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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2002
OR

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act:

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
        Yes/X/ No/ /

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
        Yes/X/ No/ /

        The aggregate market value of the voting stock held by non-affiliates of Puget Energy, Inc. at June 28, 2002 (the last business day of Puget Energy’s most recently completed second fiscal quarter), was approximately $1,807,769,393. The number of shares of Puget Energy, Inc.‘s common stock outstanding at February 28, 2003, was 93,827,455.

        All of the outstanding shares of voting stock of Puget Sound Energy, Inc. are held by Puget Energy, Inc.

Documents Incorporated by Reference

        Portions of the Puget Energy proxy statement for its 2003 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A not later than 120 days after December 31, 2002 are incorporated by reference in Part III hereof.

        This Annual Report on Form 10-K is a combined report being filed separately by two different registrants: Puget Energy, Inc. (Puget Energy) and Puget Sound Energy, Inc. (PSE). PSE makes no representation as to the information contained in this report relating to Puget Energy and the subsidiaries of Puget Energy other than PSE and its subsidiaries.

INDEX

DEFINITIONS

FORWARD-LOOKING STATEMENTS
        Puget Energy, Inc. (Puget Energy) and Puget Sound Energy, Inc. (PSE) are including the following cautionary statement in this Form 10-K to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by or on behalf of Puget Energy or PSE. This report includes forward-looking statements, which are statements of expectations, beliefs, plans, objectives, assumptions of future events or performance. Words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will likely result,” “will continue” or similar expressions identify forward-looking statements.
        Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed. Puget Energy’s and PSE’s expectations, beliefs and projections are expressed in good faith and are believed by Puget Energy and PSE, as applicable, to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in records and other data available from third parties, but there can be no assurance that Puget Energy’s and PSE’s expectations, beliefs or projections will be achieved or accomplished.
        In addition to other factors and matters discussed elsewhere in this report, some important factors that could cause actual results or outcomes for Puget Energy and PSE to differ materially from those discussed in forward-looking statements include:

        Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, Puget Energy and PSE undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

PART I

ITEM 1. BUSINESS

GENERAL
        Puget Energy, Inc. (Puget Energy) is an energy services holding company incorporated in the State of Washington in 1999. All of its operations are conducted through its subsidiaries, Puget Sound Energy, Inc. (PSE), a utility company and InfrastruX Group, Inc. (InfrastruX), a construction services company. Puget Energy has no significant assets other than the stock of its subsidiaries. Subject to limited exceptions, Puget Energy is exempt from regulation as a public utility holding company pursuant to Section 3(a)(1) of the Public Utility Holding Company Act of 1935. Puget Energy and PSE are collectively referred to herein as “the Company.” The following table provides the percentages of Puget Energy’s consolidated operating revenues and net income generated and assets held by the reportable segments:

        Additional financial data regarding these segments is included in Note 20 to the Consolidated Financial Statements included with this report.

        PUGET ENERGY STRATEGY
        Puget Energy is the parent company of the largest electric and natural gas utility headquartered in Washington State, primarily engaged in the business of electricity transmission and distribution. Puget Energy’s business strategy is to generate stable earnings and cash flow by focusing primarily on the regulated utility business conducted through PSE. The key elements of this strategy include:

        PUGET SOUND ENERGY, INC.
        PSE is a public utility incorporated in the State of Washington. PSE furnishes electric and gas service in a territory covering approximately 6,000 square miles, principally in the Puget Sound region of Washington State.

        At December 31, 2002, PSE had approximately 958,000 electric customers, consisting of 845,200 residential, 106,900 commercial, 3,900 industrial and 2,000 other customers; and approximately 622,000 gas customers, consisting of 572,300 residential, 46,800 commercial, 2,800 industrial and 100 transportation customers. At December 31, 2002 approximately 305,300 customers purchased both forms of energy from PSE. For the year 2002, PSE added approximately 17,400 electric customers and approximately 16,000 gas customers, representing annualized growth rates of 1.8% and 2.6%, respectively. During 2002 PSE’s billed retail and transportation revenues from electric utility operations, excluding conservation trust collections, were derived 48% from residential customers, 42% from commercial customers, 7% from industrial customers and 3% from transportation and other customers. PSE’s retail revenues from gas utility operations were derived 62% from residential customers, 31% from commercial customers, 5% from industrial customers and 2% from transportation customers. During this period, the largest customer accounted for approximately 1% of PSE’s operating revenues.
        PSE is affected by various seasonal weather patterns throughout the year and, therefore, utility revenues and associated expenses are not generated evenly during the year. Variations in energy usage by consumers occur from season to season and from month to month within a season, primarily as a result of weather conditions. PSE normally experiences its highest retail energy sales in the first and fourth quarters of the year. Sales of electricity to wholesale customers also vary by quarter and year depending principally upon streamflow conditions for the generation of surplus hydroelectric power after serving customer requirements and the market demand by wholesale customers. PSE has a Purchased Gas Adjustment mechanism (PGA) in retail gas rates to recover variations in gas supply and transportation costs. PSE also has a Power Cost Adjustment mechanism (PCA) in electric rates to recover variations in electricity costs on a shared basis between customers and PSE.
        During the period from January 1, 1998 through December 31, 2002, PSE’s gross electric utility plant additions were $894 million and retirements were $184 million. In the five-year period ended December 31, 2002, PSE’s gross gas utility plant additions were $565 million and retirements were $72 million. In the same five-year period, PSE’s gross common utility plant additions were $328 million and retirements were $32 million. Gross electric utility plant at December 31, 2002 was approximately $4.2 billion, which consisted of 59% distribution, 26% generation, 7% transmission and 8% general plant and other. Gross gas utility plant as of December 31, 2002 was approximately $1.6 billion, which consisted of 86% distribution, 6% transmission and 8% general plant and other. Gross common utility general plant as of December 31, 2002 was approximately $379 million.

