated herein by reference to Exhibit 10.47 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305 and 1-4393).
**	10.39	Amendment to Puget Sound Energy, Inc. Supplemental Death Benefit Plan for Executive Employees, effective November 1, 2007, as amended (incorporated herein by reference to Exhibit 10.48 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File No. 1-16305 and 1-4393).
**	10.40	Puget Energy, Inc. Amended and Restated 2005 Long-Term Incentive Plan, effective January 21, 2016 (incorporated herein by reference to Exhibit 10.43 to Puget Energy's and Puget Sound Energy's Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File No. 1-16305 and 1-4393).
**	10.41	Second Amended and Restated Credit Agreement dated ~~October 25, 2017,~~May 16, 2022 among Puget Energy Inc., as Borrower, JPMorgan ~~Chase Bank~~Cha se Ba nk N.A., as Administrative Agent, and the ~~lenders~~l enders party ~~thereto. (incorporated~~ther e to. (incorporated by ~~reference~~r eference to Exhibit 10.1 to ~~Puget~~P uget Energy's Current Report on Form ~~8-K,~~8 -K, filed ~~October 31, 2017,~~May 23, 2022, Commission File No. 1-16305).
	10.42	Amended and Restated Credit Agreement dated ~~October 25, 2017,~~May 16, 2022, among Puget Sound Energy, Inc., as Borrower, Mizuho Bank, ~~Ltd.~~Lt d., as ~~Administrative~~Adm inistrative Agent, and the lenders party thereto. (incorporated by reference to ~~Exhibits~~Exhibit 10.2 to Puget Sound ~~Energy's~~En ergy's Current Report on Form 8-K , filed ~~October 31, 2017,~~May 23, 2022, Commission file No. 1-4393).

172


**	10.43	Purchase Agreement, dated June 4, 2018, between Puget Sound Energy, Inc. and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Mizuho Securities USA LLC and each of the other underwriters named in Schedule A thereto (incorporated by reference herein to Exhibit 1.1 to Current Report on Form 8-K filed on June 5, 2018, Commission File No. 1-4393).
	10.44	Term Loan Agreement, dated October 1, 2018, among Puget Energy, Toronto Dominion (Texas) LLC, as Administrative Agent, and the lenders party thereto (incorporated by reference herein to Exhibit 10.1 to Current Report on Form 8-K filed on October 3, 2018, Commission file No. 1-16305 and 1-4393).
*	21.1	Subsidiaries of Puget Energy, Inc.
*	21.2	Subsidiaries of Puget Sound Energy, Inc.
*	22.1	Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize Securities of the Registrant
*	23.1	Consent of PricewaterhouseCoopers LLP for Puget Sound Energy, Inc.

~~175~~

23.2

Consent of PricewaterhouseCoopers LLP for Puget Energy, Inc.


*	31.1	Certification of Puget Energy, Inc. - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Mary E. ~~Kipp~~.Kipp.
*	31.2	Certification of Puget Energy, Inc. - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~– Daniel A. Doyle.~~–Kazi Hasan
*	31.3	Certification of Puget Sound Energy, Inc. - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Mary E. Kipp
*	31.4	Certification of Puget Sound Energy, Inc. – Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – ~~Daniel A. Doyle.~~Kazi Hasan.
*	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Mary E. Kipp.
*	32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – ~~Daniel A. Doyle.~~Kazi Hasan.
*	101	Financial statements from the Annual Report on Form 10-K of Puget Energy, Inc. and Puget Sound Energy, Inc. for the fiscal year ended December 31, ~~2020,~~2022, filed on February ~~25, 2021,~~23, 2023, formatted inas Inline XBRL: (i) the Consolidated Statement of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements (submitted electronically herewith).
*	101.INS	Inline XBRL Instance
*	101.SCH	Inline XBRL Taxonomy Extension Schema
*	101.CAL	Inline XBRL Taxonomy Extension Calculation
*	101.DEF	Inline XBRL Taxonomy Extension Definition
*	101.LAB	Inline XBRL Taxonomy Extension Label
*	101.PRE	Inline XBRL Taxonomy Extension Presentation
*	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_______________

*Filed herewith.

** Management contract, compensatory plan or arrangement.

*** Exhibit originally filed with the Securities and Exchange Commission in paper format and as such, a hyperlink is not available.

~~176~~173

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PUGET ENERGY, INC.

PUGET SOUND ENERGY, INC.

/s/ Mary E. Kipp

Mary E. Kipp

President and Chief Executive Officer

Date:

February ~~25, 2021~~23, 2023

Date:

February ~~25, 2021~~23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following ~~person son~~persons on behalf of each registrant and in the capacities and on the dates indicated.


