What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-26 · 269 added, 466 removed, 1922 unchanged (28% of the section changed)

1 unchanged sentence

Management's Reports on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Financial Statements:

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Northwest Natural Holding Company and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Northwest Natural Holding Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of rate cases and other proceedings, including the probability of recovery of regulatory assets and the settlement of regulatory liabilities and related accounting and disclosure impacts.

These procedures included testing the effectiveness of controls relating to management’s assessment of rates cases and other proceedings, including the probability of recovery of regulatory assets and the settlement of regulatory liabilities and related accounting and disclosure impacts.

These procedures also included, among others (i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets and settlement of regulatory liabilities, (ii) evaluating the sufficiency of the disclosures in the consolidated financial statements, and (iii) testing the regulatory assets and liabilities, including those subject to regulatory proceedings, also involved considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Northwest Natural Gas Company and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income (loss), shareholder’s equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Northwest Natural Gas Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income (loss), of shareholder's equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

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As described in Note 2 to the consolidated financial statements, there were $386.9 million of regulatory assets and $769.6 million of regulatory liabilities as of December 31, 2021.

As disclosed by management, the Company has operations that are subject to the actions of regulators which establish rates in general rate cases and other proceedings which are designed to recover specific costs of providing regulatory services for which management records regulatory assets and liabilities.

As disclo sed by management, the Company has operations that are subject to the actions of regulators which establish rates in general rate cases and other proceedings which are designed to recover specific costs of providing regulatory services for which management records regulatory assets and liabilities.

Regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet.

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures also included, among others (i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets

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Inventories 57,262 42,691

Gas reserves 11,409 15,278

Income taxes receivable — 6,000

Other current assets 59,288 56,150

Discontinued operations - current assets — 15,134

Total current assets 437,276 323,245

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Total property, plant, and equipment, net 2,871,370 2,654,770

Gas reserves 34,484 48,394

Regulatory assets 314,579 348,927

1 unchanged sentence

Other investments 89,278 83,743

Operating lease right of use asset 77,446 2,950

Operating lease right of use asset, net 75,049 77,446

Assets under sales-type leases 138,995 143,759

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Other current liabilities 54,432 52,330

Discontinued operations - current liabilities — 13,709

Total current liabilities 724,765 627,083

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Balance at December 31, 2018 $ 457,640 $ 312,182 $ ( 7,188 ) $ 762,634

Comprehensive income — 64,569 1,250 65,819

Comprehensive income (loss) — 61,735 ( 2,179 ) 59,556

Dividends on common stock, $ 1.90 per share

2 unchanged sentences

Shares issued pursuant to equity based plans 5,085 — — 5,085

Cash purchase of shares for business combination ( 7,945 ) — — ( 7,945 )

Value of shares transferred for business combination 8,525 — — 8,525

Issuance of common stock, net of issuance costs 92,956 — — 92,956

Reclassification of tax effects from the TCJA — 1,366 ( 1,366 ) —

Balance at December 31, 2019 558,282 318,450 ( 10,733 ) 865,999

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Shares issued pursuant to equity based plans 2,469 — — 2,469

Issuance of common stock, net of issuance costs 92,956 — — 92,956

Reclassification of tax effects from the TCJA — 1,366 ( 1,366 ) —

Balance at December 31, 2020 565,112 336,523 ( 12,902 ) 888,733

4 unchanged sentences

Shares issued pursuant to equity based plans 4,543 — — 4,543

Issuance of common stock, net of issuance costs 17,501 — — 17,501

Balance at December 31, 2021 $ 590,771 $ 355,779 $ ( 11,404 ) $ 935,146

14 unchanged sentences

Environmental remediation expense 9,938 9,691 12,337

Regulatory revenue deferral from the TCJA — 853 7,929

Regulatory disallowance of pension costs — — 10,500

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Deferred gas costs ( 40,541 ) 17,590 ( 23,471 )

Asset optimization revenue sharing 44,458 ( 7,244 ) 655

Decoupling mechanism ( 5,206 ) 2,884 18,661

7 unchanged sentences

Proceeds from the sale of assets 3,926 8,149 659

Purchase of equity method investment ( 14,450 ) — —

Proceeds from sale of equity method investment 7,000 7,000 —

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Financing activities:

Proceeds from stock options exercised 68 2,015 1,546

Proceeds from common stock issued — 92,956 —

Proceeds from common stock issued, net 17,501 — 92,956

Long-term debt issued 185,000 150,000 175,000

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Repayment of term loan ( 100,000 ) ( 150,000 ) —

Proceeds from issuances of commercial paper, maturities greater than 90 days 195,025 — —

Proceeds from commercial paper, maturities greater than three months — 195,025 —

Repayments of commercial paper, maturities greater than three months ( 195,025 ) — —

Changes in other short-term debt, net 280,000 ( 39,600 ) ( 68,520 )

Cash dividend payments on common stock ( 55,919 ) ( 55,420 ) ( 53,339 )

Stock purchases related to acquisitions — — ( 7,951 )

Other ( 5,121 ) ( 3,228 ) ( 599 )

Cash provided by financing activities 131,436 171,777 115,498

Increase (decrease) in cash and cash equivalents 20,520 ( 2,985 ) 9,161

Cash and cash equivalents, beginning of period 9,648 12,633 3,472

Cash and cash equivalents, end of period $ 30,168 $ 9,648 $ 12,633

Increase (decrease) in cash, cash equivalents and restricted cash ( 8,334 ) 22,818 ( 2,270 )

Cash, cash equivalents and restricted cash, beginning of period 35,454 12,636 14,906

Cash, cash equivalents and restricted cash, end of period $ 27,120 $ 35,454 $ 12,636

Supplemental disclosure of cash flow information:

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Income tax expense 28,333 21,095 14,065

Net income from continuing operations 70,563 68,974 68,049

Loss from discontinued operations, net of tax — — ( 1,723 )

Net income 81,172 70,563 68,974

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Inventories 56,752 42,325

Gas reserves 11,409 15,278

Other current assets 47,378 49,318

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Total property, plant, and equipment, net 2,812,279 2,608,330

Gas reserves 34,484 48,394

Regulatory assets 314,539 348,887

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Other investments 74,786 83,726

Operating lease right of use asset 77,328 2,760

Operating lease right of use asset, net 74,987 77,328

Assets under sales-type leases 138,995 143,759

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Balance at December 31, 2018 $ 226,452 $ 496,404 $ ( 7,188 ) $ 715,668

Comprehensive income — 66,326 1,250 67,576

Dividends on common stock — ( 41,035 ) — ( 41,035 )

Stock-based compensation (1)

2,161 — — 2,161

Shares issued pursuant to equity based plans 3,075 — — 3,075

Transfer of investments to NW Holdings as of October 1, 2018 ( 227,649 ) 168,764 — ( 58,885 )

Balance at December 31, 2018 226,452 496,404 ( 7,188 ) 715,668

Comprehensive income (loss) — 68,974 ( 2,179 ) 66,795

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Balance at December 31, 2020 319,506 528,580 ( 12,902 ) 835,184

(1) Stock-based compensation is based on stock awards of NW Natural to be issued in shares of NW Holdings.

Comprehensive income (loss) — 81,172 1,498 82,670

Dividends on common stock — ( 56,056 ) — ( 56,056 )

Capital contributions from parent 116,009 — — 116,009

Balance at December 31, 2021 $ 435,515 $ 553,696 $ ( 11,404 ) $ 977,807

See Notes to Consolidated Financial Statements

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Environmental remediation expense 9,938 9,691 12,337

Regulatory revenue deferral from the TCJA — 853 7,929

Regulatory disallowance of pension costs — — 10,500

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Deferred gas costs ( 40,541 ) 17,590 ( 23,471 )

Asset optimization revenue sharing 44,458 ( 7,244 ) 655

Decoupling mechanism ( 5,206 ) 2,884 18,661

Other, net ( 25,060 ) ( 393 ) ( 2,081 )

Discontinued operations — — 3,184

Cash provided by operating activities 141,494 148,517 186,891

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Other ( 54 ) 1,654 ( 3,544 )

Discontinued operations — — ( 20,617 )

Cash used in investing activities ( 275,729 ) ( 264,123 ) ( 243,077 )

Financing activities:

Proceeds from stock options exercised — — 1,368

Long-term debt issued 130,000 150,000 140,000

2 unchanged sentences

Repayment of term loan ( 100,000 ) ( 150,000 ) —

Proceeds from issuances of commercial paper, maturities greater than 90 days 195,025 — —

Proceeds from commercial paper, maturities greater than three months — 195,025 —

Repayment of commercial paper, maturities greater than three months ( 195,025 ) — —

Changes in other short-term debt, net 209,000 ( 88,600 ) ( 92,400 )

2 unchanged sentences

Other ( 4,600 ) ( 3,632 ) ( 2,510 )

Discontinued operations — — ( 7,951 )

Cash provided by financing activities 139,328 122,438 54,873

Increase (decrease) in cash and cash equivalents 4,534 ( 2,028 ) 4,837

Cash and cash equivalents, beginning of period 5,919 7,947 3,110

Cash and cash equivalents, end of period $ 10,453 $ 5,919 $ 7,947

Increase (decrease) in cash, cash equivalents and restricted cash 5,093 6,832 ( 1,313 )

Cash, cash equivalents and restricted cash, beginning of period 15,739 8,907 10,220

Cash, cash equivalents and restricted cash, end of period $ 20,832 $ 15,739 $ 8,907

Supplemental disclosure of cash flow information:

Interest paid, net of capitalization $ 42,395 $ 40,624 $ 39,927

Income taxes paid (refunded) 6,100 2,479 27,350

Income taxes paid 26,451 6,100 2,479

See Notes to Consolidated Financial Statements

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ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

On October 1, 2018, we completed a reorganization into a holding company structure.

In this reorganization, shareholders of NW Natural (the predecessor publicly held parent company) became shareholders of NW Holdings on a one-for-one basis;

maintaining the same number of shares and ownership percentage as held in NW Natural immediately prior to the reorganization.

NW Natural became a wholly-owned subsidiary of NW Holdings.

Additionally, certain subsidiaries of NW Natural were transferred to NW Holdings.

This reorganization was accounted for as a transaction among entities under common control.

As required under accounting guidance, these subsidiaries are presented in this report as discontinued operations in the consolidated results of NW Natural.

See Note 19 for additional information.

The accompanying consolidated financial statements represent the respective, consolidated financial results of NW Holdings and NW Natural and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise.

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NW Holdings and NW Natural consolidate all entities in which they have a controlling financial interest.

Investments in corporate joint ventures and partnerships that NW Holdings does not directly or indirectly control, and for which it is not the primary beneficiary, include NNG Financial's investment in Kelso-Beaver Pipeline, which is accounted for under the equity method, and NWN Energy's investment in Trail West Holdings, LLC (TWH), which was accounted for under the equity method through August 6, 2020 when it was sold to a third party.

See Note 14 for activity related to TWH.

Investments in corporate joint ventures and partnerships that NW Holdings does not directly or indirectly control, and for which it is not the primary beneficiary, include NNG Financial's investment in Kelso-Beaver Pipeline and NWN Water's investment in Avion Water Company, Inc., which are accounted for under the equity method.

See Note 13 for activity related to equity method investments.

NW Holdings and its direct and indirect subsidiaries are collectively referred to herein as NW Holdings, and NW Natural and its direct and indirect subsidiaries are collectively referred to herein as NW Natural.

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We concluded that the sale of Gill Ranch qualified as assets and liabilities held for sale and discontinued operations.

As such, the results of Gill Ranch were presented as a discontinued operation for NW Holdings for all periods presented and for NW Natural up until the holding company reorganization was effective on October 1, 2018 on the consolidated statements of comprehensive income and cash flows, and the assets and liabilities associated with Gill Ranch were classified as discontinued operations assets and liabilities on the NW Holdings consolidated balance sheet.

As such, the results of Gill Ranch were presented as a discontinued operation for NW Holdings for all periods presented on the consolidated statements of comprehensive income and cash flows, and the assets and liabilities associated with Gill Ranch were classified as discontinued operations assets and liabilities on the NW Holdings consolidated balance sheet.

The sale closed on December 4, 2020.

See Note 18 for additional information.

Additionally, we reevaluated reportable segments and concluded that the remaining gas storage activities no longer met the requirements to be separately reported as a segment.

Interstate Storage Services is reported in Other under NW Natural and NW Holdings as applicable, and all prior periods reflect this change.

See Note 4, which provides segment information.

Notes to the consolidated financial statements reflect the activity of continuing operations for both NW Holdings and NW Natural for all periods presented, unless otherwise noted.