        INFRASTRUX GROUP, INC.
        InfrastruX was incorporated in the State of Washington in 2000 to pursue non-regulated construction services business. InfrastruX is a national leader in providing infrastructure construction services to the electric and gas utility industries. InfrastruX has acquired eleven companies primarily in Texas and the north-central and eastern United States that are engaged in some or all of the following services and activities in their respective regions or nationally:

        The InfrastruX construction services business is affected by seasonal weather conditions and, therefore, revenues and associated expenses are not generated evenly during the year. InfrastruX will usually experience its highest revenues in the second and third quarters of the year.

        INFRASTRUX OPERATING STRATEGY
        In InfrastruX’s initial three years, InfrastruX focused on acquiring and expanding business services in the natural gas and electric utility infrastructure market that have an established regional presence and are positioned to expand their market position. Implementation of InfrastruX’s strategy involved identifying acquisition targets with established operational experience and customer relationships and a strong management team. InfrastruX’s current operating strategy depends primarily upon generating internal growth through the addition of new customers and expansion of services offered to existing customers rather than external growth through acquisitions.

        INFRASTRUX COMPETITION
        The construction services industry is both highly competitive and highly fragmented as a result of low barriers to entry, the historical geographic segmentation of utility customers, and the natural limitations of service delivery. Competitors of InfrastruX include large established and emerging national companies and many smaller, regional companies. Puget Energy believes that InfrastruX’s competitive strengths, including a diverse customer base, long-standing relationships with several key customers and operational expertise in construction services will benefit InfrastruX, but there can be no assurance that a competitor will not be able to develop expertise, experience and resources to provide services that are superior in quality or price to InfrastruX’s services.

        MARKET OUTLOOK
        In the near term, InfrastruX’s market opportunities will be limited by the general economic downturn that will result in reduced spending on infrastructure construction, including large pipeline and utility projects, by many of InfrastruX's customers. As a result, competition on project bids will increase, which may reduce profit margins and adversely impact revenue and operational growth. Puget Energy believes that in the long-term the opportunities for InfrastruX are excellent given an aging transmission and distribution infrastructure, forecast for growth in energy demand and the need for greater network infrastructure construction services.

        EMPLOYEES
        As of December 31, 2002, Puget Energy and its subsidiaries had approximately 4,660 full-time employees:

        Approximately 1,100 PSE employees are represented by the International Brotherhood of Electrical Workers Union (IBEW) and the United Association of Plumbers and Pipefitters (UA). PSE has renegotiated contract extensions with the IBEW and UA through 2007 and 2006, respectively.
        Approximately 200 InfrastruX employees are represented by the IBEW, UA, United Steelworkers of America and Laborers International Union of North America. Some unions have annual contract renewals while others are multiple-year.

        CORPORATE LOCATIONS
        Puget Energy’s and PSE’s principal executive offices are located at 411 108th Avenue N.E., Bellevue, Washington 98004, and its telephone number is (425) 454-6363. The Company’s principal executive offices will be relocating in July 2003 to 10885 N.E. 4th Street, Bellevue, Washington 98004.

        AVAILABLE INFORMATION
        The Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on Puget Energy’s website at www.pse.com.

UTILITY INDUSTRY OVERVIEW
        On December 20, 1999, FERC issued Order 2000 to advance the formation of Regional Transmission Organizations (RTOs). This regulation required each public utility that owns, operates or controls facilities for the transmission of electric energy in interstate commerce to file with FERC by October 15, 2000 plans for forming and participating in an RTO. FERC’s goal is to promote efficiency in wholesale electricity markets and to reduce prices electricity consumers pay to the lowest price possible for reliable service. On October 16, 2000, PSE and five other utilities filed with FERC their proposal for an independent transmission company, which would serve six states. The independent transmission company would be a member of the planned regional transmission organization. Any final proposal that emerges is subject to approval by FERC and relevant state public utility commissions. FERC has also issued a Notice of Proposed Rulemaking on Remedying Undue Discrimination through Open Access Transmission Service and Standard Electricity Market Design (SMD NOPR). The SMD NOPR would have major implications for the delivery of electric energy throughout the United States if enacted in its proposed form. Major elements of FERC’s proposal include: (a) the use of Network Access Service to replace the existing network and point-to-point services. All customers, including load-serving entities on behalf of bundled retail load, would be required to take network service under a new pro forma tariff; (b) vertically integrated utilities would be required to retain Independent Transmission Providers to administer the new tariff and functionally operate transmission systems; (c) the formation of Regional State Advisory Committees and other regional entities to coordinate the planning, certification and siting of new transmission facilities in cooperation with states.
        Since 1986 PSE has been offering gas transportation as a separate service to industrial and commercial customers who choose to purchase their gas supply directly from producers and gas marketers. The continued evolution of the natural gas industry, resulting primarily from FERC Orders 436, 500 and 636, has served to increase the ability of large gas end-users to independently obtain gas supply and transportation services. Although PSE has not lost any substantial industrial or commercial load as a result of such activities, in certain years up to 160 customers annually have taken advantage of unbundled transportation service; in 2002, 134 commercial and industrial customers, on average, chose to use such service. The shifting of customers from sales to transportation does not materially impact utility margin, as PSE earns similar margins on transportation service as it does on large volume, interruptible gas sales.
        The electric utility business in Washington State is fully regulated. There are no proposals or prospects for retail deregulation in Washington State anticipated in the foreseeable future.

REGULATION AND RATES
        PSE is subject to the regulatory authority of (1) the Washington Commission as to retail utility rates, accounting, the issuance of securities and certain other matters and (2) FERC with respect to the transmission of electric energy, the resale of electric energy at wholesale, accounting and certain other matters. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Rate Matters”.)

        ELECTRIC RATES AND REGULATIONS
        On March 28, 2002, the Washington Commission approved a settlement agreement which resolved the Company’s request for an interim rate increase and significant financial issues in the Company’s electric and gas general rate cases. As a result, an interim electric rate surcharge of $25 million was in effect for the period April 1, 2002 through June 30, 2002. The three important financial issues that were resolved for the general rate case included the equity capital ratio, the return on equity and adoption of an electric power cost adjustment mechanism.
        On June 20, 2002, the Washington Commission issued final regulatory approval of the comprehensive electric-rate settlement submitted by PSE, key constituents and customer groups, Washington Commission staff and the Washington State Attorney General’s Public Counsel Section. The authorization granted PSE a 4.6% electric general rate increase that will generate approximately an additional $59 million in revenue annually that began July 1, 2002. In addition, the settlement provided for an 8.76% overall return on capital based on a projected capital structure with an equity component of 40% and an authorized 11% return on common equity. The settlement resolved all electric and gas cost allocation issues and established an 8.76% overall return on capital.

