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~~2023 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%
2022:


	2023			2022
(Dollars in Thousands)	Earnings	Average Common Equity	Return on Equity	Earnings	Average Common Equity	Return on Equity
Return on equity	$131,059	$4,960,936	2.6%	$490,952	$4,613,257	10.6%
Less/Plus: Unrealized gains and losses on derivative instruments, after-tax	224,751	—	*	(206,330)	—	*
Plus: Equity adjustments1	—	70,908	*	—	(108,984)	*
Plus: Impact of average of monthly average (AMA)	—	(77,648)	*	—	127,482	*
Return on AMA equity	$355,810	$4,954,196	7.2%	$284,622	$4,631,755	6.1%
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 2022 and 2019 GRC is 9.4% for natural gas and electric effective January 1, 2023 for the 2022 GRC and 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.~~respectively for the 2019 GRC.

*Not meaningful and/or applicable.

The Company’s ~~2020~~2023 return on AMA equity was ~~6.9%~~7.2%, which is lower than the authorized regulated ROE primarily due to the following:

•Regulated equity (rate base multiplied by equity percent) was ~~$504.9~~$683.7 million lower than AMA equity for the year ended December 31, ~~2020.~~2023. The impact on ROE for this variance was negative ~~1.1%~~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.

•Plant placed in service which receives deferred accounting treatment, but for which the equity return is not yet able to be recognized, consisting of the AMI and Tacoma LNG investments, which resulted in $22.9 million of deferred return that has not yet been recognized impacting ROE by negative 0.5%.

•Plant placed in service earlier than planned resulted in higher depreciation expense and a lower rate of return in the amount of $17.8 million on an after-tax basis for the year ended December 31, 2023, for an impact on ROE of negative 0.4%.

•Power cost recovery was $20.7 million higher than the amount allowed in rates on an after-tax basis for the year ended December 31, 2023, for an impact on ROE of positive 0.4%.

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

•Regulated equity (rate base multiplied by equity percent) was $589.3 million lower than AMA equity for the year ended December 31, 2022. The impact on ROE for this variance was negative 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, significant in service projects such as, AMI and Tacoma LNG, and growth in rate base since the last GRC.

•Depreciation expense was ~~$90.9~~$18.0 million higher than the amount allowed in rates on ~~a pre-tax~~an after-tax basis for the year ended December 31, ~~2020,~~2022, for an impact on ROE of negative ~~2.1%~~0.4%.

~~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~~Operations and maintenance expense, including production operations and maintenance, was ~~$90.7~~$61.5 million higher than the amount allowed in rates on ~~a pre-tax~~an after-tax basis for the year ended December 31, ~~2019,~~2022, for an impact on ROE of negative ~~2.3%~~1.3%.

4039

Factors and Trends Affecting PSE’s Performance

PSE’s ongoing regulatory requirements and operational needs necessitated the investment of substantial capital in ~~2020~~2023 and will continue to do so in future years. Because PSE intends to seek recovery of such investments through the regulatory process, its financial results depend heavily upon favorable outcomes from that process. The principal business, economic and other factors that affect PSE’s operations and financial performance include:

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

•PSE’s ability to recover power costs that are subject to the Company's power cost adjustment mechanism 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~~Deferral of excess revenues if earnings ~~which~~ exceed PSE's authorized rate of return (ROR) by more than 0.5%;

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

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

•Wholesale commodity prices of electricity and natural gas;

•Increasing capital expenditures with additional depreciation and amortization;

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

•Changes in customer growth and customer usage;

•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~~Cybersecurity incidents and/or 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;

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

•Risks due to health crises, such as epidemics and 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; and

•Legislative, regulatory, code, and/or ordinance changes that impact operations, electric and natural gas availability, sales, transmission, delivery, and/or restrictions.

Regulation of PSE Rates and Recovery of PSE Costs

PSE's regulatory requirements, environmental compliance and operational needs require the investment of substantial capital in ~~2020~~2023 and future years. As PSE intends to seek recovery of these investments through the regulatory process, its financial results depend heavily upon outcomes from that process. The rates ~~that~~ PSE is allowed to charge for its services influence its financial condition, results of operations and liquidity. PSE is highly regulated and the rates that it charges its retail customers are approved by the Washington Commission. ~~The~~Prior to 2023, the Washington Commission ~~has traditionally~~ required ~~these~~that 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.~~assumptions. Incremental customer growth and sales typically ~~have~~did not ~~provided~~provide 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,~~Therefore, the Company ~~will need to~~would seek rate relief through a rate ~~case on a regular and frequent basis in the foreseeable future. In addition,~~cases with the Washington Commission, ~~determines~~which would determine whether the Company's expenses and capital investments ~~are~~were reasonable and prudent for the provision of cost-effective, reliable and safe electric and natural gas service. If the Washington

Commission ~~determines~~determined that a capital investment iswas not reasonable or prudent, the costs (including return on any resulting rate base) related to such capital investment ~~may~~would 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 the natural gas ~~business~~business's financial performance due to the natural gas business being ~~almost fully~~mostly decoupled.

~~Power Cost Only Rate Case~~

~~On December 9, 2020, PSE~~In May 2021, the Washington Governor signed legislation passed by the state legislature that requires investor-owned utilities to file a forward looking multi-year rate plan (MYRP) 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. Under the law, while utilities are required to file a MYRP (at least two years in length) the Washington Commission is not required to approve them. To the extent the Washington Commission approves a MYRP, utilities are bound to the first and second year of the MYRP but may file for a new rate plan in years three or four. If a company earns greater than a half percent above its ~~2020 power cost only~~authorized rate ~~case (PCORC).~~of return on a regulated basis, revenues above that level must be deferred for refunds to customers or another determination by the Washington Commission in a subsequent adjudicative proceeding. 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 PCORCWashington Commission must also set performance measurements to ~~update its power costs, leading to~~assess a ~~requested increase from $78.5 million to $88.0 million (or an average of approximately 4.1%).~~natural gas or electric company operating under a MYRP.

General Rate Case Filing

PSE filed a GRC which includes a two year MYRP with the Washington Commission on ~~June 20, 2019,~~February 15, 2024, requesting an overall increase in electric and natural gas rates of ~~6.9%~~6.7% and ~~7.9% respectively.~~19.0% respectively in rate year one (expected to approximate calendar year 2025) and 8.5% and 2.1%, respectively in rate year two (expected to approximate calendar year 2026). PSE requested a return on equity of ~~9.8% with~~9.95% for the first rate year beginning in 2025 and 10.5% for the second rate year beginning in 2026. PSE requested an overall rate of return of ~~7.62%. In addition to~~7.65% in 2025 and 7.99% in 2026. The filing requests recovery of forecasted plant additions through 2024 as required by RCW 80.28.425 as well as forecasted plant additions through 2026, 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~~final year of the ~~attrition revenue requirement in~~MYRP. The next phase of the ~~overall request in order~~filing will be to ~~address~~establish a procedural calendar for the ~~expected regulatory lag in~~adjudication of the ~~rate year. Additionally, as~~case. The Company estimates the ~~non-plant related excess deferred taxes that resulted~~agreed upon rates 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.this proceeding will become effective by statute approximately 11 months after filings.

On ~~July 8, 2020,~~December 22, 2022, the Washington Commission issued ~~its~~an order on PSE’s ~~GRC. The ruling provided for~~2022 GRC that approved a weighted cost of capital of ~~7.39%~~7.16%, or ~~6.80%~~6.62% after-tax, ~~and~~ a capital structure of ~~48.5%~~49.0% in common equity ~~with~~and 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,~~On January 6, 2023, the Washington Commission ~~extended the amortization~~approved PSE’s natural gas rates with an overall net revenue change 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$70.8 million or ~~0.05%~~6.4% in 2023 and ~~the natural gas increase to $1.3~~$19.5 million or ~~0.15%. The Washington Commission also determined that the Company’s proposed attrition adjustment~~1.7% in 2024, with an effective date 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.January 7, 2023. On ~~July 17, 2020, PSE filed a motion for clarification with~~January 10, 2023, the Washington Commission ~~seeking clarification on several items. On July 31, 2020, the Washington Commission issued~~approved PSE’s electric rates with 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~~overall net ~~increase to electric~~revenue change of ~~$59.6~~$247.0 million or ~~2.9%, an increase of $30.1 million above the $29.5 million granted~~10.8% 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 $27.72023 and $33.1 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~~in 2024 with ~~the Superior Court~~an effective date 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, PSE filed a compliance filing with the Washington

Commission. The natural gas tariffs became effective October 1, 2020 and the electric tariffs on October 15, 2020. On October 7, 2020, PSE, the Washington Commission and interveners agreed to dismiss 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.

January 11, 2023. For ~~further details regarding the 2019 GRC filing,~~additional information, see Note 4, ~~"Regulations~~"Regulation and Rates" to the consolidated financial statements included in Item 8 of this report.

~~Expedited Rate Filing~~Climate Commitment Act Deferral

On ~~November 7, 2018,~~December 29, 2022, PSE filed ~~an ERF~~accounting petitions 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~~requesting authorization to defer costs and revenues associated with the ~~tax over-collection~~Company’s compliance with the CCA codified in law within Revised Code of ~~$34.6~~ Washington (RCW) 70A.65. On February 28, 2023, in Order 01 under Docket No. UE-220974 and UG-220975, the Washington Commission granted PSE approval to defer the cost of emission allowances to comply with the CCA and the proceeds from no-cost allowances consigned to auction beginning January 1, 2023. As such, PSE concluded it was appropriate to defer and seek recovery of CCA costs not currently included in rates. As of December 31, 2023, PSE deferred $184.4

million of CCA compliance costs for natural gas and electric liabilities and recorded $83.0 million related to the proceeds from the sale of consigned GHG emission allowances.