Signature	Title	Date
	(Puget Energy and PSE unless otherwise noted)

/s/ Mary E. Kipp	President and	February ~~25, 2021~~23, 2023
(Mary E. Kipp)	Chief Executive Officer

/s/ ~~Daniel A. Doyle~~Kazi Hasan	~~Senior~~Executive Vice President and
(~~Daniel A. Doyle)~~Kazi Hasan)	Chief Financial Officer

/s/ ~~Stephen J. King~~Stacy Smith	Controller and Principal Accounting Officer
(~~Stephen J. King)~~Stacy Smith)

/s/ Scott Armstrong	Director
(Scott Armstrong)

/s/ ~~Kenton Bradbury~~Jean-Paul Marmoreo	Director
(~~Kenton Bradbury)~~

~~/s/ Steven W. Hooper~~	~~Director~~
~~(Steven W. Hooper)~~Jean-Paul Marmoreo)

/s/ Tom King	Director
(Tom King)

/s/ Richard Dinneny	Director
(Richard Dinneny)

/s/ Barbara Gordon	Director ~~of PSE Only~~
(Barbara Gordon)

/s/ ~~Christopher Hind~~Chris Parker	Director
(~~Christopher Hind )~~Chris Parker)

~~177~~174


/s/ Paul McMillan			Director
(Paul McMillan)

/s/ ~~Mary O. McWilliams~~Aaron Rubin			Director
(~~Mary O. McWilliams)~~Aaron Rubin)

/s/ Grant Hodgkins			Director
(Grant Hodgkins)

/s/ Martijn Verwoest			Director
(Martijn Verwoest)

/s/ Steven Zucchet			Director
(Steven Zucchet)

/s/ Diana Birkett Rakow			Director of PSE Only
(Diana Birkett Rakow)

~~178~~175


			Page
Definitions			4
Forward-Looking Statements			5
Part I
1. Business			7
General			7
Regulation and Rates			98
Electric Utility Operating Statistics			13
Electric Supply			15
Natural Gas Utility Operating Statistics			19
Natural Gas Supply for Natural Gas Customers			21
Energy Efficiency			2322
Environment			23
Recent and Future Environmental Law and Regulation			24
Human Capital Resources			2627
Executive Officers of the Registrants			28
1A. Risk Factors			29
1B. Unresolved Staff Comments			36
2. Properties			36
3. Legal Proceedings			36
4. Mine Safety Disclosures			36

Part II
5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			36
6. ~~Selected Financial Data~~[Reserved]			37
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3837
7A. Quantitative and Qualitative Disclosures about Market Risk			6768
8. Financial Statements and Supplementary Data			7072
Report of Management and Statement of Responsibility			7173
Report of Independent Registered Public Accounting Firm – Puget Energy			7274
Report of Independent Registered Public Accounting Firm – Puget Sound Energy			7476
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			~~142~~140
9A. Controls and Procedures			~~142~~1 41
9B. Other Information			~~143~~1 42
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			142

Part III
10. Directors, Executive Officers and Corporate Governance			~~144~~14 2
11. Executive Compensation			~~147~~14 5
12. Security Ownership of Certain Beneficial Owners and Management and Related			~~167~~164
Shareholder Matters
13. Certain Relationships and Related Transactions, and Director Independence			~~168~~165
14. Principal Accountant Fees and Services			~~169~~166

Part IV
15. Exhibits and Financial Statement Schedules			~~170~~167
16. Form 10-K Summary			~~170~~167
Exhibit Index			~~171~~168
Signatures			~~177~~174


AFUDC			Allowance for Funds Used During Construction
AOCI			Accumulated Other Comprehensive Income
ARO			Asset Retirement and Environmental Obligations
aMW			Average Megawatt
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
BPA			Bonneville Power Administration
Colstrip			Colstrip, Montana coal-fired steam electric generation facility
Dth			Dekatherm (one Dth is equal to one MMBtu)
EBITDA			Earnings Before Interest, Tax, Depreciation and Amortization
EPA			Environmental Protection Agency
~~ERF~~			~~Expedited Rate Filing~~
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
GAAP			U.S. Generally Accepted Accounting Principles
GHG			Greenhouse Gases
GRC			General Rate Case
IRP			Integrated Resource Plan
IRS			Internal Revenue Service
ISDA			International Swaps and Derivatives Association
kW			Kilowatt (one kW equals one thousand watts)
kWh			Kilowatt Hour (one kWh equals one thousand watt hours)
LIBOR			London Interbank Offered Rate
LNG			Liquefied Natural Gas
LTI Plan			Long-Term Incentive Plan
MMBtus			One Million British Thermal Units
MW			Megawatt (one MW equals one thousand kW)
MWh			Megawatt Hour (one MWh equals one thousand kWh)
NAESB			North American Energy Standards Board
NOAA			National Oceanic and Atmospheric Administration
NPNS			Normal Purchase Normal Sale
NWP			Northwest Pipeline, LLC
NYSE			New York Stock Exchange
OCI			Other Comprehensive Income
PCA			Power Cost Adjustment
PCORC			Power Cost Only Rate Case
PGA			Purchased Gas Adjustment
PLR			Private Letter Ruling
PSE			Puget Sound Energy, Inc.
PTC			Production Tax Credit
PUDs			Washington Public Utility Districts
Puget Energy			Puget Energy, Inc.
Puget Equico			Puget Equico, LLC
Puget Holdings			Puget Holdings, LLC
~~REC~~			~~Renewable Energy Credit~~
~~REP~~			~~Residential Exchange Program~~
SEC			United States Securities and Exchange Commission
SERP			Supplemental Executive Retirement Plan
~~TCJA~~SOFR			~~Tax Cuts and Jobs Act~~Secured Overnight Financing Rate
VIE			Variable Interest Entity
Washington Commission			Washington Utilities and Transportation Commission
WSPP			WSPP, Inc.


