Northwest Natural Holding Co 10-K

nwn-20241231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31 , 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to___________ Commission file number 1-38681 Commission file number 1-15973 NORTHWEST NATURAL HOLDING COMPANY NORTHWEST NATURAL GAS COMPANY (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter) Oregon 82-4710680 Oregon 93-0256722 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 250 S.W. Taylor Street Portland Oregon 97204 250 S.W. Taylor Street Portland Oregon 97204 (Address of principal executive offices) (Zip Code) (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (503) 226-4211 Registrant’s telephone number, including area code: (503) 226-4211 Securities registered pursuant to Section 12(b) of the Act: Registrant Title of each class Trading Symbol Name of each exchange on which registered Northwest Natural Holding Company Common Stock NWN New York Stock Exchange Northwest Natural Gas Company None None None Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. NORTHWEST NATURAL HOLDING COMPANY Yes ☒ No ☐ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. NORTHWEST NATURAL HOLDING COMPANY Yes ☐ No ☒ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. NORTHWEST NATURAL HOLDING COMPANY Yes ☒ No ☐ NORTHWEST NATURAL GAS COMPANY Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). NORTHWEST NATURAL HOLDING COMPANY Yes ☒ No ☐ NORTHWEST NATURAL GAS COMPANY Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. NORTHWEST NATURAL HOLDING COMPANY NORTHWEST NATURAL GAS COMPANY Large Accelerated Filer ☒ Large Accelerated Filer ☐ Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☐ Non-accelerated Filer ☒ Smaller Reporting Company ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. NORTHWEST NATURAL HOLDING COMPANY Yes ☒ No ☐ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. NORTHWEST NATURAL HOLDING COMPANY Yes ☐ No ☒ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). NORTHWEST NATURAL HOLDING COMPANY Yes ☐ No ☒ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). NORTHWEST NATURAL HOLDING COMPANY Yes ☐ No ☒ NORTHWEST NATURAL GAS COMPANY Yes ☐ No ☒ As of the end of the second quarter of 2024, the aggregate market value of the shares of Common Stock of Northwest Natural Holding Company (based upon the closing price of these shares on the New York Stock Exchange on June 30, 2024) held by non-affiliates was $ 1,380,245,550 . At February 18, 2025, 40,238,495 shares of Northwest Natural Holding Company's Common Stock (the only class of Common Stock) were outstanding. All shares of Northwest Natural Gas Company's Common Stock (the only class of Common Stock) outstanding were held by Northwest Natural Holding Company. This combined Form 10-K is separately filed by Northwest Natural Holding Company and Northwest Natural Gas Company. Information contained in this document relating to Northwest Natural Gas Company is filed by Northwest Natural Holding Company and separately by Northwest Natural Gas Company. Northwest Natural Gas Company makes no representation as to information relating to Northwest Natural Holding Company or its subsidiaries, except as it may relate to Northwest Natural Gas Company and its subsidiaries. Northwest Natural Gas Company meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this report with the reduced disclosure format. DOCUMENTS INCORPORATED BY REFERENCE Portions of Northwest Natural Holding Company's Proxy Statement, to be filed in connection with the 2025 Annual Meeting of Shareholders, are incorporated by reference in Part III. TABLE OF CONTENTS Item Page Glossary of Terms and Abbreviations 4 Forward-Looking Statements 6 PART I Item 1. Business 8 Overview 8 Business Model 8 Natural Gas Distribution 8 Other 13 Environmental Matters 15 Human Capital 15 Information About Our Executive Officers 16 Available Information 16 Item 1A. Risk Factors 17 Item 1B. Unresolved Staff Comments 31 Item 1C. Cybersecurity 32 Item 2. Properties 33 Item 3. Legal Proceedings 34 Item 4. Mine Safety Disclosures 34 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer 35 Item 6. Reserved 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 70 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 138 Item 9A. Controls and Procedures 138 Item 9B. Other Information 138 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 133 PART III Item 10. Directors, Executive Officers and Corporate Governance 139 Item 11. Executive Compensation 141 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 141 Item 13. Certain Relationships and Related Transactions, and Director Independence 143 Item 14. Principal Accountant Fees and Services 143 PART IV Item 15. Exhibits and Financial Statement Schedules 143 Item 16. Form 10-K Summary 143 EXHIBIT INDEX 144 SIGNATURES 149 3 GLOSSARY OF TERMS AND ABBREVIATIONS ACC Arizona Corporation Commission; the entity that regulates NW Holdings' regulated water and wastewater businesses in Arizona with respect to rates and terms of service, among other matters AFUDC Allowance for Funds Used During Construction AOCI / AOCL Accumulated Other Comprehensive Income (Loss) ASC Accounting Standards Codification ASU Accounting Standards Update as issued by the FASB Average Weather The 25-year average of heating degree days based on temperatures established in our last Oregon general rate case Bcf Billion cubic feet, a volumetric measure of natural gas, where one Bcf is roughly equal to 10 million therms CAP Compliance Assurance Process with the Internal Revenue Service CCA Climate Commitment Act enacted by the State of Washington CNG Compressed Natural Gas CODM Chief Operating Decision Maker, which for accounting purposes is defined as an individual or group of individuals responsible for the allocation of resources and assessing the performance of the entity's business units Core NGD Customers Residential, commercial, and industrial customers receiving firm service from the Natural Gas Distribution business Cost of Gas The delivered cost of natural gas sold to customers, including the cost of gas purchased, gas storage costs, gas reserves costs, gas commodity derivative contracts, pipeline demand costs, seasonal demand cost balancing adjustments, renewable natural gas and its attributes, including renewable thermal certificate costs, and regulatory gas cost deferrals CPP Climate Protection Program established by the Environmental Quality Commission of the Oregon Department of Environmental Quality Decoupling A natural gas billing rate mechanism, also referred to as a conservation tariff, which is designed to allow a utility to encourage residential and small commercial customers to conserve energy Degree Day The number of degrees that the average outdoor temperature falls below or exceeds a base value in a given period of time Demand Cost A component in NGD customer rates representing the cost of securing firm pipeline capacity, whether the capacity is used or not ECRM Environmental Cost Recovery Mechanism, a billing rate mechanism for recovering prudently incurred environmental site remediation costs allocable to Washington customers through NGD customer billings Energy Corp Northwest Energy Corporation, a wholly-owned subsidiary of Northwest Natural Gas Company EPA Environmental Protection Agency EPS Earnings per share ESPP Employee Stock Purchase Plan FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission; the entity regulating interstate storage services offered by the Mist gas storage facility Firm Service Natural gas service offered to customers under contracts or rate schedules that will not be disrupted to meet the needs of other customers FMBs First Mortgage Bonds General Rate Case A periodic filing with state or federal regulators to establish billing rates for utility customers GHG Greenhouse gases Interruptible Service Natural gas service offered to customers (usually large commercial or industrial users) under contracts or rate schedules that allow for interruptions when necessary to meet the needs of firm service customers Interstate Storage Services The portion of the Mist gas storage facility not used to serve NGD customers, instead serving utilities, third-party marketers, and electric generators IPUC Public Utility Commission of Idaho; the entity that regulates NW Holdings' regulated water businesses in Idaho with respect to rates and terms of service, among other matters IRA Inflation Reduction Act of 2022 IRP Integrated Resource Plan KB Kelso-Beaver Pipeline, of which 10% is owned by KB Pipeline Company, a subsidiary of NNG Financial Corporation 4 LNG Liquefied Natural Gas, the cryogenic liquid form of natural gas. To reach a liquid form at atmospheric pressure, natural gas must be cooled to approximately negative 260 degrees Fahrenheit LTIP Long Term Incentive Plan Moody's Moody's Investors Service, Inc., credit rating agency NAV Net Asset Value NGD Natural Gas Distribution, a segment of Northwest Natural Holding Company and Northwest Natural Gas Company that provides regulated natural gas distribution services to residential, commercial, and industrial customers in Oregon and Southwest Washington NGD Margin A financial measure used by NW Natural's CODM consisting of NGD operating revenues less the associated cost of gas, revenue taxes, and environmental recoveries NNG Financial NNG Financial Corporation, a wholly-owned subsidiary of NW Holdings NW Holdings Northwest Natural Holding Company NW Natural Northwest Natural Gas Company, a wholly-owned subsidiary of NW Holdings NW Natural Renewables NW Natural Renewables Holdings, LLC, a wholly-owned subsidiary of NW Holdings NWN Energy NW Natural Energy, LLC, a wholly-owned subsidiary of NW Holdings NWN Gas Reserves NWN Gas Reserves LLC, a wholly-owned subsidiary of Energy Corp NWN Gas Storage NW Natural Gas Storage, LLC, a wholly-owned subsidiary of NWN Energy NWN Water NW Natural Water Company, LLC, a wholly-owned subsidiary of NW Holdings ODEQ Oregon Department of Environmental Quality OPEIU Office and Professional Employees International Union Local No. 11, AFL-CIO, the Union which represents NW Natural's bargaining unit employees OPUC Public Utility Commission of Oregon; the entity that regulates our Oregon natural gas and regulated water businesses with respect to rates and terms of service, among other matters; the OPUC also regulates the Mist gas storage facility's intrastate storage services PGA Purchased Gas Adjustment, a regulatory mechanism primarily used to adjust natural gas customer rates to reflect changes in the forecasted cost of gas and differences between forecasted and actual gas costs from the prior year PHMSA U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration PUCT Public Utility Commission of Texas; the entity that regulates NW Holdings' regulated water and wastewater businesses in Texas with respect to rates and terms of service, among other matters RNG Renewable Natural Gas, a source of natural gas derived from organic materials which may be