On August 3, 2023, the Washington Commission approved PSE's request for CCA rates in Docket No. UG-230470, subject to refund, effective October 1, 2023, to recover the estimated ongoing allowance costs and proportionate pass back of credits to customers from estimated auction proceeds during the period of August 2023 through December 2023. Overall, the proposal included a new revenue requirement of $104.7 million related to the Washington state carbon reduction charge, mitigated by a new revenue requirement decrease of $87.9 million related to the Washington state carbon reduction credit.

On October 26, 2023, the Washington Commission approved PSE's request for CCA rates in Docket No. UG-230756, subject to refund, effective November 1, 2023, to recover the estimated ongoing allowance costs and proportionate pass back of credits to customers from estimated auction proceeds during the period of January ~~1, 2018,~~2023 through ~~April 30, 2018, over a one-year period which ended May 1, 2020.~~

September 2023. The recovery of ongoing allowance costs and pass back of credits is consistent with the approved accounting petitions in Dockets No. UG-220975 and UG-230471. As part of this filing PSE requested an annual revenue increase of $27.2 million.

For further details, ~~regarding the 2018 ERF filing,~~ see Note 4, ~~"Regulations~~"Regulation and ~~Rates"~~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, the Washington Commission approved PSE’s request within the 2017 GRC 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,~~6, 2023, the Washington Commission approved the ~~multi-party settlement agreement which was filed within PSE’s ERF~~natural gas 2022 GRC filing. As part of this ~~settlement agreement, electric and natural~~filing, the annual gas delivery allowed ~~delivery~~ revenue ~~per customer~~ was updated to reflect changes in the approved revenue requirement. ~~For electric, there were no changes to~~The Washington Commission approved removing the ~~annual allowed fixed power cost revenue.~~earnings test from the decoupling mechanism in accordance with RCW 80.28.425(6). The changes took effect on ~~March 1, 2019.~~January 7, 2023.

On ~~July 8, 2020,~~January 10, 2023, the Washington Commission ~~issued~~approved the ~~final order in Dockets UE-190529 and UG-190530, which instructed PSE to extend~~electric 2022 GRC filing. As part of this filing, the ~~collection of amortization balances for~~annual electric ~~decoupling~~ delivery and fixed power cost ~~sections originally filed through~~allowed revenue was updated to reflect changes in the ~~annual May 2020~~approved revenue requirement. The Washington Commission approved removing the earnings test from the decoupling ~~filing.~~mechanism in accordance with RCW 80.28.425(6). 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 Schedule 142 amortization rates, with a proposed effective date of~~changes took effect on January 1, 2021, where it proposed to zero 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 true up the over-collection amounts for the period of October 15, 2020 through December 31, 2020 in PSE’s annual May 2021 decoupling filing.11, 2023.

On December 31, ~~2020,~~2023, PSE performed an analysis to determine if electric and natural gas decoupling revenue deferrals would be collected from customers within 24 months of the annual period, per ~~Accounting Standards Codification (ASC)~~ASC 980. If not, for GAAP purposes only, PSE ~~would need~~is required 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~~would be collected within 24 months of the annual period; therefore, no reserve adjustment was booked to ~~2020~~2023 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, 2023	(1.5)%	$(37.6)
May 1, 20222	(1.0)	(23.5)
May 1, 20213	1.0	21.4
Natural Gas:
May 1, 2023	(1.3)%	$(16.4)
May 1, 2022	(0.7)	(7.4)
May 1, 2021	1.5	15.0

___________________

1.For electric and natural gas rates effective May 1, ~~2020~~2023, May 1, 2022, and May 1, 2021, 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.

~~The 2019 GRC final order lengthened the recovery period from original one-year recovery to two-year recovery to April 2022.~~

4442

Electric Rates

~~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, in its PCA mechanism, PSE under recovered its allowable costs by $75.4 million of which $43.3 million was apportioned to customers and $2.0 million of interest was accrued on the deferred customer balance. This compares to an under recovery of allowable costs of $67.2 million for the year ended December 31, 2019, of which $36.0 million was apportioned to customers and accrued $1.0 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~~dates. For further information on descriptions of the rate adjustments, ~~approved by~~see Business, "Regulation and Rates" included in Item 1 of this report:


Electric	Schedule	Docket	Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
Bill discount rate rider	129D	230692	October 1, 2023	0.5%	$11.9
Clean energy implementation	141CEI	230591	September 1, 2023	0.9	31.4
Colstrip adjustment rider	141COL	230808	January 1, 2024	0.03	0.9
		220066	January 11, 2023	2.2	50.3
Conservation service rider	120	230139	May 1, 2023	(0.2)	(6.3)
		220137	May 1, 2022	1.0	21.6
Energy charge credit recovery	141A	230825	January 1, 2024	(0.1)	(2.0)
		220066	January 11, 2023	1.5	35.3
Federal incentive tracker	95A	220794	January 1, 20231	1.3	1.0
		210821	January 1, 2022	0.1	(28.2)
		200897	January 1, 2021	0.3	(29.5)
Low income program	129	230694	October 1, 2023	(1.0)	(25.9)
		220656	October 1, 2022	1.1	25.8
		210674	October 1, 2021	0.3	5.8
Power adjustment clause - Schedule 95	Supplemental	230318	December 1, 2023	1.0	27.4
		200893	December 1, 20202	2.1	43.9
	2024 variable power cost update	230805	January 1, 2024	6.1	160.9
	2020 PCORC3	200980	October 1, 2021	3.3	70.9
Property tax tracker	140	230219	May 1, 2023	(0.2)	(4.4)
		220234	May 1, 2022	(0.3)	(5.8)
Rates not subject to refund	141N	230320	January 1, 2024	(3.1)	(76.2)
		220066	January 11, 2023	7.9	182.5
Rates subject to refund	141R	230320	January 1, 2024	4.2	105.6
		220066	January 11, 2023	4.0	91.7
Residential and exchange benefit3	194	230792	November 1, 2023	(0.4)	(9.9)
		210575	November 1, 2021	0.4	7.9
Transportation electrification plan	141TEP	240067	March 1, 2024	0.04	1.2
		230040	March 1, 2023	0.2	6.0
Voluntary long term renewable energy charge and credit	139	220066	January 1, 2024	—	(0.02)
			January 11, 2023	(0.2)	(4.7)

____________________

1.The 2022 rate period represented 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)

~~Federal Incentive Tracker Tariff~~

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, 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 Exchange Benefit~~

The following table sets forth residential exchange benefit 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

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)

~~Natural Gas Rates~~

~~Natural Gas Cost Recovery Mechanism~~

~~The following table sets forth 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)
November 1, 2020 1.2% $10.6
November 1, 2019 0.8 7.0
November 1, 2018

0.5

5.0

~~Purchased Gas Adjustment~~

On April 25, 2019, the Washington Commission approved PSE’s request 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 onefinal year of the ~~major pipelines feeding PSE’s distribution system.~~ten-year period used to pass back the Treasury Grants included in Schedule 95A (Federal Incentive Tracker). The ~~pipeline was repaired~~overall rate now represents a surcharge as amounts from the 2022 filing are expected to be over-distributed.

2.The Schedule 95 Supplemental PCA mechanism rates from the prior year that recovers the 2022 imbalance (effective December 1, 2023).

3.Schedule 95 update through power cost only rate case (PCORC) filing. Per the 2022 GRC Final Order 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 PGADocket No. UE-220066, PCORC rates were set to ~~zero. At the end~~zero as of ~~the recovery period, an unamortized balance of $4.9 million remained which PSE requested~~January 11, 2023.

4.Total credit to be ~~amortized in its annual PGA filing~~passed back to eligible customers is $88.1 million and $72.6 million 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 the

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 February2023 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.~~2021, respectively.

4843

Natural Gas ~~Property Tax Tracker Mechanism~~Rates

The following ~~table sets forth property tax tracker mechanism~~natural gas 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 Rider~~

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

(0.1)

(1.0)

~~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, Green Direct, to larger customers (aggregated annual loads greater than 10,000 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 1 of the program began taking service in November 2020.

In July 2018, the Washington Commission approved a second phase of the Green Direct product. The phase two project is the 150 MW solar facility to be located in Klickitat County, WA. It is expected to achieve commercial operation in 2021 and serve twenty customers. The phase 2 offering will be 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 the blended energy later in 2021.

~~Crisis Affected Customer Assistance Program~~

~~On April 6, 2020, PSE~~schedules were filed with the Washington Commission revisions to its currently effective Tariff WN U-60. The purpose of this filing is to incorporate into PSE’s low-income tariff a new temporary bill assistance program, Crisis Affected Customer Assistance Program (CACAP), to mitigateor approved by the ~~economic impact~~Washington Commission. For further information on descriptions of the COVID-19 pandemic on PSE’s customers. CACAP would allow PSE customers facing financial hardship due to COVID-19 to receive up to $1,000 in bill assistance. The program puts to immediate use $11.0 million in unspent low income funds from prior years, and supplements other forms of financial assistance. The program does not require an increase to rates and is fully compatible with other low income programs. Based on the COVID-19 pandemic and resulting state of emergency, the Washington Commission allowed the tariff revisions to become effective on April 13, 2020. PSE made 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.