	December 31,					December 31,
Retail Revenue by Class	2020		2019		Percent	2020		2019		Percent
(Dollars in Thousands)	Electric				Change	Natural Gas				Change
Residential	$	1,186,013	$	1,139,356	4.1%	$	662,502	$	613,617	8.0%
Commercial	791,898		854,910		(7.4)	253,526		236,059		7.4
Industrial	101,567		105,020		(3.3)	19,064		16,322		16.8
Other	37,864		37,920		(0.1)	17,296		20,283		(14.7)
Total	$	2,117,342	$	2,137,206	(0.9)%	$	952,388	$	886,281	7.5%


Utility Plant Additions/Retirements 5-Year Total	Utility Plant Additions/Retirements 5-Year Total	2016 - 2020						Utility Plant Additions/Retirements 5-Year Total	2018 - 2022
(Dollars in Thousands)	(Dollars in Thousands)	Electric		Natural Gas		Common		(Dollars in Thousands)	Electric		Natural Gas		Common
Additions	Additions	$	1,904,303	$	1,196,439	$	778,884	Additions	$	1,876,770	$	1,237,089	$	696,279
Retirements	Retirements	(910,519)		(119,056)		(205,323)		Retirements	(883,625)		(99,768)		(357,513)
Net Utility Plant		$	993,784	$	1,077,383	$	573,561
Net utility plant								Net utility plant	$	993,145	$	1,137,321	$	338,766


Utility Plant Balance	Utility Plant Balance	December 31, 2020									Utility Plant Balance	December 31, 2022
(Dollars in Thousands)	(Dollars in Thousands)	Electric			Natural Gas			Common			(Dollars in Thousands)	Electric			Natural Gas			Common
Distribution	Distribution	$	4,375,442	41.1%	$	4,293,359	94.9%	$	—	—%	Distribution	$	4,760,017	41.9%	$	4,719,214	91.3%	$	—	—%
Generation	Generation	4,046,923		38.0	2,883		0.1	—		—	Generation	4,060,463		35.8	3,239		0.1	—		—
Transmission	Transmission	1,601,731		15.0	—		—	—		—	Transmission	1,683,737		14.8	—		—	—		—
General Plant & Other		629,712		5.9	227,429		5.0	1,071,258		100.0
General plant & other											General plant & other	851,760		7.5	444,746		8.6	1,087,927		100.0
Total (excluding CWIP)	Total (excluding CWIP)	$	10,653,808	100.0%	$	4,523,671	100.0%	$	1,071,258	100.0%	Total (excluding CWIP)	$	11,355,977	100.0%	$	5,167,199	100.0%	$	1,087,927	100.0%


/X/			ANNUAL 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, zip code telephone number			I.R.S. Employer Identification Number


1-16305			PUGET ENERGY, ~~INC.~~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


•			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), or distribution of natural gas, 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, fires, ~~and~~extreme weather conditions, landslides, and other acts of God, terrorism, asset-based or cyber-based attacks, ~~significant or sustained civil disturbances or disruptions,~~ 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 the ~~recent~~ global ~~coronavirus (COVID–19)~~Coronavirus Disease 2019 (COVID-19) pandemic, and responses to such developments (such as voluntary and mandatory quarantines, ~~including~~ government stay at home orders, ~~as well as shut downs and other~~ restrictions on travel, commercial, social and other ~~activities)~~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;
•			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, or 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 the 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;
•			The ability to obtain insurance coverage, the availability of insurance for certain specific losses, and the cost of such insurance;
•			~~The ability to maintain effective internal controls over financial reporting and operational processes;~~
•			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; ~~and~~
•			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.~~thereunder; and
•			Recent laws proposed or passed by various municipalities in PSE's service territory, including Seattle, which 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, which in turn may impact operations due to costs and delays from incremental permitting and other requirements that are outside PSE's control.


