DOCKET NOS. UE-951270 and UE-960195 Page 1
BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION



In the Matter of the Proposal by 

PUGET SOUND POWER & LIGHT COMPANY

to Transfer Revenues from PRAM Rates to General Rates
. . . . . . . . . . . . . . . . . . . . . . . . . . . 
In the Matter of the Application of

PUGET SOUND POWER & LIGHT 
COMPANY and WASHINGTON NATURAL GAS COMPANY

for an Order Authorizing the Merger of WASHINGTON ENERGY COMPANY and WASHINGTON 
NATURAL GAS COMPANY with and into PUGET SOUND POWER & LIGHT COMPANY, and 
Authorizing the Issuance of Securities, Assumption of Obligations, Adoption of 
Tariffs, and Authorizations in Connection Therewith
. . . . . . . . . . . . . . . . . . . . . . . . . . . 

DOCKET NO. UE-951270


DOCKET NO. UE-960195



FOURTEENTH SUPPLEMENTAL ORDER ACCEPTING STIPULATION; APPROVING MERGER

SUMMARY

  Proceedings: On February 20, 1996, Puget Sound Power & Light Company (Puget) 
and Washington Natural Gas Company (WNG) jointly applied for an order of this 
Commission, under the provisions of Chapters 80.08 and 80.12 RCW, authorizing 
the merger of WNG and its parent company, Washington Energy Company (WECo), 
with and into the surviving company of Puget Sound Power & Light Company in 
accordance with an Agreement and Plan of Merger by and among Puget, WECo, and 
WNG dated October 18, 1995.  The surviving company will be renamed Puget Sound 
Energy (PSE).  The plan of merger indicates that the subsidiary companies of 
Puget and WECo (other than WNG) will be subsidiaries of PSE; that the merger 
will be effected through an exchange of stock; that the corporate headquarters 
and principal executive offices of PSE will be located in Bellevue, Washington; 
and that PSE will operate as a combined gas and electric company.

  Puget and WNG (Joint Applicants) seek authority to:  (1) merge the assets of 
these companies into the surviving company; (2) issue common and preferred 
stock; (3) assume all obligations outstanding at the effective date of the 
merger and to continue and create liens in connection therewith; (4) adopt all 
tariff schedules and service contracts of WNG in effect at the time of the 
merger; (5) transfer to PSE all WNG certificates of public convenience and 
necessity; (6) implement a proposed rate stability plan; (7) implement certain 
accounting treatment for regulatory and ratemaking purposes for conservation 
expenditures, storm damage costs, environmental remediation costs, and proceeds 
from property transfers; (8) implement a proposed method of allocating costs 
between electric and gas operations; and (9) defer and amortize for regulatory 
and ratemaking purposes over the rate stability period of the merger any 
associated transaction and transition costs.

  The Joint Application alleges that the proposed merger will:  (1) result in 
reduced costs for administrative and general expenses; (2) result in 
maintenance of stable rates for customers with lower rates over the long run; 
(3) provide customers enhanced service and choice; and (4) result in less need 
for construction of new facilities.

  Docket No. UE-951270 is a proposal by Puget to transfer to Puget’s permanent 
rate schedules, currently-collected revenue of approximately $165.5 million 
authorized in the PRAM (Periodic Rate Adjustment Mechanism) under Schedule 
100.  On April 10, 1996, the Commission ordered Docket No. UE-951270 
consolidated with the merger application.

  Hearings: The Commission held hearings on August 5-9, 1996, October 11, 1996, 
and November 4-8 and 12, 1996, in Olympia.  Hearings also were held on October 
14, 1996, in Bellingham and Kent.  The October 11 and 14 hearings included the 
opportunity for testimony by members of the public.  The hearings were held 
before Chairman Sharon L. Nelson, Commissioner Richard Hemstad, Commissioner 
William R. Gillis, and Commission Administrative Law Judges Marjorie R. Schaer 
and John Prusia.  The Commission gave proper notice to all interested parties.

  Contemporaneous with the date for filing briefs, the Joint Applicants, 
Commission Staff, and Public Counsel jointly filed a Stipulation for Commission 
consideration.  The Stipulation sets out those parties’ agreement on contested 
issues. On December 18, 1996, the Commission held a hearing in Olympia for 
presentation of the Stipulation, for cross-examination of the proponents, and 
for additional testimony from members of the public.  All parties were given 
until January 3, 1997, to file briefs to address the Stipulation and issues 
raised in direct testimony.