        The settlement also includes a PCA mechanism that triggers if PSE’s costs to provide customers’ electricity falls outside certain bands from a normalized level of power costs established in the electric general rate case. The cumulative maximum pre-tax earnings exposure due to power cost variations over the four year period ending June 30, 2006 is limited to $40 million plus 1% of the excess. All significant variable power supply cost drivers are included in the PCA mechanism (hydroelectric generation variability, market price variability for purchased power and surplus power sales, natural gas and coal fuel price variability, generation unit forced outage risk and wheeling cost variability). On an annual July through June basis, the mechanism apportions increases or decreases in power costs, on a graduated scale, between PSE and its customers in the following manner:

        Interest will be accrued on any overcollection or undercollection of the customers’ share of the excess power cost that is deferred. The Company can request a PCA rate surcharge if for any 12 month period the actual or projected deferred power costs exceeds $30 million. PSE’s share of the power costs through December 31, 2002 was $5.2 million. Because of adverse hydro conditions in 2003, PSE anticipates reaching the $40 million cumulative cap under the PCA mechanism by the fourth quarter of 2003. Under the PCA mechanism, further increases in variable power costs through June 30, 2006 would be apportioned 99% to customers and 1% to PSE.
         The settlement also gives PSE the financial flexibility to rebuild its common equity ratio to at least 39% over a three and a half year period, with milestones of 34%, 36% and 39% at the end of 2003, 2004 and 2005, respectively. If PSE should fail to meet this schedule, it would be subject to a 2% rate reduction penalty.
        On June 13, 2001, the Washington Commission approved an amended Residential Purchase and Sale Agreement (Agreement) between PSE and the BPA, under which PSE’s residential and small farm customers would continue to receive benefits of federal power. Completion of this agreement enabled PSE to continue to provide, and in fact increase, effective January 1, 2002, the Residential and Farm Energy Exchange Credit to residential and small farm customers. The Agreement provides that, for its residential and small farm customers, PSE will receive (a) cash payment benefits during the period July 1, 2001 through September 30, 2006 and (b) benefits in the form of power or cash payments during the period October 1, 2006 through September 30, 2011. On June 17, 2002, PSE entered into an agreement with the BPA which amended the payment provisions of the Agreement to provide for conditional deferral of payment by BPA of certain amounts to be paid under the original agreement.
        To implement this agreement for rate purposes, the Washington Commission approved tariff revisions that were intended to (a) transfer the Residential and Farm Energy Exchange credit in effect since October 1, 1995 in the amount of $0.01085 per kWh, to general rates effective July 1, 2001 and (b) to provide a supplemental Residential and Farm Exchange credit for eligible residential and small farm customers. On June 26, 2002, the Washington Commission then transferred the portion of the credit that had been in general rates back into Schedule 194.
        The Residential and Farm Exchange Benefit Supplemental Rider schedule was retitled Residential and Farm Energy Exchange Benefit, the portion of the credit that had been in general rates was transferred back into Schedule 194, and the credit was set at $0.01456 per kWh for the period July 1, 2002 through September 30, 2002, $0.01817 per kWh for the period October 1, 2002 through May 31, 2006 and $0.02302 per kWh for the period June 1, 2006 through September 30, 2006. The approval of these revised tariffs by the Washington Commission was effective July 1, 2002.
        In January 2003, PSE filed tariff sheets with the Washington Commission to reflect a modification to the agreement between PSE and the BPA that would reduce the Residential and Farm Energy Exchange Benefit credit. Under the modified agreement, BPA will defer paying a portion of the benefits it would have otherwise paid. The amount of benefits deferred will be $3.5 million each month for the eight-month period beginning February 2003, for a total deferral of $27.7 million. Contemporaneously with entering into this agreement with PSE, BPA is entering into other agreements similar to the agreement with PSE through which other investor-owned utilities and BPA are agreeing to BPA’s deferral of payments in their fiscal year 2003. The total cumulative amount to be deferred under the agreement with PSE and other such agreements equals $55 million, an amount that will help BPA address its current financial difficulties. Absent certain adjustments BPA will begin paying back the amount deferred with interest over the sixty-month period beginning November 2006. The Washington Commission approved the tariff changes and the Rider credit was changed to $0.01740 for the period February 15, 2003 through September 30, 2006. The deferral of the BPA benefits will not have any impact on PSE earnings, as it is a direct pass-through to PSE customers.

        BPA’s rate case may affect the level of residential exchange benefits for PSE’s customers. For 2002, the benefits of the Residential and Farm Energy Exchange credited to customers were $152.8 million with a related offset to power costs. PSE received payments from BPA in the amount of $171.2 million during 2002. The difference between the customers’ credit and the amount received from BPA is deferred and credited to customers in later periods. The difference is recorded on PSE’s balance sheet as restricted cash. The modified Agreement, if it goes into effect, would provide for payments from BPA in the amount of $630.6 million for the period January 2003 through September 2006 and for pass-through to eligible residential and farm customers of the same amount. The level of the BPA credit does not affect PSE’s earnings, since the credit is a direct pass-through to residential customers. The credit does affect the net rates paid by those customers.
        There are several actions in the Ninth Circuit Court of Appeals against BPA, in which the petitioners assert that BPA acted contrary to law or without authority in deciding to enter into, or in entering into or performing, a number of contracts, including the contract between BPA and the Company described above. BPA rates used in such contract between BPA and the Company for determining the amounts of money to be paid to the Company during the period October 1, 2001 through September 30, 2006 have been confirmed, approved and allowed to go into effect by FERC on an interim basis, subject to refund with interest. It is not clear what impact, if any, review of such rates and the above-described Ninth Circuit Court of Appeals actions may have on the Company.