captured, refined, and distributed on natural gas pipeline systems RNG Hold Co NW Natural RNG Holding Company, LLC, a wholly-owned subsidiary of Northwest Natural Gas Company ROE Return on Equity, a measure of corporate profitability, calculated as net income or loss divided by average common equity. Authorized ROE refers to the equity rate approved by a regulatory agency for use in determining utility revenue requirements ROR Rate of Return, a measure of return on utility rate base. Authorized ROR refers to the rate of return approved by a regulatory agency and is generally discussed in the context of ROE and capital structure RSU Restricted Stock Unit RTC Renewable Thermal Certificate S&P Standard & Poor's Financial Services LLC, a credit rating agency and a subsidiary of S&P Global Inc. Sales Service Service provided whereby a customer purchases both natural gas commodity supply and transportation from the NGD business SEC U.S. Securities and Exchange Commission SOFR Secured Overnight Financing Rate SRRM Site Remediation and Recovery Mechanism, a billing rate mechanism for recovering prudently incurred environmental site remediation costs allocable to Oregon through NGD customer billings, subject to an earnings test Therm The basic unit of natural gas measurement, equal to one hundred thousand British thermal units Transportation Service Service provided whereby a customer purchases natural gas directly from a supplier but pays the utility to transport the gas over its distribution system to the customer’s facility TSA Transportation Security Administration U.S. GAAP Accounting principles generally accepted in the United States of America 5 WARM An Oregon billing rate mechanism applied to natural gas residential and commercial customers to adjust for temperature variances from average weather WUTC Washington Utilities and Transportation Commission, the entity that regulates our Washington natural gas and regulated water businesses with respect to rates and terms of service, among other matters FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to the safe harbors created by such Act. Forward-looking statements can be identified by words such as anticipates, assumes, may, intends, plans, projects, seeks, should, believes, estimates, expects, will, could, and similar references (including the negatives thereof) to future periods, although not all forward-looking statements contain these words. Examples of forward-looking statements include, but are not limited to, statements regarding the following: • plans, projections and predictions; • objectives, goals, visions or strategies; • assumptions, generalizations and estimates; • ongoing continuation of past practices or patterns; • future events or performance; • trends; • risks; • uncertainties; • timing and cyclicality; • economic conditions, including impacts of inflation and interest rates, recessionary risk, and general economic uncertainty; • earnings and dividends; • capital expenditures and allocation; • capital markets or access to capital; • capital or organizational structure; • matters related to climate change and our role in decarbonization or a low-carbon future; • renewable natural gas, environmental attributes related thereto, and hydrogen; • our strategy to reduce greenhouse gas emissions and the efficacy of communicating that strategy to shareholders, investors, stakeholders and communities; • the policies and priorities of the current presidential administration and U.S. Congress; • the policies and priorities of the officials elected in the 2024 presidential and congressional elections; • growth; • customer rates; • pandemic and related illness or quarantine and economic conditions related thereto or resulting therefrom; • labor relations and workforce succession; • commodity costs; • desirability and cost competitiveness of natural gas; • gas reserves; • operational performance and costs; • energy policy, infrastructure and preferences; • public policy approach and involvement; • efficacy of derivatives and hedges; • liquidity, financial positions, and planned securities issuances; • valuations; • project and program development, expansion, or investment; • business development efforts, including new business lines such as unregulated renewable natural gas, and acquisitions and integration thereof; • implementation and execution of our water strategy; • pipeline capacity, demand, location, and reliability; • adequacy of property rights and operations center development; • technology implementation and cybersecurity practices; • competition; • procurement and development of gas (including renewable natural gas) and water supplies; • estimated expenditures, supply chain and third party availability and impairment; • supply chain disruptions; • costs of compliance, and our ability to include those costs in rates; • customers bypassing our infrastructure; • credit exposures and credit ratings or changes in credit ratings; • uncollectible account amounts; • rate or regulatory outcomes, recovery or refunds, and the availability of public utility commissions to take action; • impacts or changes of the new presidential administration, executive orders, laws, rules and regulations, or legal challenges related thereto, including energy climate related legislation; 6 • tax liabilities or refunds, including effects of tax legislation; • levels and pricing of gas storage contracts and gas storage markets; • outcomes, timing and effects of potential claims, litigation, regulatory actions, and other administrative matters; • projected obligations, expectations and treatment with respect to, and the impact of new legislation on, retirement plans; • international, federal, state, and local efforts to regulate, in a variety of ways, greenhouse gas emissions, and the effects of those efforts; • geopolitical factors, including the ongoing conflicts in Europe and the Middle East; • availability, adequacy, and shift in mix, of gas and water supplies; • effects of new or anticipated changes in critical accounting policies or estimates; • approval and adequacy of regulatory deferrals; • effects and efficacy of regulatory mechanisms; and • environmental, regulatory, litigation and insurance costs and recoveries, and timing thereof. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed at Item 1A “ Risk Factors ” of Part I and Item 7 and Item 7A, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and “ Quantitative and Qualitative Disclosures about Market Risk ”, respectively, of Part II of this report. Any forward-looking statement made in this report speaks only as of the date on which it is made. Factors or events that could cause actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. 7 PART I FILING FORMAT This annual report on Form 10-K is a combined report being filed by two separate registrants: Northwest Natural Holding Company (NW Holdings), and Northwest Natural Gas Company (NW Natural). Except where the content clearly indicates otherwise, any reference in the report to "we," "us" or "our" is to the consolidated entity of NW Holdings and all of its subsidiaries, including NW Natural, which is a distinct SEC registrant that is a wholly-owned subsidiary of NW Holdings. Each of NW Holdings' subsidiaries is a separate legal entity with its own assets and liabilities. Information contained herein relating to any individual registrant or its subsidiaries is filed by such registrant on its own behalf. Each registrant makes representations only as to itself and its subsidiaries and makes no other representation whatsoever as to any other company. Item 8 in this Annual Report on Form 10-K includes separate financial statements (i.e. balance sheets, statements of comprehensive income, statements of cash flows, and statements of equity) for NW Holdings and NW Natural, in that order. References in this discussion to the "Notes" are to the Notes to the Consolidated Financial Statements in Item 8 of this report. The Notes to the Consolidated Financial Statements are presented on a combined basis for both entities except where expressly noted otherwise. All Items other than Item 8 are combined for the reporting companies. ITEM 1. BUSINESS OVERVIEW NW Holdings is a holding company headquartered in Portland, Oregon and owns NW Natural, NW Natural Water Company, LLC (NWN Water), NW Natural Renewables Holdings, LLC, a non-regulated subsidiary established to pursue non-regulated renewable natural gas activities, and other businesses and activities. NW Natural is NW Holdings’ largest subsidiary. NW Natural distributes natural gas to residential, commercial, and industrial customers in Oregon and southwest Washington. NW Natural and its predecessors have supplied gas service to the public since 1859, was incorporated in Oregon in 1910, and began doing business as NW Natural in 1997. 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 and wastewater businesses, non-regulated renewable natural gas activities and other investments and activities are aggregated and reported as "other" at their respective registrant. Our mission is to provide safe, reliable and affordable utility services and renewable energy in a sustainable way to better the lives of the communities we serve. We support our mission by following our core values of service ethic, integrity, safety, caring, and environmental stewardship. NATURAL GAS DISTRIBUTION (NGD) SEGMENT Both NW Holdings and NW Natural have one reportable segment, the NGD segment, which is operated by NW Natural. NGD provides natural gas service through approximately 806,000 meters in Oregon and southwest Washington. Approximately 88% of customers are located in Oregon and 12% are located in southwest Washington. NW Natural has been allocated an exclusive service territory by the Oregon Public Utility Commission (OPUC) and Washington Utilities and Transportation Commission (WUTC), which includes the major population centers in western Oregon, including the Portland metropolitan area, most of the Willamette Valley, the Coastal area from Astoria to Coos Bay, and portions of Washington along the Columbia River. Major businesses located in NW Natural's service territory include retail, manufacturing, and high-technology industries. Customers The NGD business serves residential, commercial, and industrial customers with no individual customer accounting for more than 10% of NW Natural's or NW Holdings' revenues. On an annual basis, residential and commercial customers typically account for approximately 60% of NGD volumes delivered and approximately 90% of NGD margin. Industrial customers largely account for the remaining volumes and margin. 