	December 31,			December 31,
Customer Count by Class	2020	2019	Percent	2020	2019	Percent
(in thousands)	Electric		Change	Natural Gas		Change
Residential	1,048	1,033	1.5%	797	788	1.2%
Commercial	131	130	0.8	57	57	0.1
Industrial	3	3	(1.1)	2	2	(0.6)
Other	8	8	3.8	—	—	(3.1)
Total1	1,190	1,174	1.4%	856	847	1.1%


Rate Filings	Electric	Natural Gas
Baseline rates	Yes	Yes
Expedited rate filing rider	Yes	Yes
Power cost only rates mechanism	No	N/A
Federal incentive tracker	No	N/A
Low income rates tracker	No	No
Pipeline cost recovery mechanism tracker	N/A	No
Prior year decoupling deferral tracker	No	No
Property tax tracker	No	No
Renewable energy credit tracker	No	N/A
Residential exchange credits tracker	No	N/A
Conservation costs rider	No	No
Purchased gas adjustment rider	N/A	No


	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


	Year Ended December 31,
	2020			2019			2018
Average kWh used per customer:
Residential	10,558			10,494			10,388
Commercial	60,663			68,010			69,329
Industrial	333,206			348,903			353,905
Other	10,597			11,649			12,068
Average revenue per customer:
Residential	$	1,141		$	1,112		$	1,135
Commercial	6,049			6,579			6,872
Industrial	30,881			31,556			32,899
Other	2,371			2,514			2,677
Average retail revenue per kWh sold:
Residential	$	0.1081		$	0.1059		$	0.1093
Commercial	0.0997			0.0967			0.0991
Industrial	0.0927			0.0904			0.0930
Other	0.2237			0.2158			0.2218
Average retail revenue per kWh sold	0.1044			0.1016			0.1044
Heating degree days	$	4,122		$	4,208		$	4,065
Percent of normal - NOAA2 30-year average	87.8		%	89.6		%	86.2		%
Load factor3	62.1		%	61.6		%	64.2		%


	Year Ended December 31,
	2022			2021			2020
Average kWh used per customer:
Residential	11,030			10,901			10,558
Commercial	64,987			63,373			60,663
Industrial	345,720			331,410			333,206
Other	9,495			10,144			10,597
Average revenue per customer:
Residential	$	1,297		$	1,252		$	1,141
Commercial	7,348			6,810			6,049
Industrial	36,223			33,140			30,881
Other	2,328			2,291			2,371
Average retail revenue per kWh sold:
Residential	$	0.1176		$	0.1148		$	0.1081
Commercial	0.1131			0.1075			0.0997
Industrial	0.1048			0.1000			0.0927
Other	0.2452			0.2258			0.2237
Average retail revenue per kWh sold	$	0.1156		$	0.1116		$	0.1044
Heating degree days	4,715			4,471			4,122
Percent of normal - NOAA1 30-year average	105.2		%	99.2		%	87.8		%
Load factor2	58.7		%	59.7		%	62.1		%


`	Peak Power Resources At December 31,				Energy Production At December 31,
	2020		2019		2020		2019
	MW	%	MW	%	MWh	%	MWh	%
Purchased resources:
Columbia River PUD contracts1	685	14.9%	687	14.5%	3,796,841	15.3%	2,642,177	10.2%
Other hydroelectric	111	2.4	72	1.5	583,514	2.3	272,653	1.0
Other producers	285	6.2	285	6.0	2,704,663	10.9	3,276,502	12.7
Wind	193	4.2	56	1.2	300,886	1.2	123,368	0.5
Short-term wholesale energy purchases	N/A	—	N/A	N/A	5,768,251	23.2	6,144,663	23.7
Total purchased	1,274	27.7%	1,100	23.2%	13,154,155	52.9%	12,459,363	48.1%
Company-controlled resources:
Hydroelectric	250	5.5%	250	5.3%	980,194	3.9%	712,727	2.8%
Coal3	370	8.0	677	14.4	2,102,338	8.5	4,347,639	16.8
Natural gas/oil	1,931	42.0	1,931	40.8	6,402,647	25.8	6,692,188	25.9
Wind	773	16.8	773	16.3	2,215,739	8.9	1,667,489	6.4
Other2	2	—	2	—	—	—	—	—
Total company-controlled	3,326	72.3%	3,633	76.8%	11,700,918	47.1%	13,420,043	51.9%
Total resources	4,600	100.0%	4,733	100.0%	24,855,073	100.0%	25,879,406	100.0%


	Peak Power Resources At December 31,				Energy Production At December 31,
	2022		2021		2022		2021
	MW	%	MW	%	MWh	%	MWh	%
Purchased resources:
Columbia River PUD contracts1	856	13.0%	681	14.2%	4,351,894	16.4%	3,458,996	13.3%
Other hydroelectric	99	1.5	111	2.3	497,229	1.9	529,239	2.0
Other producers	1,352	20.6	468	9.7	4,224,027	15.9	2,863,684	10.9
Wind/solar	902	13.7	193	4.0	1,419,839	5.3	934,634	3.6
Biomass	17	0.3	17	0.4	83,814	0.3	126,931	0.5
Short-term wholesale energy purchases	N/A	—	N/A	—	4,767,460	18.0	5,202,413	20.0
Total purchased	3,226	49.0%	1,470	30.6%	15,344,263	57.8%	13,115,897	50.3%
Company-controlled resources:
Hydroelectric	263	4.0%	263	5.5%	758,615	2.9%	957,818	3.7%
Coal	370	5.6	370	7.7	2,726,665	10.3	2,576,702	9.9
Natural gas/oil	1,931	29.5	1,931	40.1	6,028,682	22.7	7,341,077	28.1
Wind/solar	773	11.8	773	16.1	1,684,974	6.3	2,073,787	8.0
Other2	2	—	2	—	—	—	—	—
Total company-controlled	3,339	51.0%	3,339	69.4%	11,198,936	42.2%	12,949,384	49.7%
Total resources	6,565	100.0%	4,809	100.0%	26,543,199	100.0%	26,065,281	100.0%