        GAS RATES AND REGULATION
        On August 28, 2002, the Washington Commission approved a 5.8% gas rate increase in general rates to cover higher costs of providing natural gas service to customers. This increase will provide approximately $35.6 million annually in revenues and was offset by an annual $45 million or 7.3% PGA rate reduction, also approved on August 28, 2002. Both rate actions became effective September 1, 2002. The PGA mechanism passes through to customers increases or decreases in the gas supply portion of the natural gas service rates based upon changes in the price of natural gas purchased from producers and wholesale marketers or changes in gas pipeline transportation costs. PSE’s gas margin and net income are not affected by the change in PGA rates.
        On May 24, 2002, the Washington Commission allowed a PGA rate reduction that was filed on May 6, 2002, effective June 1, 2002, lowering overall natural gas rates by 21.2%. This ended a temporary surcharge that went into effect September 1, 2001.
        On September 30, 2002, PSE filed a proposal with the Washington Commission to reduce natural gas supply rates under the PGA for a third time in 2002. The Washington Commission approved the proposal on October 30, 2002 and PSE lowered gas rates overall through the PGA by approximately 12.5% effective November 1, 2002.
        As a result of sharp increases in gas costs during 2000 and 2001, PSE filed two PGA and deferral amortization filings with the Washington Commission which were approved. The PGA filings allowed PSE to recover increased gas costs. As a result, gas rates to all sales customers increased by an average of 30.2% on August 1, 2000, and 26.4% on January 12, 2001. Subsequent declines in gas costs led to PSE obtaining approval of another PGA and deferral amortization filing in 2001 resulting in an average 8.9% reduction in gas rates on September 1, 2001.

ELECTRIC OPERATING STATISTICS

ELECTRIC SUPPLY
        At December 31, 2002, PSE’s peak electric power resources were approximately 4,577,135 KW. PSE’s historical peak load of approximately 4,847,000 KW occurred on December 21, 1998. In order to meet an extreme winter peak load, PSE supplements its electric power resources with call options and other instruments that may include, but are not limited to, weather related hedges and exchange agreements. During 2002, PSE’s total electric energy production was supplied 26.2% by its own resources, 22.5% through long-term contracts with several of the Washington Public Utility Districts (PUDs) that own hydroelectric projects on the Columbia River, and 22.9% from other firm purchases. Non-firm purchases, net of resales, accounted for 7.4% of energy purchases in 2002.
        The following table shows PSE’s electric energy supply resources at December 31, 2002 and 2001, and energy production during the year:

        PSE submitted a preliminary least-cost plan to balance future energy resources with energy needs to the Washington Commission on December 31, 2002. PSE plans to meet its resource needs either through asset acquisition, building its own generation, or entering into additional power purchase agreements, and pursuing energy conservation. PSE will submit its final least-cost plan to the Washington Commission in the spring of 2003.

        COMPANY-CONTROLLED ELECTRIC GENERATION RESOURCES
        In total PSE has the following plants with an aggregate net generating capability of 1,800,800 KW:

¹ Power received from other utilities is classified between hydro and other producers based on the character of the utility system used to supply the power or, if the power is supplied from a particular resource, the character of that resource.
² Non-firm purchases net of resales of 6,063,076 kWh and 7,494,820 kWh for 2002 and 2001 respectively, account for 7.4% and (2.4%) of energy purchases.

All of these generating facilities, except the Colstrip, Montana plants, are located in PSE’s service territories.

        On December 19, 1997, PSE was issued a 50-year license by FERC for its existing and operating White River project which includes authorization to install an additional 14,000 KW generating unit. PSE has filed for a rehearing with FERC on conditions of the license related to measures designed to enhance salmon runs on the White River, because those conditions may make the plant uneconomic to operate. On June 30, 1999 FERC issued a stay in the license proceeding. This additional time allows PSE, federal land agencies, state agencies, local governments and public interest groups to resolve common issues and explore alternatives relating to the plant’s continued operation and economics. The licensing proceeding is ongoing. In April 2001, PSE gave FERC notice of its intent to renew the license for its existing and operating 170,000 KW Baker Project. The 50-year license expires on April 30, 2006 with application due in April 2004. In 2002, PSE continued working with FERC, federal, state and local governments, Native American tribes, public interest groups and citizens to define new license terms and conditions through a collaborative process. The initial license for the existing and operating Snoqualmie Falls project expired in December 1993, and PSE continues to operate this project under a temporary license. PSE is continuing the FERC application process to relicense this project.

         COLUMBIA RIVER ELECTRIC ENERGY SUPPLY CONTRACTS
        During 2002, approximately 22.5% of PSE’s energy output was obtained at an average cost of approximately 13.96 mills per kWh through long-term contracts with several of the Washington PUDs that own and operate hydroelectric projects on the Columbia River.
        PSE’s purchases of power from the Columbia River projects are on a “cost of service” basis under which PSE pays a proportionate share of the annual debt service and operating and maintenance costs of each project in proportion to the contractual shares that PSE has rights to from such project. Such payments are not contingent upon the projects being operable, which means PSE is required to make the payments even if power is not being delivered. These projects are financed through substantially level debt service payments, and their annual costs may vary over the term of the contracts as additional financing is required to meet the costs of major maintenance, repairs or replacements or license requirements.
        PSE has contracted to purchase from Chelan County PUD (Chelan) a 50% share of the output of the original units of the Rock Island Project, which percentage will remain unchanged for the duration of the contract that expires in 2012. PSE has also contracted to purchase the output of the additional Rock Island units for the duration of the contract. As of December 31, 2002 PSE’s aggregate annual capacity from all units of the Rock Island Project was 455,340 KW. PSE’s share of output of the additional Rock Island units may be reduced by up to 10% per year which began July 1, 2000, subject to a maximum aggregate reduction of 50%, upon the exercise of rights of withdrawal by Chelan for use in its local service area. The schedule of withdrawals by Chelan for the additional Rock Island units is as follows:

        PSE has contracted to purchase from Chelan 38.9% (505,000 KW of peak capacity as of December 31, 2002) of the annual output of the Rocky Reach Project, which percentage remains unchanged for the remainder of the contract which expires in 2011. PSE has contracted to purchase from Douglas County PUD 31.3% (261,000 KW as of December 31, 2002) of the annual output of the Wells Project, the percentage of which remains unchanged for the remainder of the contract which expires in 2018. PSE has contracted to purchase from Grant County PUD 8.0% (72,000 KW as of December 31, 2002) of the annual output of the Priest Rapids Development and 10.8% (98,000 KW of peak capacity as of December 31, 2002) of the annual output of the Wanapum Development, which percentages remain unchanged for the remainder of the contracts which expire in 2005 and 2009, respectively.