8 The following table presents summary meter information for the NGD segment as of December 31, 2024: Number of Meters % of Volumes % of Margin Residential 735,117 38 % 65 % Commercial 69,362 23 % 25 % Industrial 1,050 39 % 6 % Other (1) N/A N/A 4 % Total 805,529 100 % 100 % (1) NGD margin is also affected by other items, including miscellaneous revenues, gains or losses from NW Natural's gas cost incentive sharing mechanism, other margin adjustments, and other regulated services. Generally, residential and commercial customers purchase both their natural gas commodity (gas sales) and natural gas delivery services from the NGD business. Industrial and some large commercial customers also purchase the gas commodity either from NW Natural or directly from a third-party gas marketer or supplier. Gas commodity cost is primarily a pass-through cost to customers; 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, tariffs are designed to provide some certainty regarding industrial and commercial customers' volumes by requiring an annual service election, special rates or possible restrictions for changes between elections. We estimate natural gas was in approximately 63% of single-family residential homes in NW Natural's service territory in 2024. Customer growth in our region comes mainly from the following sources: single-family housing, both new construction and conversions; multifamily housing new construction; and commercial buildings, both new construction and conversions. Single-family new construction has consistently been our largest source of growth. 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 In its service areas, the NGD business has no direct competition from other natural gas distributors. 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, perceptions, 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. In the industrial and large commercial markets, the NGD business competes with all forms of energy, including competition from wholesale natural gas marketers. In addition, large industrial customers could bypass NW Natural's natural gas distribution system by installing their own direct pipeline connection to the interstate pipeline system. NW Natural has designed custom transportation service agreements with several large industrial customers to provide transportation service rates that are competitive with the customer’s costs of installing their own pipeline. Seasonality of Business The NGD business is seasonal in nature due to higher gas usage by residential and commercial customers during the cold winter heating months. Other categories of customers experience similar seasonality in their usage but to a lesser extent. Regulation and Rates The NGD business is subject to regulation by the OPUC and WUTC. These regulatory agencies authorize rates and allow recovery mechanisms to provide the opportunity to recover prudently incurred capital and operating costs from customers, while also earning a reasonable return on investment for investors. In addition, the OPUC and WUTC also regulate the system of accounts and issuance of securities by NW Natural. NW Natural files general rate cases and rate tariff requests periodically with the OPUC and WUTC to establish approved rates, an authorized return on equity (ROE), an overall rate of return (ROR) on rate base, an authorized capital structure, and other revenue/cost deferral and recovery mechanisms. NW Natural is also regulated by the Federal Energy Regulatory Commission (FERC). Under NW Natural's Mist interstate storage certificate with FERC, NW Natural is required to file either a petition for rate approval or a cost and revenue study every five years to change or justify maintaining the existing rates for the interstate storage service. For further discussion on our most recent general rate cases, see Part II, Item 7, "Results of Operations—Regulatory Matters— Regulation and Rates ." 9 Gas Supply NW Natural strives to secure sufficient, reliable supplies of natural gas to meet the needs of customers at the lowest reasonable cost, while maintaining price stability, managing gas purchase costs prudently and supporting our core value of environmental stewardship. This is accomplished through a comprehensive strategy focused on the following items: • Reliability - ensuring gas resource portfolios are sufficient to satisfy customer requirements under extreme cold weather conditions; • Diverse Supply - providing diversity of supply sources; • Diverse Contracts - maintaining a variety of contract durations, types, and counterparties; • Cost Management and Recovery - employing prudent gas cost management strategies; and • Environmental Stewardship - striving to reduce the carbon content and environmental impacts of the energy we deliver. Reliability 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 approximately 55% of the requirements with gas from storage located within or adjacent to its service territory, while the remaining supply requirements would come from gas purchases under firm gas purchase contracts and recall agreements. 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. The reliability of service on these alternate routes will vary depending on the constraints of the pipeline system. For those segments with acceptable reliability, segmentation provides a shipper with increased flexibility and potential cost savings compared to traditional pipeline service. The NGD business relies on segmentation of firm pipeline transportation capacity that flows from Stanfield, Oregon to various points south of Molalla, Oregon. We believe gas supplies would be sufficient to meet existing NGD firm customer demand in the event of maximum design day weather conditions. The following table shows the sources of supply projected to be used to satisfy the design day sales for the 2024-25 winter heating season: Therms in millions Therms Percent Sources of NGD supply: Firm supply purchases 3.4 34 % Mist underground storage (NGD only) 3.3 33 % Company-owned LNG storage 1.8 18 % Pipeline segmentation capacity 0.6 6 % Off-system storage contract 0.5 5 % Recall agreements 0.3 3 % Peak day citygate deliveries 0.1 1 % Total 10.0 100 % The OPUC and WUTC have Integrated Resource Planning (IRP) processes in which utilities define different future scenarios and corresponding resource and compliance strategies in an effort to evaluate supply and demand resource and compliance requirements, consider uncertainties in the planning process and the need for flexibility to respond to changes, and establish a plan for providing reliable service while meeting carbon compliance obligations within frameworks that emphasize least cost and risk. 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. OPUC acknowledgment of the IRP does not constitute ratemaking approval of any specific resource acquisition strategy or expenditure. For additional information see Part II, Item 7, "Results of Operations— Regulatory Matters ." Diversity of Supply Sources NW Natural purchases gas supplies primarily from the Alberta and British Columbia provinces of Canada and multiple receipt points in the U.S. Rocky Mountains to protect against regional supply disruptions and to take advantage of price differentials. For 2024, 60% of gas supply came from Canada, with the balance primarily coming from the U.S. Rocky Mountain region. We believe gas supplies available in the western United States and Canada are adequate to serve NGD customer requirements for 10 the foreseeable future. NW Natural continues to evaluate the long-term supply mix based on projections of gas production and pricing in the U.S. Rocky Mountain region as well as other regions in North America. NW Natural supplements firm gas supply purchases with gas withdrawals from gas storage facilities, including underground reservoirs and LNG storage facilities. Storage facilities are generally injected with natural gas during the off-peak months in the spring and summer, and the gas is withdrawn for use during peak demand months in the winter. The following table presents the storage facilities available for NGD business supply: Maximum Daily Deliverability (therms in millions) Designed Storage Capacity (Bcf) Gas Storage Facilities Owned Facility Mist, Oregon (Mist Facility) (1) 3.3 12.8 Mist, Oregon (North Mist Facility) (2) 1.3 4.1 Contracted Facility Jackson Prairie, Washington (3) 0.5 1.1 LNG Facilities Owned Facilities Newport, Oregon 0.8 1.0 Portland, Oregon 1.0 0.6 Total 6.9 19.6 (1) The Mist gas storage facility has a total maximum daily deliverability of 5.3 million therms and a total designed storage capacity of about 17.5 Bcf, of which 3.3 million therms of daily deliverability and 12.8 Bcf of storage capacity are reserved for NGD business customers. (2) The North Mist facility is contracted to exclusively serve Portland General Electric, a local electric utility, and may not be used to serve other NGD customers. See " North Mist Gas Storage Facility " below for more information. (3) The storage facility is located near Chehalis, Washington and is contracted from Northwest Pipeline, a subsidiary of The Williams Companies. The Mist facility serves NGD segment customers and is also used for non-NGD purposes, primarily for contracts with gas storage customers, including utilities, third-party marketers, and electric generators. Under regulatory agreements with the OPUC and WUTC, gas storage at Mist can be developed in advance of NGD customer needs but is subject to recall when needed to serve such customers as their demand increases. When storage capacity is recalled for NGD purposes it becomes part of the NGD segment. As of May 1, 2024, 0.2 million therms per day of deliverability and 1.15 Bcf of associated non-utility Mist gas storage capacity was recalled to serve core customers. Customer rate increases related to this recall began on November 1, 2024. The North Mist facility is contracted for the exclusive use of Portland General Electric, a local electric utility, and may not be used to serve other NGD customers. See " North Mist Gas Storage Facility " below. Diverse Contract Durations and Types NW Natural has a diverse portfolio of short-, medium-, and long-term firm gas supply contracts and a variety of contract types including firm and interruptible supplies as well as supplemental supplies from gas storage facilities. The majority of our gas supply contracts include year-round, winter-only, summer-only, and monthly baseload supplies, and daily spot purchases. We also maintain options to call on additional daily supplies during the winter heating season. During 2024, a total of 822 million therms were purchased under contracts with durations as follows: Contract Duration (primary term) Percent of Purchases Long-term (one year or longer) 31 % Short-term (more than one month, less than one year) 45 Spot (one month or less) 24 Total 100 % During 2024, there was one supplier that provided 10% or more of the NGD business gas supply requirements. No other individual supplier provided 10% or more of the NGD business gas supply requirements. Gas Cost Management The cost of gas sold to NGD customers primarily consists of the following items, which are included in annual Purchased Gas Adjustment (PGA) rates: gas purchases from suppliers; charges from pipeline companies to transport gas to our