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Unrealized gain on derivatives (1)

48,130 13,674

Decoupling (3)

Income taxes (6)

15,560 23,546

Asset optimization revenue sharing 45,124 10,298

Total current $ 112,281 $ 50,362

6 unchanged sentences

445,952 427,960

Asset optimization revenue sharing 1,810 1,231

13,792 11,843

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During 2020, our regulated utilities received approval in their respective jurisdictions to defer certain financial impacts associated with COVID-19 such as bad debt expense, financing costs to secure liquidity, lost revenues related to late fees and reconnection fees, and other COVID-19 related costs, net of offsetting direct expense reductions associated with COVID-19.

As a result, we recorded a regulatory asset of approximately $ 4.8 million for incurred costs associated with COVID-19 that are recoverable.

As of December 31, 2021 and 2020, we had a regulatory asset of approximately $ 8.6 million and $ 4.8 million , respectively, for incurred costs associated with COVID-19 that we believe are recoverable.

New Accounting Standards

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Recently Adopted Accounting Pronouncements

ACCUMULATED OTHER COMPREHENSIVE INCOME.

On February 14, 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income:

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This update was issued in response to concerns from certain stakeholders regarding the current requirements under U.S.

GAAP that deferred tax assets and liabilities are adjusted for a change in tax laws or rates, and the effect is to be included in income from continuing operations in the period of the enactment date.

This requirement is also applicable to items in accumulated other comprehensive income where the related tax effects were originally recognized in other comprehensive income.

The adjustment of deferred taxes due to the new corporate income tax rate enacted through the Tax Cuts and Jobs Act (TCJA) on December 22, 2017 recognized in income from continuing operations causes the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects) to not reflect the appropriate tax rate.

The amendments in this update allow but do not require a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA and require certain disclosures about stranded tax effects.

NW Natural adopted and applied the standard in the first quarter of 2019.

NW Natural elected to reclassify the stranded tax effects of the TCJA of $ 1.4 million from accumulated other comprehensive loss to retained earnings in the period of adoption.

Going forward, our policy is that, in the event that regulation changes result in stranded tax effects, such amounts will be reclassified from accumulated other comprehensive income (loss) to retained earnings in the final period that the related deferred tax balance remeasurement is expected to impact income from continuing operations.

CLOUD COMPUTING.

On August 29, 2018, the FASB issued ASU 2018-15, "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The purpose of the amendment is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The amendments in this update were effective beginning January 1, 2020.

Early adoption was permitted, and NW Holdings and NW Natural early adopted ASU 2018-15 in the quarter ended March 31, 2019 utilizing the prospective application methodology.

The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

CREDIT LOSSES.

On June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," which applies to financial assets subject to credit losses and measured at amortized cost.

The new standard requires financial assets measured at amortized cost to be presented at the net amount expected to be collected and the allowance for credit losses is to be recorded as a valuation account that is deducted from the amortized cost basis.

The amendments in this update were effective beginning January 1, 2020 and were applied with the modified retrospective methodology.

The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

The majority of NW Holdings' and NW Natural's financial assets are either short-term in nature, such as trade receivables, or relate to leased gas facilities under approved rate schedules.

DERIVATIVES AND HEDGING.

On August 28, 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging:

Targeted Improvements to Accounting for Hedging Activities." The purpose of the amendment is to more closely align hedge accounting with companies’ risk management strategies.

The ASU amends the accounting for risk component hedging, the hedged item in fair value hedges of interest rate risk, and amounts excluded from the assessment of hedge effectiveness.

The guidance also amends the recognition and presentation of the effect of hedging instruments and includes other simplifications of hedge accounting.

The amendments in this ASU were effective beginning January 1, 2019 and were applied prospectively to hedging instruments.

The adoption did not have an impact on the financial statements or disclosures of NW Holdings or NW Natural.

FAIR VALUE MEASUREMENT.

On August 28, 2018, the FASB issued ASU 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." The purpose of the amendment is to modify the disclosure requirements for fair value measurements.

The amendments in this ASU were effective beginning January 1, 2020.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively.

All other amendments should be applied retrospectively.

NW Holdings and NW Natural do not have either Level 3 fair value measurements or transfers between Level 1 or Level 2 in their current portfolios.

The adoption did not have an impact on the financial statements or disclosures of NW Holdings or NW Natural.

On February 25, 2016, the FASB issued ASU 2016-02, "Leases," which revises the existing lease accounting guidance.

Pursuant to the new standard (“ASC 842”), lessees are required to recognize all leases, including operating leases that are greater than 12 months at lease commencement, on the balance sheet and record corresponding right of use assets and lease liabilities.

Lessor accounting will remain substantially the same under the new standard.

Quantitative and qualitative disclosures are also required for users of the financial statements to have a clear understanding of the nature of our leasing activities.

We elected the alternative prospective transition approach for adoption beginning January 1, 2019.

All comparative periods prior to January 1, 2019 will retain the financial reporting and disclosure requirements of ASC 840 “Leases” (“ASC 840”).

There was no cumulative effect adjustment to the opening balance of retained earnings recorded as of January 1, 2019 for adoption as there were no initial direct costs or other capitalized costs related to the legacy leases that needed to be derecognized upon adoption of ASC 842.

We elected the land easement optional practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under the ASC 840 lease guidance.

For the existing lease portfolio, we did not elect the optional practical expedient package to retain the legacy lease accounting conclusions upon adoption;

we re-assessed our existing contracts under the new leasing standard including whether the contract meets the definition of a lease and lease classification.

As a result, we determined that most of our underground gas storage contracts no longer meet the definition of a lease under the new lease standard.

Upon adoption on January 1, 2019, NW Holdings recorded an operating lease right of use asset and an associated operating lease liability of approximately $ 7.3 million, of which $ 7.0 million was recorded at NW Natural.

Lease liabilities are measured using NW Natural's incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments.

See Note 7 for more information.

RETIREMENT BENEFITS.

On August 28, 2018, the FASB issued ASU 2018-14, "Changes to the Disclosure Requirements for Defined Benefit Plans." The purpose of the amendment is to modify the disclosure requirements for defined benefit pension and other postretirement plans.

The amendments in this ASU were effective beginning January 1, 2020 and were applied retrospectively.

The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

Recently Issued Accounting Pronouncements

INCOME TAXES.

On December 18, 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." The purpose of the amendment is to reduce cost and complexity related to accounting for income taxes by removing certain exceptions to the general principles and improving consistent application for other areas in Topic 740.

The amendments in this ASU are effective beginning January 1, 2021.

Early adoption is permitted.

The amended presentation and disclosure guidance should be applied retrospectively.

We do not expect this ASU to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

The amendments in this ASU were effective beginning January 1, 2021.

The amended presentation and disclosure guidance was applied retrospectively.

The adoption did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

REFERENCE RATE REFORM.

On March 12, 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The purpose of the amendment is to provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022.

We do not expect this ASU to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

Scope." The purpose of the amendment is to clarify guidance on reference rate reform activities, specifically related to accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting, margining, and contract price alignment (the "discounting transition").

The amendments in ASUs 2020-04 and 2021-01 are effective for all entities as of March 12, 2020 through December 31, 2022.

We do not expect the ASUs to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

Recently Issued Accounting Pronouncements

In July 2021, the FASB issued ASU 2021-05, "Leases (Topic 842), Lessors - Certain Leases with Variable Lease Payments." The purpose of the amendment is to require lessors to account for certain lease transactions that contain variable lease payments as operating leases.

The amendments in this ASU are intended to eliminate the recognition of any day-one loss associated with certain sales-type and direct-financing lease transactions.

The changes do not impact lessee accounting.

The new guidance is effective on January 1, 2022 and may be adopted using either a retrospective or prospective approach.

We do not expect the ASU to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

Accounting Policies

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The weighted-average depreciation rate for NGD assets in service was approximately 3.0 % for 2021, 3.0 % for 2020, and 2.9 % for 2019, reflecting the approximate weighted-average economic life of the property.

This includes 2020 weighted-average depreciation rates for the

following asset categories:

This includes 2021 weighted-average depreciation rates for the following asset categories:

2.6 % for transmission and distribution plant, 2.0 % for gas storage facilities, 6.2 % for general plant, and 6.1 % for intangible and other fixed assets.

13 unchanged sentences

For purposes of reporting cash flows, cash and cash equivalents include cash on hand plus highly liquid investment accounts with original maturity dates of three months or less.

At December 31, 2020 and 2019, NW Holdings had outstanding checks of $ 4.4 million and $ 3.2 million, respectively, substantially all of which is recorded at NW Natural.

At December 31, 2021, NW Holdings had no outstanding checks and at December 31, 2020, NW Holdings had outstanding checks of $ 4.4 million, substantially all of which is recorded at NW Natural.

These balances are included in accounts payable in the NW Holdings and NW Natural balance sheets.

Restricted cash is primarily comprised of funds from public purpose charges for programs that assist low-income customers with bill payments or energy efficiency.

As of December 31, 2020 and 2019, NW Natural had restricted cash of $ 5.3 million and $ 3.0 million, respectively.

These balances are included in other current assets in the NW Holdings and NW Natural balance sheets.

Changes in these balances are presented in changes in assets and liabilities - other, net in the NW Holdings and NW Natural statements of cash flows.

There were no transfers between restricted cash and cash and cash equivalents during the years ended December 31, 2021 and 2020.

Prior period amounts have been reclassified to conform prior period information to the current presentation.

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances at NW Holdings as of December 31, 2021 and 2020:

In thousands 2021 2020

Cash and cash equivalents $ 18,559 $ 30,168

Restricted cash included in other current assets 8,561 5,286

Cash, cash equivalents and restricted cash $ 27,120 $ 35,454

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances at NW Natural as of December 31, 2021 and 2020:

In thousands 2021 2020

Cash and cash equivalents $ 12,271 $ 10,453

Restricted cash included in other current assets 8,561 5,286

Cash, cash equivalents and restricted cash $ 20,832 $ 15,739

Revenue Recognition and Accrued Unbilled Revenue

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Revenue taxes are included in operating expenses in the statements of comprehensive income for NW Holdings and NW Natural.

All revenue taxes are recorded at NW Natural and were $ 30.3 million, $ 30.3 million, and $ 30.1 million for 2020, 2019, and 2018, respectively.

Revenue taxes at NW Holdings were $ 34.7 million, $ 30.3 million, and $ 30.3 million for 2021, 2020, and 2019, respectively.

Accounts Receivable and Allowance for Uncollectible Accounts

1 unchanged sentence

NW Holdings and NW Natural establish allowances for uncollectible accounts (allowance) for trade receivables, including accrued unbilled revenue, based on the aging of receivables, collection experience of past due account balances including payment plans, and historical trends of write-offs as a percent of revenues.

A specific allowance is established and recorded for large individual customer receivables when amounts are identified as unlikely to be partially or fully

A specific allowance is established and recorded for large individual customer receivables when amounts are identified as unlikely to be partially or fully recovered.

Inactive accounts are written-off against the allowance after they are 120 days past due or when deemed uncollectible.

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For these short-term receivables, it is not expected that forecasted economic conditions would significantly affect the loss estimates under stable economic conditions.

For extreme situations like a financial crisis, natural disaster, and the economic slowdown caused by pandemics like COVID-19, we enhance our review and analysis.

After considering the significant exposure to quarantine-related job losses in Oregon and Washington state, NW Holdings and NW Natural expanded our standard review procedures for our allowance for uncollectible accounts calculation, including analyzing the significant indications of unemployment rate and comparing to historic economic data during the 2007-2009 time period when the country experienced an economic recession.

We then considered other qualitative information including recent customer interactions related to payment plans and credit issues, statistics from our website related to credit inquiries, and economic stimulus provided by the federal government which could have a beneficial impact on residential and commercial customers' abilities to ultimately make payment on their accounts.

Our provision calculation for residential and commercial accounts was estimated as a percentage of accounts that no customer payment was received for 90 or more days.

For extreme situations like a financial crisis, natural disaster, and the economic slowdown caused by the COVID-19 pandemic, we enhance our review and analysis.

After considering the significant exposure to COVID-19 related job losses in Oregon and Washington state, NW Holdings and NW Natural expanded our standard review procedures for our allowance for uncollectible accounts calculation, including analyzing the unemployment rate and comparing it to historic economic data during the 2007-2009 time period when the country experienced an economic recession.

We are also considering other qualitative information including recent customer interactions

related to payment plans and credit issues, statistics from our website related to credit inquiries, and bill assistance programs including the arrearage management program.