			Company’s Annual Share (Approximate)
Project	Contract Expiration Year	License Expiration Year	Percent of Output		MW Capacity
Chelan County PUD:
Rock Island Project	2031	2029	25.0	%	156
Rocky Reach Project	2031	2052	25.0		325
Douglas County PUD:
Wells Project	2028	2052	24.2		228
Grant County PUD:
Priest Rapids Development	2052	2052	0.6		6
Wanapum Development	2052	2052	0.6		7
Total					722


	At December 31,
	2022	2021
Natural gas volumes for power in storage at year end, therms (thousands):
Jackson Prairie	5,450	5,237
Plymouth LNG (in LNG form)	1,223	1,552


Puget Energy
Summary of Operations	Year Ended December 31,
(Dollars in Thousands)	2020		2019		2018		2017		2016
Operating revenue	$	3,326,450	$	3,401,130	$	3,346,496	$	3,460,276	$	3,164,301
Operating income	507,824		519,008		554,058		739,106		765,474
Net income	182,717		210,708		235,622		175,194		312,899

Total assets at year-end	$	15,042,965	$	14,659,863	$	14,098,861	$	13,690,789	$	13,266,380
Long-term debt	5,892,440		5,920,325		5,672,491		5,207,929		5,104,073
Junior subordinated notes	—		—		—		250,000		250,000
Finance lease obligations	795		1,480		1,315		1,129		645
Operating lease obligations	180,184		190,189		—		—		—


Puget Energy	Change in Assumption	Impact on 2020 Pension Expense Increase /(Decrease)
(Dollars in Thousands)		Pension Benefits		SERP		Other Benefits
Increase in discount rate	50 basis points	$	(3,331)	$	(128)	$	8
Decrease in discount rate	50 basis points	3,651		138		(11)
Increase in return on plan assets	50 basis points	$	(3,491)	*		$	(28)
Decrease in return on plan assets	50 basis points	3,491		*		27


Puget Sound Energy	Change in Assumption	Impact on 2022 Pension Expense Increase /(Decrease)
(Dollars in Thousands)		Pension Benefits		SERP		Other Benefits
Increase in discount rate	50 basis points	$	(3,672)	$	(241)	$	3
Decrease in discount rate	50 basis points	3,942		256		(16)
Increase in return on plan assets	50 basis points	$	(3,926)	*		$	(27)
Decrease in return on plan assets	50 basis points	3,926		*		27


Puget Energy and Puget Sound Energy	December 31, 2020				December 31, 2019
(Dollars in Thousands)	Assets		Liabilities		Assets		Liabilities
Electric portfolio:
Current	$	16,862	$	23,697	$	15,399	$	9,273
Long-term	5,682		23,225		4,534		8,231
Total Electric Portfolio	$	22,544	$	46,922	$	19,933	$	17,504
Natural gas portfolio:
Current	$	16,153	$	7,744	$	8,227	$	4,155
Long-term	3,123		6,608		3,148		4,462
Total Natural Gas Portfolio	19,276		14,352		11,375		8,617
Total derivatives	$	41,820	$	61,274	$	31,308	$	26,121


Puget Energy and Puget Sound Energy	December 31, 2022				December 31, 2021
(Dollars in Thousands)	Assets		Liabilities		Assets		Liabilities
Electric portfolio:
Current	$	267,811	$	79,668	$	61,291	$	50,979
Long-term	69,892		7,452		13,538		34,445
Total Electric Portfolio	$	337,703	$	87,120	$	74,829	$	85,424
Natural gas portfolio:
Current	319,218		45,308		66,919		12,330
Long-term	24,729		10,914		12,659		6,520
Total Natural Gas Portfolio	$	343,947	$	56,222	$	79,578	$	18,850
Total derivatives	$	681,650	$	143,342	$	154,407	$	104,274


Puget Energy and Puget Sound Energy
Energy Derivative Contracts Gain (Loss)
(Dollars in Thousands)	December 31, ~~2020~~2022
Fair value of contracts outstanding at December 31, ~~2019~~2021	$	~~5,186~~50,133
Contracts realized or otherwise settled during ~~2020~~2022	~~4,573~~ (357,980)
Change in fair value of derivatives	~~(29,213)~~846,155
Fair value of contracts outstanding at December 31, ~~2020~~2022	$	~~(19,454)~~538,308