distribution 11 system; gas storage costs; gas reserves costs; gas commodity derivative contracts; and renewable natural gas and its attributes, including renewable thermal certificates. Costs to comply with Washington's Climate Commitment Act (CCA) are included in the cost of gas for Washington customers. We expect that costs to comply with Oregon's Climate Protection Program (CPP) and any similar program that may be enacted in our service territory will also be included in the cost of gas. The NGD business employs a number of strategies to mitigate the cost of gas sold to customers. The primary strategies for managing gas commodity price risk include: • negotiating fixed prices directly with gas suppliers; • negotiating financial derivative contracts that: (1) effectively convert floating index prices in physical gas supply contracts to fixed prices (referred to as commodity price swaps); or (2) effectively set a ceiling or floor price, or both, on floating index priced physical supply contracts (referred to as commodity price options such as calls, puts, and collars); and • buying physical gas supplies at a set price and injecting the gas into storage for price stability and to minimize pipeline capacity demand costs. NW Natural also contracts with an independent energy marketing company to capture opportunities regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers. Asset management activities provide opportunities for cost of gas savings for customers and incremental revenues for NW Natural through regulatory incentive-sharing mechanisms. These activities, net of the amount shared, are included in other for segment reporting purposes. Gas Cost Recovery Mechanisms for gas cost recovery are designed to be fair and reasonable, with an appropriate balance between the interests of customers and NW Natural. In general, natural gas distribution rates are designed to recover the costs of, but not to earn a return on, the gas commodity sold. Risks associated with gas cost recovery are minimized by resetting customer rates annually through the PGA and aligning customer and shareholder interests through the use of sharing, weather normalization, and conservation mechanisms in Oregon. See Part II, Item 7, "Results of Operations— Regulatory Matters " and "Results of Operations—Business Segment—Natural Gas Distribution Operations— Cost of Gas " . Environmental Stewardship Part of our gas supply strategy is working to reduce the carbon content and the environmental impacts of the energy we deliver. To that end, NW Natural developed and implemented an emissions screening tool that uses Environmental Protection Agency (EPA) data to calculate the relative emissions intensity of gas producer operations and prioritize purchases from lower emitting producers. In 2019, we began using this emissions intensity screening tool alongside other purchasing criteria such as price, credit worthiness and geographic diversity. We view this as a cost-neutral way to reduce carbon emissions associated with our natural gas supply. NW Natural is focused on taking steps to lower its emissions on behalf of customers by purchasing environmental attributes that are generated by the production of renewable natural gas (RNG). Under Oregon Senate Bill 98, NW Natural can purchase RNG or invest in RNG facilities, which generate these environmental attributes known as Renewable Thermal Certificates (RTCs). In 2019, the Washington State legislature also passed a bill supporting RNG procurement, House Bill 1257. The RTCs work like renewable energy certificates, or RECs, used in electricity markets. RTCs are verified and certified by the Midwest Renewable Energy Tracking System (M-RETS). The M-RETS Renewable Thermal Tracking System issues one RTC for every dekatherm of RNG injected into the gas system. NW Natural enters into contracts for the purchase of RNG and RTCs either through periodic request for proposals or through formal offerings or informal requests. See Part II, Item 7, "Results of Operations— Regulatory Matters ". In addition to purchases of RNG, NW Natural has piloted a hydrogen blend in pipelines serving its Sherwood Operations and Training Center. NW Natural has successfully tested a blend of up to 20% hydrogen. The tests met the safety protocols established by PHMSA Part 192. Additionally, NW Natural is focused on developing several hydrogen pilots for industrial and commercial customers to support their decarbonization goals. NW Natural is subject to the requirements of the Washington CCA cap-and-invest program, and will be subject to Oregon's CPP. NW Natural has modeled pathways to compliance with the CCA and CPP in its most recent IRP. While 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 NW Natural's gas distribution system is reliant on a single, bi-directional interstate transmission pipeline to bring gas supplies into the natural gas distribution system. Although dependent on a single pipeline, the pipeline ’ s gas flows into the Portland metropolitan market from two directions: (1) the north, which brings supplies from the British Columbia and Alberta supply basins; and (2) the east, which brings supplies from Alberta as well as the U.S. Rocky Mountain supply basins. NW Natural incurs monthly demand charges related to firm pipeline transportation contracts. These contracts have expiration dates ranging from 2025 to 2061. The largest pipeline agreements are with Northwest Pipeline. NW Natural actively works with Northwest Pipeline and others to renew contracts in advance of expiration to ensure gas transportation capacity is sufficient to meet customer needs. 12 Rates for interstate pipeline transportation services are established by FERC within the U.S. and by Canadian authorities for services on Canadian pipelines. Gas Distribution Safety and the protection of employees, customers, and our communities are, and will remain, top priorities. NW Natural constructs, operates, and maintains its pipeline distribution system and storage operations with the goal of ensuring natural gas is delivered and stored safely, reliably, and efficiently. NW Natural has one of the most modern distribution systems in the country with no identified cast iron pipe or bare steel main. Since the 1980s, NW Natural has taken a proactive approach to replacement programs and partnered with the OPUC and WUTC on progressive regulation to further safety and reliability efforts for the distribution system. In the past, NW Natural had a cost recovery program in Oregon that encompassed programs for cast iron replacement, bare steel replacement, transmission integrity management, and distribution integrity management programs as appropriate. Natural gas distribution businesses are likely to be subject to greater federal and state regulation in the future. Additional operating and safety regulations from the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) are currently under development. In January 2025, PHMSA released the final rulemaking: Gas Pipeline Leak Detection and Repair. The rulemaking includes congressional mandates from the PIPES (Protecting our Infrastructure of Pipelines and Enhancing Safety) Act of 2020 to reduce methane emissions from new and existing gas transmission, distribution, gathering, underground storage, and LNG facilities. The unpublished rulemaking was placed on a regulatory freeze by the new presidential administration and is expected to undergo additional review and amendment. In September 2023, PHMSA issued a notice of proposed rulemaking: Safety of Gas Distribution Pipelines and Other Pipeline Safety Initiatives. The proposed rulemaking requires operators to update distribution integrity management programs, emergency response plans, operations and maintenance manuals, and other safety practices. NW Natural does not foresee a significant impact of these rulemakings on our business given the modern materials used in our system. North Mist Gas Storage Facility The North Mist gas storage facility began operations in 2019. The North Mist facility provides long-term, no-notice underground gas storage service and is dedicated solely to Portland General Electric (PGE) under a 30-year contract with options to extend up to an additional 50 years upon mutual agreement of the parties. PGE uses the facility to fuel its gas-fired electric power generation facilities. North Mist includes a reservoir providing 4.1 Bcf of available storage, a 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. The facility is included in rate base under an established tariff schedule with revenues recognized consistent with the schedule. Billing rates are updated annually to the forecasted depreciable asset level and forecasted operating expenses. There are additional expansion opportunities in the Mist storage field. Any expansion would be based on market demand, cost effectiveness, available financing, receipt of future permits, and other rights. OTHER Certain businesses and activities of NW Holdings and NW Natural are aggregated and reported as other for segment reporting purposes. NW Natural The following businesses and activities are aggregated and reported as other under NW Natural, a wholly-owned subsidiary of NW Holdings: • 4.7 Bcf of the Mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; • natural gas asset management activities; and • appliance retail center operations. Mist Gas Storage The Mist gas storage facility began operations in 1989. It is a 17.5 Bcf facility with 12.8 Bcf used to provide gas storage for the NGD business. The remaining 4.7 Bcf of the facility is contracted with other utilities, third-party marketers, and electric generators with these results reported in other. The overall facility consists of seven depleted natural gas reservoirs, 21 injection and withdrawal wells, a compressor station, dehydration and control equipment, gathering lines, and other related facilities. The capacity at Mist provides multi-cycle gas storage services to customers in the interstate and intrastate markets. The interstate storage services are offered under a limited jurisdiction blanket certificate issued by FERC. Under NW Natural's interstate storage certificate with FERC, NW Natural is required to file either a petition for rate approval or a cost and revenue study every five years to change or justify maintaining the 13 existing rates for the interstate storage service. Intrastate firm storage services in Oregon are offered under an OPUC-approved rate schedule as an optional service to certain eligible customers. Gas storage revenues from the 4.7 Bcf are derived primarily from firm service customers who provide energy-related services, including natural gas distribution, electric generation, and energy marketing. The Mist facility benefits from limited competition as there are few storage facilities in the Pacific Northwest region. Therefore, NW Natural has the ability to acquire high-value, multi-year contracts. Asset Management Activities NW Natural contracts with an