~~For additional information,~~filings, see ~~Note 4,~~Business, "Regulation and Rates" ~~to the consolidated financial statements~~ included in Item 81 of this report.


Natural gas	Schedule	Docket	Effective Date	Average Percentage Increase (Decrease) in Rates	Increase (Decrease) in Revenue (Dollars in Millions)
Bill discount rate rider	129D	230693	October 1, 2023	1.1%	$13.1
CCA - greenhouse gas emissions cap & invest	111	230968	January 1, 2024	3.0	29.1
		230756	November 1, 2023	2.1	27.2
		230470	October 1, 20231	3.2	16.8
Conservation service rider	120	230140	May 1, 2023	0.4	4.7
		220138	May 1, 2022	0.3	3.2
Cost recovery mechanism for pipeline replacement	149	220067	January 7, 2023	(2.0)	(22.6)
		220590	November 1, 2022	0.4	4.6
		210678	November 1, 2021	0.5	4.9
Distribution pipeline provisional recovery	141D	220067	January 1, 2024	(0.01)	(0.1)
			January 7, 2023	0.3	3.0
Low income program	129	230695	October 1, 2023	0.2	1.9
		220657	October 1, 2022	(0.04)	(0.4)
		210675	October 1, 2021	(0.3)	(3.0)
Property tax tracker	140	230220	May 1, 2023	(0.02)	(0.2)
		220235	May 1, 2022	0.02	0.2
Purchased gas adjustment	101, 106	230769	November 1, 2023	(24.2)	(309.4)
		220715	November 1, 2022	14.9	155.3
		210721	November 1, 2021	5.8	59.1
Rates not subject to refund	141N	230889	January 1, 2024	(2.3)	(27.6)
		220067	January 7, 2023	(0.1)	(1.6)
Rates subject to refund	141R	230889	January 1, 2024	4.0	47.2
		230323	November 1, 2023	(0.1)	(1.4)
		220067	January 7, 2023	4.1	45.5

____________________

1.Per UG-230740, the tariff was effective October 1, 2023 until December 31, 2023 and would recover costs and pass back credits from August 1, 2023 to December 31, 2023.

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.~~facilities, and could impact the Company's ability to pay dividends. 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~~contaminated sites and the environmental impacts of 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 CCA, which establishes a greenhouse gases (GHG) emissions cap-and-invest program that requires covered entities to purchase allowances to cover their GHG emissions with a cap on available allowances beginning on January 1, 2023 that declines 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. The WDOE also indicated that it will have subsequent rulemakings building off initial rulemaking while program implementation is underway and progress with Washington 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.

While the Washington Commission has approved the recovery of natural gas CCA-related costs, which has led to increases in costs to customers, it has indicated these revenues are subject-to-refund, and there is a risk PSE may ultimately not be able to recover all costs. Electric CCA-related costs have not yet been approved for recovery at this time and it is uncertain what obligation may be borne by customers or at risk for recovery. PSE faces continued risks associated with the program, including the evolving nature of the CCA rulemaking and related interpretation of the rules, 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,~~2023, and December 31, ~~2019.~~2022.

Non-GAAP Financial Measures – Electric and Natural Gas Margins

The following discussion includes financial information prepared in accordance with GAAP, as well as two other financial measures, electric margin and natural gas margin, that are considered ~~��non-GAAP~~“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,
	2023		2022
Operating income (loss)	$	335,452	$	792,462
Electric utility revenue	3,345,867		2,961,457
Purchased electricity	(1,110,572)		(1,038,728)
Electric generation fuel	(457,287)		(348,159)
Residential exchange	77,223		77,715
Utility electric margin (non-GAAP)	$	1,855,231	$	1,652,285
Natural gas operating revenue	$	1,424,368	$	1,209,636
Purchased natural gas	(641,371)		(500,849)
Utility natural gas margin (non-GAAP)	$	782,997	$	708,787
Other revenue	$	16,383	$	45,080
Unrealized gain (loss) on derivative instruments, net	(284,495)		261,177
Other operation and maintenance expenses	(735,278)		(665,259)
Non-utility expense and other	(28,658)		(47,194)
Depreciation and amortization	(865,969)		(774,291)
Taxes other than income tax expense	(404,759)		(388,123)
Operating income (loss)	$	335,452	$	792,462

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,~~2022, to December 31, ~~2020:~~2023:

_______________

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

~~2019~~2022 compared to ~~2020~~2023

Electric Operating Revenue

Electric operating revenues ~~decreased $177.6~~increased $384.4 million primarily due to ~~decreased transportation and other revenue~~increased retail sales of ~~$130.5~~$231.8 million, sales to other utilities and marketers of ~~$40.9~~$172.8 million, other decoupling revenue of ~~$20.2~~$28.7 million and ~~by lower retail sales~~decoupling revenue of ~~$20.0 million;~~$1.8 million, which were partially offset by ~~an increase~~a decrease in ~~decoupling~~transportation and other revenue of ~~$34.0~~$50.8 million. These items are discussed in detail below:

•Electric retail ~~sales~~sale ~~decreased $20.0~~s increased $231.8 million due to an increase of $283.6 million in rates compared to the prior year, partially offset by a decrease of ~~$70.2~~$51.8 million from ~~reduced~~a decrease in retail electricity usage of ~~3.6%; partially offset by an~~2.1%. The increase in rates ~~of $50.2 million compared~~is primarily due to the ~~prior year.~~tariffs filed pursuant to the Company's most recent GRC effective January 11, 2023. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 7 of this report for electric rate changes. The ~~reduction~~decrease in retail usage was due to a decrease ofin residential, commercial and industrial ~~customer~~ usage of ~~10.1%~~3.1%, 0.5% and ~~5.6%~~3.9%, ~~respectively, primarily driven by business shut downs resulting from COVID-19 and~~respectively. Customer usage decreased due to a decrease in heating and cooling degree days of ~~2.0%~~8.5% and 6.0%, respectively, in 2023 as compared to ~~2019; partially offset by an increase in residential sales of 2.0%. See Management's Discussion and Analysis, "Regulation and Rates" included in Item 7 of this report for rate changes.~~2022.

•Sales to other utilities and marketers ~~decreased $40.9~~increased $172.8 million primarily due to a ~~combination of lower sales volumes and lower market prices. Volumes were 15.8% below 2019~~103.2% increase in wholesale sale volumes due to ~~lower market heat rates~~increased volume from PSE natural gas-fired generation, which increased 72.5% in ~~2020, higher temperatures and lower demand from impacts~~2023 compared to 2022. Lower natural gas fuel prices made natural gas-fired generation more economic to dispatch in 2023 compared to 2022. This increase was partially offset by a decrease in electric wholesale sales price of ~~COVID-19. Prices were 25.7% below 2019 prices due to higher than~~24.9%.

5247

~~normal power prices in the first quarter of 2019 when wholesale prices reached an 18-year high driven by record-breaking natural gas prices.~~

•Decoupling revenue increased ~~$34.0~~$1.8 million, ~~the combination of~~attributable to a ~~$20.2~~$13.5 million decrease and a $15.3 million increase 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, ~~was outpaced by the~~respectively. The decrease in delivery deferral revenue was primarily driven by increased actual ~~usage, resulting in an~~rates, whereas the increase in FPC ~~decoupling~~deferral revenue ~~recognized during 2020 compared to 2019.~~was primarily driven by decreased usage.

•Other decoupling revenue ~~decreased $20.2~~increased $28.7 million, primarily due to changes in amortization rates. For the ~~following: i) an $8.8 million increase~~year ended December 31, 2023, prior year overcollection deferrals from residential customers were amortized at a higher rate compared to the same period in 2022. A higher percentage of amortization related to prior year overcollection results in more revenue recognized in the ~~24-month revenue reserve resulting from $0.8 million of decoupling revenue that~~current period. This 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, partially offset by ~~decreased usage; and iii) $3.5~~a $3.0 million decrease related to ~~earnings in excess~~GAAP alternative revenue program recognition guidelines. 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.~~deferred 2021 GAAP alternative decoupling revenues that were recognized. There were no such ~~returns to customers~~revenues recognized in ~~2020.~~2023.

•Transportation and other revenue decreased ~~$130.5~~$50.8 million primarily due to a $63.5 million decrease in net wholesale non-core natural gas sales and a $2.5 million energy charge credit recovery adjustment approved in the 2022 GRC, which was partially offset by an increase of ~~$95.6~~$16.8 million ~~and~~due to the IRS Private Letter Ruling in 2022, which included amortization to offset recovery through rates in 2022. The decrease in wholesale non-core natural gas sales was primarily driven by a decrease of $56.6 million in financial hedging gains in 2023 compared to 2022 due to a decrease in ~~production tax credit (PTC)s deferral revenue of $28.9 million for the re-purpose of the PTCs. The decrease in~~natural gas prices. Additionally, net wholesale non-core natural gas sales decreased $6.9 million which was ~~due to an approximately 55%~~primarily driven by a 34.1% decrease in both the average price of ~~the non-core~~natural gas ~~sold year ended December 31, 2020~~sales and purchases in 2023 compared to the same period in the prior year and a 7% decrease in sales volume. This was offset by a $36.3 million decrease 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 gas 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.2022.