For the residential allowance calculation, we consider the funds applied or granted to customers through a variety of assistance programs including the COVID-19 arrearage management programs in Oregon and Washington.

During the third quarter of 2021, the normal collection process for residential accounts resumed.

For residential and commercial accounts, we have resumed normal collection processes and our provision is based on historical write-off trends and current information on delinquent accounts.

For industrial accounts, we continue to analyze those accounts on an account-by-account basis with specific reserves taken as necessary.

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Year ended December 31, 2021

In thousands Beginning Balance Provision recorded (1)

Write-offs recognized, net of recoveries Ending Balance

In thousands Beginning Balance Provision recorded, net of adjustments Write-offs recognized, net of recoveries Ending Balance

Allowance for uncollectible accounts:

related to accounts receivable:

Residential $ 2,153 $ 783 $ ( 1,476 ) $ 1,460

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Total $ 3,219 $ 724 $ ( 1,925 ) $ 2,018

(1) Includes $ 2.3 million that was deferred to a regulatory asset for costs associated with COVID-19 that are recoverable in future rates.

ALLOWANCE FOR NET INVESTMENTS IN SALES-TYPE LEASES.

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NGD gas inventories injected into storage are priced in inventory based on actual purchase costs, and those withdrawn from storage are charged to cost of gas during the period they are withdrawn at the weighted-average inventory cost.

Gas storage inventories, which primarily represented inventories at the Gill Ranch Facility and are included in Discontinued operations - current assets on the consolidated balance sheets, mainly consist of natural gas received as fuel-in-kind from storage customers.

Gas storage inventories mainly consist of natural gas received as fuel-in-kind from storage customers.

Gas storage inventories are valued at the lower of average cost or net realizable value.

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Materials and supplies inventories consist of inventories both related to and unrelated to NGD and are stated at the lower of average cost or net realizable value.

NW Natural's NGD and gas storage inventories totaled $ 24.7 million and $ 27.5 million at 2020 and 2019, respectively.

NW Natural's NGD and gas storage inventories totaled $ 37.4 million and $ 24.7 million at December 31, 2021 and 2020, respectively.

At December 31, 2021 and 2020, NW Holdings' materials and supplies inventories, which are comprised primarily of NW Natural's materials and supplies, totaled $ 19.4 million and $ 18.0 million, respectively.

During 2021, NW Natural entered into certain agreements to purchase renewable thermal certificates (RTCs).

RTCs are initially recorded at cost and subsequently assessed for impairment based on the lower-of-cost or market model.

All RTCs purchased during 2021 were retired or used on customers behalf prior to December 31, 2021.

Gas reserves are payments to acquire and produce natural gas reserves.

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Changes in the fair value of the derivatives are recognized in earnings unless specific regulatory or hedge accounting criteria are met.

Accounting for derivatives and hedges provides an exception for contracts intended for normal purchases and normal sales for which physical delivery is probable.

Accounting for derivatives and hedges provides an exception for contracts intended for normal purchases and normal sales for

which physical delivery is probable.

In addition, certain derivative contracts are approved by regulatory authorities for recovery or refund through customer rates.

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Goodwill and Business Combinations

NW Holdings, through its wholly-owned subsidiary NWN Water and NW Water's wholly-owned subsidiaries, has completed various acquisitions that resulted in the recognition of goodwill.

NW Holdings, through its wholly-owned subsidiary NWN Water and NWN Water's wholly-owned subsidiaries, has completed various acquisitions that resulted in the recognition of goodwill.

Goodwill is measured as the excess of the acquisition-date fair value of the consideration transferred over the acquisition-date fair value of the net identifiable assets assumed.

Adjustments are recorded during the measurement period to finalize the allocation of the purchase price.

The carrying value of goodwill is

reviewed annually during the fourth quarter using balances as of October 1, or whenever events or changes in circumstance indicate that such carrying values may not be recoverable.

The carrying value of goodwill is reviewed annually during the fourth quarter using balances as of October 1, or whenever events or changes in circumstance indicate that such carrying values may not be recoverable.

The goodwill assessment policy begins with a qualitative analysis in which events and circumstances are evaluated, including macroeconomic conditions, industry and market conditions, regulatory environments, and overall financial performance of the reporting unit.

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Acquisition-related costs are expensed as incurred.

When NW Natural acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as of the acquisition date.

When NW Natural acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual

terms, economic circumstances and pertinent conditions as of the acquisition date.

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.

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In those cases, the nature of the potential loss and the fact that the high end of the range cannot be reasonably estimated is disclosed.

Unconsolidated Affiliates

NW Holdings and NWN Water have equity interests in businesses which we account for under the equity method as we do not exercise control of the major operating and financial policies.

The carrying value of these investments as of December 31, 2021 was $ 14.5 million.

The business transactions with our equity method investments are not significant.

We regularly assesses the profitability and valuation of our investments for any potential impairment.

See Note 13 .

Subsequent Events

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We primarily operate in one reportable business segment, which is NW Natural's local gas distribution business and is referred to as the NGD segment.

During the second quarter of 2018, we moved forward with long-term strategic plans, which included a shift away from the California gas storage business, by entering into a Purchase and Sale Agreement that provided for the sale of all of the membership interests in Gill Ranch.

See Note 19 for additional information.

As such, we reevaluated reportable segments and concluded that the remaining gas storage activities no longer meet the requirements of a reportable segment.

Interstate Storage Services and asset management activities at the Mist gas storage facility are now reported as other under NW Natural.

NW Natural and NW Holdings also have investments and business activities not specifically related to the NGD segment, which are aggregated and reported as other and described below for each entity.

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and government and educational institutions.

In addition to NW Natural's local gas distribution business, the NGD segment also includes the portion of the Mist underground storage facility used to serve NGD customers, the North Mist gas storage expansion in Oregon, NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp, and NW Natural RNG Holding Company, LLC, a holding company established to invest in the development and procurement of renewable natural gas.

NW Natural's activities in Other include Interstate Storage Services and third-party asset management services for the Mist facility in Oregon, appliance retail center operations, and corporate operating and non-operating revenues and expenses that cannot be allocated to NGD operations.

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Earnings from the Mist facility also include revenue, net of amounts shared with NGD customers, from management of NGD assets at Mist and upstream pipeline capacity when not needed to serve NGD customers.

Under the Oregon sharing mechanism, NW Natural retains 80 % of the pre-tax income from these services when the costs of the capacity were not included in NGD rates, or 10 % of the pre-tax income when the costs have been included in these rates.

Under the Oregon sharing mechanism, NW Natural retains 80 % of the pre-tax income from these services when the costs of the capacity were not included in NGD rates, or 10 % of

the pre-tax income when the costs have been included in these rates.

The remaining 20 % and 90 %, respectively, are recorded to a deferred regulatory account for crediting back to NGD customers.

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NWN Gas Storage, a wholly-owned subsidiary of NWN Energy;

NWN Energy's equity investment in TWH through August 6, 2020;

NWN Energy's equity investment in Trail West Holdings, LLC (TWH) through August 6, 2020;

and other pipeline assets in NNG Financial.

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Other also includes corporate revenues and expenses that cannot be allocated to other operations, including certain business development activities.

All prior period amounts have been retrospectively adjusted to reflect the change in reportable segments and the designation of Gill Ranch as a discontinued operation for NW Holdings, and the designation of subsidiaries previously owned by NW Natural that are now owned by NW Holdings as discontinued operations for NW Natural.

Segment Information Summary

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The following table presents summary financial information concerning the reportable segment and other for continuing operations.

See Note 19 for information regarding discontinued operations for NW Holdings and NW Natural.

See Note 18 for information regarding discontinued operations for NW Holdings.

In thousands NGD Other

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Total assets at December 31, 2020 3,549,868 49,468 3,599,336 157,043 3,756,379

3,273,835 47,652 3,321,487 91,833 3,413,320

Operating revenues $ 720,528 $ 19,416 $ 739,944 $ 6,428 $ 746,372

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3,273,835 47,652 3,321,487 91,833 3,413,320

(1) Total assets for NW Holdings exclude assets related to discontinued operations of $ 15.1 million and $ 13.3 million as of December 31, 2019 , and 2018, respectively.

(1) Total assets for NW Holdings exclude assets related to discontinued operations of $ 15.1 million as of December 31, 2019.

Natural Gas Distribution Margin

NGD margin is a financial measure used by the CODM, consisting of NGD operating revenues, reduced by the associated cost of gas, environmental remediation expense, and revenue taxes.

NGD margin is the primary financial measure used by the CODM, consisting of NGD operating revenues, reduced by the associated cost of gas, environmental remediation expense, and revenue taxes.

The cost of gas purchased for NGD customers is generally a pass-through cost in the amount of revenues billed to regulated NGD customers.

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At NW Holdings' election, shares sold through the DRPP may be purchased in the open market or through original issuance of shares reserved for issuance under the DRPP.

The Restated Stock Option Plan (SOP) was terminated with respect to new grants in 2012;

however, options granted before the Restated SOP was terminated remain outstanding until the earlier of their expiration, forfeiture, or exercise.

Options are now exercisable for shares of NW Holdings common stock.

There were 9,438 options outstanding at December 31, 2020, which were granted prior to termination of the plan.

On June 7, 2019, NW Holdings completed the issuance of 1,437,500 shares of common stock, inclusive of the overallotment option granted to the underwriters, which was exercised in full.

All shares were issued on June 7, 2019 at an offering price of $ 67.00 per share.

The issuance resulted in proceeds to NW Holdings of $ 93.0 million, net of discounts and expenses.

The issuance was executed to raise funds for general corporate purposes, including for equity contributions to NW Holdings’ subsidiaries, that are reflected as equity transfers on occurrence.

Contributions received by NW Natural were also used, in part, to repay short-term indebtedness.

In August 2021, NW Holdings initiated an at-the-market (ATM) equity program by entering into an equity distribution agreement under which NW Holdings may issue and sell from time to time shares of common stock, no par value, having an aggregate gross sales price of up to $ 200 million.

NW Holdings is under no obligation to offer and sell common stock under the ATM equity program, which expires in August 2024.

Any shares of common stock offered under the ATM equity program are registered on NW Holdings’ universal shelf registration statement filed with the SEC.

As of December 31, 2021, NW Holdings had issued and sold 375,720 shares of common stock pursuant to the ATM equity program resulting in cash proceeds of $ 17.5 million, net of fees and commissions paid to agents of $ 0.4 million.

The ATM equity program was initiated to raise funds for general corporate purposes, including equity contributions to NW Holdings’ subsidiaries, NW Natural and NW Natural Water.

Contributions to NW Natural and NW Natural Water will be used for general corporate purposes.

Stock Repurchase Program

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Stock-based compensation 83

Equity issuance 1,438

Sales to shareholders under DRPP 53

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Stock-based compensation 46

Equity issuance 1,438

Sales to shareholders under DRPP 68

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Stock-based compensation 49

Equity issuance 376

Sales to shareholders under DRPP 67

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Customer accounts are settled on a monthly basis or paid at time of sale and based on historical experience.

It is probable that we will collect substantially all of the

consideration to which we are entitled.

It is probable that we will collect substantially all of the consideration to which we are entitled.

We evaluated the probability of collection in accordance with the current expected credit losses standard.

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Lease Revenue

Leasing revenue primarily consists of NW Natural's North Mist natural gas storage agreement with PGE which is billed under an OPUC-approved rate schedule and includes an initial 30 -year term with options to extend, totaling up to an additional 50 years upon mutual agreement of the parties.

Leasing revenue primarily consists of NW Natural's North Mist natural gas storage agreement with PGE which is billed under an OPUC-approved rate schedule and includes an initial 30 -year term beginning May 2019 with options to extend, totaling up to an additional 50 years upon mutual agreement of the parties.

GAAP, this agreement is classified as a sales-type lease and qualifies for regulatory accounting deferral treatment.

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Total lease revenue $ 17,551 $ 18,443

Total future minimum lease payments to be received under non-cancelable leases at NW Natural at December 31, 2020 are as follows:

Additionally, lease revenue of $ 0.5 million was recognized for each of the years ended December 31, 2021 and 2020 related to operating leases associated with non-utility property rentals.

Lease revenue related to these leases was presented in other income (expense), net on the consolidated statements of comprehensive income as it is non-operating income.