independent energy marketing company to provide asset management services, primarily through the use of natural gas commodity exchange agreements and natural gas pipeline capacity release transactions. The results of these activities are included in other, except for the asset management revenues allocated to NGD business customers pursuant to regulatory agreements, which are reported in the NGD segment. NW Holdings These include the following businesses and activities aggregated under NW Holdings: • NW Natural Water Company, LLC (NWN Water) and its water and wastewater utility operations and water services business; • NWN Water's equity investment in Avion Water Company, Inc.; • NW Natural Renewables Holdings, LLC and its non-regulated renewable natural gas activities; • a minority interest in the Kelso-Beaver Pipeline held by our wholly-owned subsidiary NNG Financial Corporation (NNG Financial); and • holding company and corporate activities, including business development activities, as well as adjustments made in consolidation. NW Natural Water NWN Water currently serves an estimated 190,000 people through approximately 76,000 water and wastewater connections across six states. NWN Water continues to grow though customer additions within or near its service territories, and continues to pursue acquisitions. See further discussion about the status of water general rate cases in Part II, Item 7, "Results of Operations—Regulatory Matters— Water and Wastewater Utilities ." The water and wastewater utilities primarily serve residential and commercial customers. Water distribution operations are seasonal in nature with peak demand generally during warmer summer months, while wastewater is less seasonally affected. Entities generally operate in exclusive service territories with no direct competitors. Water distribution customer rates are regulated by state utility commissions while the wastewater businesses we own consist of some state regulated systems and some systems that are not rate regulated by utility commissions. NWN Water launched its services business in April 2023. This business provides operations and maintenance services to water and wastewater system owners and works to create value by leveraging shared personnel, technology and expertise to support delivery of clean, reliable water at a reasonable cost. Today, NWN Water provides operations and maintenance services to approximately 25,000 connections. NW Natural Renewables NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated RNG activities. In September 2021, a subsidiary of NW Natural Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to secure RNG supply from two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities). The first facility was completed and commenced delivery of RNG to Ohio Renewables in September 2024. Upon reaching this milestone, Ohio Renewables paid $ 26.0 million to the EDL subsidiary. The second facility was completed and commenced delivery of RNG to Ohio Renewables in December 2024 at which time Ohio Renewables made an additional payment of $ 25.4 million to the EDL subsidiary. Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period at a contractually specified price. Ohio Renewables has contracted to sell the supply obtained from EDL at fixed-prices to investment grade counterparties. Ohio Renewables has contracted to sell RNG produced by the EDL Facilities up to certain specified volumes in each of calendar years 2024 through 2026 to an investment-grade counterparty. We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 2,430,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period. Ohio Renewables additionally has contracted to sell a fixed-volume of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042. Amounts to be delivered under this agreement are estimated to be 112,500 MMbtu in 2025, 375,000 MMbtu in 2026, 1,950,000 MMbtu annually in 2027 through 2034, and 2,775,000 MMbtu annually in years 2035 through 2042. Under the current contract, if less than 75% of the contracted volumes of RNG are not delivered on an annual basis, Ohio Renewables is obligated to pay the per MMbtu price for volumes between the amount delivered and 75% of the contracted volumes on an annual basis. 14 ENVIRONMENTAL MATTERS Properties and Facilities NW Natural owns, or previously owned, properties and facilities that are currently being investigated that may require environmental remediation and are subject to federal, state, and local laws and regulations related to environmental matters. These laws and regulations may require expenditures over a long time frame to address certain environmental impacts. Estimates of liabilities for environmental costs are difficult to determine with precision because of the various factors that can affect their ultimate disposition. These factors include, but are not limited to, the following: • the complexity of the site; • changes in environmental laws and regulations at the federal, state, and local levels; • the number of regulatory agencies or other parties involved; • new technology that renders previous technology obsolete, or experience with existing technology that proves ineffective; • the level of remediation required; • variations between the estimated and actual period of time that must be dedicated to respond to an environmentally-contaminated site; and • the application of environmental laws that impose joint and several liabilities on all potentially responsible parties. NW Natural has received recovery of a portion of such environmental costs through insurance proceeds, seeks the remainder of such costs through customer rates, and believes recovery of these costs is probable. In both Oregon and Washington, NW Natural has mechanisms to recover expenses. Oregon recoveries are subject to an earnings test. See Part II, Item 7, "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery ", and Note 2 and Note 17 to the Consolidated Financial Statements in Item 8 of this report for more information. Greenhouse Gas Matters For information concerning greenhouse gas matters, see Part II, Item 7, “Results of Operations—Environmental Regulation and Legislation Matters.” HUMAN CAPITAL Our core values of integrity, safety, caring, service ethic, and environmental stewardship guide how we engage with customers, stakeholders, shareholders, and communities. We actively work to foster these values in our employee culture and to nurture an inclusive and equitable environment that provides opportunities, prioritizes health and safety, encourages respect and trust, and supports growth and learning. We aim to recruit and retain employees who share our core values and reflect our communities. Employees At December 31, 2024, our workforce consisted of the following: NW Natural: Unionized employees (1) 626 Non-unionized employees 649 Total NW Natural 1,275 Other Entities: Water and wastewater company employees 172 Other 5 Total other entities 177 Total Employees 1,452 (1) Members of the Office and Professional Employees International Union (OPEIU) Local No. 11, AFL-CIO. NW Natural's labor agreement with members of OPEIU covers wages, benefits, and working conditions. In May 2024, NW Natural's unionized employees ratified a collective bargaining agreement that is in effect June 1, 2024 through May 31, 2028, and is effective thereafter from year to year unless either party serves notice of its intent to negotiate modifications to the collective bargaining agreement. The terms of the collective bargaining agreement include the following items: a 6% wage increase effective June 1, 2024 and scheduled wage increases effective December 1 in the first year and each subsequent year of 4%; a 401(k) contribution of 4% for employees hired after our pension plan was closed on December 31, 2009; and a 401(k) match of 50% of the first 8% of savings. During calendar year 2024, NW Natural did not incur any work stoppages (strikes or lockouts), and therefore, experienced zero idle days for the year. Certain subsidiaries may receive services from employees of other subsidiaries. Those services are generally charged to the entity receiving those services. When such services involve regulated entities, those entities receiving services are generally 15 charged rates pursuant to shared services agreements that are filed with the applicable state regulatory commission, as applicable. Safety Safety is one of our greatest responsibilities to employees. In managing the business, we strive to foster a safety culture focused on prevention, open communication, collaboration, and a strong service and safety ethic. We believe employee safety is critical to our success. A portion of executives’ compensation is tied to achieving our identified safety metrics, and our Board of Directors regularly reviews company safety metrics and receives reports on matters of health and safety. NW Natural’s health and safety policies and procedures are designed to comply with all applicable regulations, but we also work to go beyond compliance by striving to incorporate information we learn from benchmarking, peer reviews, and industry best practices. As part of our commitment to employee health and safety, we maintain regular training programs, emergency preparedness procedures, and training and procedures to identify hazards and handle high-risk emergency situations. Employees complete classroom instruction and hands-on, scenario-based training at our training town 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 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 also have a learning management system that provides virtual training options and more efficiency and flexibility in how we train. Employee Benefits and Support To attract employees and meet the needs of our workforce, NW Natural strives to offer competitive compensation and benefits packages to employees. The benefits package options vary depending on type of employee and date of hire. NW Natural continuously looks for ways to support employees’ work-life balance and well-being and this is reflected in physical, mental and financial wellness programs to meet the needs of our employees and help them care for their families. Benefits available to employees during 2024 included, among others: healthcare and other insurance coverages, wellness resources, retirement and savings plans, paid time off programs, and flexible and hybrid work schedules, where possible, employee resource groups, and culture and community-focused resources and opportunities, and employee recognition programs and discounts. Talent Attraction and Development In order to implement our business strategy and serve our customers, we depend upon our continuing ability to attract and retain talented professionals and a technically skilled workforce, and being able to transfer the knowledge and expertise of our workforce to new and increasingly diverse employees as our older workforce retires. A significant portion of our workforce is currently eligible or will reach retirement eligibility within the next five years, and therefore, we are focused on efforts to attract, train, and retain appropriately qualified and skilled workers to prevent loss of institutional knowledge or skills gaps. NW Natural seeks to provide its employees with growth and development opportunities through programs designed to build skills and relationships. These programs currently include: (i) a culturally relevant mentoring program that creates opportunities for career growth by building relationships; (ii) a tuition assistance program for qualified educational pursuits; (iii) an internal class that provides participants with a big-picture understanding of the industry and company operations, equipping them to see how they contribute to NW Natural’s success and identify opportunities for career growth; (iv) internal and external continuing educational courses relevant to areas of expertise; and (v) ongoing management and leadership training programs. We regularly monitor employee engagement and satisfaction through a variety of tools, including our annual engagement survey that is designed to enable company leaders to gather valuable feedback and guidance from employees. 