Electric Power Costs

Electric power costs ~~decreased $143.7~~increased $181.4 million primarily due to ~~a decrease~~an increase of ~~$83.8~~$71.8 million of purchased electricity costs and $109.1 million of electric generation fuel ~~costs and $58.8 million of purchased electricity~~ costs. These items are discussed in detail below:

•Purchased electricity expense ~~decreased $58.8~~increased $71.8 million primarily due to ~~a 13.7% decrease~~increased wholesale purchase prices, which were 11.9% higher in ~~wholesale prices due to natural gas prices that trended down in 2020~~2023 compared to ~~2019 natural gas~~2022, driven by open market purchases as well as two winter peaking power purchase agreements that began after September 2022, a power purchase agreement for energy produced at the Puget Sound Refinery Cogeneration Facility that began after July 2023, and the Clearwater Wind Project that began commercial operations in November 2022. The increase from wholesale purchase prices ~~due to the effect of the Enbridge pipeline rupture in late 2018;~~were partially offset by a ~~5.6% increase~~4.4% decrease in wholesale electricity ~~purchases due to the retirement of Colstrip Units 1 and 2 and a decrease in combustion turbine (CT) generation, discussed below.~~purchases.

•Electric generation fuel expense ~~decreased $83.8~~increased $109.1 million primarily due to a ~~$46.7~~$106.4 million ~~decrease~~increase in ~~Colstrip related to the retirement of Units 1 and 2 and a $30.0 million decrease in CT generation costs primarily driven by the cost of~~ natural gas ~~and~~fuel costs as a result of a 72.5% increase in ~~wholesale purchases. As stated above~~PSE natural gas-fired generation as discussed in ~~transportation~~sales to other utilities and ~~other revenue, natural gas prices trended down in 2020 compared to 2019~~marketers above. Higher costs from increased production were partially offset by lower natural gas prices which ~~were higher due to the effect of the Enbridge pipeline rupture~~drove a 20.8% decrease in ~~late 2018.~~average unit production costs.

~~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,~~2022, to December 31, ~~2020:~~2023:

_______________

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

~~2019~~2022 compared to ~~2020~~2023

Natural Gas Operating Revenue

Natural gas operating revenue increased ~~$105.5~~$214.7 million primarily due to higher retail sales of ~~$69.1~~$165.0 million, ~~increased~~decoupling revenue of $27.1 million, other decoupling revenue of ~~$23.3~~$12.2 million ~~increased decoupling revenue of $16.6 million~~ and ~~partially offset by decreased~~ transportation and other revenue of ~~$3.5~~$10.4 million. These items are discussed in the following details:

•Natural gas retail sales increased ~~$69.1~~$165.0 million due to an increase in rates of ~~$103.5~~$233.9 million ~~primarily from an increase in rates for PGA~~ partially offset by a decrease in natural gas load of ~~4.3%,~~5.6% or ~~$34.4~~$68.8 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 PGA and ~~4.2%~~GRC effective November 1, 2022 and January 7, 2023, respectively, and was partially offset by a decrease in ~~average therms used~~the Company's most recent PGA rates effective November 2023. See "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 7 of this report for natural gas rate changes. The decrease in load is driven by a decrease of commercial and residential ~~customers, commercial firm~~usage of 3.3% and ~~industrial firm customers, respectively partially driven by~~7.0%, respectively. Customer usage decreased due to 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. See Management's Discussion and Analysis, "Regulation and Rates" and "Overview" included8.5% in ~~Item 2 of this report for natural gas rate changes and COVID-19 updates.~~

•~~Decoupling revenue~~ ~~increased $16.6 million. This is attributable~~2023 as compared to an increase of 9.3% in allowed natural gas revenues and decreased usage, as noted above in the retail revenue section. This resulted in allowed natural gas revenues being greater than actual natural gas revenues in the current year, whereas in the prior year allowed revenues were closer to actual revenues.2022.

5449

•Decoupling revenue increased $27.1 million, primarily due to decreased natural gas usage, as mentioned above, in 2023 compared to 2022, which was caused by higher average temperatures.

•Other decoupling revenue increased ~~$23.3~~$12.2 million due to ~~a $25.4 million decrease in current year~~increased amortization ofrates for prior year overcollection deferrals and decreased amortization rates for undercollection ~~which was driven by decreased usage and a decrease~~deferrals compared to the same period in ~~rates~~2022. A higher percentage of ~~5.3% and 0.5% effective May 2019 and May 2020, respectively. This is partially offset by a $2.2 million decrease~~amortization related to ~~earnings~~prior year overcollection resulted in ~~excess of allowed ROR. In 2019, earnings~~more revenue recognized in ~~excess of allowed ROR of $2.2 million was returned to customers. There were no such returns to customers in 2020.~~the current period.

•Transportation and other revenue ~~decreased $3.5~~increased $10.4 million primarily due to ~~a $2.9~~an increase in transportation revenue of $8.3 million ~~decrease~~and $3.1 million related to the IRS PLR which included amortization of the PLR to offset recovery through rates in entitlement constraint revenues for interruptible customers that have agreements in place to curtail their natural gas usage when the natural gas distribution system is constrained due to demand that was recognized in 2019.2022.

Natural Gas Energy Costs

Purchased natural gas expense increased ~~$71.9~~$140.5 million primarily due to an increase in the PGA rates in November ~~2019~~2022 and was partially offset by a decrease in the ~~addition of two supplemental gas commodity costs amortization~~PGA rates in ~~2019 which were added in order to recover the large amount of gas costs that PSE incurred in late 2018~~November 2023 and ~~early 2019 due to the Enbridge pipeline explosion partially offset by~~ a decrease in natural gas usage of ~~4.3%~~5.6% 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.~~

5550

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,~~2022, to December 31, ~~2020:~~2023:

~~2019~~2022 compared to ~~2020~~2023

Other Operating Expenses

•Net unrealized (gain) loss on derivative instruments ~~increased $23.2~~changed $545.7 million to a net loss of ~~$26.8~~$284.5 million for the year ended December 31, ~~2020. One of the drivers is related to~~2023. The primary driver was the change in the weighted average forward prices for electric and natural gas. Specifically, the change in electric ~~prices~~weighted average forward price decreased ~~22.1% resulting~~156.4%, which resulted in ~~a $75.4~~$280.0 million in loss for ~~electric.~~electric, as well as net settlement of electric trades that were previously recorded as $48.2 million in gain. Natural gas prices decreased ~~4.1%~~85.1% resulting in ~~a $17.0~~$328.2 million loss for natural gas. ~~The other driver is related to~~These losses were partially offset by the ~~net settlements of electric and~~ natural gas trades previously recorded as ~~$63.6~~$110.6 million in loss.

•Utility Operations and Maintenance expense increased $70.0 million primarily due to increases in the following: (i) $10.7 million related to transportation electrification and CEIP trackers; (ii) $9.5 million in customer service expense due to increased low-income assistance; (iii) $9.4 million in outside consulting fees related to corporate strategic planning; (iv) $7.1 million related to higher administration expenses related to customer collections and records processing; (v) $6.6 million in pension related expenses; (vi) $5.6 million ~~in losses, respectively, that settled~~related to increased steam generation maintenance expenses related to boilers and ~~are recorded in purchased electricity or electric generation fuel which results in a gain for unrealized gains~~other equipment; (vii) $5.2 million of administrative and ~~losses on derivative instruments. For further details, see Note 10, "Accounting for Derivative Instruments and Hedging"~~general expenses related to the ~~consolidated financial statements included in Item 8~~CEIP and other strategic projects; (viii) $4.1 million related to injuries and damages expense; and (ix) $4.0 million related to higher distribution operations expense. These increases were partially offset by a decrease of ~~this report.~~$7.4 million of maintenance related natural gas-fired electric generating equipment.

•Non-utility and other expense decreased ~~$2.0~~$18.4 million primarily due to a decrease ~~in long term incentive plan costs~~ of ~~$16.0 million; partially offset~~$22.1 million related to biogas purchase expense, driven by a ~~one-time $7.0 million~~decrease in both volume of biogas ~~payment~~purchased and ~~an increase in supplemental executive retirement plan (SERP) costs of $7.2 million.~~average biogas purchase price.

