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What changed in Northwest Natural Holding Co's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Northwest Natural Holding Co's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+501 added−519 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-23)

Top changes in Northwest Natural Holding Co's 2024 10-K

501 paragraphs added · 519 removed · 399 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

54 edited+10 added−8 removed65 unchanged
Biggest changeRisks associated with gas cost recovery are minimized by resetting customer rates annually through the PGA and aligning customer and shareholder interests through the use of sharing, weather normalization, and conservation mechanisms in Oregon. See Part II, Item 7, "Results of Operations— Regulatory Matters " and "Results of Operations—Business Segment—Natural Gas Distribution Operations— Cost of Gas " .
Biggest changeIn general, natural gas distribution rates are designed to recover the costs of, but not to earn a return on, the gas commodity sold. Risks associated with gas cost recovery are minimized by resetting customer rates annually through the PGA and aligning customer and shareholder interests through the use of sharing, weather normalization, and conservation mechanisms in Oregon.
Gas Cost Management The cost of gas sold to NGD customers primarily consists of the following items, which are included in annual Purchased Gas Adjustment (PGA) rates: gas purchases from suppliers; charges from pipeline companies to transport gas to our distribution system; gas storage costs; gas reserves costs; gas commodity derivative contracts; and renewable natural gas and its attributes, 11 including renewable thermal certificates.
Gas Cost Management The cost of gas sold to NGD customers primarily consists of the following items, which are included in annual Purchased Gas Adjustment (PGA) rates: gas purchases from suppliers; charges from pipeline companies to transport gas to our distribution 11 system; gas storage costs; gas reserves costs; gas commodity derivative contracts; and renewable natural gas and its attributes, including renewable thermal certificates.
Under NW Natural's interstate storage certificate with FERC, NW Natural is 13 required to file either a petition for rate approval or a cost and revenue study every five years to change or justify maintaining the existing rates for the interstate storage service.
Under NW Natural's interstate storage certificate with FERC, NW Natural is required to file either a petition for rate approval or a cost and revenue study every five years to change or justify maintaining the 13 existing rates for the interstate storage service.
Talent Attraction and Development In order to implement our business strategy and serve our customers, we depend upon our continuing ability to attract and retain diverse, talented professionals and a technically skilled workforce, and being able to transfer the knowledge and expertise of our workforce to new and increasingly diverse employees as our older workforce retires.
Talent Attraction and Development In order to implement our business strategy and serve our customers, we depend upon our continuing ability to attract and retain talented professionals and a technically skilled workforce, and being able to transfer the knowledge and expertise of our workforce to new and increasingly diverse employees as our older workforce retires.
In addition, we make available, free of charge, on our website ( www.nwnaturalholdings.com ), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and proxy materials filed under Section 14 of the Securities Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
In addition, we make available, free of charge, on our website ( www.nwnaturalholdings.com ), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and proxy materials filed under Section 14 of the Securities Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after we electronically 16 file such material with, or furnish it to, the SEC.
Those services are generally charged to the entity receiving those services. When such services involve regulated entities, those entities receiving services are generally charged rates pursuant to shared services agreements that are filed with the applicable state regulatory commission, as applicable. 15 Safety Safety is one of our greatest responsibilities to employees.
When such services involve regulated entities, those entities receiving services are generally 15 charged rates pursuant to shared services agreements that are filed with the applicable state regulatory commission, as applicable. Safety Safety is one of our greatest responsibilities to employees.
See Part II, Item 7, "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery ", and Note 2 and Note 17 of the Consolidated Financial Statements in Item 8 of this report for more information.
See Part II, Item 7, "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery ", and Note 2 and Note 17 to the Consolidated Financial Statements in Item 8 of this report for more information.
To help manage gas supplies, tariffs are designed to provide some certainty regarding industrial and commercial customers' volumes by requiring an annual service election, special rates or possible restrictions for changes between elections. We estimate natural gas was in approximately 63% of single-family residential homes in NW Natural's service territory in 2023.
To help manage gas supplies, tariffs are designed to provide some certainty regarding industrial and commercial customers' volumes by requiring an annual service election, special rates or possible restrictions for changes between elections. We estimate natural gas was in approximately 63% of single-family residential homes in NW Natural's service territory in 2024.
We support our mission by following our core values of service ethic, integrity, safety, caring, and environmental stewardship. NATURAL GAS DISTRIBUTION (NGD) SEGMENT Both NW Holdings and NW Natural have one reportable segment, the NGD segment, which is operated by NW Natural. NGD provides natural gas service through approximately 799,000 meters in Oregon and southwest Washington.
We support our mission by following our core values of service ethic, integrity, safety, caring, and environmental stewardship. NATURAL GAS DISTRIBUTION (NGD) SEGMENT Both NW Holdings and NW Natural have one reportable segment, the NGD segment, which is operated by NW Natural. NGD provides natural gas service through approximately 806,000 meters in Oregon and southwest Washington.
Of this total, the NGD business is currently capable of meeting approximately 50% of the requirements with gas from storage located within or adjacent to its service territory, while the remaining supply requirements would come from gas purchases under firm gas purchase contracts and recall agreements.
Of this total, the NGD business is currently capable of meeting approximately 55% of the requirements with gas from storage located within or adjacent to its service territory, while the remaining supply requirements would come from gas purchases under firm gas purchase contracts and recall agreements.
Benefits available to employees during 2023 included, among others: healthcare and other insurance coverages, wellness resources, retirement and savings plans, paid time off programs, and flexible and hybrid work schedules, where possible, employee resource groups, and culture and community-focused resources and opportunities, and employee recognition programs and discounts.
Benefits available to employees during 2024 included, among others: healthcare and other insurance coverages, wellness resources, retirement and savings plans, paid time off programs, and flexible and hybrid work schedules, where possible, employee resource groups, and culture and community-focused resources and opportunities, and employee recognition programs and discounts.
The primary strategies for managing gas commodity price risk include: • negotiating fixed prices directly with gas suppliers; • negotiating financial derivative contracts that: (1) effectively convert floating index prices in physical gas supply contracts to fixed prices (referred to as commodity price swaps); or (2) effectively set a ceiling or floor price, or both, on floating index priced physical supply contracts (referred to as commodity price options such as calls, puts, and collars); • buying physical gas supplies at a set price and injecting the gas into storage for price stability and to minimize pipeline capacity demand costs; and • investing in gas reserves for longer term price stability.
The primary strategies for managing gas commodity price risk include: • negotiating fixed prices directly with gas suppliers; • negotiating financial derivative contracts that: (1) effectively convert floating index prices in physical gas supply contracts to fixed prices (referred to as commodity price swaps); or (2) effectively set a ceiling or floor price, or both, on floating index priced physical supply contracts (referred to as commodity price options such as calls, puts, and collars); and • buying physical gas supplies at a set price and injecting the gas into storage for price stability and to minimize pipeline capacity demand costs.
Mist Gas Storage The Mist gas storage facility began operations in 1989. It is a 17.5 Bcf facility with 11.7 Bcf used to provide gas storage for the NGD business. The remaining 5.8 Bcf of the facility is contracted with other utilities, third-party marketers, and electric generators with these results reported in other.
Mist Gas Storage The Mist gas storage facility began operations in 1989. It is a 17.5 Bcf facility with 12.8 Bcf used to provide gas storage for the NGD business. The remaining 4.7 Bcf of the facility is contracted with other utilities, third-party marketers, and electric generators with these results reported in other.
Intrastate firm storage services in Oregon are offered under an OPUC-approved rate schedule as an optional service to certain eligible customers. Gas storage revenues from the 5.8 Bcf are derived primarily from firm service customers who provide energy-related services, including natural gas distribution, electric generation, and energy marketing.
Intrastate firm storage services in Oregon are offered under an OPUC-approved rate schedule as an optional service to certain eligible customers. Gas storage revenues from the 4.7 Bcf are derived primarily from firm service customers who provide energy-related services, including natural gas distribution, electric generation, and energy marketing.
NW Natural The following businesses and activities are aggregated and reported as other under NW Natural, a wholly-owned subsidiary of NW Holdings: • 5.8 Bcf of the Mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; • natural gas asset management activities; and • appliance retail center operations.
NW Natural The following businesses and activities are aggregated and reported as other under NW Natural, a wholly-owned subsidiary of NW Holdings: • 4.7 Bcf of the Mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; • natural gas asset management activities; and • appliance retail center operations.
The following table shows the sources of supply projected to be used to satisfy the design day sales for the 2023-24 winter heating season: Therms in millions Therms Percent Sources of NGD supply: Firm supply purchases 3.4 34 % Mist underground storage (NGD only) 3.1 30 % Company-owned LNG storage 1.9 19 % Off-system storage contract 0.5 5 % Pipeline segmentation capacity 0.6 6 % Recall agreements 0.4 4 % Peak day citygate deliveries 0.2 2 % Total 10.1 100 % The OPUC and WUTC have Integrated Resource Planning (IRP) processes in which utilities define different future scenarios and corresponding resource and compliance strategies in an effort to evaluate supply and demand resource and compliance requirements, consider uncertainties in the planning process and the need for flexibility to respond to changes, and establish a plan for providing reliable service while meeting carbon compliance obligations within frameworks that emphasize least cost and risk.
The following table shows the sources of supply projected to be used to satisfy the design day sales for the 2024-25 winter heating season: Therms in millions Therms Percent Sources of NGD supply: Firm supply purchases 3.4 34 % Mist underground storage (NGD only) 3.3 33 % Company-owned LNG storage 1.8 18 % Pipeline segmentation capacity 0.6 6 % Off-system storage contract 0.5 5 % Recall agreements 0.3 3 % Peak day citygate deliveries 0.1 1 % Total 10.0 100 % The OPUC and WUTC have Integrated Resource Planning (IRP) processes in which utilities define different future scenarios and corresponding resource and compliance strategies in an effort to evaluate supply and demand resource and compliance requirements, consider uncertainties in the planning process and the need for flexibility to respond to changes, and establish a plan for providing reliable service while meeting carbon compliance obligations within frameworks that emphasize least cost and risk.
The following table presents the storage facilities available for NGD business supply: Maximum Daily Deliverability (therms in millions) Designed Storage Capacity (Bcf) Gas Storage Facilities Owned Facility Mist, Oregon (Mist Facility) (1) 3.1 11.7 Mist, Oregon (North Mist Facility) (2) 1.3 4.1 Contracted Facility Jackson Prairie, Washington (3) 0.5 1.1 LNG Facilities Owned Facilities Newport, Oregon 0.6 1.0 Portland, Oregon 1.3 0.6 Total 6.8 18.5 (1) The Mist gas storage facility has a total maximum daily deliverability of 5.1 million therms and a total designed storage capacity of about 17.5 Bcf, of which 3.1 million therms of daily deliverability and 11.7 Bcf of storage capacity are reserved for NGD business customers.
The following table presents the storage facilities available for NGD business supply: Maximum Daily Deliverability (therms in millions) Designed Storage Capacity (Bcf) Gas Storage Facilities Owned Facility Mist, Oregon (Mist Facility) (1) 3.3 12.8 Mist, Oregon (North Mist Facility) (2) 1.3 4.1 Contracted Facility Jackson Prairie, Washington (3) 0.5 1.1 LNG Facilities Owned Facilities Newport, Oregon 0.8 1.0 Portland, Oregon 1.0 0.6 Total 6.9 19.6 (1) The Mist gas storage facility has a total maximum daily deliverability of 5.3 million therms and a total designed storage capacity of about 17.5 Bcf, of which 3.3 million therms of daily deliverability and 12.8 Bcf of storage capacity are reserved for NGD business customers.
This business provides operations and maintenance services to water and wastewater system owners and works to create value by leveraging shared personnel, technology and expertise to support delivery of clean, reliable water at a reasonable cost. Today, NWN Water provides operations and maintenance services to nearly 20,000 connections.
This business provides operations and maintenance services to water and wastewater system owners and works to create value by leveraging shared personnel, technology and expertise to support delivery of clean, reliable water at a reasonable cost. Today, NWN Water provides operations and maintenance services to approximately 25,000 connections.
Generally, residential and commercial customers purchase both their natural gas commodity (gas sales) and natural gas delivery services from the NGD business. Industrial and some large commercial customers also purchase transportation, but may buy the gas commodity either from NW Natural or directly from a third-party gas marketer or supplier.
Generally, residential and commercial customers purchase both their natural gas commodity (gas sales) and natural gas delivery services from the NGD business. Industrial and some large commercial customers also purchase the gas commodity either from NW Natural or directly from a third-party gas marketer or supplier.
During 2023, a total of 875 million therms were purchased under contracts with durations as follows: Contract Duration (primary term) Percent of Purchases Long-term (one year or longer) 24 % Short-term (more than one month, less than one year) 51 Spot (one month or less) 25 Total 100 % During 2023, there was one supplier that provided 10% or more of the NGD business gas supply requirements.
During 2024, a total of 822 million therms were purchased under contracts with durations as follows: Contract Duration (primary term) Percent of Purchases Long-term (one year or longer) 31 % Short-term (more than one month, less than one year) 45 Spot (one month or less) 24 Total 100 % During 2024, there was one supplier that provided 10% or more of the NGD business gas supply requirements.
NW Natural Water NWN Water currently serves an estimated 180,000 people through approximately 73,000 water and wastewater connections across five states. NWN Water continues to grow though customer additions within or near its service territories, and continues to pursue acquisitions.
NW Natural Water NWN Water currently serves an estimated 190,000 people through approximately 76,000 water and wastewater connections across six states. NWN Water continues to grow though customer additions within or near its service territories, and continues to pursue acquisitions.
In September 2021, a subsidiary of NW Natural Renewables, NW Natural Ohio Renewable Energy, LLC (Ohio Renewables) and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to partially fund two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities).
In September 2021, a subsidiary of NW Natural Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to secure RNG supply from two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities).
NW Natural Renewables NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated renewable natural gas activities.
NW Natural Renewables NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated RNG activities.
The facility is included in rate base under an established tariff schedule with revenues recognized consistent with the schedule. Billing rates are updated annually to the forecasted depreciable asset level and forecasted operating expenses.
The facility is included in rate base under an established tariff schedule with revenues recognized consistent with the schedule. Billing rates are updated annually to the forecasted depreciable asset level and forecasted operating expenses. There are additional expansion opportunities in the Mist storage field.
Additionally, NW Natural is focused on developing several hydrogen pilots for industrial and commercial customers to support their decarbonization goals. NW Natural is subject to the requirements of the Washington CCA cap-and-invest program, and could be subject to additional programs currently under consideration in Oregon. NW Natural has modeled pathways to compliance with the CCA in its most recent IRP.
Additionally, NW Natural is focused on developing several hydrogen pilots for industrial and commercial customers to support their decarbonization goals. NW Natural is subject to the requirements of the Washington CCA cap-and-invest program, and will be subject to Oregon's CPP. NW Natural has modeled pathways to compliance with the CCA and CPP in its most recent IRP.
While there are additional expansion opportunities in the Mist storage field, any expansion would be based on market demand, cost effectiveness, available financing, receipt of future permits, and other rights. OTHER Certain businesses and activities of NW Holdings and NW Natural are aggregated and reported as other for segment reporting purposes.
Any expansion would be based on market demand, cost effectiveness, available financing, receipt of future permits, and other rights. OTHER Certain businesses and activities of NW Holdings and NW Natural are aggregated and reported as other for segment reporting purposes.
We also implemented a new learning management system that went live in early 2021 and provides more efficiency and flexibility in how we train. Employee Benefits and Support To attract employees and meet the needs of our workforce, NW Natural strives to offer competitive compensation and benefits packages to employees.
We also have a learning management system that provides virtual training options and more efficiency and flexibility in how we train. Employee Benefits and Support To attract employees and meet the needs of our workforce, NW Natural strives to offer competitive compensation and benefits packages to employees.
Industrial and other customers largely account for the remaining volumes and margin. 8 The following table presents summary meter information for the NGD segment as of December 31, 2023: Number of Meters % of Volumes % of Margin Residential 728,915 38 % 65 % Commercial 69,273 23 % 24 % Industrial 1,062 39 % 6 % Other (1) N/A N/A 5 % Total 799,250 100 % 100 % (1) NGD margin is also affected by other items, including miscellaneous revenues, gains or losses from NW Natural's gas cost incentive sharing mechanism, other margin adjustments, and other regulated services.
Industrial customers largely account for the remaining volumes and margin. 8 The following table presents summary meter information for the NGD segment as of December 31, 2024: Number of Meters % of Volumes % of Margin Residential 735,117 38 % 65 % Commercial 69,362 23 % 25 % Industrial 1,050 39 % 6 % Other (1) N/A N/A 4 % Total 805,529 100 % 100 % (1) NGD margin is also affected by other items, including miscellaneous revenues, gains or losses from NW Natural's gas cost incentive sharing mechanism, other margin adjustments, and other regulated services.
In November 2019, NW Natural's unionized employees ratified a collective bargaining agreement that took effect on December 1, 2019 and extends to May 31, 2024, and thereafter from year to year unless either party serves notice of its intent to negotiate modifications to the collective bargaining agreement.
In May 2024, NW Natural's unionized employees ratified a collective bargaining agreement that is in effect June 1, 2024 through May 31, 2028, and is effective thereafter from year to year unless either party serves notice of its intent to negotiate modifications to the collective bargaining agreement.
In 2023, the NGD business did not recall additional deliverability or associated storage capacity to serve customer needs. The North Mist facility is contracted for the exclusive use of Portland General Electric, a local electric utility, and may not be used to serve other NGD customers. See " North Mist Gas Storage Facility " below.
The North Mist facility is contracted for the exclusive use of Portland General Electric, a local electric utility, and may not be used to serve other NGD customers. See " North Mist Gas Storage Facility " below.
