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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
February 25, 1997 February 21, 1997
___________________________________________________
(Date of earliest
event reported)
PUGET SOUND ENERGY, INC.
(Exact name of registrant as specified in its charter)
Washington 1-4393 91-0374630
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
411 108th Avenue N.E., Bellevue, Washington 98004-5515
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code:
206/454-6363
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ITEM 5 OTHER EVENTS
On Friday, February 21, 1997, Puget Sound Energy, Inc. (formerly Puget
Sound Power & Light Company) ("Puget"), the Montana Power Company ("Montana")
and Montana's wholly-owned subsidiary, Western Energy Company ("Western")
signed agreements settling and dismissing a pending litigation matter and
resolving two arbitrable disputes regarding coal prices under Puget's coal
supply agreements with Western to serve Puget's share of four coal-fired
generation projects, Colstrip 1 & 2 and Colstrip 3 & 4. Puget, Montana and
Western have also agreed to work together to restructure the existing
contractual arrangements for the operations of the Colstrip projects.
(1) Puget and Montana signed agreements to settle and to dismiss with
prejudice litigation pending in Federal District Court in Montana regarding a
Power Sales Agreement ("PSA") between the parties which provides 94MW of
power to Puget associated with Montana's share of Colstrip Unit 4. Under the
agreement, the PSA will be amended to (a) reduce the monthly fixed charges to
Puget by $6,500 per megawatt beginning January 1, 1997 through expiration of
the PSA in 2010; (b) provide Puget with 3 MW of additional capacity from the
ruggedized blade replacements at no additional monthly fixed charge upon a
one time payment of one-half the capital costs; and (c) eliminate the 75%
capacity factor limitation on Puget's right to schedule 97MW.
(2) Puget, Montana and Western agreed to settle a pending arbitrable
dispute regarding the Coal Supply Agreement associated with Colstrip Units
1&2 in which Puget has a 50% ownership share. Puget has further agreed to
withdraw from participation in the pending Colstrip 3&4 dispute, under the
gross inequity provision of the associated coal supply agreement with
Western, and to forego any benefits from the pending claim if pursued by the
other non-operating owners. Puget has a 25% ownership share of Units 3&4.
Under the settlement, to the extent not modified on a going-forward basis by
a restructuring described below, Western will reduce the price of Colstrip
1&2 and 3&4 coal to Puget beginning January 1, 1997 until the next price re-
openers. Puget expects to achieve savings on coal costs during this period
ranging from $4 million to $6 million, annually.
(3) The parties have agreed to work together to restructure the
existing contractual arrangements for the Colstrip projects and the
associated Rosebud Mine areas as if they were under common ownership in order
to achieve savings and benefits from integrated operations. This
restructuring contemplates the participation of the other non-operating
owners of Colstrip 3&4. If a restructuring occurs, the terms and conditions
of the coal supply, transportation and plant operations under a restructuring
would replace the coal price terms for Colstrip 1&2 and 3&4 coal, on a going-
forward basis, as described in paragraph (2) above.
Montana has estimated that these agreements will result in an annual
reduction in Montana Power's revenues between $11 and $13 million, before
anticipated efficiency gains, commencing January 1, 1997. Puget will see a
reduction in its power supply costs of approximately the same amount. In
addition, Puget expects reductions in coal taxes and royalties and
anticipates efficiency gains through restructuring.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUGET SOUND ENERGY, INC.
Date: February 25, 1997 By William S. Weaver
___________________________
William S. Weaver
Vice Chairman
Chairman of Unregulated Subsidiaries