•Depreciation and amortization expense ~~decreased $5.7~~increased $91.7 million primarily driven by ~~an electric amortization decrease of $31.8~~(i) $41.0 million ~~or 35.3%, from 2019 due to a $28.9 million change in the PTCs amortization due to lower taxable income year over year. The decrease was partially offset by (i) an~~ increase in electric ~~distribution depreciation~~amortization from 2022 primarily driven by $21.9 million less Lower Snake River treasury grant amortization credits in 2023 compared to 2022, $12.1 million addition of ~~$8.6 million, or 6.2%, from 2019 due to $179.2~~2022 storm cost amortized in 2023, and $6.8 million in ~~net additions of~~Get to Zero (GTZ) electric ~~distribution assets;~~tranche amortization; (ii) $27.1 million increase in natural gas distribution depreciation ~~increased by $8.3 million, or 7.4%,~~ from ~~2019~~2022 primarily due to ~~$231.9~~$188.6 million in net additions in natural gas distribution assets; (iii) $11.0 million increase in electric distribution depreciation from 2022 primarily due to $279.8 million in net additions of electric distribution assets; (iv) $10.7 million increase in electric production depreciation from 2022 primarily due to $51.1 million in net additions of electric production assets; (v) $6.4 million increase in natural gas amortization ~~increased~~from 2022 primarily driven by a $3.6 million ~~or 41.9% from 2019~~increase in GTZ natural gas tranche amortization; and (vi) $4.4 million increase in conservation amortization due to ~~the final accounting for the AMI deferrals provided by the results of the 2019 GRC and net additions of $24.3 million; and (iv)~~ conservation ~~amortization increased by $3.0 million due to an increase in~~rider rates effective May 1, ~~2020.~~2023, see "Regulation of PSE Rates and Recovery of PSE Costs" included in this Item 7 of this report. These increases were partially offset by: (i) $5.2 million decrease in electric general plant and other depreciation from 2022 primarily driven by a $5.1 million decrease in asset retirement costs in 2023 compared to 2022 and (ii) $2.7 million decrease in common general plant from 2022, driven by the timing of retirements during 2023, which were offset by additions in the fourth quarter of 2023.

•Taxes other than income taxes ~~decreased $5.3~~increased $16.6 million primarily due to an increase of $14.7 million related to municipal taxes driven by the increase in retail revenue in 2023 as compared to 2022 and $11.6 million related to the state excise tax. These increases were partially offset by a decrease of $7.7 million in ~~Montana~~ property ~~taxes of $4.1 million primarily due to the retirement of Colstrip 1 & 2 in Montana and $2.4 million of property tax tracker due to load.~~taxes.

Other Income, Interest Expense and Income Tax Expense

•Other income/expense increased ~~$15.0~~$32.4 million ~~primarily~~from net other income of $17.1 million in 2022 to $49.5 million in 2023, due to ~~$6.3~~an increase of $27.5 million ~~of SmartBurn plant investment at Colstrip Units 3 & 4 which recovery was disallowed~~ in ~~the 2019 GRC, write-offs~~other income and a decrease of $4.8 million ~~of asset costs,~~in other expense. The increase was primarily driven by the following increases: (i) $13.0 million in taxable interest and dividend income due to an increase in ~~strategic initiative costs~~PCA customer interest and interest earned on short-term investments of ~~$3.1 million.~~

•~~Interest expense~~ ~~increased $3.1~~excess cash; (ii) $10.2 million in AFUDC due to ~~$9.7 million of interest expense on the $450.0 million senior note issued~~an increase in ~~2019, increased PTCs interest expense of $4.9~~eligible construction work in progress; (iii) $6.6 million in ~~2020,~~the non-service cost component of the qualified pension net periodic benefit cost for 2023 compared to 2022; (iv) $3.2 million in other expense related to a 2022 write-off of the Colstrip dry ash facilities; and (v) $2.2 million in gain on corporate life insurance policies. These increases in other income and other expense were partially offset by a decrease of ~~$7.9~~$2.3 million ~~of other~~in AMI due to a change in AMI return deferral per the 2022 GRC.

•Interest expense increased $22.1 million primarily due to (i) $13.5 million increase in interest expense ~~attributed~~due to ~~lower commercial paper borrowing~~the May 2023 PSE bond issuance; (ii) $9.2 million increase related to interest expense recognized on the PGA liability; and (iii) $3.5 million increase in ~~2020.~~interest expense recognized in conjunction with PSE's deferred compensation liability. These increases were partially offset by a decrease of $3.3 million in monetized PTC interest expense.

•Income tax expense decreased ~~$12.9~~$86.9 millionprimarily driven by a decrease ~~of 9.5% of income before income taxes and a 26.3% decrease~~ 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.~~

5752

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,~~2022, and December 31, ~~2020,~~2023, were as follows:

~~2019~~2022 compared to ~~2020~~2023

Summary Results of Operations

Puget Energy’s net income decreased by ~~$27.9~~$360.6 million, which is primarily attributable to a decrease in PSE's net income of ~~$18.6~~$359.9 million and a decrease in other operating revenue and income of $7.3 million due to a decrease in pension non-service cost of $6.3 million. These decreases were partially offset by a decrease in interest expense of $4.6 million driven by a decrease of $8.2 million on a senior note that retired in 2022, a decrease of $9.3 million due to Puget LNG interest expense, which is eliminated during consolidation, an increase in interest expense of ~~$13.8 million. The~~$9.3 million related to the revolving credit agreement and an increase ~~in interest expense was primarily~~of $2.9 million due to a ~~$13.5 million loss from the redemption of~~ senior ~~secured notes in June 2020, a $200 million net additional issuance of $650 million~~note issued in ~~May 2020 and $450 million redeemed in June 2020.~~2022. For ~~the discussion of redemption,~~further information, see Note 7, "Long-Term Debt" and Note 8, "Liquidity" to the consolidated financial statements included in Item 8 of this report.

~~For additional information on prior years, please see discussion in Item 7, "Puget Energy Summary Results of Operation" of Form 10-K for period ended December 31, 2019.~~

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:~~2023:

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		2024		2025-2026		2027-2028		Thereafter
Contractual obligations:
Energy purchase obligations1	$	11,464,428	$	1,616,568	$	2,207,218	$	1,340,562	$	6,300,080
Long-term debt including interest2	9,801,650		261,508		538,743		797,503		8,203,896
Short-term debt including interest	336,600		336,600		—		—		—
Service contract obligations	277,501		34,702		71,504		74,469		96,826
Non-cancelable operating leases3	281,595		24,390		48,180		44,205		164,820
PSE finance leases3	136,423		6,586		13,357		13,401		103,079
Pension and other benefits funding and payments	51,242		20,846		11,074		7,825		11,497
Total PSE contractual cash obligations	22,349,439		2,301,200		2,890,076		2,277,965		14,880,198
Long-term debt including interest2	2,400,677		72,153		520,466		608,556		1,199,502
Short-term debt including interest	273,434		273,434		—		—		—
Total Puget Energy contractual cash obligations	$	25,023,550	$	2,646,787	$	3,410,542	$	2,886,521	$	16,079,700

____________________

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.

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.

~~The following are PSE’s~~For additional information regarding PSE's and Puget ~~Energy’s aggregate availability under~~Energy's 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 $— $—

~~_______________~~

1.~~As of December 31, 2020, PSE had a credit facility which provides $800.0 million of short-term liquidity needs~~see Note 8, “Liquidity Facilities and ~~includes a backstop~~Other Financing Arrangements” to the ~~Company's commercial paper program. The credit facility matures~~consolidated financial statements included in October 2023. 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 sizeItem 8 of the facility to $1.4 billion. As of December 31, 2020, no loans or letters of credit were outstanding under the credit facility and $373.8 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 million letter of credit in support of a long-term transmission contract and a $1.0 million letter of credit in support of natural gas purchases in Canada.

2.~~As of December 31, 2020, 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, Puget Energy had a revolving senior secured credit facility totaling $800.0 million, which matures in October 2023. 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, there was $14.7 million drawn and outstanding under the Puget Energy credit facility.this report.

Off-Balance Sheet Arrangements

As of December 31, ~~2020,~~2023, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a material effect on the Company's financial condition. The Company does have standby letter of credit arrangements. For more information, see Note 8 “Liquidity Facilities and Other Financing Arrangements” to the consolidated financial statements included in Item 8 of this report.

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 $381.0 million ~~compared to~~higher than forecasted amounts for ~~2020.~~2023. The increase was primarily due to (i) new generation resource acquisition, higher natural gas construction and electric first response, and unplanned thermal maintenance; (ii) pull-forward of cable remediation work, Tono and Buckley substation work, and Sammamish-Juanita transmission line project, and (iii) delayed Energize Eastside and Smart Grid projects. Construction expenditures, excluding equity allowance for funds used during construction (AFUDC), totaled ~~$908.1 million~~$1.5 billion in ~~2020.~~ 2023.

Presently planned utility construction expenditures, excluding equity AFUDC, are as follows:


Capital Expenditure Projections	Capital Expenditure Projections
(Dollars in Millions)	(Dollars in Millions)	2021	2022	2023
(Dollars in Millions)
(Dollars in Millions)						2024	2025	2026
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	$1,716.0	$1,936.4	$2,231.7

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

Capital Resources

Cash from Operations


Puget Sound Energy	Puget Sound Energy	Year Ended December 31,						Puget Sound Energy	Year Ended December 31,
(Dollars in Thousands)	(Dollars in Thousands)	2020		2019		Change		(Dollars in Thousands)	2023	2022	Change
Net income	Net income	$	274,280	$	292,924	$	(18,644)
Non-cash items1	Non-cash items1	724,650		677,261		47,389
Changes in cash flow resulting from working capital2	Changes in cash flow resulting from working capital2	(57,578)		(107,355)		49,777
Regulatory assets and liabilities	Regulatory assets and liabilities	(152,417)		(79,173)		(73,244)
Purchased gas adjustment	Purchased gas adjustment	45,111		(132,766)		177,877
GHG emission allowances
Other non-current assets and liabilities3	Other non-current assets and liabilities3	(9,236)		(26,967)		17,731
Net cash provided by operating activities		$	824,810	$	623,924	$	200,886
Net cash (used in)/provided by operating activities

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,~~2023, 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,~~2023, 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.~~2023.