  Parties: Joint Applicant Puget is represented by James M. Van Nostrand, 
attorney, Bellevue.  Joint Applicant WNG is represented by Matthew R. Harris, 
attorney, Seattle. The staff of the Washington Utilities and Transportation 
Commission (Commission Staff) is represented by Robert D. Cedarbaum, Assistant 
Attorney General, Olympia.  The public is represented by Robert F. Manifold, 
Assistant Attorney General, Public Counsel Section, Seattle.

  The following intervenors appeared: Industrial Customers of Northwest 
Utilities (ICNU) is represented by Clyde H. MacIver, attorney, Seattle.  
Northwest Industrial Gas Users (NWIGU) is represented by Edward A. Finklea and 
Paula E. Pyron, attorneys, Portland, Oregon.  Seattle Steam is represented by 
Frederick O. Frederickson, attorney, Seattle.  Air Liquide America Corporation 
is represented by Anne D. Rees, attorney, Seattle.  Washington PUD Association 
is represented by Joel C. Merkel, attorney, Seattle.  Intervenor PUD No. 1 of 
Snohomish County is represented by Eric E. Freedman, attorney, Everett.  Public 
Power Council is represented by Shelly Richardson, attorney, Portland, Oregon.  
Bonneville Power Administration (BPA) is represented by Jon D. Wright, 
attorney, Portland, Oregon. Natural Resource Defense Council (NRDC) and 
Northwest Conservation Act Coalition (NCAC) are represented by Deborah Smith, 
attorney, Helena, Montana.  King County is represented by Sally G. Tenney, 
Chief Counsel, Seattle.  The City of Seattle is represented by William H. 
Patton, Assistant City Attorney, Seattle.  The City of Tacoma Department of 
Public Utilities is represented by Glenna Malanca, Senior Assistant City 
Attorney, Tacoma.  The Washington Water Power Company is represented by David 
J. Meyer, attorney, Spokane.  International Brotherhood of Electrical Workers 
Local 77 (IBEW) is represented by Lynn Ellsworth, attorney, Seattle.  United 
Association of Plumbers and Pipefitters, Locals 32, 82, and 265 appears by 
Jeffrey J. Owen, Business Representative, Seattle.  Teamsters Local 117 is 
represented by Spencer Nathan Thal, Staff Attorney, Seattle.

  Interlocutory Order in Docket No. UE-951270:  The Seventh Supplemental Order 
in these consolidated dockets, entered September 26, 1996, granted a joint 
motion of Puget and Commission Staff for authorization to transfer for recovery 
under Puget’s general rate schedules the amounts currently collected under 
Puget’s Schedule 100, other than PRAM deferral rate elements.  The Seventh 
Supplemental Order resolved all outstanding issues in Docket No. UE-951270.

  Commission Decision:  The Commission authorizes the Joint Applicants to 
merge.  The Commission authorizes the newly formed corporation to issue 
securities, assume obligations and adopt tariffs.  The Commission accepts and 
approves the parties' stipulation resolving the issues presented in these 
applications, with clarifications set out in this Order.


MEMORANDUM

I.  PROCEDURAL HISTORY

  In this proceeding, two utility companies apply for Commission authorization 
to merge, under the provisions of chapters 80.08 and 80.12 RCW.  Puget is an 
investor-owned electric utility headquartered in Bellevue, Washington. Puget 
furnishes electric service in a territory covering approximately 4,500 square 
miles, in nine counties in the Puget Sound region of western Washington.  Puget’
s utility operations include the generation, purchase, transmission, 
distribution, and sale of electric energy on both a retail and wholesale 
basis.  As of December 1995, Puget distributed electric power to 840,000 
customers.

  WNG is an investor-owned natural gas utility headquartered in Seattle, 
Washington.  All outstanding common shares of WNG are owned by WECo.  WNG 
distributes natural gas in a territory covering approximately 2,600 square 
miles in five counties in northwestern Washington, including the greater 
Seattle area.  As of December 1995, WNG served 475,000 customers.  
Approximately 91% of those were residential customers who consumed about 44% of 
WNG’s annual gas throughput.

  Puget, WNG, and WECo have entered into a merger agreement.  Under the terms 
of the merger agreement, WECo and WNG will merge with and into Puget as the 
surviving company, which will be renamed Puget Sound Energy (PSE). The 
subsidiary companies of Puget and WECo (other than WNG) will be subsidiaries of 
PSE.  The merger will be effected through an exchange of stock.  The corporate 
headquarters and principal executive offices of PSE will be located in 
Bellevue.  PSE will operate as a combined gas and electric utility.