        On December 28, 2001, PSE signed a contract offer for new contracts for the Priest Rapids and Wanapum Developments. On April 12, 2002, PSE signed amendments to those agreements which are technical clarifications of certain sections of the agreements. Under the terms of these contracts, PSE will continue to obtain capacity and energy for the term of any new FERC license to be obtained by Grant County PUD. The new contracts begin in November 2005 for the Priest Rapids Development and in November 2009 for the Wanapum Development. Unlike the current contracts, in the new contracts PSE’s share of power from developments declines over time as Grant County PUD’s load increases.
         On March 8, 2002, the Yakama Nation filed a complaint with FERC which alleged that Grant County’s new contracts unreasonably restrain trade and violate various sections of the Federal Power Act and Public Law 83-544. On November 21, 2002, FERC dismissed the complaint while agreeing that certain aspects of the complaint had merit. As a result, they have ordered Grant County PUD to remove specific sections of the contract which constrain the parties to the Grant County PUD contracts from competing with Grant County PUD for a new license. A rehearing has been requested.

        ELECTRIC ENERGY SUPPLY CONTRACTS AND AGREEMENTS WITH OTHER UTILITIES
        PSE has entered into long-term firm purchased power contracts with other utilities in the West region. PSE is generally not obligated to make payments under these contracts unless power is delivered.
        Under a 1985 settlement agreement relating to Washington Public Power Supply System Nuclear Project No. 3, in which PSE had a 5% interest, PSE is entitled to receive from BPA beginning January 1, 1987, electric power during the months of November through April. Under the contract, PSE is guaranteed to receive not less than 191,667 MWh in each contract year until PSE has received total deliveries of 5,833,333 MWh. PSE expects the contract to be in effect until at least June 2008. Also pursuant to the 1985 settlement agreement, BPA has an option to request that PSE deliver up to 64 MW of exchange energy to BPA in all months except May, July and August for contract year 2002/2003.
        On December 31, 2002, a 15 year power contract between Avista Corporation and PSE expired under the terms of the agreement. The contract provided for the delivery of 100 MW of capacity and 657,000 MWh of energy from the Avista system annually (75 annual average MW).
        On October 27, 1988, PSE executed a 15-year contract for the purchase of firm power and energy from PacifiCorp. Under the terms of the agreement, PSE receives 120 average MW of energy and 200 MW of peak capacity. This contract expires on October 31, 2003.
        On October 1, 1989, PSE signed a contract with The Montana Power Company, which subsequently sold its assets to Northwestern Energy in 2002 under which Northwestern Energy provides PSE, from its share of Colstrip Unit 4, 71 average MW of energy (97 MW of peak capacity) over a 21-year period. This contract expires in December 2010.
        PSE executed an exchange agreement with Pacific Gas & Electric Company (PG&E) which became effective on January 1, 1992. Under the agreement, 300 MW of capacity together with 413,000 MWh of energy are exchanged seasonally every year on a unit-for-unit basis. No payments are made under this agreement. PG&E is a summer peaking utility and will provide power during the months of November through February. PSE is a winter peaking utility and will provide power during the months of June through September. Each party may terminate the contract for various reasons.
        In October 1997 a 10-year power exchange agreement between PSE and Powerex (a subsidiary of a British Columbia utility) became effective. Under this agreement Powerex pays PSE for the right to deliver power up to 1,200,000 MWh annually to PSE at the Canadian border in exchange for PSE delivering power to Powerex at various locations in the United States.

        ELECTRIC ENERGY SUPPLY CONTRACTS AND AGREEMENTS WITH NON-UTILITY GENERATORS
        As required by the federal Public Utility Regulatory Policies Act (PURPA), PSE entered into long-term firm purchased power contracts with non-utility generators. The most significant of these are the contracts described below which PSE entered into in 1989, 1990 and 1991 with operators of natural gas-fired cogeneration projects. PSE purchases the net electrical output of these three projects at fixed and annually escalating prices which were intended to approximate PSE’s avoided cost of new generation projected at the time these agreements were made.
        On February 24, 1989, PSE executed a 20-year contract to purchase 108 average MW of energy and 123 MW of capacity, beginning in April 1993, from Sumas Cogeneration Company, L.P., which owns and operates a natural gas-fired cogeneration project located in Sumas, Washington.

        On June 29, 1989, PSE executed a 20-year contract to purchase 70 average MW of energy and 80 MW of capacity, beginning October 11, 1991, from the March Point Cogeneration Company (March Point), which owns and operates a natural gas-fired cogeneration facility known as March Point Phase I, located at the Equilon refinery in Anacortes, Washington. On December 27, 1990, PSE executed a second contract (having a term coextensive with the first contract) to purchase an additional 53 average MW of energy and 60 MW of capacity, beginning in January 1993, from another natural gas-fired cogeneration facility owned and operated by March Point, which facility is known as March Point Phase II and is located at the Equilon refinery in Anacortes, Washington.
        On March 20, 1991, PSE executed a 20-year contract to purchase 216 average MW of energy and 245 MW of capacity, beginning in April 1994, from Tenaska Washington Partners, L.P., which owns and operates a natural gas-fired cogeneration project located near Ferndale, Washington. In December 1997 and January 1998, PSE and Tenaska Washington Partners entered into revised agreements in which PSE became the principal natural gas supplier to the project and power purchase prices under the Tenaska contract were revised to reflect market-based prices for the natural gas supply. PSE obtained an order from the Washington Commission creating a regulatory asset related to the $215 million restructuring payment. Under terms of the order, PSE was allowed to accrue as an additional regulatory asset one-half the carrying costs of the deferred balance over the first five years, which ended December 2002. The balance of the regulatory asset at December 31, 2002 was $231.0 million which will be recovered in electric rates over the next nine years. In addition, PSE is responsible for any potential tax indemnification to the seller imposed by the Internal Revenue Service up to a maximum of $30 million.
        In December 1999, PSE bought out the remaining 8.5 years of one of the natural gas supply contracts serving Encogen from Cabot Oil & Gas Corporation (Cabot) which provided approximately 60% of the plant’s natural gas requirements. PSE became the replacement gas supplier to the project for 60% of the supply under the terms of the Cabot Agreement.