Total future minimum lease payments to be received under non-cancelable leases at December 31, 2021 are as follows:

In thousands Operating Sales-Type Total

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Thereafter 22 236,820 236,842

Total lease revenue $ 303 $ 333,995 $ 334,298

Total minimum lease payments $ 849 $ 316,477 $ 317,326

imputed interest 177,160

Total leases receivable $ 139,317

Other NW Holdings:

2022 $ 50 $ — $ 50

Thereafter 914 — 914

Total minimum lease payments $ 1,176 $ — $ 1,176

2022 $ 627 $ 17,026 $ 17,653

2023 125 16,557 16,682

2024 126 15,867 15,993

2025 119 15,306 15,425

2026 92 14,901 14,993

Thereafter 936 236,820 237,756

Total minimum lease payments $ 2,025 $ 316,477 $ 318,502

imputed interest 177,160

Total leases receivable $ 139,317

The total leases receivable above is reported under the NGD segment and the short- and long-term portions are included within other current assets and assets under sales-type leases on the consolidated balance sheets, respectively.

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Additionally, under regulatory accounting, the revenues and expenses associated with these agreements are presented on the consolidated statements of comprehensive income such that their presentation aligns with similar regulated activities at NW Natural.

Additionally, future minimum lease payments of $ 0.5 million for each of the years ending 2021 and 2022 are to be received under non-cancelable operating leases associated with non-utility property rentals.

For each of the years ended December 31, 2020 and 2019, approximately $ 0.5 million of lease revenue is presented in other income (expense), net on the consolidated statements of comprehensive income as it is non-operating income.

Lease Expense

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We have operating leases for land, buildings and equipment.

Our primary lease is for NW Natural's operations center.

Our primary lease is for NW Natural's headquarters and operations center.

Our leases have remaining lease terms of one year to 18 years.

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Weighted-average discount rate 7.2 % 7.2 %

Commencement of Significant Lease

NW Natural commenced a 20 -year operating lease agreement in March 2020 for a new corporate operations center in Portland, Oregon.

Total estimated base rent payments over the life of the lease are approximately $ 159.4 million.

Headquarters and Operations Center Lease

NW Natural commenced a 20 -year operating lease agreement in March 2020 for a new headquarters and operations center in Portland, Oregon.

There is an option to extend the term of the lease for two additional periods of seven years .

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We recorded the difference between the minimum lease payments and the aggregate of the imputed interest on the finance lease obligation and amortization of the right-of-use asset as a regulatory asset on our balance sheet.

The balance of the regulatory asset as of December 31, 2020 was $ 4.2 million.

The balance of the regulatory asset was $ 5.7 million and $ 4.2 million as of December 31, 2021 and 2020, respectively.

Maturities of operating lease liabilities at December 31, 2021 were as follows:

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Stock-based compensation plans are designed to promote stock ownership in NW Holdings by employees and officers of NW Holdings and its affiliates.

These compensation plans include a Long Term Incentive Plan (LTIP), an ESPP, and a Restated SOP.

These compensation plans include a Long Term Incentive Plan (LTIP), an ESPP, and a terminated Restated Stock Option Plan (SOP).

Long Term Incentive Plan

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Total 35,170 70,340 $ 1,322

Performance share awards are based on the achievement of a three-year ROIC threshold that must be met and a cumulative EPS factor, which can be modified by a TSR factor relative to the performance of the Russell 2500 Utilities Index over the three-year performance period.

The performance period allows for one of the performance factors to remain variable until the first quarter of the third year of the award period.

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Generally, the RSUs awarded are forfeitable and include a performance-based threshold as well as a vesting period of four years from the grant date.

Upon vesting, the RSU holder is issued one share of common stock plus a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of that portion of the RSU.

The majority of our RSU grants obligate NW Holdings, upon vesting, to issue the RSU holder one share of common stock.

The grant may also include a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of that portion of the RSU depending on the structure of the award agreement.

The fair value of an RSU is equal to the closing market price of NW Holdings' common stock on the grant date.

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Restated Stock Option Plan

The NW Natural Restated SOP was terminated for new option grants in 2012;

however, options granted before the plan terminated remain outstanding until the earlier of their expiration, forfeiture, or exercise and are now exercisable for shares of NW Holdings common stock.

Any new grants of stock options will be made under NW Holdings' LTIP, however, no option grants have been awarded since 2012 and all stock options were vested as of December 31, 2015.

Options under the Restated SOP were granted to officers and key employees designated by a committee of the Board of Directors.

All options were granted at an option price equal to the closing market price on the date of grant and may be exercised for a period of up to 10 years and seven days from the date of grant.

Option holders may exchange shares they have owned for at least six months , valued at the current market price, to purchase shares at the option price.

The Restated SOP was terminated with respect to new grants in 2012;

however, options granted before the Restated SOP was terminated remained outstanding until the earlier of their expiration, forfeiture, or exercise.

Options were exercisable for shares of NW Holdings common stock.

As of December 31, 2021, there were no options exercisable or outstanding.

Information regarding the Restated SOP activity is summarized as follows:

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Exercised ( 1,500 ) 45.24 —

Forfeited — — n/a

Expired — — n/a

Balance outstanding and exercisable, December 31, 2020 9,438 45.74 —

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Balance outstanding and exercisable, December 31, 2021 — $ — $ —

The weighted-average remaining life of options exercisable and outstanding at December 31, 2020 was 0.17 years.

Employee Stock Purchase Plan

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The primary source of short-term liquidity for NW Holdings is cash balances, dividends from its operating subsidiaries, in particular NW Natural, available cash from a multi-year credit facility, and short-term credit facilities it may enter into from time to time.

The primary source of short-term liquidity for NW Natural is from the sale of commercial paper, its multi-year credit facilities, and short-term credit facilities it may enter into from time to time.

In addition to issuing commercial paper or bank loans to meet working capital requirements, including seasonal requirements to finance gas purchases and accounts receivable, short-term debt may also be used to temporarily fund capital requirements.

The primary source of short-term liquidity for NW Natural is from the sale of commercial paper, available cash from a multi-year credit facility, and short-term credit facilities it may enter into from time to time.

In addition to issuing commercial paper or entering into bank loans to meet working capital requirements, including seasonal requirements to finance gas purchases and accounts receivable, short-term debt may also be used to temporarily fund capital requirements.

For NW Natural, commercial paper and bank loans are periodically refinanced through the sale of long-term debt or equity contributions from NW Holdings.

NW Natural's commercial paper is sold through two commercial banks under an issuing and paying agency agreement and is supported by one or more unsecured revolving credit facilities.

Commercial paper, when outstanding, is sold through two commercial banks under an issuing and paying agency agreement and is supported by one or more unsecured revolving credit facilities.

See “ Credit Agreements ” below.

At December 31, 2020 and 2019, NW Holdings had short-term debt outstanding of $ 304.5 million and $ 149.1 million, respectively.

The weighted average interest rate of NW Holdings' short-term debt outstanding at December 31, 2020 and 2019 was 0.5 % and 2.0 %, respectively.

At December 31, 2020 and 2019, NW Natural had $ 231.5 million and $ 125.1 million of commercial paper outstanding, respectively.

The weighted average interest rate of commercial paper outstanding at December 31, 2020 and 2019 was 0.4 % and 2.0 %, respectively.

In June 2021, NW Natural entered into a $ 100.0 million 364-Day Term Loan Credit Agreement (Term Loan) and borrowed the full amount.

All principal and interest under the Term Loan was repaid in December 2021.

At December 31, 2021 and 2020, NW Natural's short-term debt outstanding of $ 245.5 million and $ 231.5 million, respectively, consisted of commercial paper borrowings.

At December 31, 2021 and 2020, NW Holdings' short-term debt outstanding of $ 389.5 million and $ 304.5 million, respectively, consisted of the commercial paper outstanding at NW Natural and $ 144.0 million and $ 73.0 million, respectively, of balances outstanding under the credit agreement at NW Holdings.

The weighted average interest rate of commercial paper at NW Natural at December 31, 2021 and 2020 was 0.3 % and 0.4 %, respectively.

weighted average interest rate on the credit agreement at NW Holdings at December 31, 2021 and 2020 was 1.1 % and 1.2 %, respectively.

The carrying cost of commercial paper approximates fair value using Level 2 inputs.

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Credit Agreements

In October 2018, NW Holdings entered into a $ 100.0 million credit agreement, with a feature that allows it to request increases in the total commitment amount, up to a maximum of $ 150.0 million.

The maturity date of the agreement is October 2, 2023, with available extensions of commitments for two additional one-year periods, subject to lender approval.

In November 2021, NW Holdings entered into an amended and restated $ 200.0 million credit agreement, with a feature that allows NW Holdings to request increases in the total commitment amount, up to a maximum of $ 300.0 million.

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.

The NW Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $ 40.0 million.

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NW Holdings was in compliance with this covenant at December 31, 2021 and 2020.

The agreement also requires NW Holdings to maintain debt ratings (which are defined by a formula using NW Natural's credit ratings in the event NW Holdings does not have a credit rating) with Standard & Poor's (S&P) and Moody's Investors Service, Inc.

The NW Holdings credit agreement also requires NW Holdings to maintain debt ratings (which are defined by a formula using NW Natural's credit ratings in the event NW Holdings does not have a credit rating) with Standard & Poor's (S&P) and Moody's Investors Service, Inc.

(Moody’s) and notify the lenders of any change in its senior unsecured debt ratings or senior secured debt ratings, as applicable, by such rating agencies.

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No letters of credit were issued or outstanding under the NW Holdings agreement at December 31, 2021 and 2020.

NW Holdings had a $ 1.0 million letter of credit issued and outstanding, separate from the aforementioned credit agreement, at December 31, 2019 for the purposes of facilitating the Suncadia acquisition.

This letter of credit was extinguished upon the close of the transaction in February 2020.

In October 2018, NW Natural entered into a multi-year credit agreement for unsecured revolving loans totaling $ 300.0 million, with a feature that allows NW Natural to request increases in the total commitment amount, up to a maximum of $ 450.0 million.

The maturity date of the agreement is October 2, 2023 with available extensions of commitments for two additional one-year periods, subject to lender approval.

In November 2021, NW Natural entered into an amended and restated credit agreement for unsecured revolving loans totaling $ 400.0 million, with a feature that allows NW Natural to request increases in the total commitment amount, up to a maximum of $ 600.0 million.

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.

The credit agreement permits the issuance of letters of credit in an aggregate amount of up to $ 60.0 million.

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NW Natural was in compliance with this covenant at December 31, 2021 and 2020.

The credit agreement also requires NW Natural to maintain credit ratings with S&P and Moody’s and notify the lenders of any change in NW Natural's senior unsecured debt ratings or senior secured debt ratings, as applicable, by such rating agencies.

The NW Natural credit agreement also requires NW Natural to maintain credit ratings with S&P and Moody’s and notify the lenders of any change in NW Natural's senior unsecured debt ratings or senior secured debt ratings, as applicable, by such rating agencies.

A change in NW Natural's debt ratings by S&P or Moody’s is not an event of default, nor is the maintenance of a specific minimum level of debt rating a condition of drawing upon the credit agreement.

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At December 31, 2021 and 2020, NW Holdings had long-term debt outstanding of $ 1,044.9 million and $ 955.4 million, respectively;

which included $ 7.5 million and $ 5.7 million of unamortized debt issuance costs at NW Natural, respectively.

which included $ 8.3 million and $ 7.5 million of unamortized debt issuance costs, respectively.

NW Holdings' long-term debt is primarily comprised of debt held at its wholly-owned subsidiaries NW Natural (shown below) and NWN Water.

Long-term debt at NWN Water is primarily comprised of a two-year term loan agreement for $ 35.0 million, due in 2021.

Long-term debt at NWN Water is primarily comprised of a five-year term loan agreement for $ 55.0 million, due in 2026.

NWN Water entered into this agreement in June 2021 and the loan carried an interest rate of 0.90 % at December 31, 2021, which is based upon the one-month LIBOR rate.

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NW Holdings was in compliance with this covenant at December 31, 2021, with a consolidated indebtedness to total capitalization ratio of 60.5 %.

NW Natural's issuance of FMBs, which includes NW Natural's medium-term notes, under the Mortgage and Deed of Trust (Mortgage) is limited by eligible property, adjusted net earnings, and other provisions of the Mortgage.

The Mortgage constitutes a first mortgage lien on substantially all of NW Natural's NGD property.

In June 2019, NW Natural Water, a wholly-owned subsidiary of NW Holdings, entered into a two-year term loan agreement for $ 35.0 million.

The loan was repaid in June 2021 upon its maturity date.

NW Natural's issuance of First Mortgage Bonds, which includes NW Natural's medium-term notes, under the Mortgage and Deed of Trust (Mortgage) is limited by eligible property, adjusted net earnings, and other provisions of the Mortgage.

The Mortgage constitutes a first mortgage lien on certain gas properties owned from time to time by NW Natural, including substantially all of NW Natural's NGD property.