  The shareholders of Puget, WNG, and WECo have approved the merger.

  Fifteen days of hearings were held for resolution of preliminary matters and 
for the testimony of witnesses.

  Contemporaneous with the date for filing briefs, the Joint Applicants, 
Commission Staff, and Public Counsel jointly filed a Stipulation for Commission 
consideration which sets out those parties’ agreement on contested issues in 
this proceeding.  The Commission held a hearing for presentation of the 
Stipulation and for cross-examination of the proponents by non-settling 
parties.  A panel of three witnesses testified in support of the Stipulation.  
All parties were given an opportunity to file briefs subsequent to the 
presentation, to address the Stipulation and issues raised in direct testimony.


II.  THE JOINT APPLICATION

  The Joint Application of Puget and WNG alleges that the merger will be 
consistent with the “public interest,” as that term is used in Washington law.

  The Joint Application states that the utilities seek to merge because they 
believe that merging will produce benefits to the public, to investors, and to 
the companies’ customers that cannot be realized through operation as separate 
utility systems.  It alleges that the projected efficiencies and cost savings 
of the merger will result in rates for the companies’ customers which are lower 
over the long term than they would be absent the merger.  It claims that over 
the long term the merger also will allow the companies to meet more effectively 
the challenges of the increasingly competitive environment in the utility 
industry.

  As a result of the merger, Puget and WNG expect to reduce their costs in 
several areas.  Expenses will be reduced by combining operations and 
eliminating duplication in staffing and resources.  The companies estimate that 
the surviving corporation could achieve merger-related cost savings of 
approximately $370 million, net of costs of achieving those savings and 
transaction and integration costs, over the ten-year period following the 
merger.  The Joint Application states that the merger offers the following 
strategic and financial benefits:

Maintenance of Stable Rates -- NewCo   The Joint Application uses the name 
NewCo to refer to the new company.  The Joint Applicants later selected the 
name Puget Sound Energy (PSE). will be able to meet the challenges of operating 
successfully in the utility industry more effectively than either Puget or WNG 
standing alone.  The merger will create the opportunity for potential benefits 
for customers in the form of lower rates over the long term than could be 
achieved if the companies operated independently and for shareholders in the 
form of greater financial strength and financial flexibility.

Enhanced Customer Service and Operational Efficiencies -- By coordinating and 
integrating certain operations of Puget’s and WNG’s utility businesses to take 
advantage of the companies’ overlapping service territories, NewCo will be able 
to provide its customers enhanced service and choice.  NewCo intends to assist 
its customers to manage their total energy service requirements in the most 
efficient manner without bias toward energy type, including the possibility of 
enabling customers to shift easily between gas and electricity to achieve 
savings.  The merger should offer greater convenience to customers who, in most 
cases, will be able to conduct all their energy business with one company 
contact.  In addition, NewCo will be able to respond more quickly to 
distribution interruptions with a combined workforce.

Better Utilization of Resources -- NewCo should be able to defer or avoid 
certain capital intensive projects, such as the construction of new service 
facilities and warehouses, which would no longer be necessary given the 
companies’ overlapping service territories.  In addition, joint engineering, 
siting and construction of facilities will reduce costs and minimize 
environmental disruption.

Integration of Administrative and Operating Functions -- NewCo will be able to 
consolidate certain corporate and administrative functions of Puget and WNG, 
thereby eliminating duplicative positions, reducing other non-labor corporate 
administrative expenses and limiting or avoiding capital expenditures for 
administrative functions and information systems.  A joint transition task 
force is examining the manner in which to best organize and manage the business 
of NewCo.  As a result of combining staff and other functions, NewCo will have 
fewer employees than Puget and WNG currently have in the aggregate. These work 
force reductions would be accomplished through severance programs (voluntary 
and involuntary), attrition, and strictly controlled hiring.  Joint 
Application, pp. 8-9.

  The Joint Application requests a Commission determination concerning the 
ratemaking treatment of merger costs and savings on PSE’s customers.  It 
proposes a five-year rate stability plan which would increase electric rates by 
1% per year, and would provide stable gas rates through 2001 (other than 
purchased gas adjustments).  It states that the Rate Plan uses the benefits of 
the merger to mitigate otherwise required general rate increases.