GAS OPERATING STATISTICS

GAS SUPPLY
        PSE currently purchases a blended portfolio of long-term firm, short-term firm and non-firm gas supplies from a diverse group of major and independent producers and gas marketers in the United States and Canada. PSE also enters into short-term physical and financial derivative instruments to hedge the cost of gas to service its customers. All of PSE’s gas supply is ultimately transported through facilities of Williams/Northwest Pipeline Corporation (NPC), the sole interstate pipeline delivering directly into the Western Washington area.

        All peak firm gas supplies and storage are connected to PSE's market with firm transportation capacity.

        For baseload and peak-shaving purposes, PSE supplements its firm gas supply portfolio by purchasing natural gas at generally lower prices in months of low market demand for gas, injecting it into underground storage facilities and withdrawing it during the winter heating season. Storage facilities at Jackson Prairie in Western Washington and at Clay Basin in Utah are used for this purpose. Peaking needs are also met by using PSE owned gas held in NPC’s liquefied natural gas (LNG) facility at Plymouth, Washington, and by producing propane-air gas at a plant owned by PSE and located on its distribution system.
        In 1998, PSE took assignment from a third party of a peaking gas supply service contract whereby PSE can divert up to 48,000 Dekatherms per day (one Dekatherm, or Dth, is equal to one million British thermal units or MMBtu) of gas it supplies to Tenaska away from the Tenaska Cogeneration Facility and toward its core gas load by causing Tenaska to operate its facility on distillate fuel and paying any additional costs of such operation.
        PSE expects to meet its firm peak-day requirements for residential, commercial and industrial markets through its firm gas purchase contracts, firm transportation capacity, firm storage capacity and other firm peaking resources. PSE believes it will be able to acquire incremental firm gas supply to meet anticipated growth in the requirements of its firm customers for the foreseeable future.

        GAS SUPPLY PORTFOLIO
        For the 2002-2003 winter heating season, PSE contracted for approximately 18.2% of its expected peak-day gas supply requirements from sources originating in British Columbia under a combination of long-term and winter-peaking purchase agreements. Long-term gas supplies from Alberta represent approximately 8.1% of the peak-day requirements. Long-term and winter peaking arrangements with U.S. suppliers and gas stored at Clay Basin make up approximately 22.1% of the peak-day portfolio. The balance of the peak-day requirements is expected to be met with gas stored at Jackson Prairie, LNG held at NPC’s Plymouth facility and propane-air resources, which represent approximately 39.0%, 8.8% and 3.8%, respectively, of expected peak-day requirements.
        During 2002, approximately 40% of gas supplies purchased by PSE originated in British Columbia while 21% originated in Alberta and 39% originated in the United States.
        The current firm, long-term gas supply portfolio consists of arrangements with 17 producers and gas marketers, with no single supplier representing more than 11% of expected peak-day requirements. Contracts have remaining terms ranging from less than 1 year to 9 years, with an average term of less than one year. With the exception of fixed price hedges for the period November 2002 through October 2003 making up a portion of the minimum planned customer requirements, gas supply contracts contain market-sensitive pricing provisions based on several published indices.
        PSE’s firm gas supply portfolio is structured to capitalize on regional price differentials when they arise. Gas and services are marketed outside PSE’s service territory (off-system sales) whenever on-system customer demand requirements permit. The geographic mix of suppliers and daily, monthly and annual take requirements permit a high degree of flexibility in managing gas supplies during off-peak periods to minimize costs.

        GAS TRANSPORTATION CAPACITY
        PSE currently holds firm transportation capacity on pipelines owned by NPC and PG&E Gas Transmission-Northwest (PGT). Accordingly, PSE pays fixed monthly demand charges for the right, but not the obligation, to transport specified quantities of gas from receipt points to delivery points on such pipelines each day for the term or terms of the applicable agreements.
        PSE holds firm year-round capacity on NPC’s pipeline totaling 447,493 Dth per day, acquired under several agreements at various times. PSE has exchanged certain segments of its firm capacity with third parties to effectively lower transportation costs. PSE’s firm transportation capacity contracts with NPC have remaining terms ranging from 2 to 13.8 years. However, PSE has either the unilateral right to extend the contracts under their current terms or the right of first refusal to extend such contracts under current FERC orders. PSE’s firm transportation capacity on PGT’s pipeline, totaling 90,392 Dth per day, has a remaining term of 21 years.
        WNG CAP I, a wholly-owned subsidiary of PSE, holds firm year-round capacity on NPC’s pipeline totaling 75,494 Dth per day, acquired under several agreements. WNG CAP I’s firm transportation capacity contracts with NPC have remaining terms ranging from 1 year to 13.5 years.