Maturities and Outstanding Long-Term Debt

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In thousands Long-term debt maturities

2021 $ 60,000

Thereafter 819,700

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3.176 % Series due 2021

10,000 10,000

3.542 % Series due 2023

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Total long-term debt $ 994,700 $ 864,700

First Mortgage Bonds

In March 2020, NW Natural issued $ 150.0 million of FMBs with an interest rate of 3.600 %, due in 2050.

Retirements of Long-Term Debt

In February 2020, NW Natural retired $ 75.0 million of FMBs with an interest rate of 5.370 %.

Fair Value of Long-Term Debt

NW Holdings' and NW Natural's outstanding debt does not trade in active markets.

The fair value of debt is estimated using natural gas distribution companies with similar credit ratings, terms, and remaining maturities to NW Holdings' and NW Natural's debt that actively trade in public markets.

The fair value of debt is estimated using the value of outstanding debt at natural gas distribution companies with similar credit ratings, terms, and remaining maturities to NW Holdings' and NW Natural's debt that actively trade in public markets.

Substantially all outstanding debt at NW Holdings is comprised of NW Natural debt.

These valuations are based on Level 2 inputs as defined in the fair value hierarchy.

The following table provides an estimate of the fair value of NW Holdings' long-term debt, including current maturities of long-term debt, using market prices in effect on the valuation date :

The following table provides an estimate of the fair value of long-term debt, including current maturities of long-term debt, using market prices in effect on the valuation date :

In thousands 2021 2020

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$ 1,110,741 $ 1,097,348

(1) Estimated fair value does not include unamortized debt issuance costs.

The following table provides an estimate of the fair value of NW Natural's long-term debt, including current maturities of long-term debt, using market prices in effect on the valuation date :

In thousands 2020 2019

Gross long-term debt $ 1,053,241 $ 962,905

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PENSION AND OTHER POSTRETIREMENT BENEFIT COSTS

NW Natural maintains a qualified non-contributory defined benefit pension plan (Pension Plan), non-qualified supplemental pension plans for eligible executive officers and other key employees, and other postretirement employee benefit plans.

NW Natural maintains a qualified non-contributory defined benefit pension plan (Pension Plan) for all eligible employees, non-qualified supplemental pension plans for eligible executive officers and other key employees, and other postretirement employee benefit plans.

NW Natural also has a qualified defined contribution plan (Retirement K Savings Plan) for all eligible employees.

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Interest cost 13,447 16,161 684 905

Net actuarial loss 52,777 58,269 145 1,809

Net actuarial (gain) loss ( 18,587 ) 52,777 ( 688 ) 145

Benefits paid ( 25,371 ) ( 25,073 ) ( 2,050 ) ( 1,837 )

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At December 31, 2021, the net liability (benefit obligations less market value of plan assets) for the Pension Plan decreased $ 46.5 million compared to 2020.

The decrease in the net pension liability is primarily due to the $ 60.9 million increase in plan assets, partially offset by the $ 47.8 million increase to the pension benefit obligation.

The liability for non-qualified plans increased $ 2.7 million, and the liability for other postretirement benefits decreased $ 0.5 million in 2020.

The decrease in the net pension liability is primarily due to the $ 25.3 million increase in plan assets and the $ 21.3 million decrease to the pension benefit obligation.

The liability for non-qualified plans decreased $ 2.3 million, and the liability for other postretirement benefits decreased $ 1.8 million in 2021.

NW Natural's Pension Plan had a projected benefit obligation of $ 503.9 million and $ 525.1 million at December 31, 2021 and 2020, respectively, and fair values of plan assets of $ 399.2 million and $ 373.9 million, respectively.

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In thousands 2021 2020 2019 2021 2020 2019 2021 2020 2019

Net actuarial loss (gain) $ 16,170 $ 10,424 $ 14,261 $ 145 $ 1,809 $ ( 327 ) $ 3,873 $ 3,595 $ ( 677 )

Net actuarial (gain) loss $ ( 32,258 ) $ 16,170 $ 10,424 $ ( 688 ) $ 145 $ 1,809 $ ( 812 ) $ 3,873 $ 3,595

Amortization of:

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Amortization of actuarial losses 1,225 923

Reclassification of stranded tax effects (1)

Total reclassifications before tax 2,037 ( 2,950 )

Tax expense 781 784

Tax (benefit) expense ( 539 ) 781

Total reclassifications for the period 1,498 ( 2,169 )

Ending balance $ ( 11,404 ) $ ( 12,902 )

(1) Reclassification of $ 1.4 million of income tax effects resulting from the TCJA from accumulated other comprehensive loss to retained earnings was made pursuant to the adoption of ASU 2018-02.

In 2022, NW Natural will amortize an estimated $ 11.8 million from regulatory assets to net periodic benefit costs, consisting of $ 12.1 million of actuarial losses offset by $ 0.3 million of prior service credits.

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The policies set forth the guidelines and objectives governing the investment of plan assets.

Plan assets are invested for total return with appropriate consideration for liquidity, portfolio risk, and return expectations.

Plan assets are invested for total return

with appropriate consideration for liquidity, portfolio risk, and return expectations.

All investments are expected to satisfy the prudent investments rule under the Employee Retirement Income Security Act of 1974.

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Amount allocated to construction ( 3,015 ) ( 2,798 ) ( 2,493 ) ( 93 ) ( 98 ) ( 86 )

Amount deferred to regulatory balancing account — — ( 10,314 ) — — —

Net periodic benefit cost charged to expense 15,657 17,662 16,356 1,006 1,204 1,174

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In addition, a certain amount of net periodic benefit costs were recorded to the regulatory balancing account, representing net periodic pension expense for the Pension Plan above the amount set in rates, as approved by the OPUC, from 2011 through October 31, 2018.

In March 2019, the OPUC issued an order concluding the NW Natural 2018 Oregon rate case.

The order allowed for the application of certain deferred revenues and tax benefits from the TCJA to reduce NW Natural's pension regulatory balancing account.

A corresponding total of $ 12.5 million in pension expenses were recognized in operating and maintenance expense and other income (expense), net in the consolidated statements of comprehensive income in the first quarter of 2019, with offsetting benefits recorded within operating revenues and income taxes.

The order also directed NW Natural to reduce the balancing account by an additional $ 10.5 million, of which $ 3.9 million was charged to operations and maintenance expense and $ 6.6 million was charged to other income (expense), net in the consolidated statements of comprehensive income.

Amortization of the remaining amount of the balancing account began in the second quarter of 2019 in accordance with the order.

Total amortization of the regulatory balancing account of $ 7.1 million and $ 16.8 million was recognized in 2020 and 2019, respectively, of which $ 2.6 million and $ 6.2 million was charged to operations and maintenance expense, respectively, and $ 4.5 million and $ 10.6 million was charged to other income (expense), net, respectively.

Total deferrals of the regulatory balancing account were $ 10.3 million in 2018, of which $ 2.4 million was deferred from operations and maintenance expense and $ 7.9 million was deferred from other income (expense), net.

Total amortization of the regulatory balancing account of $ 7.1 million was recognized in each of the years ended December 31, 2021 and 2020, of which $ 2.6 million was charged to operations and maintenance expense and $ 4.5 million was charged to other income (expense).

The following table provides the assumptions used in measuring periodic benefit costs and benefit obligations for the years ended December 31:

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Rate of increase in compensation 3.50 % 3.50 % 3.25 - 3.50 %

3.25 - 4.50 %

Expected long-term rate of return 7.25 % 7.25 % 7.50 % n/a n/a n/a

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3.50 - 6.50 %

3.25 - 4.50 %

Expected long-term rate of return 7.00 % 7.25 % 7.25 % n/a n/a n/a

(1) Rate assumption is 6.50 % in 2020 and 3.50 % thereafter.

The 2020 compensation increase assumption was a result of the 2019 execution of a new collective bargaining agreement with unionized members of NW Natural effective December 1, 2019.

(1) Rate assumption was 6.50 % in 2020 and 3.50 % thereafter.

The 2020 compensation increase assumption was a result of the 2019 execution of a collective bargaining agreement with unionized members of NW Natural effective December 1, 2019.

The assumed annual increase in health care cost trend rates used in measuring other postretirement benefits as of December 31, 2021 was 5.75 % .

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NW Natural makes contributions to its Pension Plan based on actuarial assumptions and estimates, tax regulations, and funding requirements under federal law.

The Pension Protection Act of 2006 (the Act) established funding requirements for defined benefit plans.

The Act establishes a 100% funding target over seven years for plan years beginning after December 31, 2008.

In July 2012, President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21) into law, which changed several provisions affecting pension plans, including temporary funding relief and Pension Benefit Guaranty Corporation (PBGC) premium increases, which shifts the level of minimum required contributions from the short-term to the long-term as well as increasing the operational costs of running a pension plan.

MAP-21 established a new minimum and maximum corridor for segment rates based on a 25-year average of bond yields, which resulted in lower minimum contributions requirements than those under previous regulations.

MAP-21, as amended, provides for the current corridor to be in effect through 2020 and subsequently broaden on an annual basis from 2021 through 2024.

The Pension Plan was underfunded by $ 104.7 million at December 31, 2021.

NW Natural made cash contributions totaling $ 9.6 million to its Pension Plan for 2021.

During 2021, NW Natural expects to make contributions of approximately $ 20.1 million to this plan.

The American Rescue Plan, which was signed into law on March 11, 2021, includes a provision for pension relief that extends the amortization period for required contributions from 7 to 15 years and provides for the stabilization of interest rates used to calculate future required contributions.

As a result, NW Natural does not expect to make any plan contributions during 2022.

Multiemployer Pension Plan

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That plan's employer identification number is 94-6076144.

Effective December 22, 2013, NW Natural withdrew from the plan, which was a noncash transaction.

Effective December 22, 2013,

NW Natural withdrew from the plan, which was a noncash transaction.

Vested participants will receive all benefits accrued through the date of withdrawal.

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Payments were $ 0.4 million for 2021, and as of December 31, 2021, the liability balance was $ 5.8 million.

Contributions to the plan were $ 0.6 million for each of 2019 and 2018, which was approximately 5 % to 6 % of the total contributions to the plan by all employer participants in those years.

For 2020 and 2019, contributions to the plan were $ 0.7 million and $ 0.6 million, respectively, which was approximately 6 % to 5 % of the total contributions to the plan by all employer participants in those years.

Defined Contribution Plan

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NW Natural contributions totaled $ 8.8 million, $ 8.3 million, and $ 7.0 million for 2021, 2020, and 2019, respectively.

The Retirement K Savings Plan includes an Employee Stock Ownership Plan.

Deferred Compensation Plans

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This asset class includes investments in emerging market debt, leveraged loans, REITs, high yield bonds, a commodities fund, and a hedge fund of funds .

ABSOLUTE RETURN STRATEGY.

This is a non-published NAV asset consisting of a hedge fund of funds where the valuation is not published.

This hedge fund of funds is winding down.

Based on recent dispositions, NW Natural believes the remaining investment is fairly valued.

The hedge fund of funds is valued at the weighted average value of investments in various hedge funds, which in turn are valued at the closing price of the underlying securities.

This asset class primarily includes investments in common stocks and fixed income securities.

CASH AND CASH EQUIVALENTS.

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Differences required to be flowed-through by regulatory commissions ( 4,655 ) ( 3,960 ) ( 5,772 ) ( 4,738 ) ( 3,960 ) ( 5,772 )

Deferred tax rate differential post-TCJA — — ( 76 ) — — ( 75 )

Regulatory settlement — — ( 1,129 ) — — ( 1,129 )

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Effective tax rate 25.8 % 23.1 % 16.2 % 25.9 % 23.0 % 16.9 %

The NW Holdings and NW Natural effective income tax rates for 2020 compared to 2019 changed primarily as a result of higher pre-tax income, the Oregon Corporate Activity Tax effective January 1, 2020, and amortization of excess deferred income tax benefits as ordered by regulatory commissions.

The NW Holdings and NW Natural effective income tax rates for 2019 compared to 2018 changed primarily as a result of lower pre-tax income and amortization of excess deferred income tax benefits as ordered by regulatory commissions.

The NW Holdings and NW Natural effective income tax rates for 2021 compared to 2020 changed primarily due to Oregon Corporate Activity Tax (CAT), the majority of which is incurred because of Oregon regulated operations and for which rate recovery began on November 1, 2020.

The NW Holdings and NW Natural effective income tax rates for 2020 compared to 2019 changed primarily as a result of higher pre-tax income, Oregon CAT effective January 1, 2020, and amortization of excess deferred income tax benefits as ordered by regulatory commissions.