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 at all levels contributes to long-term success. Our efforts in recruiting, promoting, and retaining diverse talent, building inclusive teams, and creating a culture that embraces differences are elements of our workforce strategy. INFORMATION ABOUT OUR EXECUTIVE OFFICERS For information concerning executive officers, see Part III, Item 10. AVAILABLE INFORMATION NW Holdings and NW Natural file annual, quarterly and current reports and other information with the Securities and Exchange Commission (SEC). The SEC maintains an Internet site where reports, proxy statements, and other information filed can be read, copied, and requested online at its website ( www.sec.gov ). In addition, we make available, free of charge, on our website ( www.nwnaturalholdings.com ), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and proxy materials filed under Section 14 of the Securities Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after we electronically 16 file such material with, or furnish it to, the SEC. 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. We have included our website address as an inactive textual reference only. Information contained on our website is not incorporated by reference into this annual report on Form 10-K. NW Holdings and NW Natural have adopted a Code of Ethics for all employees, officers, and directors that is available on our website. 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. Copies of these documents may be requested, at no cost, by writing or calling Shareholder Services, Northwest Natural Holding Company, 250 S.W. Taylor Street, Portland, Oregon 97204, telephone 503-220-2402. ITEM 1A. RISK FACTORS NW Holdings’ and NW Natural’s business and financial results are subject to a number of risks and uncertainties, many of which are not within our control, which could adversely affect our business, financial condition, and results of operations. Additional risks and uncertainties that are not currently known to us or that are not currently believed by us to be material may also harm our businesses, financial condition, and results of operations. When considering any investment in NW Holdings’ or NW Natural’s securities, investors should carefully consider the following information, as well as information contained in the caption "Forward-Looking Statements", Item 7A, and our other documents filed with the SEC. This list is not exhaustive and the order of presentation does not reflect management’s determination of priority or likelihood. Additionally, our listing of risk factors that primarily affects one of our businesses does not mean that such risk factor is inapplicable to our other businesses. Legal, Regulatory and Legislative Risks REGULATORY RISK. Regulation of NW Holdings’ and NW Natural’s regulated businesses, including changes in the regulatory environment, failure of regulatory authorities to approve rates which provide for timely recovery of costs and an adequate return on invested capital, or an unfavorable outcome in regulatory proceedings may adversely impact NW Holdings’ and NW Natural’s financial condition and results of operations. The OPUC and WUTC have general regulatory authority over NW Natural’s gas business in Oregon and Washington. In January 2025, NW Holdings acquired SiEnergy Operating, LLC (SiEnergy), which is regulated by the Railroad Commission of Texas. NW Holdings’ regulated water utility businesses are generally regulated by the public utility commission in the state in which a water business is located. These public utility commissions have broad regulatory authority, including: the rates charged to customers; authorized rates of return on rate base, including ROE; the amounts and types of securities that may be issued by our regulated utility companies, like NW Natural; services our regulated utility companies provide and the manner in which they provide them; the nature of investments our utility companies make; deferral and recovery of various expenses, including, but not limited to, pipeline replacement, environmental remediation and compliance costs, capital, information technology and other investments, commodity hedging expense, and certain employee benefit expenses such as pension costs; transactions with affiliated interests; regulatory adjustment mechanisms such as weather adjustment mechanisms, and other matters. The OPUC also regulates actions investors may take with respect to our utility companies, NW Natural and NW Holdings. Similarly, FERC has regulatory authority over NW Natural’s interstate storage services. Expansion of our businesses generally results in regulation by other regulatory authorities. For example, certain of NW Holdings’ water companies are regulated in Idaho, Texas and Arizona, and in 2025, we acquired SiEnergy, which is regulated by the Railroad Commission of Texas. The costs that are deemed recoverable in rates and prices regulators allow us to charge for regulated utility service, and the maximum FERC-approved rates FERC authorizes us to charge for interstate storage and related transportation services, are the most significant factors affecting both NW Natural’s and NW Holdings’ financial position, results of operations and liquidity. State utility regulators have the authority to disallow recovery of costs they find imprudently incurred or otherwise disallowed, and rates that regulators allow may be insufficient for recovery of costs we incur. We expect to continue to make expenditures to expand, improve and safely operate our gas and water utility distribution and gas storage systems, and to work toward reducing emissions from our gas systems. Regulators can deny recovery of those costs. Furthermore, while each applicable state regulator has established an authorized rate of return for our regulated utility businesses, we may not be able to achieve the earnings level authorized. Moreover, in the normal course of business we may place assets in service or incur higher than expected levels of operating expense before rate cases can be filed to recover those costs (this is commonly referred to as regulatory lag). The failure of any regulatory commission to approve requested rate increases on a timely basis to recover costs or to allow an adequate return could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and liquidity. As companies with regulated utility businesses, we frequently have dockets open with our regulators, including NW Natural’s general rate case filed with the OPUC in December 2024. The regulatory proceedings for these dockets typically involve multiple parties, including governmental agencies, consumer, environmental, and other advocacy groups, and other third parties. Each party advocates for the interests that they represent, which may include lower rates, additional regulatory oversight over the company, limitations on growth or phasing out of the gas system, decisions that favor electrification, or advancing other interests. 17 We cannot predict the timing or outcome of these proceedings, or the effects of those outcomes on NW Holdings’ and NW Natural’s results of operations and financial condition. REGULATION, COMPLIANCE AND TAXING AUTHORITY RISK. NW Holdings and NW Natural are subject to governmental regulation, and compliance with local, state and federal requirements, including taxing requirements, and unforeseen changes in or interpretations of such requirements could affect NW Holdings’ or NW Natural’s financial condition and results of operations. NW Holdings and NW Natural are subject to regulation by federal, state and local governmental authorities. We are required to comply with a variety of laws and regulations and to obtain authorizations, permits, approvals and certificates from governmental agencies in various aspects of our business. Significant changes in federal, state, or local governmental leadership can accelerate or amplify changes in existing laws or regulations, or the manner in which they are interpreted or enforced. For instance, the 2024 United States Presidential election has resulted in and may result in further leadership changes in many federal administrative agencies. Moreover, the 2024 election resulted in Republican control of the presidency and both houses of Congress, which may result in a wide range of new policies, executive orders, rules, initiatives and other changes to fiscal, tax, regulation, trade, environmental, climate and other federal policies, many of which have components that affect the energy and utilities sectors. Similarly, we could continue to face significant legislative, regulatory and other policy changes at the state level or in the local jurisdictions in which we operate. For example, the Oregon legislature is considering possible legislation aimed at addressing utility customer rate impacts and utility regulatory oversight. We cannot predict the impact of any such legislation on our rate structure, process or ability to apply regulatory accounting mechanisms. As we continue to expand our businesses into new states, we may be subject to additional legal, regulatory or taxing requirements. For example, certain of NW Holdings’ water companies are regulated in Idaho, Texas and Arizona, and in 2025, we acquired SiEnergy, a gas utility located in Texas. In addition, foreign governments may implement changes to their policies, in response to changes to U.S. policy or otherwise. Although we cannot predict the impact, if any, of these changes to our businesses, they could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. Until we know what policy changes are made and how those changes impact our businesses and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or will be negatively affected by them. We cannot predict