Puget Energy and Puget Sound Energy Source of Fair Value	Puget Energy and Puget Sound Energy Source of Fair Value	Fair Value of Contracts by Settlement Year										Puget Energy and Puget Sound Energy Source of Fair Value	Fair Value of Contracts by Settlement Year
																							Puget Energy and Puget Sound Energy Source of Fair Value	Fair Value of Contracts by Settlement Year
(Dollars in Thousands)	(Dollars in Thousands)	2021		2022-2023		2024-2025		Thereafter		Total		(Dollars in Thousands)	2023		2024-2025		2026-2027		Thereafter		Total
Prices provided by external sources1	Prices provided by external sources1	$	4,855	$	1,978	$	(1,433)	$	—	$	5,400	Prices provided by external sources1	$	389,832	$	33,850	$	(1,325)	$	—	$	422,357
Prices based on internal models and valuation methods	Prices based on internal models and valuation methods	(3,281)		(7,856)		(9,569)		(4,148)		(24,854)		Prices based on internal models and valuation methods	72,222		35,862		7,867		—		115,951
Total fair value	Total fair value	$	1,574	$	(5,878)	$	(11,002)	$	(4,148)	$	(19,454)	Total fair value	$	462,054	$	69,712	$	6,542	$	—	$	538,308


Long-Term Debt Instruments	Long-Term Debt Instruments	December 31, 2020				December 31, 2019				Long-Term Debt Instruments	December 31, 2022				December 31, 2021
(Dollars in Thousands)	(Dollars in Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(Dollars in Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Puget Energy	Puget Energy	$	5,892,440	$	7,980,646	$	5,920,325	$	7,412,416	Puget Energy	$	6,663,373	$	6,184,097	$	6,203,766	$	7,803,196
Puget Sound Energy	Puget Sound Energy	4,338,044		6,086,358		4,336,142		5,571,818		Puget Sound Energy	4,786,765		4,379,010		4,784,719		6,145,639


REPORTS:			Page
Report of Management and Statement of Responsibility			7173
Report of Independent Registered Public Accounting Firm –- Puget Energy			7274
Report of Independent Registered Public Accounting Firm –- Puget Sound Energy			7476

INDEX TO FINANCIAL STATEMENTS:
PUGET ENERGY:
Consolidated Statements of Income - Years Ended December 31, 20 202 2 , ~~201~~20 92 1 , and ~~201~~20820			7678
Consolidated Statements of Comprehensive Income - Years Ended December 31, 20 202 2 , 2 0102 91 , ~~201~~20820			7779
Consolidated Balance Sheets - December 31, 20 202 2 and ~~201~~20921			7880
Consolidated Statements of Common Shareholder’s Equity - Years Ended December 31, 20 202 2 , ~~201~~20 92 1 , and ~~201~~20820			8082
Consolidated Statements of Cash Flows - Years Ended December 31, 20 202 2 , ~~201~~20 92 1 , and ~~201~~20820			8183

PUGET SOUND ENERGY:
Consolidated Statements of Income - Years Ended December 31, 20~~20, 2019,~~22, 2021, and ~~2018~~2020			8284
Consolidated Statements of Comprehensive Income - Years Ended December 31, 20~~20, 2019, 2018~~22, 2021, 2020			8385
Consolidated Balance Sheets - December 31, 202 ~~2020,~~2 and 202 ~~2019~~1			8486
Consolidated Statements of Common Shareholder’s Equity - Years Ended December 31, 20~~20, 2019,~~22, 2021, and ~~2018~~2020			8688
Consolidated Statements of Cash Flows - Years Ended December 31, 20 2 2 , 20 ~~2019,~~2 1 , and ~~2018~~20 20			8789


NOTES to the Consolidated Financial Statements of Puget Energy and Puget Sound Energy:
Note 1.	Summary of Significant Accounting Policies	8890
Note 2.	New Accounting Pronouncements	9495
Note 3.	Revenue	959 6
Note 4.	Regulation and Rates	9699
Note 5.	Dividend Payment Restrictions	~~104~~105
Note 6.	Utility Plant	~~105~~106
Note 7.	Long-Term Debt	~~108~~109
Note 8.	Liquidity Facilities and Other Financing Arrangements	110
Note 9.	Leases	~~111~~112
Note 10.	Accounting for Derivative Instruments and Hedging Activities	~~113~~114
Note 11.	Fair Value Measurements	~~116~~117
Note 12.	Employee Investment Plans	1 21120
Note 13.	Retirement Benefits	121
Note 14.	Income Taxes	128
Note 15.	Litigation	131
Note 16.	Commitments and Contingencies	~~132~~131
Note 17.	Related Party Transactions	~~134~~133
Note 18.	Segment Information	134
Note 19.	Accumulated Other Comprehensive Income (Loss)	~~135~~134