The provision for current and deferred income taxes consists of the following at December 31:

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At December 31, 2021 and 2020, regulatory income tax assets of $ 2.4 million and $ 2.5 million, respectively, were recorded by NW Natural, representing future recovery of deferred tax liabilities resulting from the equity portion of AFUDC.

At December 31, 2020, regulatory income tax assets of $ 1.7 million were recorded by NW Natural, representing future recovery of Oregon Corporate Activity tax that was deferred between January 1, 2020 and October 31, 2020.

At December 31, 2021 and 2020, regulatory income tax assets of $ 0.4 million and $ 1.7 million, respectively, were recorded by NW Natural, representing future recovery of Oregon CAT that was deferred between January 1, 2020 and October 31, 2020.

In October 2020, the OPUC issued an order providing for recovery of deferred Oregon CAT as well as CAT incurred prospectively beginning November 1, 2020.

At December 31, 2020 and 2019, deferred tax assets of $ 52.4 million and $ 54.3 million, respectively, were recorded by NW Natural representing the future income tax benefit associated with the excess deferred income tax regulatory liability recorded as a result of the lower federal corporate income tax rate provided for by the TCJA.

At December 31, 2021 and 2020, deferred tax assets of $ 50.2 million and $ 52.4 million, respectively, were recorded by NW Natural representing the future income tax benefit associated with the excess deferred income tax regulatory liability recorded as a result of the lower federal corporate income tax rate provided for by the Tax Cuts and Jobs Act (TCJA).

At December 31, 2021 and 2020, regulatory liability balances representing the benefit of the change in deferred taxes as a result of the TCJA of $ 189.6 million and $ 197.8 million, respectively, were recorded by NW Natural.

NW Natural’s natural gas utility rates include an allowance to provide for the recovery of the anticipated provision for income taxes incurred as a result of providing regulated services.

As a result of the 21 percent federal corporate income tax rate enacted in 2017, NW Natural recorded an additional regulatory liability in 2018 and 2019 reflecting the deferral of the estimated rate benefit for customers.

The deferral period for Oregon ended on October 31, 2018 coincident with new rates beginning November 1, 2018.

The deferral period for Washington ended on October 31, 2019 coincident with new rates beginning November 1, 2019.

At December 31, 2019, a regulatory liability of $ 1.7 million was recorded to reflect this estimated revenue deferral.

The liability has been completely amortized to customers’ benefit as of December 31, 2020.

NW Holdings and NW Natural assess the available positive and negative evidence to estimate if sufficient taxable income will be generated to utilize their respective existing deferred tax assets.

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We anticipate fully utilizing these NOL carryforward balances before they begin to expire in 2033 for federal and 2028 for state.

Oregon Energy Incentive Program (EIP) credits, California alternative minimum tax (AMT) credits and Idaho investment tax credits (ITC) of $ 0.1 million are also available.

The EIP credits expires in 2025.

California alternative minimum tax (AMT) credits and Idaho investment tax credits (ITC) of $ 0.1 million are also available.

The AMT credits do not expire.

The ITC credits expire in 2033.

The ITC credits begin to expire in 2033.

Uncertain tax positions are accounted for in accordance with accounting standards that require an assessment of the anticipated settlement outcome of material uncertain tax positions taken in a prior year, or planned to be taken in the current year.

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The 2020 and 2021 tax years are currently under IRS CAP examination.

Our 2021 CAP application has been filed.

The 2022 CAP application has been filed.

Under the CAP program, NW Holdings and NW Natural work with the IRS to identify and resolve material tax matters before the tax return is filed each year.

As of December 31, 2021, income tax years 2017 through 2020 remain open for examination by the State of California.

Income tax years 2018 and 2019 are open for examination by the State of Idaho.

Income tax years 2018 through 2020 are open for examination by the State of Idaho.

The State of Oregon examined the Oregon corporate income tax returns for tax years 2015, 2016, and 2017.

No material changes occurred as a result of this examination.

Tax years 2018 and 2019 are open for examination by the State of Oregon.

Federal TCJA Matters

On December 22, 2017, the TCJA was enacted and permanently lowered the U.S.

federal corporate income tax rate to 21 % from the previous maximum rate of 35 %, effective for the tax year beginning January 1, 2018.

The TCJA included specific provisions related to regulated public utilities that provide for the continued deductibility of interest expense and the elimination of bonus tax depreciation for property both acquired and placed into service on or after January 1, 2018.

Under pre-TCJA law, business interest was generally deductible in the determination of taxable income.

The TCJA imposed a new limitation on the deductibility of net business interest expense in excess of approximately 30 percent of adjusted taxable income.

Taxpayers operating in the trade or business of a regulated utility are excluded from these new interest expense limitations.

Treasury Regulations became effective in November of 2020 which provide a de minimis rule whereby if 90 percent or more of a taxpayer's adjusted asset basis is allocable to regulated utility activities, then all of the business interest expense of that taxpayer is deemed to be excepted business interest of the regulated utility activity and is thereby not limited under the TCJA.

As a result of the de minimis rule, NW Holdings and NW Natural anticipate that business interest expense will not be limited under the TCJA.

The TCJA generally provides for immediate full expensing for qualified property both acquired and placed in service after September 27, 2017 and before January 1, 2023.

This would generally provide for accelerated cost recovery for capital investments.

However, the definition of qualified property excludes property used in the trade or business of a regulated utility.

Treasury Regulations were published in September of 2019 which clarified that bonus tax depreciation would not be available for regulated utility activity assets both acquired and placed in service by NW Holdings or NW Natural on or after January 1, 2018.

Treasury Regulations released in September of 2020 clarified that long production period property acquired before September 27, 2017 continues to qualify for bonus depreciation in the year placed in service consistent with pre-TCJA law.

NW Natural previously filed applications with the OPUC and WUTC to defer the NGD net income tax benefits resulting from the TCJA.

In March 2019, the OPUC issued an order addressing the regulatory amortization of the income tax benefits from the TCJA that NW Natural deferred for Oregon customers in December of 2017.

Under the order, NW Natural will provide the benefit of these TCJA income tax deferrals to Oregon customers through ongoing annual credits to customer base rates and as a one-time recovery of a portion of the pension balancing account regulatory asset balance.

On an annualized basis, it is anticipated that the income tax benefits from the provision of these TCJA benefits to customers should approximate the reduction to pretax income that occurs as a result of the customer base rate credits and one-time recovery of a portion of the pension balancing account.

In October 2019, the WUTC issued an order addressing the regulatory amortization of the income tax benefits from the TCJA that NW Natural deferred for Washington customers in December of 2017.

Under the order, NW Natural provided deferred income tax benefits from the TCJA to customers through base rate credits beginning November 1, 2019.

Tax years 2018 through 2020 are open for examination by the State of Oregon.

PROPERTY, PLANT, AND EQUIPMENT

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Total property, plant, and equipment $ 2,871,370 $ 2,654,770

NW Natural and NW Holdings:

Capital expenditures in accrued liabilities $ 37,537 $ 25,129

Capital expenditures in accrued liabilities $ 38,333 $ 25,129

Accumulated depreciation does not include the accumulated provision for asset removal costs of $ 446.0 million and $ 428.0 million at December 31, 2021 and 2020, respectively.

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Other plant balances include long-lived assets associated with water operations and non-regulated activities not held by NW Natural or its subsidiaries.

Other plant balances include long-lived assets not related to NGD and long-lived assets that may be used to support NGD operations.

Other plant balances include non-utility gas storage assets at the Mist facility and other long-lived assets not related to NGD.

The weighted average depreciation rate for NGD assets was 3.0 % in 2021, 3.0 % in 2020, and 2.9 % in 2019.

The weighted average depreciation rate for assets not related to NGD was 1.8 % in 2021, 1.8 % in 2020, and 1.8 % in 2019.

In May 2019, NW Natural placed its North Mist gas storage expansion facility into service and commenced storage services to the facility's single customer, PGE.

GAAP, this agreement is classified as a sales-type lease and qualifies for regulatory accounting deferral treatment.

Accordingly, the project was de-recognized from property, plant and equipment upon lease commencement and the investment balance is presented net of the current portion of scheduled billings within assets under sales-type leases on the consolidated balance sheets.

A total of $ 146.0 million was de-recognized from plant on the lease commencement date.

The facility is included within rate base for ratemaking purposes.

See Note 7 for information regarding leases, including North Mist.

NW Natural has invested $ 188 million through the gas reserves program in the Jonah Field located in Wyoming as of December 31, 2020.

Gas reserves are stated at cost, net of regulatory amortization, with the associated deferred tax benefits recorded as liabilities in the consolidated balance sheets.

The investment in gas reserves provides long-term price protection for NGD customers through the original agreement with Encana Oil & Gas (USA) Inc.

under which NW Natural invested $ 178 million and the amended agreement with Jonah Energy LLC under which an additional $ 10 million was invested.

NW Natural entered into the original agreements with Encana in 2011 under which NW Natural holds working interests in certain sections of the Jonah Field.

Gas produced in these sections is sold at prevailing market prices, and revenues from such sales, net of associated operating and production costs and amortization, are credited to the NGD cost of gas.

The cost of gas, including a carrying cost for the rate base investment, is included in the annual Oregon PGA filing, which allows NW Natural to recover these costs through customer rates.

The investment under the original agreement, less accumulated amortization and deferred taxes, earns a rate of return.

In March 2014, NW Natural amended the original gas reserves agreement in order to facilitate Encana's proposed sale of its interest in the Jonah field to Jonah Energy.

Under the amendment, NW Natural ended the drilling program with Encana, but increased its working interests in its assigned sections of the Jonah field.

NW Natural also retained the right to invest in new wells with Jonah Energy.

Under the amended agreement there is still the option to invest in additional wells on a well-by-well basis with drilling costs and resulting gas volumes shared at NW Natural's amended proportionate working interest for each well in which it invests.

NW Natural elected to participate in some of the additional wells drilled in 2014, but has not participated in additional wells since 2014.

However, there may be the opportunity to participate in more wells in the future.

Gas produced from the additional wells is included in the Oregon PGA at a fixed rate of $ 0.4725 per therm, which approximates the 10-year hedge rate plus financing costs at the inception of the investment.

Gas reserves acted to hedge the cost of gas for approximately 5 %, 5 % and 6 % of NGD gas supplies for the years ended December 31, 2020 , 2019, and 2018, respectively.

The following table outlines NW Natural's net gas reserves investment at December 31:

In thousands 2020 2019

Gas reserves, current $ 11,409 $ 15,278

Gas reserves, non-current 175,898 172,029

Accumulated amortization 141,414 123,635

Total gas reserves (1)

45,893 63,672

Deferred taxes on gas reserves 10,572 15,515

Net investment in gas reserves $ 35,321 $ 48,157

(1) The net investment in additional wells included in total gas reserves was $ 3.0 million and $ 3.8 million at December 31, 2020 and 2019, respectively.

NW Natural's investment is included in NW Holdings' and NW Natural's consolidated balance sheets under gas reserves with the maximum loss exposure limited to the investment balance.

Investments include financial investments in life insurance policies, and equity method investments in certain partnerships and limited liability companies.

Investments include gas reserves, financial investments in life insurance policies, and equity method investments.

The following table summarizes other investments at December 31:

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Investments in life insurance policies $ 48,178 $ 49,241 $ 48,178 $ 49,242

Investments in gas pipeline — 13,472 — —

Other 18 24 — —

Investments in gas reserves, non-current 26,608 34,484 26,608 34,484

Investment in unconsolidated affiliates 14,492 18 — —

Total other investments $ 89,278 $ 83,743 $ 74,786 $ 83,726

$ 49,259 $ 63,333 $ 49,241 $ 49,837

Investment in Life Insurance Policies

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The amount in the above table is reported at cash surrender value, net of policy loans.

Investments in Gas Pipeline

On August 6, 2020, NWN Energy completed the sale of 100 % of its interest in Trail West Holdings, LLC (TWH) to an unrelated third party for a purchase price of $ 14.0 million, $ 7.0 million of which was paid upon closing the transaction, and $ 7.0 million is to be paid upon the one-year anniversary of the close date.

The completion of the sale resulted in an after-tax gain of approximately $ 0.5 million.

NW Natural Gas Reserves

NW Natural has invested $ 188 million through the gas reserves program in the Jonah Field located in Wyoming as of December 31, 2021.

Gas reserves are stated at cost, net of regulatory amortization, with the associated deferred tax benefits of $ 6.9 million and $ 10.6 million, which are recorded as liabilities in the December 31, 2021 and 2020 consolidated balance sheets, respectively.