Puget Energy’s effectiveness of internal control over financial reporting as of December 31, ~~2020,~~2023, 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,~~2023, 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,~~2023, 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.~~2023.

PSE’s effectiveness of internal control over financial reporting as of December 31, ~~2020,~~2023, 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

During the three months ended December 31, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

ITEM ~~9B. OTHER INFORMATION~~9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

As of ~~February 25, 2021, twelve~~March 5, 2024, thirteen directors constitute Puget Energy’s Board of Directors and ~~thirteen~~fourteen 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,~~64, has been a director on the ~~boards~~board 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,~~61, 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,~~65, 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~~Christine Gregoire, age ~~51,~~76, has been a director on the ~~boards~~board of both Puget Energy and PSE since February ~~28, 2018. He~~24, 2023. Ms. Gregoire is ~~currently the Senior Principal, Private Infrastructure with Canada Pension Plan Investment Board (CPPIB)~~Chief Executive Officer of Challenge Seattle (2015 – Present), an ~~investment management organization, which position he has held since January 2016.~~alliance of Seattle-area business leaders focused on civic improvement initiatives. Prior to that ~~Mr. Hind~~time, Ms. Gregoire served two terms as the Governor of the State of Washington from 2005 to 2013. Before serving as Governor, Ms. Gregoire served for three terms as the Attorney General of the State of Washington (1993 to 2005). In addition to her role as CEO of Challenge Seattle, Ms. Gregoire has served as the former chair of the Fred Hutch Cancer Research Center, a ~~Managing Director, Investment Banking, at CIBC,~~member of the National Bipartisan Governor’s Council and as Chair of the

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National Export-Import Bank Advisory Board. An independent director not affiliated with any of the Company’s investors, Ms. Gregoire brings to the Board her extensive executive leadership experience, her deep knowledge of Washington’s legal, political and regulatory participants and processes, and her intimate familiarity with multiple communities and constituencies across the Company’s service territory.

Chris Parker, age 53, has been a ~~financial institution, from October 1997 to January 2016.~~director of both Puget Energy and PSE since February 22, 2022. Mr. ~~Hind also~~Parker is currently a member of the Ontario Teachers’ Pension Plan North America Infrastructure team where he focuses on origination, execution and management of infrastructure investments. He joined Ontario Teachers’ Pension Plan in 2011 and has served 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 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.

~~144~~Julia Hamm, age 47, has been a director on the board of both Puget Energy and PSE since May 1, 2023. Ms. Hamm is a member of the board of directors and chair of the compensation committee of Voltera, an electric fleet charging infrastructure company, a role she has held since 2022, and a member of the board of directors of the California Mobility Center, a role she has held since 2021. Ms. Hamm is also the founder and a current board member of Solar Energy Trade Shows, which manages the Solar Power International energy industry trade show. Prior to this, Ms. Hamm served as the president and CEO of Smart Electric Power Alliance, a non-profit company, from 2004-2022. Ms. Hamm serves on the boards of Puget Energy and PSE as a representative of PGGM Vermogensbeheer B.V., pursuant to the terms of the Puget Energy and PSE bylaws.

Grant Hodgkins, age ~~45,~~48, 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,~~62, 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,~~56, 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. 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. Ms. Kipp is also a member of Challenge Seattle, an alliance of Seattle-area business leaders focused on civic improvement initiatives, since 2020.

Jenine Krause, age 52, has been a director on the boards of both Puget Energy and PSE since February 2, 2024. Ms. Krause is currently a managing director at OMERS Infrastructure Management, Inc. Prior to ~~that~~joining OMERS in 2022, Ms. Krause was CEO of Enercare Inc., a home and commercial service and energy solutions company; previously she ~~served~~held senior roles at Bell Canada across numerous business units. In addition to PSE and Puget Energy, Ms. Krause is a board member of

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Beanfield Technologies, a Canadian fiber infrastructure network, BridgeTex Pipeline Company, a Texas pipeline operator, and LifeLabs, a Canadian laboratory testing services provider. Pursuant to the Amended and Restated Bylaws of each of the Companies, Ms. Krause will serve as ~~Chief Executive Officer and~~an Owner Director on their respective Boards of Directors on behalf of OMERS. Ms. Krause 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 her service as an Owner Director on the Boards, but will be reimbursed for out-of-pocket expenses.

Paul McMillan, age ~~66,~~69, 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,~~46, 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 sustainability and climate strategy, governance and regulation.

Aaron Rubin, age 46, 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 ~~the reasons that led to her appointment to the Puget Energy and PSE boards on behalf of the CPPIB.~~

~~Martijn Verwoest, age 44, has been a director on the boards of both Puget Energy and PSE since April 17, 2019.~~Directors. 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. VerwoestRubin 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,~~58, 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”~~“Information About Our Executive Officers” 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, Jenine Krause 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.

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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,~~2023, nor were they formerly Company officers or had any relationship otherwise requiring disclosure. Each member of the Committee 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,~~2023, 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, interim Chief Financial Officer (CFO), effective September 26, 2023, serving as a consultant. Mr. Doyle previously served as Senior Vice President and ~~Chief Financial Officer (CFO);~~CFO at the Company from 2011 until his retirement in 2021;

•~~Kimberly J. Harris,~~Kazi Hasan, former ~~Chief~~ Executive ~~Officer (CEO)~~Vice President and CFO who ~~retired~~terminated employment effective ~~January 2, 2020;~~September 26, 2023;

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

•~~Booga K. Gilbertson,~~Aaron August, Senior Vice President, Chief Customer and Transformation Officer, effective July 27, 2023;

•Ronald J. Roberts, Vice President Energy Supply; and

•Allan (Wade) Smith, former Executive Vice President and Chief ~~Operations Officer;~~

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

•~~David E. Mills, former Senior Vice President and Chief Strategy~~Operating Officer, who ~~retired~~terminated employment effective ~~November 9, 2020~~December 15, 2023.

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.~~Officers who are employees. Mr. Doyle is not an employee and does not participate in the programs listed below. Mr. Doyle's compensation is described in the Other Compensation section below.

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.

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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,~~2023, 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.

•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%~~83% of the target 2023 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, which are approved by the Board.

•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~~2022 Energy Services Survey, comprised of utility and other companies similar in size and scope of operations to PSE.

The 2326 companies in the custom market survey cut for 2023 pay decisions are the same as those used ~~to inform target compensation~~for the 2022 pay decisions ~~for 2020~~and are shown below:

Custom Survey Peer Group

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

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

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 1517 companies, all but one of which overlapped with the 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~~$4.0 billion, which was comparable to PSE’s annual revenues of ~~$3.4 billion at the time the peer group was developed.~~$4.2 billion. The proxy peer group was reviewed by Meridian to assess the continued relevancy of the ~~companies.Based~~companies and based on ~~Meridian’s evaluation, as well as discussion with the Committee, six~~their analysis recommended two companies ~~were removed due~~ to ~~either non-regulated business operations or because of being acquired.Five new revenue-size appropriate regulated utilities were~~be added to the group.


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.	PNM Resources
2.	2.	Ameren	8.	Idacorp	14.	Spire, Inc.	2.	Ameren	8.	Idacorp	14.	Portland General Electric
3.	3.	Atmos Energy	9.	NiSource	15.	WEC Energy	3.	Atmos Energy	9.	NiSource	15.	PPL*
4.	4.	Avista	10.	ONE Gas			4.	Avista	10.	OGE Energy*	16.	Spire
5.	5.	CMS Energy	11.	Pinnacle West Capital			5.	CMS Energy	11.	ONE Gas	17.	WEC Energy Group
6.	6.	Evergy	12.	PNM Resources


			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			1514
Natural Gas Utility Operating Statistics			1918
Natural Gas Supply for Natural Gas Customers			2119
Integrated Resource Plan s , Resource Acquisition and Developm ent			2 1
Energy Efficiency			2322
Environment			2322
Recent and Future Environmental Law and Regulation			2423
Human Capital Resources			26
Information About Our Executive Officers ~~of the Registrants~~			28
1A. Risk Factors			29
1B. Unresolved Staff Comments			36
1C. Cybersecurity			36
2. Properties			36
3. Legal Proceedings			3637
4. Mine Safety Disclosures			3637

Part II
5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			3637
6. ~~Selected Financial Data~~[Reserved]			37
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
7A. Quantitative and Qualitative Disclosures about Market Risk			6761
8. Financial Statements and Supplementary Data			7065
Report of Management and Statement of Responsibility			7166
Report of Independent Registered Public Accounting Firm – Puget Energy			7267
Report of Independent Registered Public Accounting Firm – Puget Sound Energy			7469
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			~~142~~131
9A. Controls and Procedures			~~142~~132
9B. Other Information			~~143~~133
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			133

Part III
10. Directors, Executive Officers and Corporate Governance			~~144~~133
11. Executive Compensation			~~147~~136
12. Security Ownership of Certain Beneficial Owners and Management and Related			~~167~~
Shareholder Matters			155
13. Certain Relationships and Related Transactions, and Director Independence			~~168~~156
14. Principal Accountant Fees and Services			~~169~~157

Part IV
15. Exhibits and Financial Statement Schedules			~~170~~158
16. Form 10-K Summary			~~170~~158
Exhibit Index			~~171~~159
Signatures			~~177~~165


