v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy categorizes the inputs into three levels with the highest priority given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority given to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities. Equity securities that are also classified as cash equivalents are considered Level 1 if there are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. Instruments in this category include non-exchange-traded derivatives such as over-the-counter forwards and options.

Level 3 - Pricing inputs include significant inputs that have little or no observability as of the reporting date. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.
Financial assets and liabilities measured at fair value are classified in their entirety in the appropriate fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. The Company primarily determines fair value measurements classified as Level 2 or Level 3 using a combination of the income and market valuation approaches. Inputs used to estimate the fair value of forwards, swaps and options include market-price curves, contract terms and prices, credit-risk adjustments, and discount factors. Inputs used to estimate fair value in industry-standard models are categorized as Level 2 inputs as substantially all assumptions and inputs are observable in active markets throughout the full term of the instruments. On a daily basis, the Company obtains quoted forward prices for the electric and natural gas markets from an independent external pricing service.
The Company considers its electric and natural gas contracts as Level 2 derivative instruments as such contracts are commonly traded as over-the-counter forwards with indirectly observable price quotes. However, certain energy derivative instruments with maturity dates falling outside the range of observable price quotes or that are transacted at illiquid delivery locations are classified as Level 3 in the fair value hierarchy. Management's assessment is based on the trading activity in real-time and forward electric and natural gas markets. Each quarter, the Company confirms the validity of pricing-service quoted prices used to value Level 2 commodity contracts with the actual prices of commodity contracts entered into during the most recent quarter. The Company’s environmental compliance obligation is categorized in Level 2 of the fair value hierarchy and is measured at fair value using a market approach based on quoted prices from an independent pricing service.

Assets and Liabilities with Estimated Fair Value
The carrying values of cash and cash equivalents, restricted cash, and short-term debt as reported on the balance sheet are reasonable estimates of their fair value due to the short-term nature of these instruments and are classified as Level 1 in the fair value hierarchy. Investments in life insurance contracts of $45.8 million and $44.8 million at June 30, 2026 and December 31, 2025, respectively, are included in "Other property and investments" on the balance sheet. These investments are carried at cash surrender values, which represent the amount of cash that could be realized under the contracts.
The fair value of the long-term notes was estimated using the discounted cash flow method with the U.S. Treasury yields and the Company's credit spreads as inputs, interpolating to the maturity date of each issue. The carrying values and estimated fair values were as follows:
Puget EnergyAt June 30, 2026At December 31, 2025
(Dollars in Thousands)LevelCarrying
Value		Fair
Value		Carrying
Value		Fair
Value
Liabilities:
Long-term debt (fixed-rate), net of discount1
2$9,419,233 $9,175,662 $8,525,032 $8,199,785 


Puget Sound EnergyAt June 30, 2026At December 31, 2025
(Dollars in Thousands)LevelCarrying
Value		Fair
Value		Carrying
Value		Fair
Value
Liabilities:
Long-term debt (fixed-rate), net of discount2
2$6,459,069 $6,052,126 $6,457,684 $6,054,647 
_______________
1 The carrying value includes debt issuances costs of $25.7 million and $23.2 million for June 30, 2026 and December 31, 2025, respectively, which are not included in fair value.
2 The carrying value includes debt issuances costs of $21.4 million and $22.2 million for June 30, 2026 and December 31, 2025, respectively, which are not included in fair value.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company's financial assets and liabilities by level, within the fair value hierarchy, that were accounted for at fair value on a recurring basis:
Puget Energy and
Puget Sound Energy		Fair Value
At June 30, 2026		Fair Value
At December 31, 2025
(Dollars in Thousands)Level 2Level 3TotalLevel 2Level 3Total
Assets:      
Electric derivative instruments$34,190 $3,611 $37,801 $38,930 $3,044 $41,974 
Natural gas derivative instruments2,851 2,829 5,680 2,262 4,473 6,735 
Total assets$37,041 $6,440 $43,481 $41,192 $7,517 $48,709 
Liabilities:      
Electric derivative instruments$246,876 $218,639 $465,515 $281,007 $212,327 $493,334 
Natural gas derivative instruments62,461 1,121 63,582 78,945 1,142 80,087 
Compliance obligations73,822 — 73,822 96,490 — 96,490 
Total liabilities$383,159 $219,760 $602,919 $456,442 $213,469 $669,911 