NW Natural's investment is included in NW Holdings' and NW Natural's consolidated balance sheets under other current assets and other investments (non-current portion) with the maximum loss exposure limited to the investment balance.

The amount of gas reserves included in other current assets was $ 5.4 million and $ 11.4 million as of December 31, 2021 and 2020, respectively.

The investment in gas reserves provides long-term price protection and acted to hedge the cost of gas for approximately 4 % and 5 % of NGD gas supplies for the years ended December 31, 2021 and 2020, respectively.

Investments in Unconsolidated Affiliates

On December 17, 2021, NW Natural Water purchased a 37.3 % ownership stake in Avion Water Company, Inc.

(Avion Water), an investor-owned water utility for $ 14.5 million.

Avion Water operates in Bend, Oregon and the surrounding communities, serving approximately 15,000 customer connections and employing 35 people.

The carrying value of the equity method investment is $ 10.3 million higher than the underlying equity in the net assets of the investee at December 31, 2021 due to equity method goodwill.

On August 6, 2020, NWN Energy completed the sale of 100 % of its interest in Trail West Holdings, LLC (TWH) to an unrelated third party for a purchase price of $ 14.0 million, $ 7.0 million of which was paid upon closing the transaction, and $ 7.0 million of which was paid upon the one-year anniversary of the close date.

The completion of the sale resulted in an after-tax gain of approximately $ 0.5 million for the year ended December 31, 2020.

TWH was a variable interest entity reported under equity method accounting through its sale.

The investment in TWH did not meet the criteria to be classified as held for sale or discontinued operations.

The investment balance in TWH was $ 13.4 million at December 31, 2019.

BUSINESS COMBINATIONS

2021 Business Combinations

During the year ended December 31, 2021, NWN Water and its subsidiaries completed four acquisitions qualifying as business combinations.

The aggregate fair value of the preliminary consideration transferred for these acquisitions were not material and are not significant to NW Holdings' results of operations.

2020 Business Combinations

During the year ended December 31, 2020, NWN Water and its subsidiaries completed two significant acquisitions qualifying as business combinations.

The aggregate fair value of the preliminary cash consideration transferred for these acquisitions was $ 38.1 million, most of which was preliminarily allocated to property, plant and equipment and goodwill.

The aggregate fair value of the total cash consideration transferred for these acquisitions was $ 38.1 million, most of which was allocated to property, plant and equipment and goodwill.

These transactions align with NW Holdings' water sector strategy as it continues to expand its water services territories in the Pacific Northwest and beyond and included:

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• T&W Water Service Company which was acquired by NWN Water of Texas on March 2, 2020.

As each of these acquisitions met the criteria of a business combination, a preliminary allocation of the consideration to the acquired net assets based on their estimated fair value as of the acquisition date was performed.

The allocation for each of these business combinations is considered preliminary as of December 31, 2020, as facts and circumstances that existed as of the acquisition date may be discovered as we continue to integrate these businesses.

As each of these acquisitions met the criteria of a business combination, an allocation of the consideration to the acquired net assets based on their estimated fair value as of the acquisition date was performed.

In accordance with U.S.

GAAP, the fair value determination involves management judgment in determining the significant estimates and assumptions used and was made using existing regulatory conditions for net assets associated with Suncadia Water Company, LLC and T&W Water Service Company.

This allocation is considered preliminary as of December 31, 2020, as facts and circumstances that existed as of the acquisition date may be discovered as we continue to integrate the acquired businesses.

As a result, subsequent adjustments to the preliminary valuation of tangible assets, contract assets and liabilities, tax positions, and goodwill may be required.

Subsequent adjustments are not expected to be significant, and any such adjustments are expected to be completed within the one-year measurement period for all acquisitions described above.

Total preliminary goodwill of $ 18.2 million was recognized from the acquisitions described above.

Final goodwill of $ 18.2 million was recognized from the acquisitions described above.

No intangible assets aside from goodwill were acquired.

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The acquisition costs associated with each business combination were expensed as incurred.

The results of these business

combinations were not material to the consolidated financial results of NW Holdings for the year ended December 31, 2020.

Other Business Combinations

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These business combinations were not significant to NW Holdings' results of operations.

2019 Business Combinations

On May 31, 2019, NWN Water of Oregon, a wholly-owned indirect subsidiary of NW Holdings, completed the acquisition of Sunriver Water LLC and Sunriver Environmental LLC (collectively referred to as Sunriver), a privately-owned water utility and wastewater treatment company located in Sunriver, Oregon that serves approximately 9,400 connections.

The acquisition-date fair value of the total consideration transferred, after closing adjustments, was approximately $ 55.0 million in cash consideration.

The transaction aligns with NW Holdings' water sector strategy as it continues to expand its water utility service territory in the Pacific Northwest and begins to pursue wastewater investment opportunities.

The Sunriver acquisition met the criteria of a business combination, and as such a preliminary allocation of the consideration to the acquired assets based on their estimated fair value as of the acquisition date was performed.

In accordance with U.S.

GAAP, the fair value determination was made using existing regulatory conditions for assets associated with Sunriver Water LLC as well as existing market conditions and standard valuation approaches for assets associated with Sunriver Environmental LLC in order to allocate value as determined by an independent third party assessor for certain assets, which involved the use of management judgment in determining the significant estimates and assumptions used by the assessor, with the remaining difference from the consideration transferred being recorded as goodwill.

The acquisition costs were expensed as incurred.

Final goodwill of $ 41.1 million was recognized from this acquisition.

The goodwill recognized is attributable to Sunriver's regulated water utility service territory, experienced workforce, and the strategic benefits for both the water utility and wastewater services expected from growth in its service territory.

No intangible assets aside from goodwill were acquired.

The total amount of goodwill that is expected to be deductible for income tax purposes is approximately $ 50.0 million.

The final purchase price for the acquisition has been allocated to the net assets acquired as of the acquisition date and is as follows:

In thousands May 31, 2020

Current assets $ 222

Property, plant and equipment 12,866

Goodwill 41,054

Deferred tax assets 828

Current liabilities ( 22 )

Total net assets acquired $ 54,948

The amount of Sunriver revenues included in NW Holdings' consolidated statements of comprehensive income was $ 6.6 million for the year ended December 31, 2020.

Earnings included in NW Holdings' consolidated statements of comprehensive income was $ 1.6 million for the year ended December 31, 2020.

Other Business Combinations

During 2019, NWN Water completed three additional acquisitions qualifying as business combinations.

The aggregate fair value of the preliminary consideration transferred for these acquisitions was approximately $ 2.0 million.

These business combinations were not significant to NW Holdings' results of operations.

NW Holdings allocates goodwill to reporting units based on the expected benefit from the business combination.

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Counterparties generally allow a certain credit limit threshold before requiring NW Natural to post collateral against unrealized loss positions.

Given NW Natural's counterparty credit limits and portfolio diversification, it was not subject to collateral calls in 2020 or 2019.

Given NW Natural's credit ratings, counterparty credit limits and portfolio diversification, it was not subject to collateral calls in 2021 or 2020.

The collateral call exposure is set forth under credit support agreements, which generally contain credit limits.

NW Natural could also be subject to collateral call exposure where it has agreed to provide adequate assurance, which is not specific as to the amount of credit limit allowed, but could potentially require additional collateral in the event of a material adverse change.

Based upon current commodity financial swap and option contracts outstanding, which reflect unrealized gains of $ 13.1 million at December 31, 2020, we have estimated the level of collateral demands, with and without potential adequate assurance calls, using current gas prices and various credit downgrade rating scenarios for NW Natural as follows:

Credit Rating Downgrade Scenarios

In thousands (Current Ratings) A+/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 Speculative

With Adequate Assurance Calls $ — $ — $ — $ — $ 51

Without Adequate Assurance Calls $ — $ — $ — $ — $ 51

NW Natural's financial derivative instruments are subject to master netting arrangements;

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NW Natural utilizes master netting arrangements through International Swaps and Derivatives Association contracts to minimize this risk along with collateral support agreements with counterparties based on their credit ratings.

In certain cases, NW Natural requires guarantees or letters of credit from counterparties to meet its minimum credit requirement standards.

In certain cases, NW Natural may require guarantees or letters of credit from counterparties to meet its minimum credit requirement standards.

NW Natural's financial derivatives policy requires counterparties to have an investment-grade credit rating at the time the derivative instrument is entered into, and specifies limits on the contract amount and duration based on each counterparty’s credit rating.

NW Natural does not speculate with derivatives.

Derivatives are used to hedge exposure above risk tolerance limits.

Increases in market risk created by the use of derivatives is offset by the exposures they modify.

NW Natural does not speculate in derivatives.

Derivatives are used to reduce NW Natural's net market risk and hedge exposure above risk tolerance limits.

It is required that increases in market risk created by the use of derivatives is offset by the exposures they modify.

We actively monitor NW Natural's derivative credit exposure and place counterparties on hold for trading purposes or require other forms of credit assurance, such as letters of credit, cash collateral, or guarantees as circumstances warrant.

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NW Natural also enters into short-term and long-term gas purchase agreements.

The aggregate amounts of these agreements were as follows at December 31, 2020:

In thousands Gas

Purchase Agreements Pipeline

In November 2021, NW Natural and a subsidiary of Archaea Energy entered into a long-term RNG purchase and sale agreement.

Under the agreement, NW Natural committed to purchase the environmental attributes generated by Archaea related to up to ten million therms of RNG annually from its portfolio of RNG production facilities for a fixed fee for a period of 21 years.

The agreement will commence in 2022, with the full annual quantity beginning in 2025.

The aggregate amounts of these agreements at NW Natural were as follows at December 31, 2021:

In thousands Gas Purchase Agreements (1)

Purchase Agreements Pipeline

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Total at present value $ 364,236 $ 784,228 $ 18,649

(1) Gas purchase agreements include environmental attributes of RNG

Total fixed charges under capacity purchase agreements were $ 82.9 million for 2021, $ 81.8 million for 2020, and $ 82.2 million for 2019, of which $ 7.7 million, $ 4.8 million, and $ 4.3 million, respectively, related to capacity releases.

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It is likely changes in these estimates and ranges will occur throughout the remediation process for each of these sites due to the continued evaluation and clarification concerning responsibility, the complexity of environmental laws and regulations and the determination by regulators of remediation alternatives.

In addition to remediation costs, NW Natural could also be subject to Natural Resource Damages (NRD) claims.

In addition to remediation costs, NW Natural could also be subject to

Natural Resource Damages (NRD) claims.

NW Natural will assess the likelihood and probability of each claim and recognize a liability if deemed appropriate.

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Gasco/Siltronic Upland site 15,711 14,887 36,215 40,250

Central Service Center site — — — —

Front Street site 1,100 3,816 811 1,107

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The cost of that remedy is expected to be allocated among more than one hundred PRPs.

NW Natural is participating in a non-binding allocation process with the other PRPs in an effort to resolve its potential liability.

NW Natural is participating in a non-binding allocation process with other PRPs in an effort to resolve its potential liability.

The Portland Harbor ROD does not provide any additional clarification around allocation of costs among PRPs;

accordingly, NW Natural has not modified any of the recorded liabilities at this time as a result of the issuance of the Portland Harbor ROD.

NW Natural manages its liability related to the Superfund site as two distinct remediation projects, the Gasco/Siltronic Sediments and Other Portland Harbor projects.

GASCO/SILTRONIC SEDIMENTS.

NW Natural manages its liability related to the Superfund site as two distinct remediation projects, the Gasco Sediments Site and Other Portland Harbor projects.

GASCO SEDIMENTS.

In 2009, NW Natural and Siltronic Corporation entered into a separate Administrative Order on Consent with the EPA to evaluate and design specific remedies for sediments adjacent to the Gasco uplands and Siltronic uplands sites.

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Siltronic Corporation is not a party to the amended order.

At this time, the estimated costs for the various sediment remedy alternatives in the draft EE/CA for the additional studies and design work needed before the cleanup can occur, and for regulatory oversight throughout the cleanup range from $ 51.3 million to $ 350 million.

In the second quarter of 2021, NW Natural began preliminary design discussions with the EPA for the Gasco sediments site.

These preliminary design discussions did not include a cost estimate for cleanup.

None of the alternatives in the EE/CA are more likely than others at this time, and NW Natural expects further design discussion and iteration with the EPA.

The estimated costs for the various sediment remedy alternatives in the draft EE/CA for the additional studies and design work needed before the cleanup can occur, and for regulatory oversight throughout the cleanup range from $ 49.7 million to $ 350 million.

NW Natural has recorded a liability of $ 49.7 million for the Gasco sediment clean-up, which reflects the low end of the range.