Employees At December 31, 2023, our workforce consisted of the following: NW Natural: Unionized employees (1) 614 Non-unionized employees 600 Total NW Natural 1,214 Other Entities: Water and wastewater company employees 161 Other 5 Total other entities 166 Total Employees 1,380 (1) Members of the Office and Professional Employees International Union (OPEIU) Local No. 11, AFL-CIO.
Employees At December 31, 2024, our workforce consisted of the following: NW Natural: Unionized employees (1) 626 Non-unionized employees 649 Total NW Natural 1,275 Other Entities: Water and wastewater company employees 172 Other 5 Total other entities 177 Total Employees 1,452 (1) Members of the Office and Professional Employees International Union (OPEIU) Local No. 11, AFL-CIO.
The M-RETS Renewable Thermal Tracking System issues one RTC for every dekatherm of RNG injected into the gas system. NW Natural enters into contracts for the purchase of RNG and RTCs either through periodic request for proposals or through formal offerings or informal requests. See Part II, Item 7, "Results of Operations— Regulatory Matters ".
RTCs are verified and certified by the Midwest Renewable Energy Tracking System (M-RETS). The M-RETS Renewable Thermal Tracking System issues one RTC for every dekatherm of RNG injected into the gas system. NW Natural enters into contracts for the purchase of RNG and RTCs either through periodic request for proposals or through formal offerings or informal requests.
NW Natural supplements firm gas supply purchases with gas withdrawals from gas storage facilities, including underground reservoirs and LNG storage facilities. Storage facilities are generally injected with natural gas during the off-peak months in the spring and summer, and the gas is withdrawn for use during peak demand months in the winter.
Storage facilities are generally injected with natural gas during the off-peak months in the spring and summer, and the gas is withdrawn for use during peak demand months in the winter.
The SEC maintains an Internet site where reports, proxy statements, and other information filed can be read, copied, and requested online at its website ( www.sec.gov ).
AVAILABLE INFORMATION NW Holdings and NW Natural file annual, quarterly and current reports and other information with the Securities and Exchange Commission (SEC). The SEC maintains an Internet site where reports, proxy statements, and other information filed can be read, copied, and requested online at its website ( www.sec.gov ).
Alongside these development agreements, Ohio Renewables and a subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period.
Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period at a contractually specified price. Ohio Renewables has contracted to sell the supply obtained from EDL at fixed-prices to investment grade counterparties.
We expect that costs to comply with Washington's Climate Commitment Act (CCA) and any similar program that may be enacted in our service territory will be included in the cost of gas. The NGD business employs a number of strategies to mitigate the cost of gas sold to customers.
Costs to comply with Washington's Climate Commitment Act (CCA) are included in the cost of gas for Washington customers. We expect that costs to comply with Oregon's Climate Protection Program (CPP) and any similar program that may be enacted in our service territory will also be included in the cost of gas.
In September 2023, OPEIU provided a notice of intent to negotiate, and negotiations are currently underway. During calendar year 2023, NW Natural did not incur any work stoppages (strikes or lockouts), and therefore, experienced zero idle days for the year. Certain subsidiaries may receive services from employees of other subsidiaries.
During calendar year 2024, NW Natural did not incur any work stoppages (strikes or lockouts), and therefore, experienced zero idle days for the year. Certain subsidiaries may receive services from employees of other subsidiaries. Those services are generally charged to the entity receiving those services.
Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) are currently under development. In May 2023, PHMSA issued a notice of proposed rulemaking: Gas Pipeline Leak Detection and Repair.
Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) are currently under development. In January 2025, PHMSA released the final rulemaking: Gas Pipeline Leak Detection and Repair.
Since the 1980s, NW Natural has taken a proactive approach to replacement programs and partnered with the OPUC and WUTC on progressive regulation to further safety and reliability efforts for the distribution system.
NW Natural has one of the most modern distribution systems in the country with no identified cast iron pipe or bare steel main. Since the 1980s, NW Natural has taken a proactive approach to replacement programs and partnered with the OPUC and WUTC on progressive regulation to further safety and reliability efforts for the distribution system.
See Note 13 for additional information about our gas reserves. NW Natural also contracts with an independent energy marketing company to capture opportunities regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers.
NW Natural also contracts with an independent energy marketing company to capture opportunities regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers. Asset management activities provide opportunities for cost of gas savings for customers and incremental revenues for NW Natural through regulatory incentive-sharing mechanisms.
The proposed rulemaking requires operators to update distribution integrity management programs, emergency response plans, operations and maintenance manuals, and other safety practices. North Mist Gas Storage Facility The North Mist gas storage facility began operations in 2019.
In September 2023, PHMSA issued a notice of proposed rulemaking: Safety of Gas Distribution Pipelines and Other Pipeline Safety Initiatives. The proposed rulemaking requires operators to update distribution integrity management programs, emergency response plans, operations and maintenance manuals, and other safety practices.
NW Natural incurs monthly demand charges related to firm pipeline transportation contracts. These contracts have expiration dates ranging from 2024 to 2061. The largest pipeline agreements are with Northwest Pipeline. NW Natural actively works with 12 Northwest Pipeline and others to renew contracts in advance of expiration to ensure gas transportation capacity is sufficient to meet customer needs.
NW Natural incurs monthly demand charges related to firm pipeline transportation contracts. These contracts have expiration dates ranging from 2025 to 2061. The largest pipeline agreements are with Northwest Pipeline.
The proposed rulemaking includes congressional mandates from the PIPES (Protecting our Infrastructure of Pipelines and Enhancing Safety) Act of 2020 to reduce methane emissions from new and existing gas transmission, distribution, gathering, underground storage, and LNG facilities. In September 2023, PHMSA issued a notice of proposed rulemaking: Safety of Gas Distribution Pipelines and Other Pipeline Safety Initiatives.
The rulemaking includes congressional mandates from the PIPES (Protecting our Infrastructure of Pipelines and Enhancing Safety) Act of 2020 to reduce methane emissions from new and existing gas transmission, distribution, gathering, underground storage, and LNG facilities. The unpublished rulemaking was placed on a regulatory freeze by the new presidential administration and is expected to undergo additional review and amendment.
Environmental Stewardship Part of our gas supply strategy is working to reduce the carbon content and the environmental impacts of the energy we deliver. To that end, NW Natural developed and implemented an emissions screening tool that uses Environmental Protection Agency (EPA) data to calculate the relative emissions intensity of gas producer operations and prioritize purchases from lower emitting producers.
To that end, NW Natural developed and implemented an emissions screening tool that uses Environmental Protection Agency (EPA) data to calculate the relative emissions intensity of gas producer operations and prioritize purchases from lower emitting producers. In 2019, we began using this emissions intensity screening tool alongside other purchasing criteria such as price, credit worthiness and geographic diversity.
Gas Cost Recovery Mechanisms for gas cost recovery are designed to be fair and reasonable, with an appropriate balance between the interests of customers and NW Natural. In general, natural gas distribution rates are designed to recover the costs of, but not to earn a return on, the gas commodity sold.
These activities, net of the amount shared, are included in other for segment reporting purposes. Gas Cost Recovery Mechanisms for gas cost recovery are designed to be fair and reasonable, with an appropriate balance between the interests of customers and NW Natural.
Ohio Renewables additionally has contracted to sell a fixed-volume amount of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042. 14 ENVIRONMENTAL MATTERS Properties and Facilities NW Natural owns, or previously owned, properties and facilities that are currently being investigated that may require environmental remediation and are subject to federal, state, and local laws and regulations related to environmental matters.
Ohio Renewables additionally has contracted to sell a fixed-volume of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042.
Rocky Mountains to protect against regional supply disruptions and to take advantage of price differentials. For 2023, 59% of gas supply came from Canada, with the balance primarily coming from the U.S. Rocky Mountain region. The extraction of shale gas has increased the availability of gas supplies throughout North America.
Rocky Mountains to protect against regional supply disruptions and to take advantage of price differentials. For 2024, 60% of gas supply came from Canada, with the balance primarily coming from the U.S. Rocky Mountain region. We believe gas supplies available in the western United States and Canada are adequate to serve NGD customer requirements for 10 the foreseeable future.
We believe gas supplies available in the western United States and Canada are adequate to serve NGD customer requirements for the foreseeable 10 future. NW Natural continues to evaluate the long-term supply mix based on projections of gas production and pricing in the U.S. Rocky Mountain region as well as other regions in North America.
NW Natural continues to evaluate the long-term supply mix based on projections of gas production and pricing in the U.S. Rocky Mountain region as well as other regions in North America. NW Natural supplements firm gas supply purchases with gas withdrawals from gas storage facilities, including underground reservoirs and LNG storage facilities.
In 2019, the Washington State legislature also passed a bill supporting RNG procurement, House Bill 1257. The RTCs work like renewable energy certificates, or RECs, used in electricity markets. RTCs are verified and certified by the Midwest Renewable Energy Tracking System (M-RETS).
Under Oregon Senate Bill 98, NW Natural can purchase RNG or invest in RNG facilities, which generate these environmental attributes known as Renewable Thermal Certificates (RTCs). In 2019, the Washington State legislature also passed a bill supporting RNG procurement, House Bill 1257. The RTCs work like renewable energy certificates, or RECs, used in electricity markets.
NW Natural constructs, operates, and maintains its pipeline distribution system and storage operations with the goal of ensuring natural gas is delivered and stored safely, reliably, and efficiently. NW Natural has one of the most modern distribution systems in the country with no identified cast iron pipe or bare steel main.
Gas Distribution Safety and the protection of employees, customers, and our communities are, and will remain, top priorities. NW Natural constructs, operates, and maintains its pipeline distribution system and storage operations with the goal of ensuring natural gas is delivered and stored safely, reliably, and efficiently.
NW Natural is focused on taking steps to lower its emissions on behalf of customers by purchasing environmental attributes that are generated by the production of renewable natural gas (RNG). Under Oregon Senate Bill 98, NW Natural can purchase RNG or invest in RNG facilities, which generate these environmental attributes known as Renewable Thermal Certificates (RTCs).
We view this as a cost-neutral way to reduce carbon emissions associated with our natural gas supply. NW Natural is focused on taking steps to lower its emissions on behalf of customers by purchasing environmental attributes that are generated by the production of renewable natural gas (RNG).
In addition to purchases of RNG, NW Natural is currently piloting a hydrogen blend in pipelines serving its Sherwood Operations and Training Center. NW Natural has tested a blend of 15% hydrogen and is now testing a blend of 20% hydrogen at that location.
See Part II, Item 7, "Results of Operations— Regulatory Matters ". In addition to purchases of RNG, NW Natural has piloted a hydrogen blend in pipelines serving its Sherwood Operations and Training Center. NW Natural has successfully tested a blend of up to 20% hydrogen. The tests met the safety protocols established by PHMSA Part 192.
Our efforts in recruiting, promoting, and retaining diverse talent, building inclusive teams, and creating a culture that embraces differences are at the core of our workforce strategy. To attract diverse candidates, we work with community partners to help promote awareness of job opportunities within diverse communities.
Our efforts in recruiting, promoting, and retaining diverse talent, building inclusive teams, and creating a culture that embraces differences are elements of our workforce strategy. INFORMATION ABOUT OUR EXECUTIVE OFFICERS For information concerning executive officers, see Part III, Item 10.
Rates for interstate pipeline transportation services are established by FERC within the U.S. and by Canadian authorities for services on Canadian pipelines. Gas Distribution Safety and the protection of employees, customers, and our communities are, and will remain, top priorities.
NW Natural actively works with Northwest Pipeline and others to renew contracts in advance of expiration to ensure gas transportation capacity is sufficient to meet customer needs. 12 Rates for interstate pipeline transportation services are established by FERC within the U.S. and by Canadian authorities for services on Canadian pipelines.
Removed
Asset management activities provide opportunities for cost of gas savings for customers and incremental revenues for NW Natural through regulatory incentive-sharing mechanisms. These activities, net of the amount shared, are included in other for segment reporting purposes.
Added
As of May 1, 2024, 0.2 million therms per day of deliverability and 1.15 Bcf of associated non-utility Mist gas storage capacity was recalled to serve core customers. Customer rate increases related to this recall began on November 1, 2024.
Removed
In 2019, we began using this emissions intensity screening tool alongside other purchasing criteria such as price, credit worthiness and geographic diversity. We view this as a cost-neutral way to reduce carbon emissions associated with our natural gas supply.
Added
The NGD business employs a number of strategies to mitigate the cost of gas sold to customers.
Removed
The EDL Facilities have been constructed, and testing and commissioning of these facilities is underway, but has been delayed. Upon each EDL Facility achieving full commercial operations, Ohio Renewables is committed to make cash payments of approximately $25 million for each facility to partially fund the infrastructure required to condition biogas.
Added
See Part II, Item 7, "Results of Operations— Regulatory Matters " and "Results of Operations—Business Segment—Natural Gas Distribution Operations— Cost of Gas " . Environmental Stewardship Part of our gas supply strategy is working to reduce the carbon content and the environmental impacts of the energy we deliver.
Removed
The agreements provide that either party may terminate the agreements and related transactions with respect to the subject facility if it does not reach commercial operations and the funding does not close by December 31, 2023, provided the terminating party has not failed to fulfill its obligations under such agreements, including with respect to achieving commercial operations.
Added
NW Natural does not foresee a significant impact of these rulemakings on our business given the modern materials used in our system. North Mist Gas Storage Facility The North Mist gas storage facility began operations in 2019.
Removed
We have employee-led groups that develop programs and activities that build awareness around issues important to their co-workers, families, customers, and our community. Groups include the Diversity, Equity & Inclusion Council, Women's Network, African American, Rainbow Alliance (LGBTQ+), Veterans, Somos Unidos (Latinx), Asian American, and Neurodiversity employee resource groups, Wellness Advisory Committee, and Sustainability and Equity Engagement Team.
Added
The first facility was completed and commenced delivery of RNG to Ohio Renewables in September 2024. Upon reaching this milestone, Ohio Renewables paid $26.0 million to the EDL subsidiary.
Removed
We also continue to emphasize diversity, equity and inclusion values through employee training and education, including expanded diversity training as part of new hire onboarding and other diversity, equity, and inclusion education that occurs throughout the year.
Added
The second facility was completed and commenced delivery of RNG to Ohio Renewables in December 2024 at which time Ohio Renewables made an additional payment of $25.4 million to the EDL subsidiary.
Removed
An area of focus going forward is to understand and increase awareness of internal systems and structures that could limit representation and equity for underrepresented employees. To that end, we are working toward revising and refocusing new manager and new hire training to include implicit bias, diversity, equity and inclusion, and anti-racism education.
Added
We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 2,430,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period.
Removed
INFORMATION ABOUT OUR EXECUTIVE OFFICERS For information concerning executive officers, see Part III, Item 10. 16 AVAILABLE INFORMATION NW Holdings and NW Natural file annual, quarterly and current reports and other information with the Securities and Exchange Commission (SEC).
Added
Amounts to be delivered under this agreement are estimated to be 112,500 MMbtu in 2025, 375,000 MMbtu in 2026, 1,950,000 MMbtu annually in 2027 through 2034, and 2,775,000 MMbtu annually in years 2035 through 2042.
Added
Under the current contract, if less than 75% of the contracted volumes of RNG are not delivered on an annual basis, Ohio Renewables is obligated to pay the per MMbtu price for volumes between the amount delivered and 75% of the contracted volumes on an annual basis. 14 ENVIRONMENTAL MATTERS Properties and Facilities NW Natural owns, or previously owned, properties and facilities that are currently being investigated that may require environmental remediation and are subject to federal, state, and local laws and regulations related to environmental matters.
Added
The terms of the collective bargaining agreement include the following items: a 6% wage increase effective June 1, 2024 and scheduled wage increases effective December 1 in the first year and each subsequent year of 4%; a 401(k) contribution of 4% for employees hired after our pension plan was closed on December 31, 2009; and a 401(k) match of 50% of the first 8% of savings.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

96 edited+25 added−22 removed176 unchanged
Biggest changeApproximately 28% of NW Natural’s current utility employees were hired prior to these dates, and therefore remain eligible for these plans. Other businesses we acquire may also have pension plans.
Biggest changeUntil NW Natural closed the pension plans to new hires, which for non-union employees was in 2006 and for union employees was in 2009, it provided pension plans and postretirement healthcare benefits to eligible full-time utility employees and retirees. Approximately 22% of NW Natural’s current utility employees were hired prior to these dates, and therefore remain eligible for these plans.
If natural gas prices are high relative to other energy sources, or if the cost, environmental impact or public perception of such other energy sources improves relative to natural gas, it may negatively affect NW Natural’s ability to secure new customers or retain our existing customers, which could have a negative impact on our customer growth rate and NW Holdings’ and NW Natural’s results of operations.
If natural gas prices are high relative to other energy sources, or if the cost, environmental impact or public perception of such other energy sources improves relative to natural gas, it may negatively affect our ability to secure new customers or retain our existing customers, which could have a negative impact on our customer growth rate and NW Holdings’ and NW Natural’s results of operations.
Additionally, downgrades in its current credit ratings below investment grade could cause additional delays in NW Natural's ability to access the capital markets while it seeks supplemental state regulatory approval, which could hamper its ability to access credit markets on a timely basis.
Additionally, downgrades in NW Natural’s current credit ratings below investment grade could cause additional delays in NW Natural's ability to access the capital markets while it seeks supplemental state regulatory approval, which could hamper its ability to access credit markets on a timely basis.