III.  TESTIMONY

  The Commission conducted a full set of hearings on the merger application 
prior to receipt of the proposed Stipulation.  Thirteen witnesses testified for 
the Joint Applicants.  Eight witnesses testified for Commission Staff, six 
witnesses for Public Counsel, and seven witnesses for the various intervenors.  
Eighteen public witnesses testified at the October 11 and 14, 1996, hearing 
sessions.  In addition to the members of the public who testified at the 
hearings, many others wrote letters in which they expressed their views.  
Illustrative Exhibit 279 contains letters and materials sent by those persons.

A. Joint Applicants

  The testimony of the Joint Applicants in support of the application contends 
that the proposed merger is good for customers, good for the environment, good 
for investors, good for employees, and good for communities.

  The following witnesses testified for the Joint Applicants: Richard R. 
Sonstelie; William P. Vititoe; James P. Torgerson; Thomas J. Flaherty; Lori J. 
Wile; Paul M. Wiegand; John H. Story; Colleen E. Lynch; Ronald J. Amen; James 
A. Heidell; Jerry Lehenbauer; William A. Abrams, and William D. Steinmeier.  
The Joint Applicants’ witnesses testified that customers will benefit in 
several ways:  from more choice in their energy options; from increased 
availability of natural gas and increased promotion of customer awareness; from 
lower prices over the long term; from PSE’s use of merger-related cost savings 
and savings from implementing best practices to avoid rate increases that 
otherwise would be necessary;  from better quality of service; from better 
coordination and integration of operations; from having a company that is less 
dependent on rate relief and better positioned to deal efficiently with further 
evolution of the energy industry; and from lower capital costs which flow from 
a financially stronger company.

  WNG witnesses testified that the residential market in its territory will 
continue to grow, and the company’s costs will continue to rise, requiring 
general rate relief sooner than 2001, absent the merger.

  Puget witnesses testified that Puget faces future rate pressures due to 
continued customer growth, power contract price increases, inflationary price 
increases related to transmission and distribution, and price increases in the 
capital budget.  They testified that Puget has an immediate need for an 
additional $74.3 million of electric revenue requirement.  They testified that 
estimated merger-related cost savings of $370 million over the rate stability 
period are not sufficient to allow PSE to meet its commitment to rate stability 
and earn a reasonable return on equity, but that by also implementing best 
practices and achieving other cost controls PSE can achieve both.  They 
testified that adoption of their rate stability plan assures customers of 
receiving their share of merger benefits, while placing on management the 
responsibility to bring costs into line.



  They testified that PSE will commit up to $1 million annually to low-income 
programs that will offer a new energy education program to assist low-income 
customers in reducing their energy bills, continue to fund weatherization of 
low-income households, and provide financial assistance for conversions of 
space- and water-heating load from electric to gas.

  They testified that PSE will develop and implement a customer service 
guarantee for residential customers and will develop a customer satisfaction 
survey to monitor the quality of its service.

  The Joint Applicants’ witnesses testified that the merger will benefit the 
environment by:  facilitating fuel switching; allowing the distribution systems 
for the two services to be designed and sized in an integrated manner; 
postponing some system improvements that would otherwise be necessary; enabling 
service facilities to be combined; and allowing joint resource planning to 
occur.

  They testified that the merger will benefit investors in that it will result 
in a combined company that is financially stronger, with lower investment risk, 
than either Puget or WECo would be on a stand-alone basis.  They testified that 
the merger will benefit employees in that it will assemble a strong management 
team and create a new enterprise that is more likely to succeed in the long 
run, and will provide a more stimulating workplace with greater opportunities 
for retained employees.  They testified that the merger will benefit 
communities in that both companies have strong reputations for being active and 
involved in their communities, and PSE will be financially more flexible and a 
stronger partner in meeting communities’ changing needs.

B. Testimony of Other Parties

  The following witnesses testified for Commission Staff: Dixie L. Linnenbrink; 
Richard J. Lurito; Roland C. Martin; Thomas E. Schooley; James W. Miernyk; 
Frank J. Maglietti; Deborah L. Stephens; and Merton R. Lott.  The following 
witnesses testified for Public Counsel: Jim Lazar; Neil H. Talbot; William B. 
Marcus; George Sterzinger; Barbara R. Alexander; and Michael Karp.  Robert K. 
Schneider testified for IBEW Local 77.  Tom Anderson testified for the 
Washington PUD Association.  Carol Close Opatrny testified for Snohomish County 
Public Utility District No. 1.  George Oakes testified for the City of 
Seattle.  Dr. Thomas Michael Power testified for NCAC and NRDC.  Donald 
Schoenbeck testified for NWIGU.  Lincoln Wolverton testified for ICNU.