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~~RCW			~~Renewable Energy Credit~~
~~REP~~			~~Residential Exchange Program~~Revised Code of Washington
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	2019 - 2023
(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
Retirements	Retirements	(910,519)		(119,056)		(205,323)
Net Utility Plant		$	993,784	$	1,077,383	$	573,561
Net utility plant


Utility Plant Balance		December 31, 2020
Utility Plant in Service											Utility Plant in Service	December 31, 2023
(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	$	4,989,007	41.6%		41.6%			$	5,101,390	94.8%			94.8%		$	—	—%		—%
Generation	Generation	4,046,923		38.0	2,883		0.1	—		—	Generation	4,084,846		34.1		34.1			3,239		0.1			0.1		—		—		—
Transmission	Transmission	1,601,731		15.0	—		—	—		—	Transmission	1,701,878		14.2		14.2			—		—			—		—		—		—
General Plant & Other		629,712		5.9	227,429		5.0	1,071,258		100.0
General plant & other											General plant & other	1,207,563			10.1			275,697				5.1			1,028,489				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)	$	11,983,294	100.0%		100.0%			$	5,380,326	100.0%			100.0%		$	1,028,489	100.0%		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~~by-products of electric generation (including coal ash or other substances), or natural gas distribution and sales, natural resources, and fish and wildlife (including the Endangered Species Act) as well as the risk of litigation arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures;
•			Changes in tax law, related regulations or differing interpretation, or enforcement of applicable law by the Internal Revenue Service (IRS) or other taxing jurisdiction; and PSE's ability to recover costs in a timely manner arising from such changes;
•			Inability to realize deferred tax assets and use production tax credits (PTCs) due to insufficient future taxable income;
•			Accidents or natural disasters, such as hurricanes, windstorms, earthquakes, floods, landslides, fires and ~~landslides,~~wildfires (either affecting or caused by PSE's facilities or infrastructure), extreme weather conditions 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~~costs, and subject the ~~recent global coronavirus (COVID–19) pandemic, and responses~~Company 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) could materially and adversely affect, among other things, electric and natural gas demand, customers’ ability to pay, supply chains, availability of skilled work-force, contract counterparties, liquidity and financial markets;liability;
•			Commodity price risks associated with procuring natural gas and power in wholesale markets from creditworthy counterparties;
•			Wholesale market disruption, which may result in a deterioration of market liquidity, increase the risk of counterparty default, affect the regulatory and legislative process in unpredictable ways, negatively affect wholesale energy prices and/or impede PSE's ability to manage its energy portfolio risks and procure energy supply, affect the availability and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers;
•			Financial difficulties of other energy companies and related events, which may affect the regulatory and legislative process in unpredictable ways, adversely affect the availability of and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers;
•			The effect of wholesale market structures (including, but not limited to, regional market designs or transmission organizations) or other related federal initiatives;
•			PSE electric or natural gas distribution system failure, blackouts or large curtailments of transmission systems (whether PSE's or others'), or failure of the interstate natural gas pipeline delivering to PSE's system, all of which can affect PSE's ability to deliver power or natural gas to its customers and generating facilities;
•			Electric plant generation and transmission system outages, which can have an adverse impact on PSE's expenses with respect to repair costs, added costs to replace energy or higher costs associated with dispatching a more expensive generation resource;


•			The ability to restart generation following a regional transmission disruption;
•			The ability of a natural gas or electric plant to operate as intended;


•			PSE's resource adequacy needs to meet the Washington Clean Energy Transformation Act (CETA) and the Washington 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,~~PSE's operational territory, which could have effects on customer usage and PSE's revenue and expenses;
•			Regional or national weather conditions (including conditions and events associated with climate change), wildfires, droughts, earthquakes, and other natural disasters, 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 and terms 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;
•			General economic and political conditions, such as the effects of geopolitical tensions related to the ongoing Russia-Ukraine and Israel-Hamas conflicts, recessions, fuel prices, international currency fluctuations, corruption, political instability, acts of war, and local and national elections;
•			Employee workforce factors including strikes; work stoppages; retirements; absences due to pandemics, accidents, natural disasters or other significant, unforeseeable events; availability of qualified employees or the loss of a key executive;
•			PSE's ability to attract, retain, and compensate employees while operating within a region of high demand for skilled workers resulting in significant competition and wage pressure;
•			The ability to obtain insurance coverage, the availability of insurance for certain specific losses, including those arising from catastrophic events such as wildfires and the cost of such insurance;
•			~~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;~~generally and the ability to pay dividends;
•			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 heating, 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~~Rates not subject to refund rate adjustment	NoYes	~~N/A~~Yes
~~Federal incentive tracker~~Rates subject to refund rate adjustment	NoYes	~~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~~	NoYes


	Year Ended December 31,
	2023		2022		2021
Generation and purchased power, MWh
Company-controlled resources	14,894,381		11,198,936		12,949,384
Contracted resources	11,806,074		10,422,069		8,624,183
Non-firm energy purchased	2,910,517		4,922,194		4,491,714
Total generation and purchased power	29,610,972		26,543,199		26,065,281
Less: losses and Company use	(1,113,911)		(1,318,609)		(1,481,152)
Total energy, MWh	28,497,061		25,224,590		24,584,129
Electric energy sales, MWh
Residential	11,387,971		11,753,057		11,479,045
Commercial	8,637,063		8,677,178		8,402,057
Industrial	1,070,933		1,113,909		1,082,718
Other customers	76,495		76,407		79,998
Total energy sales to customers	21,172,462		21,620,551		21,043,818
Sales to other utilities and marketers	7,324,599		3,604,039		3,540,311
Total energy sales, MWh	28,497,061		25,224,590		24,584,129
Transportation	2,270,474		2,300,711		2,246,244
Electric energy sales and transportation, MWh	30,767,535		27,525,301		26,830,373
Electric operating revenue by classes
(Dollars in Thousands)
Residential	$	1,514,149	$	1,381,858	$	1,318,320
Commercial	1,071,385		981,170		902,928
Industrial	123,548		116,712		108,267
Other customers	21,199		18,734		18,067
Total operating revenue from customers	2,730,281		2,498,474		2,347,582
Transportation	23,573		22,353		19,987
Sales to other utilities and marketers	502,391		329,589		154,533
Decoupling revenue	(35,621)		(37,423)		(12,452)
Other decoupling revenue1	16,635		(12,067)		(17,506)
Miscellaneous operating revenue2	108,608		160,531		179,479
Total electric operating revenue	$	3,345,867	$	2,961,457	$	2,671,623
Number of customers served (average):
Residential	1,077,406		1,065,508		1,053,027
Commercial	134,375		133,521		132,581
Industrial	3,187		3,222		3,267
Other	8,156		8,047		7,886
Transportation	109		104		98
Total customers	1,223,233		1,210,402		1,196,859


	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,
	2023			2022			2021
Average kWh used per customer:
Residential	10,570			11,030			10,901
Commercial	64,276			64,987			63,373
Industrial	336,032			345,720			331,410
Other	9,379			9,495			10,144
Average revenue per customer:
Residential	$	1,405		$	1,297		$	1,252
Commercial	7,973			7,348			6,810
Industrial	38,766			36,223			33,140
Other	2,599			2,328			2,291
Average retail revenue per kWh sold:
Residential	$	0.1330		$	0.1176		$	0.1148
Commercial	0.1240			0.1131			0.1075
Industrial	0.1154			0.1048			0.1000
Other	0.2771			0.2452			0.2258
Average retail revenue per kWh sold	$	0.1290		$	0.1156		$	0.1116
Heating degree days	4,313			4,715			4,471
Percent of normal - NOAA1 30-year average	98.1		%	105.2		%	99.2		%


`	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%


	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


					Company’s Annual Share (Approximate)
			Company’s Annual Share (Approximate)														Company’s Annual Share (Approximate)
Project	Project	Contract Expiration Year		License Expiration Year	Percent of Output		MW Capacity	Project	Contract Expiration Year		Percent of Output				MW Capacity
Chelan County PUD:
Chelan County PUD1:
Rock Island Project
Rock Island Project
Rock Island Project	Rock Island Project	2031		2029	25.0	%	156	2031		30.0	%			187
Rocky Reach Project	Rocky Reach Project	2031		2052	25.0		325	Rocky Reach Project	2031		30.0		390			390
Douglas County PUD:
Douglas County PUD2:
Wells Project	Wells Project	2028		2052	24.2		228
Grant County PUD:
Wells Project
Wells Project
Grant County PUD3:
Priest Rapids Development
Priest Rapids Development
Priest Rapids Development	Priest Rapids Development	2052		2052	0.6		6	2052		4.8		45			45
Wanapum Development	Wanapum Development	2052		2052	0.6		7	Wanapum Development	2052		4.8		52			52
Total	Total						722


	At December 31,
	2023	2022
Natural gas volumes for power in storage at year end, therms (thousands):
Jackson Prairie	13,374	5,450
Plymouth LNG (in LNG form)	1,761	1,223
Clay Basin	7,629	—


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		—		—		—


	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


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)


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


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, 2023				December 31, 2022
(Dollars in Thousands)	Assets		Liabilities		Assets		Liabilities
Electric portfolio:
Current	$	62,929	$	107,195	$	267,811	$	79,668
Long-term	30,099		19,744		69,892		7,452
Total Electric Portfolio	$	93,028	$	126,939	$	337,703	$	87,120
Natural gas portfolio:
Current	11,296		78,593		319,218		45,308
Long-term	5,225		18,305		24,729		10,914
Total Natural Gas Portfolio	$	16,521	$	96,898	$	343,947	$	56,222
Total derivatives	$	109,549	$	223,837	$	681,650	$	143,342


