Puget Energy Reports Second Quarter 2008 Financial Results

Business Wire, August 4, 2008

* Second quarter 2008 income of 26 cents per diluted share from Puget Energy

* Second quarter 2008 income of 30 cents per diluted share from Puget Sound Energy (PSE), Puget Energy's core utility business

* Year-to-date June 30, 2008 income of 87 cents per diluted share from Puget Energy

* Year-to-date June 30, 2008 income of 92 cents per diluted share from PSE

BELLEVUE, Wash. -- Puget Energy (NYSE:PSD) today reported net income of $33.7 million, or 26 cents per diluted share, for the second quarter 2008 compared to $38.6 million, or 33 cents per share, in the second quarter 2007. Net income from Puget Energy's regulated electric and gas utility subsidiary, Puget Sound Energy (PSE), was $39.1 million, or 30 cents per share, in the second quarter 2008, compared to $38.4 million, or 33 cents per share, in the second quarter 2007.

"Our financial results at June 30 met our expectations. The current challenging environment of rising energy costs and operating expenses impacted our results. For example, average natural gas prices at the Sumas trading hub increased to $10.39 per MMBTU in the second quarter of 2008 compared to $6.68 in the same period a year ago, and depreciation expense continues to increase with delivery system investments," said Stephen P. Reynolds, chairman, president and CEO of Puget Energy and PSE. "Despite these challenges, we are maintaining our focus on additions and upgrades to PSE's distribution systems to improve service and reliability to our customer base in the dynamic Puget Sound region.

"Our focus in 2008 is also on the completion of the proposed merger with a consortium of long-term infrastructure investors. The merger will provide us partners who are able and willing to meet PSE's significant capital needs to deliver energy that is safe, reliable, reasonably priced and environmentally responsible."

Higher retail electric and natural gas sales volumes driven by cooler than normal temperatures in the Puget Sound region favorably impacted PSE's revenue for the second quarter 2008. However, the favorable impact of these sales was offset by increased power costs due to a decline in hydroelectric energy supplies, higher costs related to fuel supply for electric generating facilities and a rise in purchased power prices. PSE's financial results in the second quarter of 2008 also reflect higher utility operating and maintenance costs and increased depreciation expense as a result of new utility capital investments.

Puget Energy Second Quarter 2008 Summaries:

The following tables provide a summary of Puget Energy's financial results for the second quarter of 2008 compared to the same quarter a year ago.

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Puget Sound Energy (PSE) Second Quarter 2008 Highlights:

Key components of PSE's second quarter 2008 financial performance are highlighted below. All amounts are pre-tax unless otherwise noted.

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Year-to-date June 30, 2008 Summary

Key components of PSE's year-to-date June 30, 2008, financial performance are summarized below. All amounts are pre-tax unless otherwise noted.

For the six months ended June 30, 2008, Puget Energy's net income was $113.5 million, or 87 cents per diluted share, compared to net income of $117.7 million, or $1 per diluted share, for the same period in 2007. During the six months ended June 30, 2008, Puget Energy incurred $7 million in costs related to the proposed merger announced on Oct. 26, 2007.

PSE's net income for the six months ended June 30, 2008, was $120 million, or 92 cents per diluted share, compared to net income of $117.1 million, or $1 per diluted share, for the same period in 2007. PSE's net income for the six months ended June 30, 2008, was positively impacted by increased electric and gas margins of $24.5 million and $20.9 million, respectively, driven by higher energy sales volumes resulting from cooler temperatures (relative to historic averages) and customer growth. Additional utility plant placed into service resulted in a $16.2 million increase in depreciation and amortization for the six months ended June 30, 2008, which negatively impacted PSE's net income for the period. An increase in utility operations and maintenance expense of $31.5 million, which includes a $10.5 million charge related to the settlement of a lawsuit, also negatively impacted PSE's net income for the six months ending June 30, 2008.

Merger

The consummation of the merger is subject to certain closing conditions, including regulatory approval from the Washington Utilities and Transportation Commission (UTC). A joint application was filed with the UTC on Dec. 17, 2007, by PSE and the investor consortium seeking approval of the merger. On July 21, 2008, PSE and the investor consortium reached a settlement to resolve all issues with several of the parties involved in the merger proceeding before the UTC. The UTC must still review the multi-party settlement stipulation and issue its decision on the merger request.

PSE and the investor consortium filed a Hart-Scott-Rodino application and received early termination of the waiting period effective Aug. 1, 2008. The merger transaction is expected to close during the second half of 2008 once all closing conditions have been met, including completion of reviews by the Committee on Foreign Investment in the United States, the Federal Communications Commission, and, as discussed above, the UTC.