Changes in economic activity in our markets and in global financial markets can result lower demand for energy, increased incidence of customers’ inability to pay or delay in paying utility bills or increase in customer bankruptcies, less new housing construction or fewer conversions to natural gas, higher levels of residential foreclosures or vacancies, uncertainty regarding energy prices and the capital and commodity markets, increased credit risk and supply chain uncertainty.
Changes in economic activity in our markets and in global financial markets can result in lower demand for energy, increased incidence of customers’ inability to pay or delay in paying utility bills or increase in customer bankruptcies, less new housing construction or fewer conversions to natural gas, higher levels of residential foreclosures or vacancies, uncertainty regarding energy prices and the capital and commodity markets, increased credit risk and supply chain uncertainty.
Our Renewables business is subject to risks, in addition to those described above, including: • unpredictable production levels or performance or gas quality below expected levels, which may impact our ability to accept or deliver RNG under our contractual agreements; • construction risks or delays, including due to inclement weather, supply chain or labor disruptions or otherwise; • cost overruns and the need to commit more capital than initially budgeted as a result of environmental, construction, technological or other complications; • weather conditions; • changes in energy commodity prices, including pricing of, and volatility in markets for, RNG and its associated attributes; • equipment failure, difficulties or delays in repairing or replacing equipment, technical difficulties or otherwise higher than expected operating costs; 31 • regulatory, policy, and legal requirements, including environmental, health and safety laws and regulations or regulations that may impact the value of RNG and its associated attributes or our ability to deliver RNG in the manner contemplated under our contractual arrangements; • changes to laws or policies that may reduce demand for, or desirability of, RNG or its associated attributes; • reliance on third parties, including for pipeline interconnection and for a sufficient supply of waste for conversion to RNG; • catastrophic events such as fires, explosions, earthquakes, droughts, acts of terrorism and other force majeure events that may impact the Renewables business, its customers, suppliers, or other business partners; and • failures or delays in obtaining necessary land rights, permits, approvals or other consents required to construct and operate projects.
Our Renewables business is subject to risks, in addition to those described above, including: • unpredictable production levels or performance or gas quality below expected levels, which may impact our ability to accept or deliver RNG under our contractual agreements; • construction risks or delays, including due to inclement weather, supply chain or labor disruptions or otherwise; • cost overruns and the need to commit more capital than initially budgeted as a result of environmental, construction, technological or other complications; • weather conditions; • changes in energy commodity prices, including pricing of, and volatility in markets for, RNG and its associated attributes; • equipment failure, difficulties or delays in repairing or replacing equipment, technical difficulties or otherwise higher than expected operating costs; • regulatory, policy, and legal requirements, including environmental, health and safety laws and regulations or regulations that may impact the value of RNG and its associated attributes or our ability to deliver RNG in the manner contemplated under our contractual arrangements; • changes to laws or policies that may reduce demand for, or desirability of, RNG or its associated attributes; • reliance on third parties, including for pipeline interconnection and for a sufficient supply of waste for conversion to RNG; • catastrophic events such as fires, explosions, earthquakes, droughts, acts of terrorism and other force majeure events that may impact the Renewables business, its customers, suppliers, or other business partners; and • failures or delays in obtaining necessary land rights, permits, approvals or other consents required to construct and operate projects.
Although we believe that natural gas serves an important role in helping our region reduce GHG emissions and move to a resilient lower-carbon energy system, certain advocacy groups have opposed the use of natural gas as a fuel source altogether and have pursued policies that limit, restrict, or impose additional costs on, the use of natural gas in a variety of contexts. 18 Concerns raised about the use of natural gas include the potential for natural gas explosions or delivery disruptions, methane leakage along production, transportation and delivery systems, and end-use equipment, and contribution of natural gas energy use to GHG emission levels and global warming.
Although we believe that natural gas serves an important role in helping our region reduce GHG emissions and move to a more resilient lower-carbon energy system, certain advocacy groups have opposed the use of natural gas as a fuel source altogether and have pursued policies that limit, restrict, or impose additional costs on, the use of natural gas in a variety of contexts. 18 Concerns raised about the use of natural gas include the potential for natural gas explosions or delivery disruptions, methane leakage along production, transportation and delivery systems, and end-use equipment, and contribution of natural gas energy use to GHG emission levels and global warming.
An increasing national focus on energy conservation, including improved building practices and appliance efficiencies may result in increased energy conservation by customers. This can decrease NW Natural’s sales of natural gas and adversely affect NW Holdings’ or NW Natural’s results of operations because revenues are collected mostly through volumetric rates, based on the amount of gas sold.
An increasing national focus on energy conservation, including improved building practices and appliance efficiencies may result in increased energy conservation by customers. This can decrease our sales of natural gas and adversely affect NW Holdings’ or NW Natural’s results of operations because revenues are collected mostly through volumetric rates, based on the amount of gas sold.
The collective bargaining agreements may also limit our flexibility in dealing with NW Natural’s workforce, and the ability to change work rules and practices and implement other efficiency-related improvements to successfully compete in today’s challenging marketplace, which may negatively affect NW Holdings’ and NW Natural’s financial condition and results of operations. 23 Environmental Risks ENVIRONMENTAL LIABILITY RISK.
The collective bargaining agreements may also limit our flexibility in dealing with NW Natural’s workforce, and the ability to change work rules and practices and implement other efficiency-related improvements to successfully compete in today’s challenging marketplace, which may negatively affect NW Holdings’ and NW Natural’s financial condition and results of operations. Environmental Risks ENVIRONMENTAL LIABILITY RISK.
Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed policies, regulations, restrictions or programs, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our customer growth, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, increase the likelihood of litigation, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements which may or may not be recoverable in customer rates, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings’ or NW Natural’s business operations, financial condition and results of operations.
Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed policies, regulations, restrictions or programs, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our customer growth, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, increase the likelihood of litigation, reduce our access to capital, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements which may or may not be recoverable in customer rates, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings’ or NW Natural’s business operations, financial condition and results of operations.
Business Continuity and Technology Risks BUSINESS CONTINUITY RISK. NW Holdings and NW Natural may be adversely impacted by local or national disasters, political unrest, terrorist activities, cyber-attacks or data breaches, and other extreme events to which we may not be able to promptly respond, which could adversely affect NW Holdings’ or NW Natural’s operations or financial condition.
Business Continuity and Technology Risks BUSINESS CONTINUITY RISK. NW Holdings and NW Natural may be adversely impacted by local or national disasters, pandemics, political unrest, terrorist activities, cyber-attacks or data breaches, and other extreme events to which we may not be able to promptly respond, which could adversely affect NW Holdings’ or NW Natural’s operations or financial condition.
As these potential cyber security attacks become more common and sophisticated, we could be required to incur costs to strengthen our systems or maintain insurance coverage against potential losses. Moreover, a variety of regulatory agencies are increasingly focused on cybersecurity risks, and specifically in critical infrastructure sectors.
As these potential cyber security attacks become more common and sophisticated, we could be required to incur costs to strengthen our systems or maintain insurance coverage against potential losses. Moreover, a variety of regulatory agencies are focused on cybersecurity risks, and specifically in critical infrastructure sectors.
The cost of the original gas reserves venture is currently included in customer 20 rates and additional wells under that arrangement are recovered at specific costs, the occurrence of one or more of these risks could affect NW Natural’s ability to recover this hedge in rates.
The cost of the original gas reserves venture is currently included in customer rates and additional wells under that arrangement are recovered at specific costs, the occurrence of one or more of these risks could affect NW Natural’s ability to recover this hedge in rates.
Our access to funds under committed credit facilities, which are currently provided by a number of banks, is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity.
Our access to funds under committed 28 credit facilities, which are currently provided by a number of banks, is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity.
Insufficient customer growth, for economic, political, public perception, policy, or other reasons could adversely affect NW Holdings’ or NW Natural’s utility margin, earnings and cash flows. RISK OF COMPETITION. Our NGD business is subject to increased competition which could negatively affect NW Holdings’ or NW Natural’s results of operations.
Insufficient customer growth, for economic, political, public perception, policy, or other reasons could adversely affect NW Holdings’ or NW Natural’s utility margin, earnings and cash flows. 20 RISK OF COMPETITION. Our NGD business is subject to increased competition which could negatively affect NW Holdings’ or NW Natural’s results of operations.
Any impairment charge taken with respect to our long-lived assets or goodwill could be material and could have a material effect on NW Holdings’ or NW Natural’s financial condition and results of operations. 29 CUSTOMER CONSERVATION RISK. Customers’ conservation efforts may have a negative impact on NW Holdings’ and NW Natural’s revenues.
Any impairment charge taken with respect to our long-lived assets or goodwill could be material and could have a material effect on NW Holdings’ or NW Natural’s financial condition and results of operations. CUSTOMER CONSERVATION RISK. Customers’ conservation efforts may have a negative impact on NW Holdings’ and NW Natural’s revenues.
While we have risk management procedures for hedging in place, they may not always work as planned and cannot entirely eliminate the risks associated with hedging. Additionally, our hedging activities may cause us to incur additional expenses to obtain the hedge.
While we have risk management procedures for hedging in place, they may not always work as planned and cannot entirely eliminate the risks associated with hedging. Additionally, our hedging activities may cause 27 us to incur additional expenses to obtain the hedge.
NW Holdings and NW Natural are subject to all of the risks and hazards inherent in the businesses of gas and liquid transmission, distribution and storage, water distribution, and water and wastewater services including: • earthquakes, wildfires, floods, storms, landslides and other severe weather incidents and natural hazards; • leaks or losses of gases or liquids, or contamination of gases or liquids by chemicals or compounds, as a result of the malfunction of equipment or facilities or otherwise; • operator errors or damages from third parties; • negative performance by our storage reservoirs, facilities, or wells that could cause us to fail to meet expected or forecasted operational levels or contractual commitments to our customers or other third parties; • problems maintaining, or the malfunction of, pipelines, biodigester facilities, wellbores and related equipment and facilities that form a part of the infrastructure that is critical to the operation of our facilities; 21 • presence of chemicals or other compounds in the gases or liquids we deliver that could adversely affect the performance of the system or end-use equipment; • collapse of underground storage reservoirs; • inadequate supplies of RNG, natural gas or water or contamination of water supplies; • operating costs that are substantially higher than expected; • supply chain disruptions, including unexpected price increases, or supply restrictions beyond the control of our suppliers; • migration of gas through faults in the rock or to some area of the reservoir where existing wells cannot drain the gas effectively, resulting in loss of the gas; • blowouts (uncontrolled escapes of gas from a pipeline or well) or other accidents, fires and explosions; and • risks and hazards inherent in the drilling operations associated with the development of gas storage facilities, and wells.
NW Holdings and NW Natural are subject to all of the risks and hazards inherent in the businesses of gas and liquid transmission, distribution and storage, water distribution, and water and wastewater services including: • earthquakes, wildfires, floods, storms, landslides and other severe weather incidents and natural hazards; • leaks or losses of gases or liquids, or contamination of gases or liquids by chemicals or compounds, as a result of the malfunction of equipment or facilities or otherwise; • operator errors or damages from third parties; • negative performance by our storage reservoirs, facilities, or wells that could cause us to fail to meet expected or forecasted operational levels or contractual commitments to our customers or other third parties; • problems maintaining, or the malfunction of, pipelines, biodigester facilities, wellbores and related equipment and facilities that form a part of the infrastructure that is critical to the operation of our facilities; • presence of chemicals or other compounds in the gases or liquids we deliver that could adversely affect the performance of the system or end-use equipment; • failure of gas or water storage reservoirs; • inadequate supplies of RNG, natural gas or water or contamination of water supplies; • operating costs that are substantially higher than expected; • supply chain disruptions, including unexpected price increases, or supply restrictions beyond the control of our suppliers; • migration of gas through faults in the rock or to some area of the reservoir where existing wells cannot drain the gas effectively, resulting in loss of the gas; • blowouts (uncontrolled escapes of gas from a pipeline or well) or other accidents, fires and explosions; and • risks and hazards inherent in the drilling operations associated with the development of gas storage facilities, and wells.
Moreover, a significant portion of the nation’s gas 24 infrastructure is located in areas susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to gas supply interruptions and price spikes.
Moreover, a significant portion of the nation’s gas infrastructure is located in areas susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to gas supply interruptions and price spikes.
For example, the 2020 Protecting our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act) prompted PHSMA to issue three new rulemakings impacting transmission lines, gathering lines, and valve automation in response to past incidents in other parts of the country.
For example, the 2020 Protecting our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act) prompted PHSMA to issue three rulemakings impacting transmission lines, gathering lines, and valve automation in response to past incidents in other parts of the country.
NW Holdings’ and NW Natural’s efforts to integrate, consolidate and streamline each of their operations has resulted in increased reliance on technology, the failure of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.
RELIANCE ON TECHNOLOGY RISK. NW Holdings’ and NW Natural’s efforts to integrate, consolidate and streamline each of their operations has resulted in increased reliance on technology, the failure of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.
Higher natural gas commodity prices and volatility in the price of gas may adversely affect NW Natural’s NGD business, whereas lower gas price volatility may adversely affect NW Natural’s gas storage business, negatively affecting NW Holdings’ and NW Natural’s results of operations and cash flows.
Higher natural gas commodity prices and volatility in the price of gas may adversely affect our NGD business, whereas lower gas price volatility may adversely affect NW Natural’s gas storage business, negatively affecting NW Holdings’ and NW Natural’s results of operations and cash flows.
The occurrence of any operating risks not covered by insurance could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. SAFETY REGULATION RISK.
The occurrence of any operating risks not covered by insurance could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. 21 SAFETY REGULATION RISK.
Temporary gas price increases can also adversely affect NW Holdings’ and NW Natural’s operating cash flows, liquidity and results of operations because a portion (10% or 20%) of any difference between the estimated average PGA gas cost in rates and the actual average gas cost incurred is recognized as current income or expense.
Temporary gas price increases can also adversely affect NW Holdings’ and NW Natural’s operating cash flows, liquidity and results of operations. In Oregon, a portion (10% or 20%) of any difference between the estimated average PGA gas cost in rates and the actual average gas cost incurred is recognized as current income or expense.
Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations. 30 INVESTMENT RISK.
Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations. INVESTMENT RISK.
In addition, as the regulatory environment for our businesses increases in complexity, the risk of inadvertent noncompliance may also increase. Changes in regulations, the imposition of additional regulations, and the failure to comply with laws and regulations could negatively influence NW Holdings’ or NW Natural’s operating environment and results of operations.
In addition, as we expand our businesses and the regulatory environment for our businesses increases in complexity, the risk of inadvertent noncompliance may also increase. Changes in regulations, the imposition of additional regulations, and the failure to comply with laws and regulations could negatively influence NW Holdings’ or NW Natural’s operating environment and results of operations.
Further, based on current interpretations, each of NW Holdings, NW Natural and NWN Water is not considered a "swap dealer" or "major swap participant" in 2023, so we are exempt from certain requirements under the Dodd-Frank Act.
Further, based on current interpretations, each of NW Holdings, NW Natural and NWN Water is not considered a "swap dealer" or "major swap participant" in 2024, so we are exempt from certain requirements under the Dodd-Frank Act.
The integration of newly acquired water businesses, particularly over noncontiguous geographic regions, may be unpredictable, subject to delays or changed circumstances, and such businesses may not perform in accordance with our expectations.
The integration of newly acquired water, wastewater or water services businesses, particularly over noncontiguous geographic regions, may be unpredictable, subject to delays or changed circumstances, and such businesses may not perform in accordance with our expectations.
Additionally, approximately half of NW Natural workers are represented by the OPEIU Local No. 11 AFL-CIO and are covered by a collective bargaining agreement that extends to May 31, 2024.
Additionally, approximately half of NW Natural workers are represented by the OPEIU Local No. 11 AFL-CIO and are covered by a collective bargaining agreement that extends to May 31, 2028.
Other jurisdictions, including several in our service territory, such as the city of Milwaukie, have considered or are currently considering similar restrictions or other measures discouraging the use of natural gas, such as limitations or bans on the use of natural gas in 25 new construction, requiring the conversion of buildings to electric heat, or adopting policies or incentives to encourage the use of electricity in lieu of natural gas.
Other jurisdictions, including several in our service territory, have considered or are currently considering similar restrictions or other measures discouraging the use of natural gas, such as limitations or bans on the use of natural gas in new construction, requiring the conversion of buildings to electric heat, or adopting policies or incentives to encourage the use of electricity in lieu of natural gas.
If we can no longer apply regulatory accounting, we could be required to write off our regulatory assets and precluded from the future deferral of costs not recovered through rates at the time such amounts are incurred, even if we are expected to recover these amounts from customers in the future. Public Health Risk PUBLIC HEALTH RISK .
If we can no longer apply regulatory accounting, we could be required to write off our regulatory assets and precluded from the future deferral of costs not recovered through rates at the time such amounts are incurred, even if we are expected to recover these amounts from customers in the future.
Temporary or sustained higher gas prices may also cause NW Natural to experience an increase in short-term debt and temporarily reduce liquidity because it pays suppliers for gas when it is purchased, which can be in advance of when these costs are recovered through rates.
Temporary or sustained higher gas prices may also cause us to experience an increase in short-term debt and temporarily reduce liquidity because it pays suppliers for gas when it is purchased, which can be in advance of when these costs are recovered through rates.
If gas prices were to increase significantly and remain higher, it could raise the cost of energy to NW Natural’s customers, potentially causing those customers to conserve or switch to alternate sources of energy. Sustained significant price increases could also cause new home builders and commercial developers to select alternative energy sources.
If gas prices were to increase significantly and remain higher, it could raise the cost of energy to our customers, potentially causing those customers to conserve or switch to alternate sources of energy. Sustained significant price increases could also cause new home builders and commercial developers to select alternative energy sources.
