What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-02-25 · 51 added, 69 removed, 294 unchanged (29% of the section changed)

1 unchanged sentence

NW Natural is NW Holdings’ largest subsidiary.

NW Natural owns NW Natural RNG Holding Company, LLC, a holding company established to invest in the development and procurement of regulated renewable natural gas for NW Natural.

NW Natural distributes natural gas to residential, commercial, and industrial customers in Oregon and southwest Washington.

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NW Natural's natural gas distribution activities are reported in the natural gas distribution (NGD) segment.

All other business activities, including certain gas storage activities, water businesses, non-regulated renewable natural gas activities and other investments and activities are aggregated and reported as "other" at their respective registrant.

All other business activities, including certain gas storage activities, water and wastewater businesses, non-regulated renewable natural gas activities and other investments and activities are aggregated and reported as "other" at their respective registrant.

NATURAL GAS DISTRIBUTION (NGD) SEGMENT

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Gas commodity cost is primarily a pass-through cost to customers;

therefore, profit margins are not materially affected by an industrial customer's decision to purchase gas from NW Natural or from third parties.

therefore, profit margins are not significantly affected by an industrial customer's decision to purchase gas from NW Natural or from third parties.

Industrial and large commercial customers may also select between firm and interruptible service levels, with firm services generally providing higher profit margins compared to interruptible services.

To help manage gas supplies, industrial tariffs are designed to provide some certainty regarding industrial customers' volumes by requiring an annual service election, special rates or possible restrictions for changes between elections, and in some cases, a minimum or maximum volume requirement before changing options.

Customer growth rates for natural gas utilities in the Pacific Northwest historically have been among the highest in the nation due to lower market saturation as natural gas became widely available as a residential heating source after other fuel options.

We estimate natural gas was in approximately 63% of single-family residential homes in NW Natural's service territory in 2022.

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Single-family new construction has consistently been our largest source of growth.

Continued customer growth is closely tied to the comparative price of natural gas to electricity and fuel oil and the economic health of Portland, Oregon and Vancouver, Washington.

We believe there is potential for continued growth as natural gas is a preferred direct energy source due to its affordability, reliability, comfort, and convenience.

Continued customer growth is closely tied to consumer preference for natural gas, the comparative price of natural gas to electricity and fuel oil, regulations and building codes permitting the use of natural gas in new construction and conversions, and the economic health of our service territory.

Competitive Conditions

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However, it competes with other forms of energy in each customer class.

This competition among energy suppliers is based on price, efficiency, reliability, performance, preference, market conditions, technology, federal, state, and local energy policy, and environmental impacts.

This competition among energy suppliers is based on price, efficiency, reliability, performance, preference, market conditions, building codes, technology, federal, state, and local energy policy, and environmental impacts.

For residential and small to mid-size commercial customers, the NGD business competes primarily with providers of electricity, fuel oil, and propane.

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• Environmental Stewardship - striving to reduce the carbon content and environmental impacts of the energy we deliver.

The effectiveness of the natural gas distribution system ultimately rests on whether reliable service is provided to NGD customers.

To ensure effectiveness, the NGD business has developed a risk-based methodology in which it uses a planning standard to serve the highest firm sales demand day in any year with 99% certainty.

To support system reliability, the NGD business has developed a risk-based methodology in which it uses a planning standard to serve the highest firm sales demand day in any year with 99% certainty.

The projected maximum design day firm NGD customer sales is approximately 10 million therms.

Of this total, the NGD business is currently capable of meeting about 55% of requirements with gas from storage located within or adjacent to its service territory, while the remaining supply requirements would come from gas purchases under firm gas purchase contracts and recall agreements.

Of this total, the NGD business is currently capable of meeting approximately 50% of the requirements with gas from storage located within or adjacent to its service territory, while the remaining supply requirements would come from gas purchases under firm gas purchase contracts and recall agreements.