~~SUPPLEMENTAL QUARTERLY FINANCIAL DATA~~			~~137~~

SCHEDULE:
I. Condensed Financial Information of Puget Energy - December 31, 202 ~~2020,~~2 , and 202 ~~2019,~~1 , and for the Years Ended December 31, 202 ~~2020,~~2 , 202 ~~2019,~~1 , and 20 ~~2018~~20			~~138~~137
II. Valuation and Qualifying Accounts and Reserves - Years Ended December 31, 202 2 , 202 1 , 20 20 ~~, 201~~9 ~~, 201~~8			~~142~~140



	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)
	Shares	Amount				Retained Earnings				Total Equity
Balance at December 31, 2019	200	$	—	$	3,308,957	$	775,491	$	(84,149)	$	4,000,299
Net income (loss)	—	—		—		182,717		—		182,717
Common stock dividend paid	—	—		—		(45,421)		—		(45,421)
Capital contribution	—	—		4,575		—		—		4,575
Other comprehensive income (loss)	—	—		—		—		(2,288)		(2,288)

Balance at December 31, 2020	200	$	—	$	3,313,532	$	912,787	$	(86,437)	$	4,139,882
Net income (loss)	—	—		—		260,849		—		260,849
Common stock dividend paid	—	—		—		(106,420)		—		(106,420)
Capital contribution	—	—		210,000		—		—		210,000
Other comprehensive income (loss)	—	—		—		—		59,005		59,005
Balance at December 31, 2021	200	$	—	$	3,523,532	$	1,067,216	$	(27,432)	$	4,563,316
Net income (loss)	—	—		—		414,345		—		414,345
Common stock dividend paid	—	—		—		(16,230)		—		(16,230)

Other comprehensive income (loss)	—	—		—		—		2,658		2,658
Balance at December 31, 2022	200	$	—	$	3,523,532	$	1,465,331	$	(24,774)	$	4,964,089



	Common Stock			Additional				Accumulated Other
	Shares	Amount		Paid-in Capital		Retained Earnings		Comprehensive Income (Loss)		Total Equity
Balance at December 31, 2017	200	$	0	$	3,308,957	$	465,355	$	(24,282)	$	3,750,030
Net income (loss)	—	—		—		235,622		—		235,622
Common stock dividend paid	—	—		—		(77,204)		—		(77,204)
Other comprehensive income (loss)	—	—		—		—		(52,920)		(52,920)
Cumulative effect of accounting change	—	—		—		5,230				5,230
Balance at December 31, 2018	200	$	—	$	3,308,957	$	629,003	$	(77,202)	$	3,860,758
Net income (loss)	—	—		—		210,708		—		210,708
Common stock dividend paid	—	—		—		(64,220)		—		(64,220)
Other comprehensive income (loss)	—	—		—		—		(6,947)		(6,947)

Balance at December 31, 2019	200	$	—	$	3,308,957	$	775,491	$	(84,149)	$	4,000,299
Net income (loss)	—	—		—		182,717		—		182,717
Common stock dividend paid	—	—		—		(45,421)		—		(45,421)
Capital contribution	—	—		4,575		—		—		4,575
Other comprehensive income (loss)	—	—		—		—		(2,288)		(2,288)

Balance at December 31, 2020	200	$	—	$	3,313,532	$	912,787	$	(86,437)	$	4,139,882


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	Year Ended December 31, 2021
Revenue from contracts with customers:	Electric		Natural Gas		Other		Total
Retail
Residential	$	1,318,326	$	722,003	$	—	$	2,040,329
Commercial	902,928		292,275		—		1,195,203
Industrial	108,267		21,741		—		130,008
Other	18,834		392		—		19,226
Wholesale	161,152		—		—		161,152
Transmission and transportation	43,753		20,030		—		63,783
Miscellaneous	47,948		9,863		66,620		124,431
Total revenue from contracts with customers	$	2,601,208	$	1,066,304	$	66,620	$	3,734,132
Total other revenue1	70,415		1,114		—		71,529
Total operating revenue	$	2,671,623	$	1,067,418	$	66,620	$	3,805,661


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	Year Ended December 31, 2020
Revenue from contracts with customers:	Electric		Natural Gas		Other		Total
Retail
Residential	$	1,186,012	$	662,503	$	—	$	1,848,515
Commercial	791,898		251,740		—		1,043,638
Industrial	101,567		18,592		—		120,159
Other	26,644		5,227		—		31,871
Wholesale	66,345		—		—		66,345
Transmission and transportation	38,073		19,555		—		57,628
Miscellaneous	25,007		3,107		26,121		54,235
Total revenue from contracts with customers	$	2,235,546	$	960,724	$	26,121	$	3,222,391
Total other revenue1	83,870		20,189		—		104,059
Total operating revenue	$	2,319,416	$	980,913	$	26,121	$	3,326,450