We may not be able to maintain sufficient insurance to cover all risks associated with local and national disasters, terrorist activities, cyber-attacks and other attacks or events.
We may not be able to maintain sufficient insurance to cover all risks associated with local and national disasters, pandemic illnesses, terrorist activities, cyber-attacks and other attacks or events.
Additionally, large scale natural disasters or terrorist attacks could destabilize the insurance industry making the insurance we do have unavailable, which could increase the risk that an event could adversely affect NW Holdings’ or NW Natural’s operations or financial results. RELIANCE ON TECHNOLOGY RISK.
Additionally, large scale natural disasters or terrorist attacks could destabilize the insurance industry making the insurance we do have unavailable, which could increase the risk that an event could adversely affect NW Holdings’ or NW Natural’s operations or financial results.
If NW Holdings' expectations regarding the financial results of its investments in water operations prove to be inaccurate, it may adversely affect NW Holdings' financial position or results of operations. Non-Regulated RNG Risks INVESTMENT RISK.
If NW Holdings' 30 expectations regarding the financial results of its investments in water, wastewater or water services operations prove to be inaccurate, it may adversely affect NW Holdings' financial position or results of operations. Non-Regulated RNG Risks INVESTMENT RISK.
Technological improvements such as electric heat pumps, batteries or other alternative technologies, or building code or other regulations or restrictions affecting the cost or ability to use certain gas appliances, could erode NW Natural’s competitive advantage.
Technological improvements such as electric heat pumps, batteries or other alternative technologies, or building code or other regulations or restrictions affecting the cost or ability to use certain gas appliances, could erode our competitive advantage.
In addition, we are dependent on a continuing flow of important components and appropriately skilled individuals to maintain and upgrade our information technology systems. Our suppliers have faced disruptions due to COVID-19 and may face additional production or import delays due to natural disasters, strikes, lock-outs, political unrest, pandemics or other such circumstances.
In addition, we are dependent on a continuing flow of important components and appropriately skilled individuals to maintain and upgrade our information technology systems. Our suppliers have previously faced disruptions, such as during the COVID-19 pandemic, and may face additional production or import delays due to natural disasters, strikes, lock-outs, political unrest, pandemics or other such circumstances.
Although the water businesses are not currently expected to materially contribute to the results of operations of NW Holdings, these businesses are subject to risks, in addition to those described above, including: • contamination of water supplies, including water provided to customers with naturally occurring or human-made substances or other hazardous materials, or disruptions to water treatment processes; • interruptions in water supplies and service, weather conditions, natural disasters and droughts; • insufficient water supplies, limitations on or disputes with respect to water rights or supplies, or the inability to secure water rights or supplies at a reasonable cost; • disruptions to the wastewater collection and treatment process; • reliance on third parties for water supplies and transportation of such water supplies; • the ability to attract and retain customers to our water services business and competition for customers’ business; • conservation efforts by customers; • regulatory and legal requirements, including environmental, health and safety laws and regulations; • operational risks, including customer and employee safety; and • the outcome of rate cases and other regulatory proceedings.
Although the water businesses are not currently expected to materially contribute to the results of operations of NW Holdings, these businesses are subject to risks, in addition to those described above, including: • contamination of water supplies, including water provided to customers with naturally occurring or human-made substances or other hazardous materials, or disruptions to water treatment processes; • interruptions in water supplies and service, weather conditions, natural disasters and droughts; • insufficient water supplies, limitations on or disputes with respect to water rights or supplies, or the inability to secure water rights or supplies at a reasonable cost; • disruptions to the wastewater collection and treatment process, including spills, overflows or system failures; • wastewater discharges by third parties that contain unanticipated levels of chemical or other pollutants; • reliance on third parties for water supplies and transportation of such water supplies; • the ability to attract and retain customers to our water services business and competition for customers’ business; • conservation efforts by customers; • regulatory and legal requirements, including environmental, health and safety laws and regulations; • operational risks, including customer and employee safety; and • the outcome of rate cases and other regulatory proceedings.
If NW Natural is unable or limited in its ability to obtain natural gas, RNG or environmental attributes or credits from its current suppliers or new sources, it may not be able to meet customers' gas requirements or regulatory or compliance requirements, and would likely incur costs associated with actions necessary to mitigate service disruptions or regulatory compliance, which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations.
If we are unable or limited in our ability to obtain natural gas, RNG or environmental attributes or credits from our current suppliers or new sources, we may not be able to meet customers' gas requirements or regulatory or compliance requirements, and would likely incur costs associated with actions necessary to mitigate service disruptions or regulatory compliance, which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations.
NW Holdings and NW Natural are subject to governmental regulation, and compliance with local, state and federal requirements, including taxing requirements, and unforeseen changes in or interpretations of such requirements could affect NW Holdings’ or NW Natural’s financial condition and results of operations. NW Holdings and NW Natural are subject to regulation by federal, state and local governmental authorities.
REGULATION, COMPLIANCE AND TAXING AUTHORITY RISK. NW Holdings and NW Natural are subject to governmental regulation, and compliance with local, state and federal requirements, including taxing requirements, and unforeseen changes in or interpretations of such requirements could affect NW Holdings’ or NW Natural’s financial condition and results of operations.
NW Natural relies on third parties to supply or optimize natural gas, RNG, storage or pipeline capacity, and environmental attributes or credits in its NGD segment, and limitations on NW Natural’s ability to obtain supplies, engage in effective optimization, or failure to receive expected supplies, could have an adverse impact on NW Holdings’ or NW Natural’s financial results.
We rely on third parties to supply or optimize natural gas, RNG, storage or pipeline capacity, and environmental attributes or credits in our NGD segment, and limitations on our ability to obtain supplies, engage in effective optimization, or failure to receive expected supplies, could have an adverse impact on NW Holdings’ or NW Natural’s financial results.
Additionally, third parties on whom NW Natural relies may fail to deliver supplies for which it has contracted. For example, in October, 2018, a 36-inch pipeline near Prince George, British Columbia owned by Enbridge ruptured, disrupting natural gas flows from Canada into Washington while the ruptured pipeline and an adjacent pipeline were assessed and the ruptured pipeline was repaired.
Additionally, third parties that we may rely on may fail to deliver supplies for which it has contracted. For example, in October, 2018, a 36-inch pipeline near Prince George, British Columbia owned by Enbridge ruptured, disrupting natural gas flows from Canada into Washington while the ruptured pipeline and an adjacent pipeline were assessed and the ruptured pipeline was repaired.
Furthermore, recent trends toward investments that are perceived to be “green” or “sustainable” could shift capital away from, or increase the cost of capital for, our natural gas business. We believe our business is an important component of a low carbon future and are striving to decarbonize our systems.
Furthermore, recent trends toward investments that are perceived to be “green” or “sustainable” could shift capital away from, or increase the cost of capital for, our natural gas business. We believe our business is an important component of a lower carbon future and are striving to reduce emissions from our systems.
Any such transactions involve substantial risks, including the following: 19 • such transactions that are contracted for may fail to close for a variety of reasons; • the result of such transactions may not produce revenues, earnings or cash flow at anticipated levels, which could, among other things, result in the impairment of any investments or goodwill associated with such transactions; • acquired businesses or assets could have environmental, permitting, or other problems for which contractual protections prove inadequate; • there may be difficulties in integration or higher than expected operation costs of new businesses; • there may exist liabilities that were not disclosed to us, that exceed our estimates, or for which our rights to indemnification from the seller are limited; • we may be unable to obtain the necessary regulatory or governmental approvals to close a transaction or receive approvals granted subject to terms that are unacceptable to us; • we may be unable to achieve the anticipated regulatory treatment of any such transaction as part of the transaction approval or subsequent to closing the transaction; or • we may be unable to avoid a disposition of assets for a price that is less than the book value of those assets.
Any such transactions involve substantial risks, including the following: • such transactions that are contracted for may fail to close for a variety of reasons; • the result of such transactions may not produce revenues, earnings or cash flow at anticipated levels, which could, among other things, result in the impairment of any investments or goodwill associated with such transactions; • acquired businesses or assets could have environmental, permitting, or other problems for which contractual protections prove inadequate; • our forecasts and projections regarding customer and business growth, financial performance, or economic and market conditions may prove to be incorrect; • there may be difficulties in integration or higher than expected operation costs of new businesses; • there may exist liabilities that were not disclosed to us, that exceed our estimates, or for which our rights to indemnification from the seller are limited; • we may be unable to obtain the necessary regulatory or governmental approvals to close a transaction or receive approvals granted subject to terms that are unacceptable to us; • we may be unable to achieve the anticipated regulatory treatment of any such transaction as part of the transaction approval or subsequent to closing the transaction; or • we may be unable to avoid a disposition of assets for a price that is less than the book value of those assets.
NW Natural’s ability to secure natural gas, RNG and environmental attributes or credits depends upon its ability to purchase and receive delivery of them from third parties.
Our ability to secure natural gas, RNG and environmental attributes or credits depends upon its ability to purchase and receive delivery of them from third parties.
Nevertheless, perceptions in the financial markets could differ or outpace our decarbonization progress and result in a shift funding away from, or limit or restrict certain forms of funding for, natural gas businesses.
Nevertheless, perceptions in the financial markets could differ or outpace our progress toward reducing emissions and result in a shift funding away from, or limit or restrict certain forms of funding for, natural gas businesses.
We expect to continue to make expenditures to expand, improve and safely operate our gas and water utility distribution and gas storage systems, and to work toward decarbonizing our gas systems. Regulators can deny recovery of those costs.
We expect to continue to make expenditures to expand, improve and safely operate our gas and water utility distribution and gas storage systems, and to work toward reducing emissions from our gas systems. Regulators can deny recovery of those costs.
Additionally, extreme weather events, such as those that occurred in February 2021 and January 2024 can result in the purchase of higher levels of gas at significantly higher spot rates.
Additionally, extreme weather events, such as those that occurred in NW Natural’s service territory in February 2021 and January 2024 can result in the purchase of higher levels of gas at significantly higher spot rates.
At the state level, the State of Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that provides an overall limit for GHG emissions from major sources in the state that began on January 1, 2023 and declines yearly to 95% below 1990 levels by 2050. NW Natural is currently subject to the CCA.
At the state level, effective beginning in 2023, the State of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that provides an overall limit for GHG emissions from major sources in the state and declines yearly to 95% below 1990 levels by 2050. NW Natural is currently subject to the CCA.
If the economy or the markets in which we operate decline from present levels, it may have an adverse effect on our business, financial condition, and results of operations. WEATHER RISK. Warmer than average weather may have a negative impact on our revenues and results of operations.
If the economy or the markets in which we operate decline from present levels, it may have an adverse effect on our business, financial condition, and results of operations. WEATHER RISK. Warmer than average weather may have a negative impact on our revenues and results of operations. We are exposed to weather risk in our natural gas businesses.
One or more of these risks could affect NW Holdings’ and NW Natural’s financial condition, results of operations, and cash flows. BUSINESS DEVELOPMENT RISK.
One or more of these risks could affect NW Holdings’ and NW Natural’s financial condition, results of operations, and cash flows.
NW Natural’s gas purchasing requirements expose us to risks of commodity price movements, while NW Holdings’ and NW Natural’s use of debt and equity financing exposes us to interest rate, liquidity and other financial market risks.
Our gas purchasing requirements expose us to risks of commodity price movements, while our use of debt and equity financing exposes us to interest rate, liquidity and other financial market risks.
NW Natural also contracts with an independent energy marketing company to provide asset management services regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers.
We also contract with an independent energy marketing company to provide asset management services regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers.
We could also experience issues such as: technological challenges; ineffective scalability; failure to achieve expected outcomes; unsuccessful business models; startup and construction delays; construction cost overruns; disputes with contractors; the inability to negotiate acceptable agreements such as rights-of-way, easements, construction, gas supply or other material contracts; changes in customer demand, perception or commitment; public opposition to projects; marketing risk and changes in market regulation, behavior or prices, market volatility or unavailability, including markets for RNG and its associated attributes or other environmental attributes; the inability to receive expected tax or regulatory treatment; and operating cost increases.
We could also experience issues such as: technological challenges; ineffective scalability; failure to achieve expected outcomes; unsuccessful business models; startup and construction delays; construction cost overruns; reliance on or inability to direct third parties; disputes with contractors or other third parties; the inability to negotiate acceptable agreements such as rights-of-way, easements, construction, gas supply or other material contracts; failure or delay in receiving applicable permits; changes in customer demand, perception or commitment; public opposition to projects; marketing risk and changes in market regulation, behavior or prices, market volatility or unavailability, including markets for RNG and its associated attributes or other environmental attributes; the inability to receive expected tax or regulatory treatment (including any applicable tax incentives or credits for renewable fuels); and operating cost increases.
NW Natural, and in some cases its suppliers, does not have control over the availability of natural gas, RNG or environmental attributes or credits, competition for those supplies, disruptions in those supplies, priority allocations on transmission pipelines, markets for those supplies, or pricing and other terms related to such 22 supplies.
We, and in some cases our suppliers, do not have control over the availability of natural gas, RNG or environmental attributes or credits, competition for those supplies, disruptions in those supplies, priority allocations on transmission pipelines, markets for those supplies, or pricing and other terms related to such supplies.
A credit downgrade to NW Natural, or resulting negative impact on NW Holdings, could also require additional support in the form of letters of credit, cash or other forms of collateral and otherwise adversely affect NW Holdings' or NW Natural’s financial condition and results of operations. IMPAIRMENT OF LONG-LIVED ASSETS OR GOODWILL RISK .
A credit downgrade could also require additional support in the form of letters of credit, cash or other forms of collateral and otherwise adversely affect NW Holdings' or NW Natural’s financial condition and results of operations. IMPAIRMENT OF LONG-LIVED ASSETS OR GOODWILL RISK .
For example, the Transportation Security Administration (TSA) has published security directives and is currently in the process of implementing formal rules mandating cybersecurity actions for critical pipeline owners and operators. Failure to meet the requirements of these directives or other cybersecurity regulations could result in fines or other penalties.
For example, the Transportation Security Administration (TSA) has published security directives and in November 2024, proposed formal rules mandating cybersecurity actions for critical pipeline owners and operators. Failure to meet the requirements of these directives or other cybersecurity regulations could result in fines or other penalties.
However, it is difficult to estimate such costs due to uncertainties surrounding the course of environmental remediation, the preliminary nature of certain site investigations, natural recovery of the site, unavoidable limitations associated with environmental investigations and remedial technologies, evolving science, and the application of environmental laws that impose joint and several liabilities on all potentially responsible parties.
However, it is difficult to estimate such costs due to uncertainties surrounding the course of environmental remediation, the preliminary nature of certain site investigations, natural recovery of the site, unavoidable limitations associated with environmental investigations and remedial technologies, evolving science, the application of environmental laws that impose joint and several liabilities on all 23 potentially responsible parties, and changes in federal, state or local environmental statutes, regulations or policies.
Decreases in the volume of gas NW Natural sells could reduce NW Holdings or 28 NW Natural’s earnings, and a decline in customers could slow growth in future earnings.
Decreases in the volume of gas we sell could reduce NW Holdings or NW Natural’s earnings, and a decline in customers could slow growth in future earnings.
In addition, the State of Washington is in the process of implementing, and the State of Oregon and some local jurisdictions are considering, building codes that could have the effect of disfavoring or disallowing natural gas in residential or commercial new construction or conversions, including locations within our service territory, such the City of Eugene.
In addition, the State of Washington has implemented, and the State of Oregon and some local jurisdictions have considered or are considering, building codes that could have the effect of disfavoring or disallowing natural gas in residential or commercial new construction or conversions, including locations within our service territory.
The OPUC also regulates actions investors may take with respect to our utility companies, NW Natural and NW Holdings. Similarly, FERC has regulatory authority over NW Natural’s interstate storage services. Expansion of our businesses generally results in regulation by other regulatory authorities. For example, certain of NW Holdings’ water companies are regulated in Idaho, Texas and Arizona.
The OPUC also regulates actions investors may take with respect to our utility companies, NW Natural and NW Holdings. Similarly, FERC has regulatory authority over NW Natural’s interstate storage services. Expansion of our businesses generally results in regulation by other regulatory authorities.
Although NW Holdings expects this expansion will result in various benefits, including providing cost-effective solutions to decarbonize the utility, commercial, industrial and transportation sectors, NW Holdings may not be able to realize these or other benefits.
Although NW Holdings expects this expansion will result in various benefits, including providing renewable fuels to support decarbonization in the utility, commercial, industrial and transportation sectors, NW Holdings may not be able to realize these or other benefits.
The OPUC and WUTC have general regulatory authority over NW Natural’s gas business in Oregon and Washington. NW Holdings’ regulated water utility businesses are generally regulated by the public utility commission in the state in which a water business is located.
The OPUC and WUTC have general regulatory authority over NW Natural’s gas business in Oregon and Washington. In January 2025, NW Holdings acquired SiEnergy Operating, LLC (SiEnergy), which is regulated by the Railroad Commission of Texas. NW Holdings’ regulated water utility businesses are generally regulated by the public utility commission in the state in which a water business is located.
Additionally, any failure to comply with existing or new laws and regulations could result in fines, penalties or injunctive measures. For example, under the Energy Policy Act of 2005, the FERC has civil authority under the Natural Gas Act to impose penalties for current violations of over $1.5 million per day for each violation.
Additionally, any failure to comply with existing or new laws and regulations could result in fines, penalties or injunctive measures. For example, under the Energy Policy Act of 2005, the FERC may assess civil penalties under the Natural Gas Act for violations of FERC’s requirements up to nearly $1.6 million per day for each violation.
THIRD PARTY PIPELINE RISK. NW Natural’s gas storage business depends on third-party pipelines that connect our storage facilities to interstate pipelines, the failure or unavailability of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.