NW Natural segments transportation capacity, which is a natural gas transportation mechanism under which a shipper can leverage its firm pipeline transportation capacity by separating it into multiple segments with alternate delivery routes.

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Total 10.1 100 %

The OPUC and WUTC have Integrated Resource Planning (IRP) processes in which utilities define different growth scenarios and corresponding resource and compliance strategies in an effort to evaluate supply and demand resource and compliance requirements, consider uncertainties in the planning process and the need for flexibility to respond to changes, and establish a plan for providing reliable service at the least cost.

NW Natural generally files a full IRP biennially for Oregon and Washington with the OPUC and the WUTC, respectively, and files updates between filings.

The OPUC and WUTC have Integrated Resource Planning (IRP) processes in which utilities define different future scenarios and corresponding resource and compliance strategies in an effort to evaluate supply and demand resource and compliance requirements, consider uncertainties in the planning process and the need for flexibility to respond to changes, and establish a plan for providing reliable service while meeting carbon compliance obligations within frameworks that emphasize least cost and risk.

NW Natural generally files a full IRP biennially for Oregon and Washington with the OPUC and the WUTC, respectively, and files updates in Oregon between filings.

The OPUC acknowledges NW Natural's action plan, whereas the WUTC provides notice that the IRP has met the requirements of the Washington Administrative Code.

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gas reserves contracts;

and gas commodity derivative contracts.

gas commodity derivative contracts;

and renewable natural gas and its attributes, including renewable thermal certificates (RTCs).

We expect that costs to comply with Oregon's Climate Protection Program (CPP) and Washington's Climate Commitment Act (CCA) programs will be included in the cost of gas.

The NGD business employs a number of strategies to mitigate the cost of gas sold to customers.

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To that end, NW Natural developed and implemented an emissions screening tool that uses Environmental Protection Agency (EPA) data to calculate the relative emissions intensity of gas producer operations and prioritize purchases from lower emitting producers.

Beginning in 2019, we began using this emissions intensity screening tool alongside other purchasing criteria such as price, credit worthiness and geographic diversity.

In 2019, we began using this emissions intensity screening tool alongside other purchasing criteria such as price, credit worthiness and geographic diversity.

The result has been a cost-neutral way to reduce carbon emissions associated with our natural gas supply.

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RTCs are verified and certified by the Midwest Renewable Energy Tracking System (M-RETS).

The M-RETS Renewable Thermal Tracking System issues one RTC for every dekatherm of renewable natural gas.

The M-RETS Renewable Thermal Tracking System issues one RTC for every dekatherm of RNG injected into the gas system.

NW Natural enters into contracts for the purchase of RNG and RTCs either through periodic request for proposals or through formal offerings or informal requests.

See Part II, Item 7, "Results of Operations— Regulatory Matters ".

In addition to purchases of RNG, NW Natural is subject to the carbon-reduction requirements of the Oregon CPP and the Washington CCA programs.

NW Natural has modeled pathways to compliance with the CPP and CCA in its most recent IRP, which are currently under review by the OPUC and WUTC.

While costs associated with each possible compliance pathway differ, we intend to pursue recovery of the costs associated with these programs in rates.

Transportation of Gas Supplies

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Gas Distribution

Safety and the protection of employees, customers, and our communities at large are, and will remain, top priorities.

Safety and the protection of employees, customers, and our communities are, and will remain, top priorities.

NW Natural constructs, operates, and maintains its pipeline distribution system and storage operations with the goal of ensuring natural gas is delivered and stored safely, reliably, and efficiently.

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MAOP Reconfirmation, Expansion of Assessment Requirements, and Other Related Amendments." In 2019, PHMSA issued the first of three portions of the rulemaking which went into effect on July 1, 2020 and includes up to a 15-year timeline for compliance.

The gas gathering rule was issued in late 2021 and the leak detection rule is expected to be issued in 2022.

NW Natural intends to continue to work diligently with industry associations as well as federal and state regulators to ensure the safety of the system and compliance with new laws and regulations.