The following tables present the Company's reconciliation of the changes in the fair value of Level 3 derivatives in the fair value hierarchy:
Puget Energy and
Puget Sound Energy		Three Months Ended June 30,
(Dollars in Thousands)20262025
Level 3 Roll-Forward Net Asset/(Liability)ElectricNatural GasTotalElectricNatural GasTotal
Balance at beginning of period$(227,299)$2,447 $(224,852)$(203,718)$1,585 $(202,133)
Changes during period:
Realized and unrealized energy derivatives:
Included in regulatory assets / liabilities(9,684)308 (9,376)102,904 3,407 106,311 
Settlements21,955 (1,047)20,908 7,450 (454)6,996 
Balance at end of period$(215,028)$1,708 $(213,320)$(93,364)$4,538 $(88,826)

Puget Energy and
Puget Sound Energy		Six Months Ended June 30,
(Dollars in Thousands)20262025
Level 3 Roll-Forward Net Asset/(Liability)ElectricNatural GasTotalElectricNatural GasTotal
Balance at beginning of period$(209,283)$3,330 $(205,953)$(175,110)$1,391 $(173,719)
Changes during period:
Realized and unrealized energy derivatives:
Included in regulatory assets / liabilities(63,389)925 (62,464)44,419 4,024 48,443 
Settlements57,644 (2,547)55,097 37,327 (877)36,450 
Balance at end of period$(215,028)$1,708 $(213,320)$(93,364)$4,538 $(88,826)

Realized gains and losses on energy derivatives for Level 3 recurring items are included in energy costs in the Company's consolidated statements of income under purchased electricity, electric generation fuel or purchased natural gas when settled. Unrealized gains and losses on energy derivatives for Level 3 recurring items are deferred as regulatory assets or liabilities on the Company's consolidated balance sheet.
The Company does not use internally developed models to make adjustments to significant unobservable pricing inputs. The only significant unobservable input into the fair value measurement of the Company's Level 3 assets and liabilities is the forward price for electric and natural gas contracts. The weighted average price is calculated as the total market value divided by the total volume of the Company's Level 3 electric and natural gas commodity contracts, respectively, as of the reporting date.
The following table presents the forward price ranges for the Company's Level 3 commodity contracts as of June 30, 2026:
Puget Energy and
Puget Sound Energy		Fair ValueRange
(Dollars in Thousands)
Assets1
Liabilities1
Valuation TechniqueUnobservable InputLowHigh
Weighted Average
Electric
$3,611 $218,639 Discounted cash flow
Power prices (per MWh)
$19.16 $115.77 $54.94 
Natural gas
$2,829 $1,121 Discounted cash flowNatural gas prices (per MMBtu)$0.95 $4.27 $1.73 
_______________
1 The valuation techniques and unobservable inputs are the same for asset and liability positions.

The following table presents the forward price ranges for the Company's Level 3 commodity contracts as of December 31, 2025:
Puget Energy and
Puget Sound Energy		Fair ValueRange
(Dollars in Thousands)
Assets1
Liabilities1
Valuation TechniqueUnobservable InputLowHigh
Weighted Average
Electric
$3,044 $212,327 Discounted cash flowPower prices (per MWh)$18.40 $126.87 $57.64 
Natural gas
$4,473 $1,142 Discounted cash flowNatural gas prices (per MMBtu)$1.53 $4.46 $2.30 
_______________
1 The valuation techniques and unobservable inputs are the same for asset and liability positions.

The significant unobservable inputs listed above would have a direct impact on the fair values of the above instruments if they were adjusted. Consequently, significant increases or decreases in the forward prices of electricity or natural gas in isolation would result in a significantly higher or lower fair value for Level 3 assets and liabilities. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets. As of June 30, 2026 and December 31, 2025, a hypothetical 10% increase or decrease in market prices of natural gas and electricity would change the fair value of the Company's derivative portfolio, classified as Level 3 within the fair value hierarchy, by $50.7 million and $48.1 million, respectively.