Status Report: Puget Energy - Macquarie Infrastructure Partners

While the overall perception of the Puget Energy (PSD) - Macquarie Infrastructure Partners transaction remains highly negative, it must be pointed out at this time that: a) the Washington UTC settlement conferences are apparently proceeding without delay, and b) the companies have provided pro-consumer publicity for the transaction over the last few weeks. Both of these developments are considered significant with respect to moving this transaction towards the possibility of successful conclusion.

The UTC process is significant in that is have been, and remains, expected that the procedural schedule in this case will encounter some revisions and substantial delays. The fact that the settlement conferences have not been postponed suggests that the UTC staff is willing to start the negotiations despite the current posture of the staff against the transaction. This should be considered very tentative and essentially the preliminary stages of negotiations, but the lack of procedural schedule alteration must also be viewed as an overall positive at this stage. Naturally, the settlement conferences are subject to delays as the continue over the next two weeks.

Second, as widely reported last week, certain PSD investors have offered to cut roughly $100 million from future rate increases (over a ten year period) if the transaction is consummated. This offer was made as a direct response to staff and state official (Attorney General) opposition to the deal. While this is perceived as a token gesture, it is nonetheless a starting point for lessening and perhaps ultimately appeasing, growing public/political opposition. This gesture will certainly not ensure UTC consent or turn the Attorney General in favor of the transaction, but it may serve as the foundation for future good will via concessions.

Provided below is the current procedural schedule for the UTC review. Note that the settlement conferences are scheduled to conclude on July 18 and evidentiary hearings are scheduled for the last four days of this month. It will be somewhat surprising if the evidentiary hearings are not postponed into August or September.

Applicants’ Rebuttal and Cross- Answering Testimony	July 2, 2008
Settlement Conferences	July 7-11 and 16-18, 2008
Evidentiary Hearing	July 28-31, 2008
Simultaneous Briefs	August 13, 2008
Requested Date for Final Order	September 2, 2008