The costs associated with compliance with federal, state, and local laws and regulations are expected to be recovered in rates.

The second portion of the rule known as the gas gathering rule was issued in late 2021, and final rulemaking titled "The Safety of Gas Transmission Pipelines:

Repair Criteria, Integrity Management Improvements, Cathodic Protection, Management of Change, and Other Related Amendments" was issued in August 2022.

A Gas Pipeline Leak Detection rule is expected to be issued in 2023.

NW Natural intends to continue to work diligently with industry associations as well as federal and state regulators to support the safety of the system and compliance with new laws and regulations.

We expect the costs associated with compliance with federal, state, and local laws and regulations to be recovered in rates.

North Mist Gas Storage Facility

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PGE uses the facility to fuel its gas-fired electric power generation facilities, which backs up PGE's variable load of renewable energy on the electric grid.

North Mist includes a reservoir providing 4.1 Bcf of available storage, an additional compressor station with a contractual capacity of 120,000 dekatherms of gas per day, no-notice service that can be drawn on rapidly, and a 13-mile pipeline to connect to PGE's Port Westward gas plants in Clatskanie, Oregon.

North Mist includes a reservoir providing 4.1 Bcf of available storage, an additional compressor station with a contractual capacity of 120,000 dekatherms of gas deliverability per day, no-notice service that can be drawn on rapidly, and a 13-mile pipeline to connect to PGE's Port Westward gas plants in Clatskanie, Oregon.

Upon placement into service in May 2019, the facility was included in rate base under an established tariff schedule with revenues recognized consistent with the schedule.

Billing rates will be updated annually to the current depreciable asset level and forecasted operating expenses.

Billing rates are updated annually to the forecasted depreciable asset level and forecasted operating expenses.

While there are additional expansion opportunities in the Mist storage field, any expansion would be based on market demand, cost effectiveness, available financing, receipt of future permits, and other rights.

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The remaining 5.8 Bcf of the facility is contracted with other utilities and third-party marketers with these results reported in other.

In 2021, NW Natural began to utilize 1 Bcf of increased storage capacity realized through reservoir expansion during more than 15 years of delta pressure operations.

This change increased the working gas capacity from 16 Bcf to 17 Bcf.

In 2022, NW Natural utilized 0.5 Bcf of increased storage capacity realized through reservoir expansion during more than 15 years of delta pressure operations.

This change increased the working gas capacity from 17.0 Bcf in 2021 to 17.5 Bcf in 2022.

The overall facility consists of seven depleted natural gas reservoirs, 22 injection and withdrawal wells, a compressor station, dehydration and control equipment, gathering lines, and other related facilities.

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Intrastate firm storage services in Oregon are offered under an OPUC-approved rate schedule as an optional service to certain eligible customers.

Gas storage revenues from the 5.7 Bcf are derived primarily from firm service customers who provide energy-related services, including natural gas distribution, electric generation, and energy marketing.

Gas storage revenues from the 5.8 Bcf are derived primarily from firm service customers who provide energy-related services,

including natural gas distribution, electric generation, and energy marketing.

The Mist facility benefits from limited competition as there are few storage facilities in the Pacific Northwest region.

5 unchanged sentences

• NW Natural Water Company, LLC (NWN Water) and its water and wastewater utility operations;

• NWN Water's equity investment in Avion Water Company, Inc.;

• NW Natural Renewables Holdings, LLC and its non-regulated renewable natural gas activities;

1 unchanged sentence

• holding company and corporate activities, including business development activities, as well as adjustments made in consolidation.

Water Utilities

NWN Water serves a total of approximately 80,000 people through approximately 33,000 water and wastewater connections in the Pacific Northwest and Texas.

NWN Water has additional signed acquisition agreements for water and wastewater utilities in the Pacific Northwest, Texas and Arizona, which pending transactions are subject to state utility commission approvals, and other closing conditions, and are expected to close during 2022.