NW Natural’s gas storage business depends on third-party pipelines that connect our storage facilities to interstate pipelines, the failure or unavailability of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. 22 Our gas storage facilities are reliant on the continued operation of a third-party pipeline and other facilities that provide delivery options to and from our storage facilities.
Local or national disasters, political unrest, terrorist activities, cyber-attacks and data breaches, power outages, and other extreme events are a threat to our assets and operations.
Local or national disasters (including but not limited to earthquakes, wildfires, floods, storms, landslides), pandemics, political unrest, terrorist activities, cyber-attacks and data breaches, power outages, and other extreme events are a threat to our assets and operations.
If the qualitative assessment indicates that the carrying value may be at risk, we will perform a quantitative assessment and recognize a goodwill impairment for any amount in which the fair value of a reporting unit exceeds its fair value. NW Holdings' total goodwill was $163.3 million as of December 31, 2023 and $149.3 million as of December 31, 2022.
If the qualitative assessment indicates that the carrying value may be at risk, we will perform a quantitative assessment and recognize a goodwill impairment for any amount in which the fair value of a reporting unit exceeds its fair value.
Proposed rules issued in 2023 by PHMSA include regulations related to the detection and repair of leaks and safety of gas distribution pipelines.
Regulations issued in 2024 by PHMSA contain requirements related to the detection and repair of leaks and safety of gas distribution pipelines.
We are exposed to weather risk in our natural gas business, primarily at NW Natural. A majority of NW Natural’s gas volume is driven by gas sales to space heating residential and small commercial customers during the winter heating season. Current NW Natural rates are based on an assumption of average weather.
A majority of NW Natural’s gas volume is driven by gas sales to space heating residential and small commercial customers during the winter heating season. Current NW Natural rates are based on an assumption of average weather. Warmer than average weather typically results in lower gas sales. Colder weather typically results in higher gas sales.
Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS We have no unresolved staff comments.
Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations.
NW Natural is currently rated by S&P and Moody’s and a negative change in its credit ratings, particularly below investment grade, could adversely affect its cost of borrowing and access to sources of liquidity and capital. Such a downgrade could further limit its access to borrowing under available credit lines.
A negative change in their respective credit ratings, particularly below investment grade, could adversely affect our cost of borrowing and access to sources of liquidity and capital. Such a downgrade could further limit our access to borrowing under available credit lines.
In addition, our businesses could experience breaches of security pertaining to sensitive customer, employee, and vendor information maintained by us in the normal course of business, which could adversely affect our reputation, diminish customer confidence, disrupt operations, materially increase the costs we incur to protect against these risks, and subject us to possible financial liability or increased regulation or litigation.
We are continuing to evaluate the potential costs of implementation of these directives, and there is no assurance that we will be able to continue to recover in rates costs associated with such compliance. 26 In addition, our businesses could experience breaches of security pertaining to sensitive customer, employee, and vendor information maintained by us in the normal course of business, which could adversely affect our reputation, diminish customer confidence, disrupt operations, materially increase the costs we incur to protect against these risks, and subject us to possible financial liability or increased regulation or litigation.
In addition, foreign governments may implement changes to their policies, in response to changes to U.S. policy or otherwise. Although we cannot predict the impact, if any, of these changes to our businesses, they could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.
Although we cannot predict the impact, if any, of these changes to our businesses, they could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.
Technology services provided by third-parties also could be disrupted due to events and circumstances beyond our control which could adversely impact our business, financial condition and results of operations. 26 Any modifications, upgrades, system maintenance or replacements subject us to inherent costs and risks, including potential disruption of our internal control structure, substantial capital expenditures, additional administrative and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems.
Any modifications, upgrades, system maintenance or replacements subject us to inherent costs and risks, including potential disruption of our internal control structure, substantial capital expenditures, additional administrative and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems.
In the residential and commercial markets, NW Natural’s NGD business competes primarily with suppliers of electricity, fuel oil, and propane. In the industrial market, NW Natural competes with suppliers of all forms of energy.
In the residential and commercial markets, our natural gas distribution businesses compete primarily with suppliers of electricity, fuel oil, and propane. In the industrial market, we compete with suppliers of all forms of energy.
Additionally, we may not be able to obtain required governmental permits and approvals to complete our projects in a cost-efficient or timely manner, potentially resulting in delays or abandonment of the projects.
Our business development activities are subject to uncertainties and changed circumstances and may not reach the scale expected, 19 be successful or perform as anticipated. Additionally, we may not be able to obtain required governmental permits and approvals to complete our projects in a cost-efficient or timely manner, potentially resulting in delays or abandonment of the projects.
The cost of providing pension and postretirement healthcare benefits is subject to changes in pension assets and liabilities, changing employee demographics and changing actuarial assumptions, which may have an adverse effect on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. 27 Until NW Natural closed the pension plans to new hires, which for non-union employees was in 2006 and for union employees was in 2009, it provided pension plans and postretirement healthcare benefits to eligible full-time utility employees and retirees.
The cost of providing pension and postretirement healthcare benefits is subject to changes in pension assets and liabilities, changing employee demographics and changing actuarial assumptions, which may have an adverse effect on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.
Threatened or actual national disasters or terrorist activities may also disrupt capital or bank markets and our ability to raise capital or obtain debt financing, or impact our suppliers or our customers directly.
Threatened or actual national disasters, pandemics or terrorist activities may also disrupt capital or bank markets and our ability to raise capital or obtain debt financing, or impact our suppliers or our customers directly, including increasing volatility in the price of natural gas or reducing demand for natural gas or water.
Each party advocates for the interests that they represent, which may include lower rates, additional regulatory oversight over the company, limitations on growth or phasing out of the gas system, decisions that favor electrification, or advancing other interests.
Each party advocates for the interests that they represent, which may include lower rates, additional regulatory oversight over the company, limitations on growth or phasing out of the gas system, decisions that favor electrification, or advancing other interests. 17 We cannot predict the timing or outcome of these proceedings, or the effects of those outcomes on NW Holdings’ and NW Natural’s results of operations and financial condition.
The failure of any regulatory commission to approve requested rate increases on a timely basis to recover costs or to allow an adequate return could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and liquidity. 17 As companies with regulated utility businesses, we frequently have dockets open with our regulators, including a general rate case filed with the OPUC in December 2023.
The failure of any regulatory commission to approve requested rate increases on a timely basis to recover costs or to allow an adequate return could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and liquidity.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe made significant additional and accelerated investments in cybersecurity in response to the TSA directives. Our cybersecurity program has several fundamental tenants, including security governance, cybersecurity risk management, compliance, defensibility, zero-trust architecture and cloud security.
Biggest changeOur cybersecurity program has several fundamental tenants, including security governance, cybersecurity risk management, compliance, defensibility, zero-trust architecture and cloud security. We utilize multilayered defenses and continuous monitoring with data analytics to detect anomalies and search for cyber threats in our system.
Beginning in May 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two directives, with several updates, applicable to certain owners and operators of pipeline facilities, including NW Natural.
Beginning in May 2021, the Department of Homeland Security’s (DHS) and the Transportation Security Administration (TSA) released two directives, with several updates, applicable to certain owners and operators of pipeline facilities, including NW Natural.
See Item 1A, "Risk Factors” above for additional information on risks related to our business, including for example risks related to cyber attacks, information and system breaches, and technology disruptions and failures, our reliance on technology.
See Item 1A, "Risk Factors” above for additional information on risks related to our business, including for example risks related to cyber attacks, information and system breaches, technology disruptions and failures, and our reliance on technology.
We conduct regular reviews and tests of our information security program and also utilize audits by our internal audit team and third-party consultants, table-top exercises, penetration and vulnerability testing, data recovery testing, simulations, and other exercises to evaluate the effectiveness of our information security program and improve our security measures and planning.
We conduct regular reviews and tests of our information security program and also utilize audits by our internal audit team and third-party consultants, table-top exercises, penetration and vulnerability testing, data recovery testing, simulations, and other exercises to evaluate the effectiveness of our information security program 32 and improve our security measures and planning.
These directives cumulatively required owners and operators to implement cybersecurity incident reporting to the DHS, designate two cybersecurity coordinators, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies; implement a significant number of specified cyber security controls and processes; and clarifying Operational Technology (OT) scope and providing a risk- and outcome-based framework.
These directives cumulatively require owners and operators to implement cybersecurity incident reporting to the DHS, designate two cybersecurity coordinators, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies; implement a significant number of specified cyber security controls and processes; and clarifying Operational Technology (OT) scope and providing a risk- and outcome-based framework.
In the event of emergencies, including cybersecurity events, we stand up an Incident Command Team to respond to the emergency. We exercise and train the ICT for a variety of emergencies, including, cyber events on a regular basis.
In the event of emergencies, including cybersecurity events, we stand up a cross-functional Incident Command Team (ICT) to respond to the emergency. We exercise and train the ICT for a variety of emergencies, including cyber events on a regular basis.
We utilize multilayered defenses and continuous monitoring with data analytics to detect anomalies and search for cyber threats in our system. 32 Key components of our cybersecurity risk management program include: • risk assessments designed to help identify cybersecurity risks to our critical systems, information, services, and our broader technology environment; • the use of external service providers with specific expertise, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel and senior management, as well as periodic experiential learning through “phishing simulations”; • segmentation of, and back-ups for, certain of our sensitive systems and data; • third-party cyber risk management process for vendors including, among other things, a security assessment, contracting program, and ongoing monitoring for vendors based on their risk profile; • physical security around our sensitive infrastructure and cybersystems.
Key components of our cybersecurity risk management program include: • risk assessments designed to help identify cybersecurity risks to our critical systems, information, services, and our broader technology environment; • the use of external service providers with specific expertise, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel and senior management, as well as periodic experiential learning through “phishing simulations”; • segmentation of, and back-ups for, certain of our sensitive systems and data; • third-party cyber risk management process for vendors including, among other things, a security assessment, contracting program, and ongoing monitoring for vendors based on their risk profile; and • physical security around our sensitive infrastructure and cybersystems.
The CIO receives regular updates on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation. 33 In the event of an incident, we intend to utilize our ICT and follow our detailed incident program and processes, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying relevant functional areas, as well as senior leadership and the Board, as appropriate.
In the event of an incident, we intend to utilize our ICT and follow our detailed incident program and processes, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying relevant functional areas, as well as senior leadership and the Board, as appropriate. 33
Our cybersecurity and compliance team regularly collects data on cybersecurity threats and risk areas, monitors our systems, and conducts testing to assess our processes and procedures and the threat landscape.
Our cybersecurity and compliance team regularly collects data on cybersecurity threats and risk areas, monitors our systems, and conducts testing to assess our processes and procedures and the threat landscape. Our VP, CIO and CISO receives regular updates on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation.
Removed
Our Cybersecurity management team has been led, since 2017, by our Vice President, Chief Information Officer, who also functions as our Chief Information Security Officer and reports to our CEO. Mr. Downing has an extensive career of 29 years in information technology services in the energy sector, including at WorleyParsons, British Petroleum and Schlumberger.
Added
We made significant additional and accelerated investments in cybersecurity in response to the TSA directives. In November 2024, the TSA proposed regulations with the aim of making the security directives permanent by incorporating them into the US Code of Federal Regulations.
Removed
He holds a degree in Information Systems as well as a Masters of Business Administration. Mr. Downing is supported by Mr. Carlson, our Director of Cybersecurity and Compliance, and his team. Mr. Carlson has 24 years of experience in information technology focused on highly regulated sectors including energy, government, and insurance.
Added
Our Cybersecurity management team is led by Brian Fellon, our Vice President, Chief Information Officer and Chief Information Security Officer (VP, CIO and CISO). Mr. Fellon joined NW Natural and was appointed to his role by the Board of Directors in September 2024. Mr. Fellon reports to our Chief Financial Officer. He has 28 years of experience in information technology.
Removed
He holds a bachelor’s degree in Information Technology, and master’s degrees in Information Assurance and Business Administration. The remainder of our team is comprised of cybersecurity professionals with broad experience and expertise, including in cybersecurity, threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats and regulatory compliance.
Added
Prior to joining NW Natural, Mr. Fellon served as Director of Information Technology at Puget Sound Energy in Bellevue, Washington from 2016 to September 2024, where he was responsible for applications services, artificial intelligence and data. Mr. Fellon is supported by our Director of Cybersecurity and Compliance, and his team.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNW Natural owns LNG storage facilities in Portland and near Newport, Oregon. A portion of these properties are used in the NGD segment. NWN Water's Distribution Properties NWN Water owns and maintains water distribution pipes, storage, wells and other infrastructure and wastewater treatment facilities, and holds related leases and other property interests in Oregon, Washington, Idaho, Texas and Arizona.
Biggest changeNW Natural owns LNG storage facilities in Portland and near Newport, Oregon. A portion of these properties are used in the NGD segment. NWN Water's Distribution Properties NWN Water owns and maintains water distribution pipes, storage, wells and other infrastructure and wastewater treatment facilities, and holds related leases and other property interests in Oregon, Washington, Idaho, Texas, Arizona and California.
ITEM 2. PROPERTIES NW Natural's Natural Gas Distribution Properties NW Natural's natural gas pipeline system consists of approximately 14,300 miles of distribution mains, approximately 700 miles of transmission mains and approximately 10,300 miles of service lines located in its territory in Oregon and southwest Washington.
ITEM 2. PROPERTIES NW Natural's Natural Gas Distribution Properties NW Natural's natural gas pipeline system consists of approximately 14,400 miles of distribution mains, approximately 700 miles of transmission mains and approximately 10,300 miles of service lines located in its territory in Oregon and southwest Washington.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 34 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 Item 6. Reserved 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 34 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer 35 Item 6. Reserved 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 70

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information about purchases of NW Holdings' equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2023: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) Balance forward 2,124,528 $ 16,732,648 10/01/23-10/31/23 — $ — — — 11/01/23-11/30/23 — $ — — — 12/01/23-12/31/23 — $ — — — Total — 2,124,528 $ 16,732,648 (1) During the quarter ended December 31, 2023, no shares of NW Holdings common stock were repurchased pursuant to the NW Holdings Board of Directors-approved share repurchase program.
Biggest changeIssuer Purchases of Equity Securities The following table provides information about purchases of NW Holdings' equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Balance forward 2,124,528 $ 150,000,000 10/01/24-10/31/24 — $ — — — 11/01/24-11/30/24 — $ — — — 12/01/24-12/31/24 — $ — — — Total — 2,124,528 $ 150,000,000 (1) During the quarter ended December 31, 2024, no shares of common stock were purchased on the open market to meet the requirements of NW Holdings' Dividend Reinvestment and Direct Stock Purchase Plan.
As of February 14, 2024, there were 4,060 holders of record of NW Holdings' common stock and NW Holdings was the sole holder of NW Natural's common stock.
As of February 18, 2025, there were 3,808 holders of record of NW Holdings' common stock and NW Holdings was the sole holder of NW Natural's common stock.
Removed
Effective August 3, 2022, we received NW Holdings Board approval to extend the repurchase program. Such authorization will continue until the program is used, terminated or replaced. For more information on this program, see Note 5.
Added
For more information regarding cash dividends declared on our common stock and dividend policies, see "Financial Condition - Liquidity and Capital Resources " in Item 7 of this Annual Report on Form 10-K.
Added
Unregistered Sales of Equity Securities On October 2, 2024, NW Holdings issued a total of 11,182 unregistered shares of NW Holdings common stock as holdback consideration payable to the sellers in connection with the acquisition of Rose Valley Water Company in Arizona.
Added
On December 16, 2024, NW Holdings issued a total of 2,179 unregistered shares to the sellers as an earnout payment in connection with the same transaction.
Added
On October 2, 2023 and December 22, 2023, NW Holdings issued a total of 175,674 and 141 unregistered shares of common stock, respectively, to the sellers as closing consideration and post-closing purchase price adjustment payment in connection with the acquisition of Rose Valley Water Company.
Added
In aggregate, NW Holdings has issued 189,176 unregistered shares of common stock in 2023 and 2024 in connection with its acquisition of Rose Valley Water Company.
Added
On December 30, 2024, NW Holdings issued a total of 22,965 unregistered shares of NW Holdings common stock as holdback consideration payable to the sellers in connection with the acquisition of Hiland Water Corp. in Oregon.
Added
On October 31, 2023 and December 29, 2023, NW Holdings issued a total of 9,158 and 142,292 unregistered shares of common stock, respectively, to the sellers as closing consideration in connection with the acquisition of Hiland Water Corp.
Added
In aggregate, NW Holdings has issued 174,415 unregistered shares of common stock in 2023 and 2024 in connection with the acquisition of Hiland Water Corp. These transactions were exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as transactions not involving a public offering.
Added
During the quarter ended December 31, 2024, no shares of NW Holdings common stock were purchased on the open market to meet the requirements of share-based compensation programs. (2) During the quarter ended December 31, 2024, no shares of NW Holdings common stock were repurchased pursuant to the Board approved share repurchase program.
Added
Effective May 23, 2024, NW Holdings' Board authorized a new share repurchase program under which NW Holdings may repurchase in open market or privately negotiated transactions up to an aggregate of 5 million shares or an amount not to exceed $150 million. The new share repurchase program is authorized to continue until the program is used, terminated or replaced.