        GAS STORAGE CAPACITY
        PSE holds storage capacity in the Jackson Prairie and Clay Basin underground gas storage facilities adjacent to NPC’s pipeline. The Jackson Prairie facility, operated and one-third owned by PSE, is used primarily for intermediate peaking purposes, able to deliver a large volume of gas over a relatively short time period. Combined with capacity contracted from NPC’s one-third stake in Jackson Prairie, PSE has peak, firm delivery capacity of over 318,000 Dth per day and total firm storage capacity exceeding 7,500,000 Dth at the facility. The location of the Jackson Prairie facility in PSE’s market area provides significant cost savings by reducing the amount of annual pipeline capacity required to meet peak-day gas requirements. The Clay Basin storage facility is supply area storage and is utilized for withdrawals over the entire winter, capturing savings due to injecting lower cost gas supplies during the summer. After the release of capacity, PSE has maximum firm withdrawal capacity of over 64,000 Dth per day from the facility with total storage capacity of almost 6,700,000 Dth. The capacity is held under two contracts with remaining terms of 11 and 17 years. PSE has capacity release contracts with multiple parties at the Clay Basin storage facility with remaining terms ranging from 3 to 15 months. PSE’s maximum firm withdrawal capacity and total storage capacity at Clay Basin is over 110,000 Dth per day and exceeds 13,000,000 Dth, respectively, when PSE has not released any of the capacity.

        LNG AND PROPANE-AIR RESOURCES
        LNG and propane-air resources provide gas supply on short notice for short periods of time. Due to their typically high cost, these resources are normally utilized as the supply of last resort in extreme peak-demand periods typically lasting a few hours or days. PSE has long-term contracts for storage of approximately 240,000 Dth of PSE owned gas as LNG at NPC’s Plymouth facility, which equates to approximately three and one-half days’ supply at maximum daily deliverability of 72,000 Dth. PSE owns storage capacity for approximately 1.5 million gallons of propane. The propane-air injection facilities are capable of delivering the equivalent of 30,000 Dth of gas per day for up to four days directly into PSE’s distribution system.

        CAPACITY RELEASE
        FERC provided a capacity release mechanism as the means for holders of firm pipeline and storage entitlements to temporarily relinquish unutilized capacity to others in order to recoup all or a portion of the cost of such capacity. Capacity may be released through several methods including open bidding and by pre-arrangement. PSE continues to successfully mitigate a portion of the demand charges related to both storage and NPC pipeline capacity not utilized during off-peak periods through capacity release. WNG CAP I, a wholly-owned subsidiary of PSE, was formed to provide additional flexibility and benefits from capacity release. Capacity release benefits are passed on to customers through the PGA.

ENERGY CONSERVATION
        PSE offers programs designed to help new and existing customers use energy efficiently. PSE uses a variety of mechanisms including cost effective financial incentives, information and technical services to enable customers to make energy-efficient choices with respect to building design, equipment and building systems, appliance purchases and operating practices.
        Since May 1997, PSE has recovered electric energy conservation expenditures through a tariff rider mechanism. The rider mechanism allows PSE to defer the conservation expenditures and amortize them to expense as PSE concurrently collects the conservation expenditures in rates over a one-year period. As a result of the rider, there is no effect on earnings.
        Since 1995, PSE has been authorized by the Washington Commission to defer gas energy conservation expenditures and recover them through a tariff tracker mechanism. The tracker mechanism allows PSE to defer conservation expenditures and recover them in rates over the subsequent year. The tracker mechanism also allows PSE to recover an Allowance for Funds Used to Conserve Energy (AFUCE) on any outstanding balance that is not being recovered in rates.

ENVIRONMENT
        Puget Energy’s operations are subject to environmental regulation by federal, state and local authorities. Due to the inherent uncertainties surrounding the development of federal and state environmental and energy laws and regulations, Puget Energy cannot determine the impact such laws may have on its existing and future facilities. (See Note 16 to the Consolidated Financial Statements for further discussion of environmental sites.)

        REGULATION OF EMISSIONS
        PSE has an ownership interest in coal-fired, steam-electric generating plants at Colstrip, Montana, which are subject to regulation of emissions and other regulatory requirements. PSE also owns combustion turbine units in Western Washington, which are capable of being fueled by natural gas or diesel fuel. These combustion turbines are operated to comply with emission limits set forth in their respective air operating permits.
        There is no assurance that in the future environmental regulations affecting sulfur dioxide, carbon monoxide, particulate matter, or nitrogen oxide emissions may not be further restricted, or that restrictions on greenhouse gas emissions, such as carbon dioxide, or other combustion byproducts may not be imposed.

        FEDERAL ENDANGERED SPECIES ACT
        Since the 1991 listing of the Snake River Sockeye salmon as an endangered species, one more species of salmon has been listed and two more have been proposed which may further influence operations. Upper Columbia River Steelhead was listed by National Marine Fisheries Service in August 1997. Anticipating the Steelhead listing, the Mid-Columbia PUDs initiated consultation with the federal and state agencies, Native American tribes and non-governmental organizations to secure operational protection through a long-term settlement and habitat conservation plan which includes fish protection and enhancement measurement for the next 50 years. The negotiations have concluded among the Chelan and Douglas County PUDs and various fishery agencies, and final agreement is subject to a National Environmental Policy Act review and power purchaser approval. Generally, the agreement obligates the PUDs to achieve certain levels of passage efficiency for downstream migrants at their hydroelectric facilities and to fund certain habitat conservation measures. Grant County PUD has yet to reach agreement on these issues.
        The proposed listings of Puget Sound Chinook salmon and spring Chinook salmon for the upper Columbia River were approved in March 1999. The listing of spring Chinook salmon for the upper Columbia River should not result in markedly differing conditions for operations from previous listings in the area.
        The completed listings of Coastal/Puget Sound Distinct Population Segment of Bull Trout in the fall of 1999 and Puget Sound Chinook salmon in the winter of 2001 are causing a number of changes to operations of governmental agencies and private entities in the region, including PSE. These changes may adversely affect hydro plant operations and permit issuance for facilities construction, and increase costs for process and facilities. Because PSE relies substantially less on hydroelectric energy from the Puget Sound area than from the Mid-Columbia River and because the impact on PSE operations in the Puget Sound area is not likely to impair significant generating resources, the impact of listing for Puget Sound Chinook salmon and Bull Trout, while potentially representing cost exposure and operational constraints, should be proportionately less than the effects of the Columbia River listings. PSE is actively engaging the federal agencies to address Endangered Species Act issues for PSE’s generating facilities. The consultation with the federal agencies is ongoing.