Puget Sound Energy	Remaining Amortization Period	December 31,
(Dollars in Thousands)		2022		2021
Environmental remediation	(a)	$	141,893	$	127,977
Storm damage costs electric	3 to 5 years	127,524		127,789
PCA mechanism	N/A	112,207		79,546
Chelan PUD contract initiation	8.8 years	62,611		69,699
Deferred Washington Commission AFUDC	30 years	61,463		62,244
Baker Dam licensing operating and maintenance costs	(b)	55,049		54,525
Get to zero depreciation expense deferral (c)	1 to 4 years	49,605		50,220
Lower Snake River	14.4 years	48,536		53,757
Decoupling deferrals and interest (d)	Less than 2 years	36,773		79,125
Unamortized loss on reacquired debt	1 to 45 years	33,732		35,805
Advanced metering infrastructure	3 years	30,431		23,037
Washington Commission LNG	N/A	25,188		1,764
PGA receivable	2 years	—		57,935
Generation plant major maintenance, excluding Colstrip	3 to 7 years	20,374		12,094
Low Income Program Costs	N/A	17,370		21,755
Property tax tracker	Less than 2 years	12,398		25,896
Energy conservation costs	(a)	10,296		3,573
Washington Commission electric vehicle (c)	4 years	7,796		6,109
Regulatory filing fee deferral	N/A	7,559		—
Snoqualmie licensing operating and maintenance costs	(b)	7,445		7,446
Washington Commission COVID-19	N/A	7,051		3,657
Water heater rental property loss	N/A	5,725		5,725
Mint Farm ownership and operating costs	2.3 years	4,317		6,318
Colstrip major maintenance (c)	3 years	4,035		4,035
Various other regulatory assets	(a)	7,060		32,508
Total PSE regulatory assets		$	896,438	$	952,539
Deferred income taxes (e)	N/A	(811,724)		(866,541)
Cost of removal	(f)	(639,320)		(563,129)
PGA unrealized gain	N/A	(287,725)		(60,728)
Repurposed production tax credits	N/A	(133,855)		(134,270)
Decoupling liability	Less than 2 years	(63,206)		(36,506)
Green direct	N/A	(11,837)		(13,194)
Refund on counterparty settlement	1 year	(4,353)		—
PGA liability	2 years	(3,536)		—
Various other regulatory liabilities	(a)	(5,583)		(35,093)
Total PSE regulatory liabilities		(1,961,139)		(1,709,461)
PSE net regulatory assets (liabilities)		$	(1,064,701)	$	(756,922)


Puget Energy
Jointly Owned Generating Plants (Dollars in Thousands)	Energy Source (Fuel)	Company’s Ownership Share	Plant in Service at Cost		Construction Work in Progress		Accumulated Depreciation

Colstrip Units 3 & 4	Coal	25.00%	$	321,767	$	—	$	(176,847)
Frederickson 1	Natural Gas	49.85	63,348		—		(21,894)
Jackson Prairie	Natural Gas	33.34	44,708		837		(12,178)
Tacoma LNG	Natural Gas	various	494,795		2,936		(10,922)


(Dollars in Thousands)			December 31,
Series	Type	Due	2020		2019
Puget Sound Energy:
7.150%	First Mortgage Bond	2025	$	15,000	$	15,000
7.200%	First Mortgage Bond	2025	2,000		2,000
7.020%	Senior Secured Note	2027	300,000		300,000
7.000%	Senior Secured Note	2029	100,000		100,000
3.900%	Pollution Control Bond	2031	138,460		138,460
4.000%	Pollution Control Bond	2031	23,400		23,400
5.483%	Senior Secured Note	2035	250,000		250,000
6.724%	Senior Secured Note	2036	250,000		250,000
6.274%	Senior Secured Note	2037	300,000		300,000
5.757%	Senior Secured Note	2039	350,000		350,000
5.795%	Senior Secured Note	2040	325,000		325,000
5.764%	Senior Secured Note	2040	250,000		250,000
4.434%	Senior Secured Note	2041	250,000		250,000
5.638%	Senior Secured Note	2041	300,000		300,000
4.300%	Senior Secured Note	2045	425,000		425,000
4.223%	Senior Secured Note	2048	600,000		600,000
3.250%	Senior Secured Note	2049	450,000		450,000
4.700%	Senior Secured Note	2051	45,000		45,000

*	Debt discount, issuance cost and other	*	(35,816)		(37,718)
Total PSE long-term debt			$	4,338,044	$	4,336,142
Puget Energy:
*	Fair value adjustment of PSE long-term debt	*	$	(165,357)	$	(173,865)
*	Revolving Credit Agreement	2023	14,700		24,100
*	Term Loan Agreement2	2021	0		174,000
*	Term Loan Agreement	2022	210,000		210,000
6.000%	Senior Secured Note1	2021	0		500,000
5.625%	Senior Secured Note	2022	450,000		450,000
3.650%	Senior Secured Note	2025	400,000		400,000
4.100%	Senior Secured Note	2030	650,000		0
*	Debt discount, issuance cost and other	*	(4,947)		(52)
Total Puget Energy long-term debt			$	5,892,440	$	5,920,325