Added
The repurchase program replaces the Company’s previously authorized share repurchase program, which commenced in 2000 and authorized the repurchase of up to 2.8 million shares, or an amount not to exceed $100 million, in the aggregate. For more information on our share repurchase program, see Note 5.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

220 edited+51 added−85 removed191 unchanged
Biggest changeThe primary factors contributing to the increase in NGD net income were as follows: • $26.1 million increase in NGD margin primarily due to: ▪ $14.9 million increase due to new customer rates from the 2022 Oregon and 2021 Washington rate cases that went into effect November 1, 2022; ▪ $6.1 million increase driven by customer growth; ▪ $3.0 million increase due to higher usage from colder comparative weather from customers that are not decoupled, net of the loss from the Oregon gas cost incentive sharing mechanism; ▪ $2.9 million increase due to the amortization of deferred balances primarily related to COVID-19, cybersecurity, and ERP upgrades; and • $12.1 million increase in other income, net primarily due to lower pension non-service costs and interest income from the equity portion of AFUDC; partially offset by • $16.7 million increase in NGD operations and maintenance expenses due to higher contract labor, amortization expense related to cloud computing arrangements, professional service fees, and information technology costs; • $3.4 million increase in interest expense primarily due to higher long-term debt balances and higher interest rates, partially offset by higher AFUDC debt interest income; • $2.9 million higher income tax expense reflecting higher pre-tax income; and • $2.4 million increase in depreciation expense as we continue to invest in our natural gas utility system and facilities.
Biggest changeThe primary factors contributing to the decrease in NGD net income were as follows: • $18.2 million decrease in other income, net driven by higher pension non-service costs, lower interest income from invested cash, lower regulatory interest income and a decline in the equity portion of AFUDC; • $13.7 million decrease due to the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case; • $10.1 million increase in depreciation expense from continued capital investments in our system for safety and reliability; • $2.8 million increase in interest expense primarily due to higher short and long-term debt balances; and • $2.0 million increase in general taxes primarily driven by higher regulatory commission fees; partially offset by • $26.3 million increase in NGD margin primarily due to: ▪ $25.8 million increase due to new customer rates in Oregon that went into effect November 1, 2024; ▪ $3.7 million increase due to the amortization of deferred balances primarily related to COVID-19, cybersecurity, and ERP upgrades; and ▪ $2.2 million increase driven by customer growth; partially offset by 47 ▪ $4.3 million decrease due to lower usage from warmer comparative weather for customers not covered under the weather normalization mechanism; and ▪ $1.8 million decline in gains on the Oregon gas cost incentive sharing mechanism due to market prices more closely approximating prices embedded in the PGA and higher than estimated gas costs during the cold weather event in January 2024; and • $2.1 million decrease in NGD operations and maintenance expenses (excluding the regulatory disallowance) due to lower contract labor costs and lower bad debt expense, partially offset by higher amortization expense related to cloud computing arrangements.
Consolidated net income increased $13.2 million at NW Natural primarily due to the following factors: • $69.1 million increase in NGD segment margin driven by new rates in Oregon and Washington, actual gas prices that were lower than what was estimated in the 2022-2023 PGA, amortization of deferred balances (which is mostly offset in operations and maintenance expenses and interest expense), and customer growth; and • $15.8 million increase in other income, net primarily due to interest income from invested cash and the equity portion of AFUDC, and lower pension costs; partially offset by • $39.8 million increase in operations and maintenance expenses due to higher payroll costs, higher contract labor, the amortization of deferred balances (which is mostly offset in revenues), information technology costs and amortization expense related to cloud computing arrangements; • $14.3 million increase in interest expense, net primarily due to higher long-term debt balances; • $6.5 million increase in depreciation expense due to additional capital investments; • $4.8 million increase in general taxes primarily driven by higher property and payroll taxes; and • $4.6 million increase in income tax expense due to higher pre-tax income.
Consolidated net income increased $13.2 million at NW Natural primarily due to the following factors: • $69.1 million increase in NGD segment margin driven by new rates in Oregon and Washington, actual gas prices that were lower than what was estimated in the 2022-2023 PGA, amortization of deferred balances (which is mostly offset in operations and maintenance expenses and interest expense), and customer growth; and • $15.8 million increase in other income, net primarily due to interest income from invested cash and the equity portion of AFUDC, and lower pension costs; partially offset by • $39.8 million increase in operations and maintenance expenses due to higher payroll costs, higher contract labor, the amortization of deferred balances (which is mostly offset in revenues), information technology costs and amortization expense related to cloud computing arrangements; • $14.3 million increase in interest expense, net primarily due to higher long-term debt balances; 37 • $6.5 million increase in depreciation expense due to additional capital investments; • $4.8 million increase in general taxes primarily driven by higher property and payroll taxes; and • $4.6 million increase in income tax expense due to higher pre-tax income.
Hedge levels are subject to change based on actual load volumes, which depend to a certain extent on weather, economic conditions, and gas reserve production. Also, gas storage inventory levels may increase or decrease with storage expansion, changes in storage contracts with third parties, variations in the heat content of the gas, and/or storage recall by NW Natural.
Hedge levels are subject to change based on actual load volumes, which depend to a certain extent on weather, economic conditions, and gas reserve production. Also, gas storage inventory levels may increase or decrease with storage expansion, changes in storage contracts with third parties, 40 variations in the heat content of the gas, and/or storage recall by NW Natural.
Other income, net increased $15.8 million at NW Natural primarily due to $5.5 million of interest income from invested cash, $4.1 million from higher equity AFUDC interest income, and $5.8 million of lower pension costs. Costs related to our defined benefit pension plan for 2023 decreased compared to the prior year due to a decrease in amortization of actuarial losses.
Other income, net increased $15.8 million at NW Natural primarily due to $5.5 million of interest income from invested cash, $4.1 million from higher equity AFUDC interest income, and $5.8 million of lower pension costs. 53 Costs related to our defined benefit pension plan for 2023 decreased compared to the prior year due to a decrease in amortization of actuarial losses.
Daily average temperatures and 25-year average temperatures are based on a set point temperature of 59 degrees Fahrenheit for residential customers and 58 degrees Fahrenheit for commercial customers. The collections of any unbilled WARM amounts due to tariff caps and floors are deferred and earn a carrying charge until collected, or returned, in the PGA the following year.
Daily average temperatures and 25-year average temperatures are based on a set point temperature of 59 degrees Fahrenheit for 41 residential customers and 58 degrees Fahrenheit for commercial customers. The collections of any unbilled WARM amounts due to tariff caps and floors are deferred and earn a carrying charge until collected, or returned, in the PGA the following year.
We are not currently able to quantify the extent to which limitations on natural gas use, or declining line extension allowances provided in rates to cover construction costs for new services, will affect new meter additions, or to what extent carbon compliance costs included in rates will affect the competitiveness of our business and the demand for natural gas service.
We are not currently able to quantify the extent to which limitations on natural gas use, or declining line extension allowances provided in rates to cover construction costs for new services, will affect new meter additions, or to what extent carbon 46 compliance costs included in rates will affect the competitiveness of our business and the demand for natural gas service.
In Washington, SB 5116, the Clean Energy Transformation Act, requires all electric utilities in Washington to transition to carbon-neutral electricity by 2030 and to 100 percent carbon-free electricity by 2045. We expect compliance with 47 these and other laws will increase the cost of energy for electric customers in our service territory.
In Washington, SB 5116, the Clean Energy Transformation Act, requires all electric utilities in Washington to transition to carbon-neutral electricity by 2030 and to 100 percent carbon-free electricity by 2045. We expect compliance with these and other laws will increase the cost of energy for electric customers in our service territory.
If certain regulatory conditions are met, then the derivative instrument fair value is recorded together with an offsetting entry to a regulatory asset or liability account pursuant to regulatory accounting, and no unrealized gain or loss is recognized in current income or loss. See " Regulatory Accounting " above for additional information.
If certain regulatory conditions are met, then the derivative instrument fair value is recorded together with an offsetting entry to a regulatory asset or liability account pursuant to 64 regulatory accounting, and no unrealized gain or loss is recognized in current income or loss. See " Regulatory Accounting " above for additional information.
After insurance proceeds are fully 42 amortized, if in a particular year the request to collect deferred amounts exceeds one percent of Washington normalized revenues, then the excess will be collected over three years with interest. INTERSTATE STORAGE AND ASSET MANAGEMENT SHARING .
After insurance proceeds are fully amortized, if in a particular year the request to collect deferred amounts exceeds one percent of Washington normalized revenues, then the excess will be collected over three years with interest. INTERSTATE STORAGE AND ASSET MANAGEMENT SHARING .
See " Most Recent Completed Rate Cases " below. MIST INTERSTATE GAS STORAGE . NW Natural's interstate storage activity at Mist is subject to regulation by the OPUC, WUTC, and the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, rates and terms of service.
See " Most Recent Completed Rate Cases " below. 38 MIST INTERSTATE GAS STORAGE . NW Natural's interstate storage activity at Mist is subject to regulation by the OPUC, WUTC, and the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, rates and terms of service.
Washington ECRM The ECRM established by the WUTC order effective November 1, 2019 permits NW Natural’s recovery of environmental remediation expenses allocable to Washington customers. These expenses represent 3.32% of costs associated with remediation of sites that historically served both Oregon and Washington customers.
Washington ECRM The ECRM established by the WUTC order effective November 1, 2019 permits NW Natural’s recovery of environmental remediation expenses allocable to Washington customers. These expenses represent 3.32% of costs associated with 42 remediation of sites that historically served both Oregon and Washington customers.
Total Household Income Bill Discount Percentage Tier 0 At or below 60% FPL 80% Tier 1 61% - 120% of FPL 40% Tier 2 121% - 150% of FPL 20% Tier 3 Greater of 80% AMI or 151% - 200% of FPL 15% 43 RENEWABLE NATURAL GAS AND AUTOMATIC ADJUSTMENT CLAUSE.
Total Household Income Bill Discount Percentage Tier 0 At or below 60% FPL 80% Tier 1 61% - 120% of FPL 40% Tier 2 121% - 150% of FPL 20% Tier 3 Greater of 80% AMI or 151% - 200% of FPL 15% RENEWABLE NATURAL GAS AND AUTOMATIC ADJUSTMENT CLAUSE.
Effective February 1, 2021, building codes in Washington state require new residential homes to achieve higher levels of energy efficiency based on specified carbon emissions assumptions, which calculate electric appliances to have lower on-site GHG emissions than comparable gas appliances.
Effective February, 2021, building codes in Washington state require new residential homes to achieve higher levels of energy efficiency based on specified carbon emissions assumptions, which calculate electric appliances to have lower on-site GHG emissions than comparable gas appliances.
NW Natural is required under its Mist interstate storage certificate authority and rate approval orders to file every five years either a petition for rate approval or a cost and revenue study to change or justify maintaining the existing rates for its interstate storage services.
FERC. NW Natural is required under its Mist interstate storage certificate authority and rate approval orders to file every five years either a petition for rate approval or a cost and revenue study to change or justify maintaining the existing rates for its interstate storage services.
All lenders under the NW Holdings credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2023 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 200 Total $ 200 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Holdings if the lender defaulted due to lack of funds or insolvency; however, NW Holdings does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings.
All lenders under the NW Holdings credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2024 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 200 Total $ 200 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Holdings if the lender defaulted due to lack of funds or insolvency; however, NW Holdings does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings.
If NW Natural’s long-term secured credit ratings are below A- for S&P and A3 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 45% or more.
If NW Natural’s long-term 55 secured credit ratings are below A- for S&P and A3 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 45% or more.
If NW Natural’s long-term secured credit ratings are below BBB for S&P and Baa2 for Moody’s, 56 dividends may be issued so long as NW Natural’s common equity ratio is 46% or more.
If NW Natural’s long-term secured credit ratings are below BBB for S&P and Baa2 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 46% or more.
Ohio Renewables additionally has contracted to sell a fixed-volume amount of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042.
Ohio Renewables additionally has contracted to sell a fixed-volume of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042.
From November 1, 2020 through October 31, 2022, average weather was calculated over the period June 1, 1994 through May 31, 2019, as determined in NW Natural’s 2020 Oregon general rate case. 50 Residential and Commercial Sales The primary factors that impact results of operations in the residential and commercial markets are customer growth, seasonal weather patterns, energy prices, competition from other energy sources, and economic conditions in our service areas.
From November 1, 2020 through October 31, 2022, average weather was calculated over the period June 1, 1994 through May 31, 2019, as determined in NW Natural’s 2020 Oregon general rate case. 49 Residential and Commercial Sales The primary factors that impact results of operations in the residential and commercial markets are customer growth, seasonal weather patterns, energy prices, competition from other energy sources, and economic conditions in our service areas.
Based on several factors, including current credit ratings, NW Natural's commercial paper program, current cash reserves, committed credit facilities, and an expected ability to issue long-term debt and receive equity contributions from NW Holdings, 57 NW Natural believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, and investing and financing activities as discussed in " Cash Flows " below.
Based on several factors, including current credit ratings, NW Natural's commercial paper program, current cash reserves, committed credit facilities, and an expected ability to issue long-term debt and receive equity contributions from NW Holdings, 56 NW Natural believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, and investing and financing activities as discussed in " Cash Flows " below.
In making such a determination, available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. NW Holdings and NW Natural have determined that all recorded deferred tax assets are more likely than not to be realized as of December 31, 2023. See Note 11.
In making such a determination, available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. NW Holdings and NW Natural have determined that all recorded deferred tax assets are more likely than not to be realized as of December 31, 2024. See Note 11.
Legislation or other forms of regulation could take a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, additional charges to fund energy efficiency activities or other regulatory actions, incentives or mandates to conserve energy or use renewable energy sources, tax advantages and other subsidies to support alternative energy sources, a reduction in rate recovery for construction costs related to the installation of new customer services or other new infrastructure investments, mandates for the use of specific fuels or technologies, bans on specific fuels or technologies, or promotion of research into new technologies to reduce the cost and increase the scalability of alternative energy sources.
Legislation or other forms of regulation have taken, and could continue to take, a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, additional charges to fund energy efficiency activities or other regulatory actions, incentives or mandates to conserve energy or use renewable energy sources, tax advantages and other subsidies to support alternative energy sources, a reduction in rate recovery for construction costs related to the installation of new customer services or other new infrastructure investments, mandates for the use of specific fuels or technologies, bans on specific fuels or technologies, or promotion of research into new technologies to reduce the cost and increase the scalability of alternative energy sources.
In June 2021, the State of Oregon enacted HB 2021, a clean electricity bill that requires the state’s two largest investor-owned electric utilities and retail electricity service suppliers to reduce GHG emissions associated with electricity sold to Oregon customers to 100 percent below baseline levels by 2040 with interim steps, including an 80 percent reduction by 2030 and 90 percent reduction by 2035.
For example, in June 2021, the State of Oregon enacted HB 2021, a clean electricity bill that requires the state’s two largest investor-owned electric utilities and retail electricity service suppliers to reduce GHG emissions associated with electricity sold to Oregon customers to 100 percent below baseline levels by 2040 with interim steps, including an 80 percent reduction by 2030 and 90 percent reduction by 2035.
The gain or loss from the fair value of a derivative instrument subject to regulatory deferral is 66 included in the recovery from, or refund to, NGD business customers in future periods.
The gain or loss from the fair value of a derivative instrument subject to regulatory deferral is included in the recovery from, or refund to, NGD business customers in future periods.
NW Holdings and NW Natural participate in the Compliance Assurance Process (CAP) with the Internal Revenue Service (IRS). Under the CAP program companies work with the IRS to identify and resolve material tax matters before the federal income tax return is filed each year. No reserves for uncertain tax benefits were recorded during 2023, 2022, or 2021. See Note 11.
NW Holdings and NW Natural participate in the Compliance Assurance Process (CAP) with the Internal Revenue Service (IRS). Under the CAP program companies work with the IRS to identify and resolve material tax matters before the federal income tax return is filed each year. No reserves for uncertain tax benefits were recorded during 2024, 2023, or 2022. See Note 11.
To the extent more than authorized ROE is earned in a year, the amount transferred to post-review would be reduced by those earnings that exceed its authorized ROE. For 2023, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2024. No earnings test adjustment is expected for 2023.
To the extent more than authorized ROE is earned in a year, the amount transferred to post-review would be reduced by those earnings that exceed its authorized ROE. For 2024, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2025. No earnings test adjustment is expected for 2024.
NW Natural's natural gas distribution business is subject to regulation by the OPUC and WUTC with respect to, among other matters, rates and terms of service, systems of accounts, and issuances of securities by NW Natural. In 2023, approximately 88% of NGD customers were located in Oregon, with the remaining 12% in Washington.
NW Natural's natural gas distribution business is subject to regulation by the OPUC and WUTC with respect to, among other matters, rates and terms of service, systems of accounts, and issuances of securities by NW Natural. In 2024, approximately 88% of NGD customers were located in Oregon, with the remaining 12% in Washington.
Residential and commercial customers in Oregon are allowed to opt out of the weather normalization mechanism, and as of December 31, 2023, approximately 7% of total eligible customers had opted out. NW Natural does not have a weather normalization mechanism approved for Washington customers, which account for about 12% of total customers.
Residential and commercial customers in Oregon are allowed to opt out of the weather normalization mechanism, and as of December 31, 2024, approximately 7% of total eligible customers had opted out. NW Natural does not have a weather normalization mechanism approved for Washington customers, which account for about 12% of total customers.
This condition is designed to ensure NW Natural continues to be adequately capitalized under the holding company structure. Under the WUTC order, the average common equity ratio must not exceed 56%. At December 31, 2023 and 2022, NW Natural satisfied the ring-fencing provisions described above.
This condition is designed to ensure NW Natural continues to be adequately capitalized under the holding company structure. Under the WUTC order, the average common equity ratio must not exceed 56%. At December 31, 2024 and 2023, NW Natural satisfied the ring-fencing provisions described above.
The NW Natural credit agreement permits the issuance of letters of credit in an aggregate amount of up to $60 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. There were no outstanding balances under this credit agreement at December 31, 2023 or 2022.