Puget Energy and Puget Sound Energy
Energy Derivative Contracts Gain (Loss)
(Dollars in Thousands)	December 31, ~~2020~~2023
Fair value of contracts outstanding at December 31, ~~2019~~2022	$	~~5,186~~538,308
Contracts realized or otherwise settled during ~~2020~~2023	~~4,573~~ (339,224)
Change in fair value of derivatives	~~(29,213)~~(313,372)
Fair value of contracts outstanding at December 31, ~~2020~~2023	$	~~(19,454)~~(114,288)


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


(Dollars in Thousands)
(Dollars in Thousands)
(Dollars in Thousands)
(Dollars in Thousands)
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(Dollars in Thousands)
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(Dollars in Thousands)
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(Dollars in Thousands)
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(Dollars in Thousands)
(Dollars in Thousands)
(Dollars in Thousands)	(Dollars in Thousands)	2021		2022-2023		2024-2025		Thereafter		Total		2024		2025-2026	2027-2028	Thereafter	Total
Prices provided by external sources1	Prices provided by external sources1	$	4,855	$	1,978	$	(1,433)	$	—	$	5,400
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)
Total fair value	Total fair value	$	1,574	$	(5,878)	$	(11,002)	$	(4,148)	$	(19,454)


REPORTS:			Page
Report of Management and Statement of Responsibility			7166
Report of Independent Registered Public Accounting Firm –- Puget Energy			7267
Report of Independent Registered Public Accounting Firm –- Puget Sound Energy			7469

INDEX TO FINANCIAL STATEMENTS:
PUGET ENERGY:
Consolidated Statements of Income - Years Ended December 31, 20 20 ~~, 201~~9 ,2023, 2022, and ~~201~~20218			7671
Consolidated Statements of Comprehensive Income - Years Ended December 31, 202023, 2022, and 2021 20 ~~, 2~~01 9 ~~, 201~~8			7772
Consolidated Balance Sheets - December 31, 20 20 2023 and ~~201~~20229			7873
Consolidated Statements of Common Shareholder’s Equity - Years Ended December 31, 20 20 ~~, 201~~9 ,2023, 2022, and ~~201~~20218			8075
Consolidated Statements of Cash Flows - Years Ended December 31, 20 20 ~~, 201~~9 ,2023, 2022, and ~~201~~20218			8176

PUGET SOUND ENERGY:
Consolidated Statements of Income - Years Ended December 31, 20~~20, 2019,~~2023, 2022, and ~~2018~~2021			8277
Consolidated Statements of Comprehensive Income - Years Ended December 31, 202023, 2022, and 2021~~20, 2019, 2018~~			8378
Consolidated Balance Sheets - December 31, 202 ~~2020,~~3 and ~~2019~~2022			8479
Consolidated Statements of Common Shareholder’s Equity - Years Ended December 31, 20~~20, 2019,~~2023, 2022, and ~~2018~~2021			8681
Consolidated Statements of Cash Flows - Years Ended December 31, 20202~~20, 2019,~~3 , 202 2 , and ~~2018~~202 1			8782


NOTES to the Consolidated Financial Statements of Puget Energy and Puget Sound Energy:
Note 1.	Summary of Significant Accounting Policies	8883
Note 2.	New Accounting Pronouncements	9488
Note 3.	Revenue	9590
Note 4.	Regulation and Rates	9692
Note 5.	Dividend Payment Restrictions	~~104~~98
Note 6.	Utility Plant	~~105~~99
Note 7.	Long-Term Debt	~~108~~102
Note 8.	Liquidity Facilities and Other Financing Arrangements	~~110~~103
Note 9.	Leases	~~111~~104
Note 10.	Accounting for Derivative Instruments and Hedging Activities	~~113~~107
Note 11.	Fair Value Measurements	~~116~~110
Note 12.	Employee Investment Plans	1 21113
Note 13.	Retirement Benefits	~~121~~114
Note 14.	Income Taxes	~~128~~120
Note 15.	Litigation	~~131~~122
Note 16.	Commitments and Contingencies	~~132~~123
Note 17.	~~Related Party Transactions~~	~~134~~
~~Note 18.~~	~~Segment Information~~	~~134~~
~~Note 19.~~	Accumulated Other Comprehensive Income (Loss)	~~135~~126


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

SCHEDULE:
I. Condensed Financial Information of Puget Energy - December 31, 202 ~~2020,~~3 , and 202 ~~2019,~~2 , and for the Years Ended December 31, 202 ~~2020,~~3 , 202 ~~2019,~~2 , and 202 ~~2018~~1			~~138~~128
II. Valuation and Qualifying Accounts and Reserves - Years Ended December 31, 20 20 ~~, 201~~9 ~~, 201~~82023, 2022, 2021			~~142~~131



	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)
	Shares	Amount				Retained Earnings				Total Equity

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
Net income (loss)	—	—		—		53,740		—		53,740
Common stock dividend paid	—	—		—		(99,760)		—		(99,760)
Other comprehensive income (loss)	—	—		—		—		42,313		42,313
Balance at December 31, 2023	200	$	—	$	3,523,532	$	1,419,311	$	17,539	$	4,960,382



	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, 2022
Revenue from contracts with customers:	Electric		Natural Gas		Other1		Total
Retail
Residential	$	1,381,858	$	808,376	$	—	$	2,190,234
Commercial	981,170		352,243		—		1,333,413
Industrial	116,712		25,096		—		141,808
Other	18,759		—		—		18,759
Wholesale	319,380		—		—		319,380
Transmission and transportation	47,027		20,332		—		67,359
Miscellaneous	13,065		718		50,069		63,852
Total revenue from contracts with customers	$	2,877,971	$	1,206,765	$	50,069	$	4,134,805
Total other revenue2	83,486		2,871		—		86,357
Total operating revenue	$	2,961,457	$	1,209,636	$	50,069	$	4,221,162


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 Sound Energy	Remaining Amortization Period	December 31,
(Dollars in Thousands)		2023		2022
Climate Commitment Act recovery	N/A	$	186,550	$	—
Environmental remediation	(a)	182,697		141,893
Automated meter reading	20 years	104,159		—
Storm damage costs electric	3 to 5 years	95,754		127,524
PGA unrealized loss	N/A	80,376		—
Deferred Washington Commission AFUDC	30 years	58,648		61,463
Baker Dam licensing operating and maintenance costs	(b)	55,641		55,049
Chelan PUD contract initiation	7.8 years	55,523		62,611
PCA mechanism	N/A	48,427		112,207
Lower Snake River	13.4 years	43,220		48,536
Washington Commission LNG	N/A	42,247		28,335
Energy conservation costs	(a)	37,560		10,296
Unamortized loss on reacquired debt	1 to 44 years	31,626		33,732
Decoupling deferrals and interest	Less than 2 years	31,398		36,773
Get to zero depreciation expense deferral (c)	1 to 3 years	29,185		49,605
Colstrip tracker expenditures	N/A	26,253		—
Washington Commission COVID-19	N/A	17,097		7,051
Generation plant major maintenance, excluding Colstrip	2 to 9 years	16,941		20,374
Regulatory filing fee deferral	N/A	14,582		7,559
Advanced metering infrastructure	N/A	12,094		30,431
Snoqualmie licensing operating and maintenance costs	(b)	7,428		7,445
Washington Commission electric vehicle (c)	3 years	5,755		7,796
Water heater rental property loss	3 years	3,847		5,725
Colstrip major maintenance (c)	2 years	2,690		4,035
Mint Farm ownership and operating costs	1.3 years	2,317		4,317
Property tax tracker	Less than 2 years	—		12,398
Various other regulatory assets	(a)	19,963		21,283
Total PSE regulatory assets		$	1,211,978	$	896,438
Deferred income taxes (d)	N/A	$	(761,621)	$	(811,724)
Cost of removal	(e)	(682,058)		(639,320)
PGA liability	2 years	(132,082)		(3,536)
Repurposed production tax credits	N/A	(126,482)		(133,855)
Climate Commitment Act auction proceeds	N/A	(84,485)		—
Decoupling liability	Less than 2 years	(60,664)		(63,206)
Colstrip tracker recovery	N/A	(31,390)		—
Property tax tracker	Less than 2 years	(11,135)		—
Green direct	N/A	(10,442)		(11,837)
Bill discount rate deferral	N/A	(6,579)		—
PGA unrealized gain	N/A	—		(287,725)
Various other regulatory liabilities	(a)	(7,958)		(9,936)
Total PSE regulatory liabilities		$	(1,914,896)	$	(1,961,139)
PSE net regulatory assets (liabilities)		$	(702,918)	$	(1,064,701)


Maturities of lease liabilities	Future Minimum Lease Payments
(Dollars in Thousands)
At December 31,	Operating Leases		Finance Leases
2021	$	23,170	$	508
2022	22,785		279
2023	22,345		98
2024	21,613		0
2025	18,249		0
Thereafter	144,912		0
Total lease payments	$	253,074	$	885
Less imputed interest	(72,890)		(90)
Total net present value	$	180,184	$	795