changes in laws, regulations, interpretations or enforcement or the impact of such changes. Additionally, any failure to comply with existing or new laws and regulations could result in fines, penalties or injunctive measures. For example, under the Energy Policy Act of 2005, the FERC may assess civil penalties under the Natural Gas Act for violations of FERC’s requirements up to nearly $1.6 million per day for each violation. In addition, as we expand our businesses and the regulatory environment for our businesses increases in complexity, the risk of inadvertent noncompliance may also increase. Changes in regulations, the imposition of additional regulations, and the failure to comply with laws and regulations could negatively influence NW Holdings’ or NW Natural’s operating environment and results of operations. There is uncertainty as to how our regulators will reflect the impact of the legislation and other government regulation in rates. The resulting ratemaking treatment may negatively affect NW Holdings’ or NW Natural’s financial condition and results of operations. Additionally, changes in federal, state, local or foreign tax laws and their related regulations, or differing interpretations or enforcement of applicable law by a federal, state, local or foreign taxing authority, could result in substantial cost to us and negatively affect our results of operations. Tax law and its related regulations and case law are inherently complex and dynamic. Disputes over interpretations of tax laws may be settled with the taxing authority in examination, through programs like the Compliance Assurance Process (CAP), upon appeal or through litigation. Our judgments may include reserves for potential adverse outcomes regarding tax positions that have been or plan to be taken that may be subject to challenge by taxing authorities. Changes in laws, regulations or adverse judgments and the inherent difficulty in quantifying potential tax effects of business decisions may negatively affect NW Holdings’ or NW Natural’s financial condition and results of operations. Furthermore, certain tax assets and liabilities, such as deferred tax assets and regulatory tax assets and liabilities, are recognized or recorded by NW Holdings or NW Natural based on certain assumptions and determinations made based on available evidence, such as projected future taxable income, tax-planning strategies, and results of recent operations. If these assumptions and determinations prove to be incorrect, the recorded results may not be realized, which may negatively impact the financial results of NW Holdings and NW Natural. REPUTATIONAL RISKS. To the extent that customers, legislators, or regulators have or develop a negative opinion of our businesses, NW Holdings’ and NW Natural’s financial position, results of operations and cash flows could be adversely affected. A number of factors can affect customers’, legislators’, regulators’, and other third parties’ perception of us or our business including: service interruptions or safety concerns due to failures of equipment or facilities or from other causes, and our ability to promptly respond to such failures; our ability to safeguard sensitive customer information; the timing and magnitude of rate increases; and volatility of rates. Customers', legislators', and regulators' opinions of us can also be affected by media coverage, including social media, which may include information, whether factual or not, that could damage the perception of natural gas, our brand, or our reputation. Although we believe that natural gas serves an important role in helping our region reduce GHG emissions and move to a more resilient lower-carbon energy system, certain advocacy groups have opposed the use of natural gas as a fuel source altogether and have pursued policies that limit, restrict, or impose additional costs on, the use of natural gas in a variety of contexts. 18 Concerns raised about the use of natural gas include the potential for natural gas explosions or delivery disruptions, methane leakage along production, transportation and delivery systems, and end-use equipment, and contribution of natural gas energy use to GHG emission levels and global warming. Similarly, concerns have also been raised regarding the use of RNG or hydrogen in place of conventional natural gas. In addition, studies and claims by advocacy groups contend that there are detrimental indoor public health effects associated with the use of natural gas, which may also impact public perception. Shifts in public sentiment due to these concerns or others that may be raised may impact further legislative initiatives, regulatory actions, and litigation, as well as behaviors and perceptions of customers, investors, lawmakers, and regulators. If customers, legislators, regulators, or other third parties have or develop a negative opinion of us and our services, or of natural gas as an energy source generally, this could make it more difficult for us to achieve policy, legislative or regulatory outcomes supportive of our business. Negative opinions could also result in reduced customer growth, sales volumes reductions, increased use of other sources of energy, or difficulties in accessing capital markets. Any of these consequences could adversely affect NW Holdings’ or NW Natural’s financial position, results of operations and cash flows. REGULATORY ACCOUNTING RISK. In the future, NW Holdings or NW Natural may no longer meet the criteria for continued application of regulatory accounting practices for all or a portion of our regulated operations. If we can no longer apply regulatory accounting, we could be required to write off our regulatory assets and precluded from the future deferral of costs not recovered through rates at the time such amounts are incurred, even if we are expected to recover these amounts from customers in the future. The criteria for the application of regulatory accounting is highly specific, and legislative or regulatory changes to our rate structure or processes could impact our ability to apply regulatory accounting in the future. Growth and Strategic Risks STRATEGIC TRANSACTION RISK. NW Holdings’ and NW Natural’s ability to successfully complete strategic transactions is subject to significant risks, which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations, and cash flows. From time to time, NW Holdings and NW Natural have pursued and may continue to pursue strategic transactions including mergers, acquisitions, combinations, divestitures, joint ventures, business development projects or other strategic transactions, including, but not limited to, investments in RNG projects on a regulated basis by NW Natural and on a non-regulated basis by NW Holdings, as well as acquisitions by NW Holdings in the water, wastewater and water services, or in the gas or other utility sectors. Any such transactions involve substantial risks, including the following: • such transactions that are contracted for may fail to close for a variety of reasons; • the result of such transactions may not produce revenues, earnings or cash flow at anticipated levels, which could, among other things, result in the impairment of any investments or goodwill associated with such transactions; • acquired businesses or assets could have environmental, permitting, or other problems for which contractual protections prove inadequate; • our forecasts and projections regarding customer and business growth, financial performance, or economic and market conditions may prove to be incorrect; • there may be difficulties in integration or higher than expected operation costs of new businesses; • there may exist liabilities that were not disclosed to us, that exceed our estimates, or for which our rights to indemnification from the seller are limited; • we may be unable to obtain the necessary regulatory or governmental approvals to close a transaction or receive approvals granted subject to terms that are unacceptable to us; • we may be unable to achieve the anticipated regulatory treatment of any such transaction as part of the transaction approval or subsequent to closing the transaction; or • we may be unable to avoid a disposition of assets for a price that is less than the book value of those assets. One or more of these risks could affect NW Holdings’ and NW Natural’s financial condition, results of operations, and cash flows. For example, in January 2025, we completed the acquisition of SiEnergy, and while we consider this acquisition to be an important component of our growth strategy, we may face unexpected costs or challenges associated with integration of the business or otherwise fail to achieve the expected benefits of the transaction. BUSINESS DEVELOPMENT RISK. NW Holdings’ and NW Natural’s business development projects may not be successful or may encounter unanticipated obstacles, costs, changes or delays that could result in a project being unsuccessful or becoming impaired, which could negatively impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. Business development projects involve many risks. We are currently engaged in several business development projects, including, but not limited to, several water, wastewater, water services and RNG projects, non-regulated investments in RNG projects, and purchasing, marketing and reselling of RNG and its associated attributes. We may also engage in other business development projects such as investments in additional long-term gas reserves, gas storage projects, CNG refueling stations, power to gas, power generation, hydrogen projects, carbon capture projects, geothermal projects or other similar projects. Our business development activities are subject to uncertainties and changed circumstances and may not reach the scale expected, 19 be successful or perform as anticipated. Additionally, we may not be able to obtain required governmental permits and approvals to complete our projects in a cost-efficient or timely manner, potentially resulting in delays or abandonment of the projects. We could also experience issues such as: technological challenges; ineffective scalability; failure to achieve expected outcomes; unsuccessful business models; startup and construction delays; construction cost overruns; reliance on or inability to direct third parties; disputes with contractors or other third parties; the inability to negotiate acceptable agreements such as rights-of-way, easements, construction, gas supply or other material contracts; failure or delay in receiving applicable permits; changes in customer demand, perception or commitment; public opposition to projects; marketing risk and changes in market regulation, behavior or prices, market volatility or unavailability, including markets for RNG and its associated attributes or other environmental attributes; the inability to receive expected tax or regulatory treatment (including any applicable tax incentives or credits for renewable fuels); and operating cost