The NW Natural credit agreement permits the issuance of letters of credit in an aggregate amount of up to $60 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. There were no outstanding balances under this credit agreement at December 31, 2024 or 2023.
NW Natural was in compliance with both of these ring-fencing provisions as of December 31, 2023 and 2022. NW Natural may file a voluntary petition for bankruptcy only if approved unanimously by the Board of Directors of NW Natural, including the independent director, and by the holder of the preferred share.
NW Natural was in compliance with both of these ring-fencing provisions as of December 31, 2024 and 2023. NW Natural may file a voluntary petition for bankruptcy only if approved unanimously by the Board of Directors of NW Natural, including the independent director, and by the holder of the preferred share.
Derivative contracts outstanding at December 31, 2023, 2022 and 2021 were measured at fair value using models or other market accepted valuation methodologies derived from observable market data. Estimates of fair value may change significantly from period-to-period depending on market conditions, notional amounts, and prices.
Derivative contracts outstanding at December 31, 2024, 2023 and 2022 were measured at fair value using models or other market accepted valuation methodologies derived from observable market data. Estimates of fair value may change significantly from period-to-period depending on market conditions, notional amounts, and prices.
The discussion covers the years ended December 31, 2023, 2022, and 2021 and refers to the consolidated results of NW Holdings, the substantial majority of which consist of the operating results of NW Natural. When significant activity exists at NW Holdings that does not exist at NW Natural, additional disclosure has been provided.
The discussion covers the years ended December 31, 2024, 2023, and 2022 and refers to the consolidated results of NW Holdings, the substantial majority of which consist of the operating results of NW Natural. When significant activity exists at NW Holdings that does not exist at NW Natural, additional disclosure has been provided.
The OPUC also regulates intrastate storage services at Mist, while FERC regulates interstate storage services at Mist. The FERC uses a maximum cost of service model which allows for gas storage prices to be set at or below the cost of service as approved by FERC in our last regulatory filing.
The OPUC also regulates intrastate storage services at Mist, while FERC regulates interstate storage services at Mist. The FERC uses a maximum cost of service model which allows for gas storage prices to be set at or below the cost of service as approved by each agency in our last regulatory filing.
NW Natural was not required to post collateral at December 31, 2023. See Note 15 below. Other items that may have a significant impact on NW Natural's liquidity and capital resources include NW Natural's pension contribution requirements and environmental expenditures. PENSION CONTRIBUTIONS.
NW Natural was not required to post collateral at December 31, 2024. See Note 15 below. Other items that may have a significant impact on NW Natural's liquidity and capital resources include NW Natural's pension contribution requirements and environmental expenditures. PENSION CONTRIBUTIONS.
In addition, NW Natural has entered into long-term agreements to release firm pipeline capacity. NW Natural also enters into short-term and long-term gas purchase agreements. Refer to Note 16 for gas and pipeline capacity purchase commitments. NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated renewable natural gas activities.
In addition, NW Natural has entered into long-term agreements to release firm pipeline capacity. NW Natural also enters into short-term and long-term gas purchase agreements. Refer to Note 16 for gas and pipeline capacity purchase commitments. NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated RNG activities.
A qualitative assessment was performed during the fourth quarter of 2023 which indicated a quantitative assessment was not required; thus, no goodwill impairment was recorded. See Note 2 and Note 14 for additional information. Business combinations are accounted for using the acquisition method.
A qualitative assessment was performed during the fourth quarter of 2024 which indicated a quantitative assessment was not required; thus, no goodwill impairment was recorded. See Note 2 and Note 14 for additional information. Business combinations are accounted for using the acquisition method.
In September 2023, NW Natural filed its annual PGAs and received OPUC and WUTC approval in October 2023. PGA rate changes were effective November 1, 2023. Rates may vary between states due to different rate structures, rate mechanisms and hedging policies.
In September 2024, NW Natural filed its annual PGAs and received OPUC and WUTC approval in October 2024. PGA rate changes were effective November 1, 2024. Rates may vary between states due to different rate structures, rate mechanisms and hedging policies.
With respect to IRPs generally, the WUTC issues letters of compliance and Oregon acknowledges the IRP. In August 2023, NW Natural received a letter of compliance from the WUTC acknowledging the 2022 IRP. The OPUC issued their order on NW Natural's 2022 IRP in August 2023.
With respect to IRPs generally, the WUTC issues letters of compliance and Oregon acknowledges the IRP Action Plan. In August 2023, NW Natural received a letter of compliance from the WUTC acknowledging compliance of the 2022 IRP. The OPUC issued their order on NW Natural's 2022 IRP in August 2023.
The following table presents changes in key metrics if the estimated percentage of unbilled volume at December 31 was adjusted up or down by 1%: 2023 In millions Up 1% Down 1% Unbilled revenue increase (decrease) (1) $ 1.2 $ (1.2) Margin increase (decrease) (1) 0.2 (0.2) Net income before tax increase (decrease) (1) 0.1 (0.1) (1) Includes impact of regulatory mechanisms including decoupling mechanism and excludes the impact of unbilled revenue from water services.
The following table presents changes in key metrics if the estimated percentage of unbilled volume at December 31 was adjusted up or down by 1%: 2024 In millions Up 1% Down 1% Unbilled revenue increase (decrease) (1) $ 1.4 $ (1.4) Margin increase (decrease) (1) 0.2 (0.2) Net income before tax increase (decrease) (1) 0.1 (0.1) (1) Includes impact of regulatory mechanisms including decoupling mechanism and excludes the impact of unbilled revenue from water services.
When there is substantial judgment or uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities. 69
When there is substantial judgment or uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities. 67
The following shows the sensitivity of retirement benefit costs and benefit obligations to changes in certain actuarial assumptions: Dollars in millions Change in Assumption Impact on 2023 Retirement Benefit Costs Impact on Retirement Benefit Obligations at Dec. 31, 2023 Discount rate: (0.25) % Qualified defined benefit plans $ (0.2) $ 10.8 Non-qualified plans — 0.1 Other postretirement benefits — 0.5 Expected long-term return on plan assets: (0.25) % Qualified defined benefit plans 0.9 N/A Income Taxes Valuation Allowances Deferred tax assets are recognized to the extent that these assets are believed to be more likely than not to be realized.
The following shows the sensitivity of retirement benefit costs and benefit obligations to changes in certain actuarial assumptions: Dollars in millions Change in Assumption Impact on 2024 Retirement Benefit Costs Impact on Retirement Benefit Obligations at Dec. 31, 2024 Discount rate: (0.25) % Qualified defined benefit plans $ 1.1 $ 9.7 Non-qualified plans — 0.1 Other postretirement benefits — 0.5 Expected long-term return on plan assets: (0.25) % Qualified defined benefit plans 0.8 N/A Income Taxes Valuation Allowances Deferred tax assets are recognized to the extent that these assets are believed to be more likely than not to be realized.
NW Natural filed a rate petition with the FERC in August 2023 and the revised rates were effective beginning September 1, 2023. NW Natural continuously evaluates the need for rate cases in its jurisdictions. Regulatory Proceeding Updates 2024 OREGON RATE CASE . On December 29, 2023, NW Natural filed a request for a general rate increase with the OPUC.
NW Natural filed a rate petition with the FERC in August 2023 and the revised rates were effective beginning September 1, 2023. NW Natural continuously evaluates the need for rate cases in its jurisdictions. Regulatory Proceeding Updates 2025 OREGON RATE CASE. On December 30, 2024, NW Natural filed a request for a general rate increase with the OPUC.
Similarly, some jurisdictions and advocates are seeking to ban the use of natural gas and certain natural gas appliances inside homes and contend that there are detrimental indoor health effects associated with the use of natural gas.
Similarly, some jurisdictions and advocates are seeking to ban the use of natural gas and certain natural gas appliances inside homes contending that there are detrimental indoor health effects associated with the use of natural gas.
Operations and maintenance expense increased $49.1 million at NW Holdings primarily due to the following: • $39.8 million increase in operations and maintenance expense at NW Natural as discussed above; and • $9.3 million increase in other NW Holdings operations and maintenance expense primarily due to costs associated with recently acquired water and wastewater subsidiaries and business development costs at the holding company. 2022 COMPARED TO 2021.
Operations and maintenance expense increased $49.1 million at NW Holdings primarily due to the following: • $39.8 million increase in operations and maintenance expense at NW Natural as discussed above; and • $9.3 million increase in other NW Holdings operations and maintenance expense primarily due to costs associated with recently acquired water and wastewater subsidiaries and business development costs at the holding company.
Other income, net increased $16.7 million at NW Holdings driven by the increase at NW Natural discussed above and a $2.7 million gain recognized from a settlement agreement with a third party to settle outstanding receivables, partially offset by contributions to fund community outreach initiatives at NW Holdings. 2022 COMPARED TO 2021.
Other income, net increased $16.7 million at NW Holdings driven by the increase at NW Natural discussed above and a $2.7 million gain recognized from a settlement agreement with a third party to settle outstanding receivables, partially offset by contributions to fund community outreach initiatives at NW Holdings.
NW Holdings was in compliance with this covenant at December 31, 2023 and 2022, with consolidated indebtedness to total capitalization ratios of 56.5% and 57.6%, respectively.
NW Holdings was in compliance with this covenant at December 31, 2024 and 2023, with consolidated indebtedness to total capitalization ratios of 57.6% and 56.5%, respectively.
Further, it is reasonable to expect the recovery or refund of NW Natural's regulatory assets and liabilities at December 31, 2023 through future customer rates.
Further, it is reasonable to expect the recovery or refund of NW Natural's regulatory assets and liabilities at December 31, 2024 through future customer rates.
NW Natural does not expect a refund for 2023 based on results, and anticipates filing its 2023 earnings test in May 2024. GAS RESERVES.
NW Natural does not expect a refund for 2024 based on results, and anticipates filing its 2024 earnings test in May 2025. GAS RESERVES.
Cash provided by financing activities decreased $237.4 million at NW Holdings attributable to lower proceeds from common stock issuances and the retirement of short and long-term debt, partially offset by an increase in long-term debt issuances. 2022 COMPARED TO 2021.
Cash provided by financing activities decreased $237.4 million at NW Holdings attributable to lower proceeds from common stock issuances and the retirement of short and long-term debt, partially offset by an increase in long-term debt issuances.
Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly. The program began January 1, 2023. In December 2023, the WUTC approved a CCA cost recovery mechanism with a rate effective date of January 1, 2024.
Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly. The program began January 1, 2023. In December 2024, the WUTC re-authorized a CCA cost recovery mechanism with a rate effective date of January 1, 2025.
Sales volumes decreased 14.8 million therms, or 3%, primarily due to lower usage from multiple customers, most notably in the primary metals, pulp and paper, glass, stone and clay, and chemical manufacturing industries. 2022 COMPARED TO 2021.
Sales volumes decreased 14.8 million therms, or 3%, primarily due to lower usage from multiple customers, most notably in the primary metals, pulp and paper, glass, stone and clay, and chemical manufacturing industries.
For the 2022-23 and 2023-24 gas years, NW Natural selected the 90% deferral option. The ROE threshold is subject to adjustment annually based on movements in long-term interest rates. For calendar years 2021, 2022, and 2023, the ROE threshold was 10.40% in all periods. There were no refunds required for 2021 and 2022.
For the 2023-24 and 2024-25 gas years, NW Natural selected the 90% deferral option. The ROE threshold is subject to adjustment annually based on movements in long-term interest rates. For calendar years 2022, 2023, and 2024, the ROE threshold was 10.40% in all periods. There were no refunds required for 2022 and 2023.
Depreciation expense increased $8.9 million for NW Holdings, primarily due to a $2.4 million increase in other NW Holdings depreciation related to water and wastewater subsidiaries and a $6.5 million increase at NW Natural as discussed above. 2022 COMPARED TO 2021.
Depreciation expense increased $8.9 million for NW Holdings, primarily due to a $2.4 million increase in other NW Holdings depreciation related to water and wastewater subsidiaries and a $6.5 million increase at NW Natural as discussed above.
NW Natural earns a carrying cost equal to the amortization rate determined annually by the OPUC, which approximates a short-term borrowing rate. NW Natural included $9.6 million and $6.8 million of deferred remediation expense approved by the OPUC for collection during the 2023-24 and 2022-23 PGA years, respectively.
NW Natural earns a carrying cost equal to the amortization rate determined annually by the OPUC, which approximates a short-term borrowing rate. NW Natural included $8.8 million and $9.6 million of deferred remediation expense approved by the OPUC for collection during the 2024-25 and 2023-24 PGA years, respectively.
Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period.
Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period at a contractually specified price.
Interest expense, net, increased $23.3 million at NW Holdings due to the increase at NW Natural discussed above and higher interest expense on a higher level of long-term debt at NW Holdings and NWN Water. 2022 COMPARED TO 2021.
Interest expense, net, increased $23.3 million at NW Holdings due to the increase at NW Natural discussed above and higher interest expense on a higher level of long-term debt at NW Holdings and NWN Water.
Ohio Renewables has contracted to sell RNG produced by the EDL Facilities up to certain specified volumes in each of calendar years 2024 through 2026 to an investment-grade counterparty.
Gas Sale Agreements Ohio Renewables has contracted to sell RNG produced by the EDL Facilities up to certain specified volumes in each of calendar years 2024 through 2026 to an investment-grade counterparty.
Based on several factors, including current cash reserves, committed credit facilities, its ability to receive dividends from its operating subsidiaries, in particular NW Natural, a contracted issuance of long-term debt in March 2024, and an expected ability to issue long-term debt and equity securities in the capital markets, NW Holdings believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, investing, and financing activities as discussed in " Cash Flows " below.
Based on several factors, including current cash reserves, committed credit facilities, its ability to receive dividends from its operating subsidiaries, in particular NW Natural, and an expected ability to issue long-term debt and equity securities in the capital markets, NW Holdings believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, investing, and financing activities as discussed in " Cash Flows " below.
At December 31, 2023 and 2022, NW Natural had net regulatory income tax assets of $8.0 million and $10.2 million, respectively, representing future rate recovery of deferred tax liabilities resulting from differences in NGD plant financial statement and tax bases and NGD plant removal costs. These regulatory assets are currently being recovered through customer rates.
At December 31, 2024 and 2023, NW Natural had net regulatory income tax assets of $5.8 million and $8.0 million, respectively, representing future rate recovery of deferred tax liabilities resulting from differences in NGD plant financial statement and tax bases and NGD plant removal costs. These regulatory assets are currently being recovered through customer rates.
The IRP examines and analyzes uncertainties in the planning process, including potential changes in governmental and regulatory policies. The CCA that was passed in Washington is an example of a new policy that resulted in compliance requirements that need to be included in the planning process. PIPELINE SECURITY.
The IRP examines and analyzes uncertainties in the planning process to evaluate risk, including potential changes in governmental and regulatory policies. The CCA that was passed in Washington is an example of a new policy that resulted in compliance requirements that need to be included in the planning process.
NW Natural was in compliance with this covenant at December 31, 2023 and 2022, with consolidated indebtedness to total capitalization ratios of 52.8% and 52.1%, respectively.
NW Natural was in compliance with this covenant at December 31, 2024 and 2023, with consolidated indebtedness to total capitalization ratios of 53.1% and 52.8%, respectively.
Total Household Income Bill Discount Percentage Tier 0 At or below 15% SMI 40% Tier 1 16% - 30% of SMI 25% Tier 2 31% - 45% of SMI 20% Tier 3 46% - 60% of SMI 15% Washington In December 2023, NW Natural received approval from the WUTC for an income-qualifying residential bill discount program.
Total Household Income Bill Discount Percentage Tier 0 At or below 15% SMI 85% Tier 1 16% - 30% of SMI 50% Tier 2 31% - 45% of SMI 30% Tier 3 46% - 60% of SMI 15% Washington In December 2023, NW Natural received approval from the WUTC for an income-qualifying residential bill discount program.
There was $73.0 million and $88.0 million of outstanding balances under the NW Holdings agreement at December 31, 2023 and 2022, respectively. The NW Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $40 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date.
There was $33.6 million and $73.0 million of outstanding balances under the NW Holdings agreement at December 31, 2024 and 2023, respectively. The NW Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $40 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date.
Achieving our target capital structure and maintaining sufficient liquidity to meet operating requirements is necessary to maintain attractive credit ratings and provide access to the capital markets at reasonable costs. 55 NW Holdings' consolidated capital structure, excluding short-term debt, was as follows: December 31, 2023 2022 Common equity 44.9 % 46.8 % Long-term debt (including current maturities) 55.1 53.2 Total 100.0 % 100.0 % NW Natural's consolidated capital structure, excluding short-term debt, was as follows: December 31, 2023 2022 Common equity 47.5 % 51.4 % Long-term debt (including current maturities) 52.5 48.6 Total 100.0 % 100.0 % As of December 31, 2023 and 2022, NW Holdings' consolidated capital structure included common equity of 43.5% and 42.4%, long-term debt of 48.3% and 45.0%, and short-term debt including current maturities of long-term debt of 8.2% and 12.6%, respectively.
Achieving our target capital structure and maintaining sufficient liquidity to meet operating requirements is necessary to maintain attractive credit ratings and provide access to the capital markets at reasonable costs. 54 NW Holdings' consolidated capital structure, excluding short-term debt, was as follows: December 31, 2024 2023 Common equity 44.8 % 44.9 % Long-term debt (including current maturities) 55.2 55.1 Total 100.0 % 100.0 % NW Natural's consolidated capital structure, excluding short-term debt, was as follows: December 31, 2024 2023 Common equity 49.2 % 47.5 % Long-term debt (including current maturities) 50.8 52.5 Total 100.0 % 100.0 % As of December 31, 2024 and 2023, NW Holdings' consolidated capital structure included common equity of 42.4% and 43.5%, long-term debt of 51.4% and 48.3%, and short-term debt including current maturities of long-term debt of 6.2% and 8.2%, respectively.