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OTHER PORTLAND HARBOR.

While we believe liabilities associated with the Gasco/Siltronic sediments site represent NW Natural's largest exposure, there are other potential exposures associated with the Portland Harbor ROD, including NRD costs and harborwide remedial design and cleanup costs (including downstream petroleum contamination), for which allocations among the PRPs have not yet been determined.

While we believe liabilities associated with the Gasco sediments site represent NW Natural's largest exposure, there are other potential exposures associated with the Portland Harbor ROD, including NRD costs and harborwide remedial design and cleanup costs (including downstream petroleum contamination), for which allocations among the PRPs have not yet been determined.

NW Natural and other parties have signed a cooperative agreement with the Portland Harbor Natural Resource Trustee council to participate in a phased NRD assessment to estimate liabilities to support an early restoration-based settlement of NRD claims.

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The Yakama Nation has filed two amended complaints addressing certain pleading defects and dismissing the State of Oregon.

On the motion of NW Natural and certain other defendants the federal court has stayed the case pending the outcome of the non-binding allocation proceeding discussed above.

On the motion of NW Natural and certain other defendants the federal court has stayed the case

pending the outcome of the non-binding allocation proceeding discussed above.

NW Natural has recorded a liability for NRD claims which is at the low end of the range of the potential liability;

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NW Natural submitted a revised Remedial Investigation Report for the uplands to ODEQ in May 2007.

In March 2015, ODEQ approved Remedial Assessment (RA) for this site, enabling commencement of work on the FS in 2016.

In March 2015, ODEQ approved the Risk Assessment (RA) for this site, enabling commencement of work on the FS in 2016.

NW Natural has recognized a liability for the remediation of the uplands portion of the site which is at the low end of the range of potential liability;

the high end of the range cannot be reasonably estimated at this time.

In October 2016, ODEQ and NW Natural agreed to amend their VCP agreement to incorporate a portion of the Siltronic property adjacent to the Gasco site formerly owned by Portland Gas & Coke between 1939 and 1960 into the Gasco RA and FS, excluding the uplands for Siltronic.

In October 2016, ODEQ and NW Natural agreed to amend their VCP agreement for the Gasco uplands to incorporate a portion of the Siltronic property formerly owned by Portland Gas & Coke between 1939 and 1960 into the Gasco RA and FS.

Previously, NW Natural was conducting an investigation of manufactured gas plant constituents on the entire Siltronic uplands for ODEQ.

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NW Natural has estimated the cost associated with the ongoing operation of the system and has recognized a liability which is at the low end of the range of potential cost.

NW Natural cannot estimate the high end of the range at this time due to the uncertainty associated with the duration of running the water treatment station, which is highly dependent on the remedy determined for both the upland portion as well as the final remedy for Gasco sediment exposure.

In addition to those sites above, NW Natural has environmental exposures at three other sites:

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the high end of the range could not be reasonably estimated at this time.

CENTRAL SERVICE CENTER SITE.

The investigative phase to characterize the existing site has been completed and determined by the Oregon Department of Environmental Quality (DEQ) to be sufficient to allow for the issuance of a Conditional No Further Action (cNFA).

NW Natural is now conducting ongoing environmental monitoring activities through 2024 in order to meet the conditions which were included within the cNFA.

FRONT STREET SITE.

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In addition, the selected remedy also requires institutional controls and long-term inspection and maintenance.

In September 2020, NW Natural revised its estimate of the remaining cost to construct the remedy to be approximately $ 7.1 million.

Further, NW Natural has recognized an additional liability of $ 4.9 million for munitions and design costs, regulatory and permitting issues, and post-construction work.

Construction of the remedy began in early July 2020 and was completed in October 2020.

Construction of the remedy began in July 2020 and was completed in October 2020.

The first year of post-construction monitoring was completed in 2021 and demonstrated that the cap was intact and performing as designed.

NW Natural has recognized an additional liability of $ 1.9 million for munitions and design costs, regulatory and permitting issues, and post-construction work.

OREGON STEEL MILLS SITE.

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(1) Includes pre-review and post-review deferred costs, amounts currently in amortization, and interest, net of amounts collected from customers.

In Oregon, NW Natural earns a carrying charge on cash amounts paid, whereas amounts accrued but not yet paid do not earn a carrying charge until expended.

NW Natural also accrues a carrying charge on insurance proceeds for amounts owed to customers.

In Washington, neither the cash paid nor insurance proceeds accrue a carrying charge.

(2) Excludes 3.3 % of the Front Street site liability, or $ 0.2 million in 2020 and $ 0.4 million in 2019, as the OPUC only allows recovery of 96.7 % of costs for those sites allocable to Oregon, including those that historically served only Oregon customers.

(2) Excludes 3.3 % of the Front Street site liability as the OPUC only allows recovery of 96.7 % of costs for those sites allocable to Oregon, including those that historically served only Oregon customers.

Amounts excluded from regulatory assets were or $ 0.1 million in 2021 and $ 0.2 million in 2020.

(3) Environmental costs relate to specific sites approved for regulatory deferral by the OPUC and WUTC.

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Environmental remediation expenses relating to sites that previously served both Oregon and Washington customers are allocated between states with Washington customers receiving 3.3 % percent of the costs and insurance proceeds.

As a result of the WUTC Order, in the fourth quarter of 2019, approximately $ 3.0 million of prudently incurred costs deferred from the initial deferral authorization in February 2011 through November 2018 were fully offset with insurance proceeds.

In addition, approximately $ 1.5 million of disallowed deferred environmental remediation expenses incurred prior to the deferral authorization were charged to environmental remediation expense.

Insurance proceeds will be fully applied to costs incurred between December 2018 and June 2019 once deemed prudent in future rate proceedings.

In accordance with the WUTC Order, insurance proceeds were fully applied to costs incurred between December 2018 and June 2019 that were deemed prudent.

Remaining insurance proceeds will be amortized over a 10.5 year period ending December 31, 2029.

On an annual basis, NW Natural will file for a prudence determination and a request to amortize costs to the extent that remediation expenses exceed the insurance amortization.

As of December 31, 2021, approximately $ 3.6 million of proceeds have been applied to prudently incurred costs.

On an annual basis, NW Natural files for a prudence determination and a request to amortize costs to the extent that remediation expenses exceed the insurance amortization.

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.

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Subsequent changes in the fair value will be recorded in earnings.

The completion of the sale resulted in an after-tax gain of $ 5.9 million.

The completion of the sale resulted in an after-tax gain of $ 5.9 million for the year ended December 31, 2020.

The following table presents the operating results of Gill Ranch and is presented net of tax on NW Holdings' consolidated statements of comprehensive income:

NW Holdings Discontinued Operations

In thousands, except per share data 2020 2019 2018

In thousands 2020 2019

Revenues $ 10,193 $ 5,301

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As a result of the disposition of the membership interests of Gill Ranch, there were no assets or liabilities classified as held for sale at December 31, 2020.

The assets and liabilities of the discontinued operations classified as held for sale in the consolidated balance sheet at December 31, 2019 include the following:

NW Holdings Discontinued Operations

In thousands 2019

Accounts receivable $ 333

Inventories 695

Other current assets 457

Property, plant, and equipment, net 13,284

Operating lease right of use asset 118

Other non-current assets 247

Total discontinued operations assets - current assets (1)

Accounts payable $ 1,250

Other current liabilities 848

Operating lease liabilities 116

Other non-current liabilities 11,495

Total discontinued operations liabilities - current liabilities (1)

(1) The total assets and liabilities of Gill Ranch were classified as current because it was probable that the sale would be completed within one year.

As part of the holding company reorganization in October 2018, NWN Energy, NWN Gas Storage, Gill Ranch, NNG Financial, NWN Water, and NW Holdings, which were direct and indirect subsidiaries of NW Natural prior to the reorganization, are no longer subsidiaries of NW Natural.

See Note 1 for additional information.

As a result, NW Natural's financial statements reflect amounts related to these entities as discontinued operations for all periods presented.

The expenses included in the results of discontinued operations are the direct operating expenses incurred by the entities that may be reasonably segregated from the costs of NW Natural's continuing operations.

The following table presents the operating results prior to the holding company reorganization effective October 1, 2018 of NWN Energy, NWN Gas Storage, Gill Ranch, NNG Financial, NWN Water, and NW Holdings, which were historically reported within the gas storage segment and other, and is presented net of tax on NW Natural's consolidated statements of comprehensive income:

NW Natural Discontinued Operations

In thousands, except per share data 2018

Revenues $ 3,016

Operations and maintenance 4,151

General taxes 448

Depreciation and amortization 420

Other expenses and interest 342

Total expenses 5,361

Loss from discontinued operations before income tax ( 2,345 )

Income tax benefit ( 622 )

Loss from discontinued operations, net of tax $ ( 1,723 )

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF NORTHWEST NATURAL HOLDING COMPANY

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(PARENT COMPANY ONLY)

In thousands Year ended December 31, 2020 Year ended December 31, 2019 Inception through December 31, 2018

Year Ended December 31,

In thousands 2021 2020 2019

Operating expenses:

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Net income 78,666 76,781 61,735

Other comprehensive income (loss) from subsidiaries, net of tax 1,498 ( 2,169 ) ( 2,179 )

Comprehensive income $ 80,164 $ 74,612 $ 59,556

See Notes to Condensed Financial Statements

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Payables to affiliates 16,105 12,912

Taxes accrued — 127

Other current liabilities 243 49

Total current liabilities 160,634 86,080

Common stock 847,193 840,364

Retained earnings 45,097 27,025

Total equity 935,146 888,733

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(PARENT COMPANY ONLY)

In thousands Year ended

2020 Year ended December 31, 2019 Inception through December 31, 2018

Year Ended December 31,

In thousands 2021 2020 2019

Operating activities:

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Changes in assets and liabilities:

Receivables, net ( 12,788 ) 846 ( 585 )

Receivables from affiliates 12,558 ( 12,788 ) 846

Income and other taxes 1,299 ( 7,451 ) 4,325

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Other, net ( 313 ) ( 364 ) ( 346 )

Cash provided by (used in) operating activities 42,086 50,330 ( 935 )

Cash provided by operating activities 68,501 42,086 50,330

Investing activities:

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Financing activities:

Proceeds from stock options exercised 68 2,015 —

Proceeds from common stock issued — 92,956 —

Proceeds from common stock issued, net 17,501 — 92,956

Changes in other short-term debt, net 71,000 49,000 24,000

Cash dividend payments on common stock ( 55,919 ) ( 55,420 ) ( 53,339 )

Capital contributions — — 20,000

Other 4,320 3,676 4,752

Cash (used in) provided by financing activities ( 2,744 ) 68,369 6,750

Cash provided by (used in) financing activities 36,902 ( 2,744 ) 68,369

Increase (decrease) in cash and cash equivalents ( 11,002 ) 11,148 ( 3,892 )

Cash and cash equivalents, beginning of period 119 4,011 —

Cash and cash equivalents, end of period $ 11,267 $ 119 $ 4,011

Cash, cash equivalents and restricted cash, beginning of period 11,267 119 4,011

Cash, cash equivalents and restricted cash, end of period $ 265 $ 11,267 $ 119

See Notes to Condensed Financial Statements

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Equity earnings of subsidiaries including earnings from NW Natural were $ 83.1 million, $ 78.5 million, and $ 64.3 million for the years ended December 31, 2021, 2020, and 2019 respectively.

There were $ 74.4 million and $ 88.4 million of cash dividends paid to NW Holdings from wholly-owned subsidiaries for the years ended December 31, 2020 and 2019, respectively, and none for the year ended December 31, 2018.

There were $ 82.1 million, $ 74.4 million and $ 88.4 million of cash dividends paid to NW Holdings from wholly-owned subsidiaries for the years ended December 31, 2021, 2020 and 2019, respectively.

Other Comprehensive Income (Loss) from Subsidiaries Correction

During 2021, NW Holdings identified that activities related to other comprehensive income (loss) from subsidiaries had been excluded from the condensed statements of comprehensive income and condensed balance sheets.

NW Holdings corrected the previously presented condensed balance sheet for the year ended December 31, 2020, and in doing so, decreased total equity by $ 3.6 million with a corresponding decrease in investment in subsidiaries.

In addition, the condensed statements of comprehensive income for the years ended December 31, 2020 and 2019 were corrected to include other comprehensive loss of $ 2.2 million and $ 2.2 million, respectively.

NW Holdings has evaluated the effect of the misstatement, both qualitatively and quantitatively, and concluded that it did not have a material impact on, nor require amendment of, any previously filed condensed financial statements.

Condensed Statements of Cash Flows Correction

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data