Once closed, NWN Water expects to serve approximately 145,000 customers through an aggregate total of approximately 60,000 water and wastewater connections in the Pacific Northwest, Texas and Arizona, with a cumulative investment in the water and wastewater sectors of approximately $215 million.

NW Holdings continues to pursue additional acquisitions in a disciplined manner.

NW Natural Water

NWN Water currently serves an estimated 155,000 people through approximately 62,500 water and wastewater connections across five states.

NWN Water continues to grow though customer additions within or near its service territories, and continues to pursue acquisitions.

For recently acquired water utilities, see further discussion about the status of water general rate cases in Part II, Item 7, "Results of Operations—Regulatory Matters— Water General Rate Cases ."

The water and wastewater utilities primarily serve residential and commercial customers.

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NW Natural Renewables

NW Natural Renewables is a newly formed subsidiary of NW Natural Holdings established to pursue non-regulated renewable natural gas activities.

NW Natural Renewables is focused on providing cost-effective solutions to decarbonize a variety of sectors utilizing existing waste streams and renewable energy resources.

NW Natural Renewables is a newly formed non-regulated subsidiary of NW Natural Holdings established to invest in renewable energy through the production and supply of lower-carbon fuels.

NW Natural Renewables' first project is with a subsidiary of EDL, a global producer of sustainable distributed energy.

In September 2021, a subsidiary of NW Natural Renewables and a subsidiary of EDL executed agreements, whereby the subsidiary of NW Natural Renewables committed $50 million toward the development of two production facilities that are designed to convert landfill waste gases to RNG and connect gas production to existing regional pipeline networks.

Testing and commissioning of the production facilities is expected to occur in 2023.

Alongside these development agreements, a subsidiary of NW Natural Renewables and a subsidiary of EDL executed agreements designed to secure a 20-year supply of RNG for NW Natural Renewables.

Testing and commissioning of the production facilities is expected to occur in the spring of 2023.

Alongside these development agreements, a subsidiary of NW Natural Renewables and a subsidiary of EDL executed agreements designed to secure a 20-year supply of RNG produced from the facilities for NW Natural Renewables.

In 2022, NW Natural Renewables executed a four-year off-take agreement with a counterparty for the near-term RNG production.

NW Natural Renewables is currently in discussions with other counterparties to contract the remaining RNG production under long-term contracts.

ENVIRONMENTAL MATTERS

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Greenhouse Gas Matters

For information concerning greenhouse gas matters, see Part II, Item 7, “Results of Operations—Environmental, Legislation and Regulation Matters.”

For information concerning greenhouse gas matters, see Part II, Item 7, “Results of Operations—Environmental Regulation and Legislation Matters.”

HUMAN CAPITAL

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Other Entities:

Water company employees 61

Water and wastewater company employees 105

Total other entities 109

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Employees complete classroom instruction and hands-on, scenario-based training at our training facility in Oregon that allows employees to experience realistic situations in a controlled environment.

We also host natural gas safety training events for ﬁrst responders, which prepare those first responders and NW Natural field employees to deliver an integrated, seamless response in the event of an emergency that involves or affects the natural gas system.

We navigated, and continue to navigate, the COVID-19 pandemic with limited class sizes and online training to help keep people safe.

We also host natural gas safety training events for ﬁrst responders, which are designed to prepare those first responders and NW Natural field employees to deliver an integrated, seamless response in the event of an emergency that involves or affects the natural gas system.

We navigated, and continue to navigate, the COVID-19 pandemic to help keep people safe.

We also implemented a new learning management system that went live in early 2021 and provides more efficiency and flexibility in how we train.

Our ongoing COVID-19 response is just one example of our safety culture in action.

As a critical infrastructure energy company that provides an essential service to our customers, NW Natural has well-defined emergency response command structures and protocols.