EXECUTIVE OFFICERS OF THE REGISTRANTS
        The executive officers of Puget Energy as of February 28, 2003 are listed below. For their business experience during the past five years, please refer to the table below regarding Puget Sound Energy’s executive officers. Officers of Puget Energy are elected for one-year terms.

        The executive officers of Puget Sound Energy as of February 28, 2003 are listed below along with their business experience during the past five years. Officers of Puget Sound Energy are elected for one-year terms.

ITEM 2. PROPERTIES

        The principal electric generating plants and underground gas storage facilities owned by PSE are described under Item 1 — Business — Electric Supply and Gas Supply. PSE owns its transmission and distribution facilities and various other properties. Substantially all properties of PSE are subject to the liens of PSE’s Mortgage Indentures.
        InfrastruX operates a fleet of vehicles and machines that it uses in its utility construction business. Its fleet is comprised of owned and leased trucks and other specialized equipment such as backhoes, trenchers, boring machines, cranes and other equipment required to perform its work. InfrastruX owns some of the facilities out of which it operates and rents the remaining facilities.

ITEM 3. LEGAL PROCEEDINGS

        See the section titled “Proceedings Relating to the Western Power Market” under Item 7 “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and the “Litigation” section of Note 16 of this Annual Report on Form 10-K.
        Contingencies arising out of the normal course of the Company’s business exist at December 31, 2002. The ultimate resolution of these issues is not expected to have a material adverse impact on the financial condition, results of operations or liquidity of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        Puget Energy’s common stock, the only class of common equity of Puget Energy, is traded on the New York Stock Exchange under the symbol PSD. As of December 31, 2002 there were approximately 45,200 holders of record of Puget Energy’s common stock. The outstanding shares of PSE’s common stock, the only class of common equity of PSE, are held by Puget Energy and are not traded.
        The following table shows the market price range of, and dividends paid on, Puget Energy’s common stock during the periods indicated in 2002 and 2001. Puget Energy and its predecessor companies have paid dividends on common stock each year since 1943 when such stock first became publicly held.

        The amount and payment of future dividends will depend on Puget Energy’s financial condition, results of operations, capital requirements and other factors deemed relevant by Puget Energy’s Board of Directors. The Board of Directors’ policy is anticipated to pay out approximately 60% of normalized utility earnings in dividends.
        Puget Energy’s primary source of funds for the payment of dividends to its shareholders is dividends received from PSE.
        PSE’s payment of common stock dividends to Puget Energy is restricted by provisions of certain covenants applicable to preferred stock and long-term debt contained in PSE’s Articles of Incorporation and electric and gas mortgage indentures. Under the most restrictive covenants of PSE, earnings reinvested in the business unrestricted as to payment of cash dividends were approximately $202.7 million at December 31, 2002.

ITEM 6. SELECTED FINANCIAL DATA

        The following tables show selected financial data. Puget Energy became the holding company for PSE on January 1, 2001 pursuant to a plan of exchange in which each share of PSE common stock was exchanged on a one-for-one basis for Puget Energy common stock.

Puget Energy
Summary of Operations
(Dollars in thousands except per share data)

Puget Sound Energy
Summary of Operations
(Dollars in thousands)

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

        The following discussion and analysis should be read in conjunction with the financial statements and related notes thereto included elsewhere in this annual report on Form 10-K. The discussion contains forward-looking statements that involve risks and uncertainties, such as Puget Energy’s and PSE’s objectives, expectations and intentions. Puget Energy’s and PSE’s actual results could differ materially from results that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Forward-Looking Statements” included elsewhere in this report. Words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “plans,” “predicts,” “projects,” “will likely result,” “will continue” and similar expressions are intended to identify certain of these forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned not to place undue reliance on these forward–looking statements, which speak only as of the date of this report. Except as required by law, neither Puget Energy nor PSE undertakes an obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in Puget Energy’s and PSE’s other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Puget Energy’s and PSE’s business, prospects and results of operations.

        FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        PUGET ENERGY
        Net income in 2002 was $117.9 million on operating revenues of $2.4 billion, compared to $106.8 million on operating revenues of $2.9 billion in 2001 and $193.8 million on operating revenues of $3.3 billion in 2000. Income for common stock was $110.1 million in 2002, compared to $98.4 million in 2001 and $184.8 million in 2000.
        Basic and diluted earnings per share in 2002 were $1.24 on 88.4 million weighted average common shares outstanding compared to $1.14 on 86.4 million weighted average common shares outstanding in 2001 and $2.16 on 85.4 million weighted average common shares outstanding in 2000.
        Net income in 2002 was positively impacted by an increase in utility net income of $23.9 million from 2001 due to increased electric and gas margins resulting from general tariff rate increases. In addition, net income was positively impacted by $10.9 million of one-time federal tax refunds in 2002. Net income in 2002 was negatively impacted by a decrease in non-utility net income of $19.8 million primarily due to a decline in property sales from 2001 at PSE’s real estate investment and development subsidiary, Puget Western, Inc., and a $8.0 million gain on PSE’s sale of the assets in its ConneXt subsidiary in August 2001. This was partially offset by an increase of $6.9 million in net income at InfrastruX.
        Total kilowatt-hour energy sales to retail consumers in 2002 were 19.3 billion compared with 19.9 billion in 2001 and 21.9 billion in 2000. Kilowatt-hour sales to wholesale customers were 3.5 billion in 2002, 5.0 billion in 2001 and 14.2 billion in 2000. Kilowatt-hours transported to transportation customers under a new tariff established in 2001 were 2.3 billion in 2002 and 364 million in 2001. Kilowatt-hours transported to transportation customers under a terminated pilot program were 164 thousand in 2000.
        Total gas sales to retail consumers in 2002 were 839.6 million therms compared with 850.4 million therms in 2001 and 890.5 million therms in 2000. Total gas sales to transportation customers in 2002 were 207.9 million therms compared with 188.2 million therms in 2001 and 204.0 million therms in 2000.