We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 3,540,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period.
We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 2,430,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period.
The maturity date of the agreement is November 3, 2026 with an available extension of commitments for two additional one-year periods, subject to lender approval. 59 All lenders under the NW Natural credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2023 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 400 Total $ 400 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Natural if the lender defaulted due to lack of funds or insolvency; however, NW Natural does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings.
In December 2024, the maturity date of the agreement was extended to November 3, 2027 with an available extension of commitments for one additional one-year period, subject to lender approval. 58 All lenders under the NW Natural credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2024 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 400 Total $ 400 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Natural if the lender defaulted due to lack of funds or insolvency; however, NW Natural does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings.
The TSA is in the process of formulating regulations with the aim of rendering the security directives permanent. NW Natural is currently evaluating and implementing the security directives and related deliverables. NW Natural frequently updates the TSA on its progress on achieving the security directives.
The TSA continues to renew both directives and is in the process of formulating regulations with the aim of rendering the security directives permanent. NW Natural is currently evaluating and implementing the security directives and related deliverables. NW Natural frequently updates the TSA on its progress on achieving the security directives.
The significant factors contributing to the $136.7 million increase at NW Natural cash flow provided by operating activities were as follows: • $126.6 million decrease in accounts receivable due to colder weather in December 2022; • $40.0 million decrease in net deferred gas costs due to the recovery of higher priced gas in 2022; • $30.6 million decrease in asset optimization revenue sharing bill credits; and • $19.9 million increase due to a compliance obligation related to the Washington CCA; partially offset by • $64.9 million decrease in accounts payable resulting from payments of higher priced gas purchased in December 2022; and • $22.3 million decrease in the decoupling mechanism. 63 The $132.3 million increase in cash provided by operating activities at NW Holdings was primarily driven by the factors discussed above. 2022 COMPARED TO 2021.
The significant factors contributing to the $136.7 million increase at NW Natural cash flow provided by operating activities were as follows: • $126.6 million decrease in accounts receivable due to colder weather in December 2022; • $40.0 million decrease in net deferred gas costs due to the recovery of higher priced gas in 2022; • $30.6 million decrease in asset optimization revenue sharing bill credits; and • $19.9 million increase due to a compliance obligation related to the Washington CCA; partially offset by • $64.9 million decrease in accounts payable resulting from payments of higher priced gas purchased in December 2022; and • $22.3 million decrease in the decoupling mechanism.
Other Purchase Agreements Other purchase commitments primarily consist of remaining balances under existing purchase orders and gas storage agreements. At December 31, 2023, the amount due over the duration of the purchase agreements totaled $35.4 million. Except for these certain purchase commitments, NW Holdings and NW Natural have no material off-balance sheet financing arrangements.
Other Purchase Agreements Other purchase commitments primarily consist of remaining balances under existing purchase orders and gas storage agreements. At December 31, 2024, the amount due over the duration of the purchase agreements totaled $22.5 million. Except for these certain purchase commitments, NW Holdings and NW Natural have no material off-balance sheet financing arrangements.
The following table summarizes the amount of gains realized from commodity price transactions for the last three years: In millions 2023 2022 2021 NGD business net gain on commodity swaps $ 125.5 $ 107.8 $ 50.9 Realized gains and losses from commodity hedges shown above were recorded in cost of gas and were, or will be, included in annual PGA rates.
The following table summarizes the amount of gains (losses) realized from commodity price transactions for the last three years: In millions 2024 2023 2022 NGD business net gain (loss) on commodity swaps $ (119.2) $ 125.5 $ 107.8 Realized gains and losses from commodity hedges shown above were recorded in cost of gas and were, or will be, included in annual PGA rates.
In January 2024, the OPUC approved the annual 2024 bill credit for Oregon customers' share of interstate storage and asset management activities totaling approximately $20.6 million, which was credited to customers' bills in February 2024. This includes revenue generated for the November 2022 through October 2023 PGA year.
In January 2025, the OPUC approved the annual 2025 bill credit for Oregon customers' share of interstate storage and asset management activities totaling approximately $15.5 million, which was credited to customers' bills in February 2025. This includes revenue generated for the November 2023 through October 2024 PGA year.
See “Credit Agreements” below. 58 At December 31, 2023 and 2022, NW Natural's short-term debt consisted of the following: December 31, 2023 December 31, 2022 In millions Balance Outstanding Weighted Average Interest Rate (1) Balance Outstanding Weighted Average Interest Rate (1) NW Natural: Commercial paper $ 16.8 5.5 % $ 170.2 4.6 % Other (NW Holdings): Credit agreement 73.0 6.4 % 88.0 5.3 % NW Holdings $ 89.8 $ 258.2 (1) Weighted average interest rate on outstanding short-term debt Credit Agreements NW Holdings NW Holdings has a $200 million sustainability-linked credit agreement, with a feature that allows it to request increases in the total commitment amount, up to a maximum of $300 million.
See “Credit Agreements” below. 57 At December 31, 2024 and 2023, NW Natural's short-term debt consisted of the following: December 31, 2024 December 31, 2023 In millions Balance Outstanding Weighted Average Interest Rate (1) Balance Outstanding Weighted Average Interest Rate (1) NW Natural: Commercial paper $ 136.5 4.8 % $ 16.8 5.5 % Other (NW Holdings): Credit agreement 33.6 5.5 % 73.0 6.4 % NW Holdings $ 170.1 $ 89.8 (1) Weighted average interest rate on outstanding short-term debt Credit Agreements NW Holdings NW Holdings has a $200 million sustainability-linked credit agreement, with a feature that allows it to request increases in the total commitment amount, up to a maximum of $300 million.
Washington has also enacted the CCA, which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly beginning January 1, 2023, resulting in an overall reduction of GHG emissions to 95% below 1990 levels by 2050.
In 2022, the state of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly beginning January 1, 2023, resulting in an overall reduction of GHG emissions to 95% below 1990 levels by 2050.
In September 2021, a subsidiary of NW Natural Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to partially fund two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities).
In September 2021, a subsidiary of NW Natural Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to secure RNG supply from two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities).
Other Income (Expense), Net Other income (expense), net highlights include: In millions 2023 2022 2021 NW Natural total other income (expense), net $ 15.4 $ (0.4) $ (12.7) Other NW Holdings activity 2.5 1.6 0.1 NW Holdings total other income (expense), net $ 17.9 $ 1.2 $ (12.6) Other income (expense), net primarily consists of regulatory interest, pension and other postretirement non-service costs, gains from company-owned life insurance, interest income and donations. 2023 COMPARED TO 2022 .
Other Income (Expense), Net Other income (expense), net highlights include: In millions 2024 2023 2022 NW Natural total other income (expense), net $ (2.8) $ 15.4 $ (0.4) Other NW Holdings activity 1.7 2.5 1.6 NW Holdings total other income (expense), net $ (1.1) $ 17.9 $ 1.2 Other income (expense), net primarily consists of regulatory interest, pension and other postretirement non-service costs, gains from company-owned life insurance, the equity portion of AFUDC, interest income and donations. 2024 COMPARED TO 2023 .
Consolidated net income increased $7.6 million at NW Holdings primarily due to the following factors: • $13.2 million increase in consolidated net income at NW Natural as discussed above; partially offset by • $5.6 million decrease in other net income primarily reflecting higher interest expense at the holding and water companies. 2022 COMPARED TO 2021.
Consolidated net income increased $7.6 million at NW Holdings primarily due to the following factors: • $13.2 million increase in consolidated net income at NW Natural as discussed above; partially offset by • $5.6 million decrease in other net income primarily reflecting higher interest expense at the holding and water companies. CURRENT ECONOMIC AND POLITICAL CONDITIONS .
See "Business Segment— Natural Gas Distribution " below. 41 INDUSTRIAL TARIFFS . The OPUC and WUTC have approved tariffs covering NGD service to major industrial customers, which are intended to give NW Natural certainty in the level of gas supplies needed to serve this customer group.
INDUSTRIAL TARIFFS . The OPUC and WUTC have approved tariffs covering NGD service to major industrial customers, which are intended to give NW Natural certainty in the level of gas supplies needed to serve this customer group.
At December 31, 2023 and 2022, regulatory income tax assets of $4.9 million and $2.9 million, respectively, were recorded by NW Natural, representing probable future rate recovery of deferred tax liabilities resulting from the equity portion of AFUDC.
At December 31, 2024 and 2023, regulatory income tax assets of $6.0 million and $4.9 million, respectively, were recorded by NW Natural, representing future rate recovery of deferred tax liabilities resulting from the equity portion of AFUDC.
The filing includes effects of inflation, an updated depreciation study, and an increase in average rate base of $381 million compared to the last rate case for several long-planned investments by NW Natural including the following: • Supporting reinforcement, safety and reliability of NW Natural's distribution systems and operating facilities; • Upgrading technology to, among other things, further modernize NW Natural’s information technology infrastructure, enhance cybersecurity protections, and modernize metering infrastructure; and • Investing in components of NW Natural’s Mist and liquified natural gas storage facilities, which support service during winter heating months.
The filing includes approximately $10 million related to an updated depreciation study and an increase in average rate base of $204 million compared to the last rate case for several long-planned investments by NW Natural including the following: • Supporting reinforcement, safety and reliability of NW Natural's distribution systems and operating facilities; • Upgrading technology to, among other things, further modernize NW Natural’s information technology infrastructure, and enhance cybersecurity protections, and • Investing in components of NW Natural’s Mist gas storage facility, which supports service during winter heating months.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeNW Natural does not have credit exposure to financial commodity swap derivative counterparties when forward gas prices are lower than our hedge prices, which was the case with all financial commodity swap counterparties at December 31, 2023. NW Natural’s credit exposure also includes interest rate swap and foreign exchange forward counterparties, neither of which were significant at December 31, 2023.
Biggest changeNW Natural’s credit exposure also includes interest rate swap and foreign exchange forward counterparties, neither of which were significant at December 31, 2024.
NW Natural actively monitors and manages derivative credit exposure and places counterparties on hold for trading purposes or requires cash collateral, letters of credit, or guarantees as circumstances warrant. 70 The following table summarizes NW Natural's overall financial swap and option credit exposure, based on estimated fair value, and the corresponding counterparty credit ratings.
NW Natural actively monitors and manages derivative credit exposure and places counterparties on hold for trading purposes or requires cash collateral, letters of credit, or guarantees as circumstances warrant. 68 The following table summarizes NW Natural's overall financial swap and option credit exposure, based on estimated fair value, and the corresponding counterparty credit ratings.
Commodity Price Risk Natural gas commodity prices are subject to market fluctuations due to unpredictable factors including weather, pipeline transportation congestion, drilling technologies, market speculation, and other factors that affect supply and demand.
Commodity Price Risk Natural gas commodity prices are subject to market fluctuations due to unpredictable factors including weather, pipeline transportation congestion, drilling technologies, market speculation, governmental tariffs and other factors that affect supply and demand.
Unrealized gains related to these interest rate swap agreements totaled $0.2 million and $0.1 million, net of tax, as of December 31, 2023 and 2022, respectively. Foreign Currency Risk The costs of certain pipeline fees are subject to changes in the value of the Canadian currency in relation to the U.S. currency.
Unrealized gains related to these interest rate swap agreements totaled $0.2 million and $0.2 million, net of tax, as of December 31, 2024 and 2023, respectively. Foreign Currency Risk The costs of certain pipeline fees are subject to changes in the value of the Canadian currency in relation to the U.S. currency.
NW Natural's long-term gas supply contracts are primarily index-based and subject to monthly re-pricing, a strategy that is intended to substantially mitigate credit exposure to physical gas counterparties. Absolute notional amounts under physical gas contracts related to open positions on derivative instruments were 572 million therms and 463 million therms as of December 31, 2023 and 2022, respectively.
NW Natural's long-term gas supply contracts are primarily index-based and subject to monthly re-pricing, a strategy that is intended to substantially mitigate credit exposure to physical gas counterparties. Absolute notional amounts under physical gas contracts related to open positions on derivative instruments were 561 million therms and 572 million therms as of December 31, 2024 and 2023, respectively.
The table uses credit ratings from S&P and Moody’s, reflecting the higher of the S&P or Moody’s rating or a middle rating if the entity is split-rated with more than one rating level difference: Financial Derivative Position by Credit Rating Unrealized Fair Value Gain (Loss) In millions 2023 2022 AA/Aa $ (100.7) $ 77.9 A/A (14.8) 72.7 Total $ (115.5) $ 150.6 In most cases, NW Natural also mitigates the credit risk of financial derivatives by having master netting arrangements with counterparties which provide for making or receiving net cash settlements.
The table uses credit ratings from S&P and Moody’s, reflecting the higher of the S&P or Moody’s rating or a middle rating if the entity is split-rated with more than one rating level difference: Financial Derivative Position by Credit Rating Unrealized Fair Value Gain (Loss) In millions 2024 2023 AA/Aa $ (71.9) $ (100.7) A/A (10.8) (14.8) Total $ (82.7) $ (115.5) In most cases, NW Natural also mitigates the credit risk of financial derivatives by having master netting arrangements with counterparties which provide for making or receiving net cash settlements.
NW Natural's financial derivatives policy requires counterparties to have at least an investment-grade credit rating at the time the derivative instrument is entered into and specific limits on the notional amount and duration based on each counterparty’s credit rating.
NW Natural's financial derivatives policy requires counterparties to have at least an investment-grade credit rating at the time the derivative instrument is entered into and specific limits on the potential financial exposure and duration based on each counterparty’s credit rating.
If all of the foreign currency forward contracts had been settled on December 31, 2023, a gain of $0.2 million would have been realized. See Note 15. Credit Risk Credit Exposure to Natural Gas Suppliers Certain gas suppliers have either relatively low credit ratings or are not rated by major credit rating agencies.
If all of the foreign currency forward contracts had been settled on December 31, 2024, a loss of $0.5 million would have been realized. See Note 15. Credit Risk Credit Exposure to Natural Gas Suppliers Certain gas suppliers have either relatively low credit ratings or are not rated by major credit rating agencies.
Foreign currency forward contracts are used to hedge against fluctuations in exchange rates for NW Natural's commodity-related demand and reservation charges paid in Canadian dollars. Notional amounts under foreign currency forward contracts were $11.9 million and $7.6 million as of December 31, 2023 and 2022, respectively.
Foreign currency forward contracts are used to hedge against fluctuations in exchange rates for NW Natural's commodity-related demand and reservation charges paid in Canadian dollars. Notional amounts under foreign currency forward contracts were $10.3 million and $11.9 million as of December 31, 2024 and 2023, respectively.
At December 31, 2023, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 24% in the United States and 76% in Canada, based on counterparties' location. At December 31, 2022, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 28% in the United States and 71% in Canada with our counterparties.
At December 31, 2024, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 17% in the United States and 83% in Canada, based on counterparties' location. At December 31, 2023, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 24% in the United States and 76% in Canada with our counterparties.
NW Natural has performed stress tests on the gas portfolio and concluded the liquidity risk from collateral calls is not material. Derivative credit exposure is primarily with investment grade counterparties rated AA-/Aa3 or higher. Contracts are diversified across counterparties, business types and countries to reduce credit and liquidity risk.
NW Natural has performed stress tests on the gas portfolio and concluded the liquidity risk from collateral calls is not material. Derivative credit exposure is primarily with investment grade counterparties rated AA-/Aa3 or higher. Contracts are diversified by counterparty, industry, sector and country to reduce credit and liquidity risk.
Credit Exposure to Financial Derivative Counterparties NW Natural did not have any credit exposure related to commodity swap contracts based on the estimated fair value at December 31, 2023.
Credit Exposure to Financial Derivative Counterparties NW Natural did not have any counterparty credit exposure related to commodity swap counterparties based on their estimated fair value at December 31, 2024.
Notional amounts under financial derivative contracts were $405.7 million and $359.5 million as of December 31, 2023 and 2022, respectively.
Notional amounts under financial derivative contracts were $303.7 million and $405.7 million as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, approximately 7% of Oregon customers had opted out. In addition to the Oregon customers opting out, Washington residential and commercial customers account for approximately 12% of our total customer base and are not covered by weather normalization.
As of December 31, 2024, approximately 7% of Oregon customers had opted out. In addition to the Oregon customers opting out, Washington customers account for approximately 12% of our total customer base and are not covered by weather normalization. The combination of Oregon and Washington customers not covered by a weather normalization mechanism is 18% o f all customers.
The fair value of financial swaps, based on market prices at December 31, 2023, was an unrealized loss of $115.5 million, which would result in cash outflows of $89.6 million in 2024, $22.9 million in 2025, and $3.0 million in 2026.
The fair value of financial swaps, based on market prices at December 31, 2024, was an unrealized loss of $82.7 million, which would result in cash outflows of $71.3 million in 2025, $10.0 million in 2026, and $1.4 million in 2027.
Removed
The combination of Oregon and Washington customers not covered by a weather normalization mechanism is 19% o f all residential and commercial customers. See "Results of Operations—Regulatory Matters—Rate Mechanisms— WARM " above. 71
Added
NW Natural does not have credit exposure to financial commodity swap derivative counterparties when the value of contracts in an unrealized loss position exceeds that of contracts in an unrealized gain position. The net unrealized loss position occurs when forward market prices are lower than our hedge prices.
Added
See "Results of Operations—Regulatory Matters—Rate Mechanisms— WARM " above. 69

Other NWN 10-K year-over-year comparisons