In response to the COVID-19 pandemic, NW Natural initially mobilized its incident command team and business continuity plans in early March 2020 and initiated similar procedures at our water utilities, with a focus on the safety of our employees and the people, business partners, and communities we serve.

We continue to monitor and respond to developments related to the COVID-19 pandemic.

For employees whose role requires them to work in the field or onsite, we are following CDC, OSHA, and state specific guidance.

Measures continue to include:

following social distancing guidelines;

use of personal protective equipment (PPE);

enhanced sanitizing protocols;

employee health screening protocols;

remote and flexible work arrangements where possible;

and other measures intended to mitigate the spread of this disease and keep our employees and customers safe and informed.

Our water companies are following similar protocols.

As an essential service provider, our water and natural gas utility businesses continue to serve our customers without interruption.

Our experience and approach to workplace safety have enabled us to preserve business continuity while continuing to focus on our commitment to the safety of our customers, business partners and the communities we serve.

The COVID-19 pandemic also presents challenges for employees’ emotional well-being and ability to balance work and family responsibilities.

We are supporting our employees through these unusual times with the following:

frequent employee surveys;

virtual meetings on wellness topics;

resiliency support;

additional psychological support services;

processes to facilitate flexible and reduced-schedule work where possible;

virtual ergonomic assistance to help remote employees work safely at home;

and support and access to obtain vaccines.

Employee Benefits

Employee Benefits and Support

To attract employees and meet the needs of our workforce, NW Natural strives to offer competitive compensation and benefits packages to employees.

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Benefits available to employees during 2022 included, among others:

healthcare and other insurance coverages, wellness resources, retirement and savings plans, paid time off programs and flexible work schedules, culture and community-focused resources and opportunities, and employee recognition programs and discounts.

healthcare and other insurance coverages, wellness resources, retirement and savings plans, paid time off programs, and flexible and hybrid work schedules, where possible, employee resource groups, and culture and community-focused resources and opportunities, and employee recognition programs and discounts.

Talent Attraction and Development

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Diversity, Equity and Inclusion

We have a longstanding commitment to creating a diverse and inclusive culture that reflects and supports the communities we serve, and believe a diverse, equitable, and inclusive workforce contributes to long-term success.

This commitment to diversity also extends to leadership positions, including members of the officer team and the Board of Directors.

Our efforts in recruiting, promoting, and retaining diverse talent, building inclusive teams, and creating a culture that embraces differences are at the core of our workforce strategy.

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We have employee-led groups that develop programs and activities that build awareness around issues important to their co-workers, families, customers, and our community.

Groups include the Diversity, Equity & Inclusion Council, African American, Rainbow Alliance (LGBTQ+), Veterans, Somos Unidos (Latinx), and Asian American employee resource groups, Wellness Advisory Committee, Women’s Network, and Sustainability and Equity Engagement Team.

Groups include the Diversity, Equity & Inclusion Council, Women's Network, African American, Rainbow Alliance (LGBTQ+), Veterans, Somos Unidos (Latinx), Asian American, and Neurodiversity employee resource groups, Wellness Advisory Committee, and Sustainability and Equity Engagement Team.

We also continue to emphasize diversity, equity and inclusion values through employee training and education, including expanded diversity training as part of new hire onboarding and other diversity, equity, and inclusion education that occurs throughout the year.

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We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Accordingly, investors should monitor our

website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

We have included our website address as an inactive textual reference only.

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We intend to disclose revisions and amendments to, and any waivers from, the Code of Ethics for officers and directors on our website.

Our Corporate Governance Standards, Director Independence Standards, charters of each of the committees of the Board of Directors, and additional information about NW Holdings and NW Natural are also available at the website.

Our Corporate Governance Standards, Director Independence Standards, charters of each of the committees of

the Board of Directors, and additional information about NW Holdings and NW Natural are also available at the website.

Copies of these documents may be requested, at no cost, by writing or calling Shareholder Services, Northwest Natural Holding Company, 250 S.W.

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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 1. Business