  Of the parties who testified, none expressed opposition to the merger.
However, most witnesses expressed concerns about the merger proposal, and 
recommended that the Commission authorize the merger only subject to various 
conditions.

  Commission Staff witnesses disputed the Joint Applicants’ estimates of cost 
pressures and estimates of savings related to the implementation of best 
practices and controlling power supply costs and other costs. They expressed 
concern that Puget presently is cutting rates for its largest industrial 
customers while proposing to increase rates for residential and other 
customers, and contended that if the merger is to be in the public interest, it 
must provide positive benefits to all customers.  Commission Staff proposed an 
alternative five-year Rate Plan that would freeze electric rates and lower gas 
rates.  It recommended that the Commission require PSE to amortize certain 
regulatory assets over the rate stability period to enable PSE to better 
position itself to meet future electric competition.  Commission Staff 
supported a service quality incentive program proposed by Public Counsel. 
Commission Staff witnesses recommended that the Commission require PSE to 
implement measures to prevent negative impacts of the merger on competition, 
including reporting on market concentration.

  Public Counsel’s witnesses also testified that the Joint Applicants have 
overstated cost pressures and understated the likelihood of savings through the 
implementation of best practices and controlling power supply costs and other 
costs. They contended that the Joint Applicants’ plan would impose excessive 
rates on consumers by shifting costs from industrial customers to residential 
customers through the plan’s proposed 1% annual increases in electric rates, 
coupled with special contracts and Puget’s market-rate tariff (Schedule 48) for 
the largest industrial customers.  Public Counsel proposed a freeze on rates 
during the proposed five-year rate stability period.

  Public Counsel’s witnesses testified that under the Joint Applicant’s rate 
proposal, residential rates could go up as much as 20% by July 1, 2001, rather 
than at 1% per year, primarily because of the loss of Bonneville Power 
Administration residential exchange benefits. The residential exchange program 
is a federal program which allows customers of privately owned utilities in the 
Northwest to benefit from the federal investment, through the BPA, in public 
hydropower facilities.  The costs of the program are paid by BPA’s customers 
through rates charged by BPA for the sale of electric power and transmission 
services.  Residential and small farm customers of privately owned utilities 
receive the benefit in the form of a credit which reduces their monthly bills.  
Meanwhile, industrial rates could drop as much as 40% under Puget’s proposed 
Schedule 48.  They testified that PSE should be required to absorb any loss of 
BPA residential exchange benefits that occurs during the rate stability period, 
because Puget has the ability to influence this credit, and placing the burden 
on Puget will give it an incentive to protect the credit.

  Public Counsel’s witnesses testified that PSE will have an incentive to cut 
operations and maintenance expenditures under a multi-year plan to increase 
revenues and profits.  They proposed a Service Quality Index which would 
incorporate ten measurable performance areas in three broad categories of 
performance:  customer satisfaction, service reliability and safety, and 
business office performance.  They proposed that PSE be required to annually 
report performance in each performance area, and proposed a total penalty 
amount of $7.5 million.  Public Counsel’s proposed index essentially is the 
same one proposed in the later Stipulation, and is discussed below in Section 
V.E.

  Public Counsel’s witnesses recommended that the Commission condition approval 
of the merger on implementation of a customer service quality index, funding of 
low income programs, and the launching of an open access pilot program for all 
customers.

  Two public utility district witnesses testified that the merger could delay 
or impede retail competition, because it will result in unfair competition.  
They testified that a dual-fuel utility has an advantage over single-fuel PUDs 
in attracting new customers and competing for unified trench installation 
services, and may try to tie gas and electric service to each other in the 
guise of a combined energy service. They recommended that if the Commission 
approves the merger, it condition its approval on PSE undertaking measures to 
mitigate anticompetitive impacts.

  One witness each testified for ICNU (representing large electricity 
customers) and NWIGU (representing large gas customers).  ICNU does not oppose 
the merger so long as it does not impede competition.  ICNU’s witness testified 
that the 1% increases proposed in the rate stability plan should not apply to 
the energy component of Schedule 48, because if they did, the tariff would 
exceed market prices, violating the structure and underlying purpose of the 
tariff.

  NWIGU’s witness expressed the organization’s concerns about electric stranded 
cost and service quality.  He testified that it is critical to gas customers 
that any order entered by the Commission affirmatively state that gas customers 
of PSE will not pay any electric costs, including uneconomic costs, as a result 
of the merger, and further should say that any other cost shifts or revenue 
losses experienced by the electric utility will not be borne by gas customers 
in the future.  The witness testified that a program to monitor industrial gas 
customers’ satisfaction with service quality, and responsiveness of PSE, would 
be appropriate.

  One witness (Dr. Power) testified for NRDC and NCAC, concerning possible 
adverse effects on conservation investment under the Joint Applicants’ rate 
stability plan.  He testified that the rate stability plan is a rate cap that 
has perverse incentives with respect to conservation investment or “demand side 
management” (DSM).  He testified that there is cost-effective DSM that PSE 
could pursue but which a competitive market will not obtain.  He proposed that 
the Commission remove the negative incentives that discourage investment in DSM 
by breaking the link between sales of kilowatt-hours and profits with a revenue 
cap linking recovery of transmission and distribution margins to growth in the 
number of customers rather than growth in sales volume.  He proposed that the 
Commission require other conservation spending.  NCAC and NRDC have continued 
to advocate, throughout this proceeding, the measures recommended by Dr. 
Power.  Their position is discussed further in Section V.F, below.

  One witness testified for the labor union intervenors.  He testified that 
over the past five years, Puget has reduced staff levels, particularly 
maintenance and repair, and that system reliability has deteriorated during the 
period.  The witness urged the Commission to require measures that address 
deterioration in system reliability.

  One witness testified for the City of Seattle concerning the need for 
coordination between city utilities and WNG on construction projects.

C. Public Participation

  Eighteen public witnesses testified at the October hearings.  Nine testified 
on their own behalf as customers of Puget, WNG, or both companies.  Six of the 
nine support the merger, giving as reasons their past good experiences with the 
companies, a likelihood that the merger will result in efficiencies and savings 
that will be passed to customers, and rate stability.  Several witnesses 
testified that the companies have been very public-minded and involved in their 
communities, have a good understanding of what businesses and residents in 
their territory need, and that the merger will give them the resources to be 
able to continue their local involvement. One supporter expressed concern about 
gas appliance safety, and recommended that regular inspection of WNG-leased 
equipment be required. Two customers opposed the merger, arguing that the 
merger will eliminate competition between electricity and gas, and in the long 
run will result in higher rates.  One customer did not expressly oppose the 
merger, but argued that the proposed residential rate increase is out of line 
given the merger-related savings described, and expressed concern that 
competition between gas and electric will cease and that electric system 
reliability and the gas company’s responsiveness in emergencies already are 
suffering.

  Nine of the October public witnesses spoke on behalf of entities or 
constituencies.  A representative of an industrial customer supported the 
merger, arguing that it will have important synergies that the companies can 
take advantage of to reduce costs, and arguing that one-stop energy shopping is 
convenient.  An employee of the King County Housing Authority expressed concern 
that low income rate payers should share equally with industrial rate payers in 
the merger benefits, and argued that the Commission should require that some 
attention be paid to renewable resources, including the funding of 
experimentation with renewable resources.  All seven witnesses in Bellingham 
were employees of Whatcom Opportunity Council.  They expressed concern that:  
all customers should share any merger-related savings; expressed concern that 
large industrial customers are receiving rate decreases under Puget’s Schedule 
48, while low income customers will receive a rate increase; and that low 
income rate payers will be hurt by the low level of conservation funding that 
the Joint Applicants propose, which is lower than such funding has been and is 
less than a quarter of the level recommended for low income customers by the 
Comprehensive Review of the Regional Energy System.

  More than 80% of the customer letters expressed opposition to the proposed 
merger.  The principal concern expressed is that the merger will eliminate 
competition, and as a result rates for both electricity and gas will increase 
and service will deteriorate.  Many WNG customers expressed a lack of 
confidence in Puget’s management, concern that Puget’s costs and rates are 
high, and a suspicion that Puget is seeking to merge with WNG in order to shift 
some of its electric costs to gas customers.  There is a widespread perception 
among this group of customers that the only beneficiaries of the merger will be 
management and shareholders, and that residential rate payers will not receive 
any of the benefits of the merger.  Other concerns expressed are that it is 
unfair that industrial customers will not also receive a rate increase, loss of 
consumer choice or opportunity to switch to a lower-cost fuel when competition 
between the two companies ceases, and loss of jobs.  The letters in support of 
the merger cite opportunities for efficiency, elimination of duplication, and 
reduced costs that would result from the merger.

  The Commission appreciates the breadth of the comments delivered at the 
public hearings and sent in by persons who did not attend the hearings.  Each 
of the witnesses expressed thoughtful comments that have been valuable in