increases. Additionally, we may be unable to finance our business development projects at acceptable costs or within a scheduled time frame necessary for completing the project. Any of the foregoing risks, if realized, could result in business development efforts failing to produce expected financial results and the project investment becoming impaired, and such failure or impairment could have an adverse effect on NW Holdings’ or NW Natural’s financial condition and results of operations. JOINT PARTNER RISK. Investing in business development projects through partnerships, joint ventures or other business arrangements affects our ability to manage certain risks and could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. We use joint ventures and other business arrangements to manage and diversify the risks of certain development projects and investments, including NW Natural’s gas reserves agreements, certain RNG projects, and certain of NW Holdings’ subsidiaries’ unregulated RNG projects and water platform investments. For example, in 2020, NW Natural began a partnership with BioCarbN to invest up to an estimated $38 million in four separate RNG development projects that access biogas derived from water treatment at Tyson Foods' processing plants, subject to approval by all parties. NW Holdings or NW Natural currently has and may further acquire or develop part-ownership interests in other projects in the future, including but not limited to, natural gas, water, wastewater, water services, RNG, or hydrogen projects. Under these arrangements, we may not be able to fully direct the management and policies of the business relationships, and other participants in those relationships may act contrary to our interests, including making operational decisions that could negatively affect our costs and liabilities. In addition, other participants may withdraw from the project, divest important assets, become financially distressed or bankrupt, be subject to additional regulatory or legal requirements, or have economic or other business interests or goals that are inconsistent with ours. We have in the past and may in the future become involved in disputes with our business partners, which could result in additional cost or divert management’s attention. NW Natural’s gas reserves arrangements, which operate as a hedge backed by physical gas supplies, involve a number of risks, including: gas production that is significantly less than the expected volumes, or no gas volumes; operating costs that are higher than expected; inherent risks of gas production, including disruption to operations or a complete shut-in of the field; and one or more participants in one of these gas reserves arrangements becoming financially insolvent or acting contrary to NW Natural’s interests. For example, Jonah Energy, the counterparty in NW Natural’s gas reserves arrangement, no longer maintains any company credit ratings. Although NW Natural intends to continue monitoring Jonah Energy’s financial condition and take appropriate actions to preserve NW Natural’s interests, it does not control Jonah Energy’s financial condition or continued performance under the gas reserves arrangement. The cost of the original gas reserves venture is currently included in customer rates and additional wells under that arrangement are recovered at specific costs, the occurrence of one or more of these risks could affect NW Natural’s ability to recover this hedge in rates. Further, new gas reserves arrangements have not been approved for inclusion in rates, and regulators may ultimately determine to not include all or a portion of future transactions in rates. The realization of any of these situations could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. CUSTOMER GROWTH RISK. NW Holdings’ and NW Natural’s NGD margin, earnings and cash flow may be negatively affected if we are unable to sustain customer growth rates in our NGD segment. NW Natural’s NGD margins and earnings growth have largely depended upon the sustained growth of its residential and commercial customer base due, in part, to the new construction housing market, conversions of customers to natural gas from other energy sources and growing commercial use of natural gas. Building codes recently enacted and others under consideration in our territory may have the effect of reducing our natural gas customer growth rate. For example, building codes implemented in Washington, if determined to be valid, would have the effect of restricting or eliminating the use of gas space and water heating in new commercial and residential construction, or otherwise increasing the cost of new home construction incorporating natural gas. Certain jurisdictions in Oregon and Washington are considering similar measures. While we expect these types of codes to be subject to legal challenge, we cannot predict the outcome of any such challenge. Other regulations may impact growth; for example, in connection with the resolution of NW Natural’s general rate case, on October 25, 2024, the OPUC issued an order ordering the phase out of NW Natural’s line extension allowance by November 1, 2027. We are not currently able to quantify the extent to which limitations on natural gas use, or declining line extension allowances provided in rates to cover construction costs for new services, will affect new meter additions, or to what extent carbon compliance costs included in rates will affect the competitiveness of our business and the demand for natural gas service. Insufficient customer growth, for economic, political, public perception, policy, or other reasons could adversely affect NW Holdings’ or NW Natural’s utility margin, earnings and cash flows. 20 RISK OF COMPETITION. Our NGD business is subject to increased competition which could negatively affect NW Holdings’ or NW Natural’s results of operations. In the residential and commercial markets, our natural gas distribution businesses compete primarily with suppliers of electricity, fuel oil, and propane. In the industrial market, we compete with suppliers of all forms of energy. Competition among these forms of energy is based on price, efficiency, reliability, performance, market conditions, technology, federal, state and local governmental regulation, actual and perceived environmental impacts, and public perception. Technological improvements such as electric heat pumps, batteries or other alternative technologies, or building code or other regulations or restrictions affecting the cost or ability to use certain gas appliances, could erode our competitive advantage. If natural gas prices are high relative to other energy sources, or if the cost, environmental impact or public perception of such other energy sources improves relative to natural gas, it may negatively affect our ability to secure new customers or retain our existing customers, which could have a negative impact on our customer growth rate and NW Holdings’ and NW Natural’s results of operations. Our natural gas storage operations compete primarily with other storage facilities and pipelines. Increased competition in the natural gas storage business could reduce the demand for our natural gas storage services, drive prices down for our storage business, and adversely affect our ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows, which could adversely affect NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows. Operational Risks OPERATING RISK. Transporting and storing gas and liquid fuels and distributing gas and liquid fuels and, water and wastewater involves numerous risks that may result in accidents and other operating risks and costs, some or all of which may not be fully covered by insurance, and which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. NW Holdings and NW Natural are subject to all of the risks and hazards inherent in the businesses of gas and liquid transmission, distribution and storage, water distribution, and water and wastewater services including: • earthquakes, wildfires, floods, storms, landslides and other severe weather incidents and natural hazards; • leaks or losses of gases or liquids, or contamination of gases or liquids by chemicals or compounds, as a result of the malfunction of equipment or facilities or otherwise; • operator errors or damages from third parties; • negative performance by our storage reservoirs, facilities, or wells that could cause us to fail to meet expected or forecasted operational levels or contractual commitments to our customers or other third parties; • problems maintaining, or the malfunction of, pipelines, biodigester facilities, wellbores and related equipment and facilities that form a part of the infrastructure that is critical to the operation of our facilities; • presence of chemicals or other compounds in the gases or liquids we deliver that could adversely affect the performance of the system or end-use equipment; • failure of gas or water storage reservoirs; • inadequate supplies of RNG, natural gas or water or contamination of water supplies; • operating costs that are substantially higher than expected; • supply chain disruptions, including unexpected price increases, or supply restrictions beyond the control of our suppliers; • migration of gas through faults in the rock or to some area of the reservoir where existing wells cannot drain the gas effectively, resulting in loss of the gas; • blowouts (uncontrolled escapes of gas from a pipeline or well) or other accidents, fires and explosions; and • risks and hazards inherent in the drilling operations associated with the development of gas storage facilities, and wells. For example, TC Pipelines, LP (TC Pipelines) has identified the presence of a chemical substance, dithiazine, at several facilities on the system of its subsidiary, Gas Transmission Northwest (GTN), and those of some upstream and downstream connecting pipeline facilities. A portion of NW Natural’s gas supplies from Canada are transported on GTN’s pipelines. TC Pipelines reports that dithiazine can drop out of gas streams in a powdery form at some points of pressure reduction (for example, at a regulator), and that in incidents where a sufficient quantity of the material accumulates in certain places, improper functioning of equipment can occur, which can result in increased preventative and corrective action costs. While NW Natural has not detected significant quantities of dithiazine on its system to date, we continue to monitor and could discover increased levels of dithiazine or other compounds on NW Natural’s system that could affect the performance of the system or end-use equipment. These and other operational risks could result in disruption of service, personal injury or loss of human life, damage to and destruction of property and equipment, pollution or other environmental damage, breaches of our contractual commitments, and may result in curtailment or suspension of operations, which in turn could lead to significant costs and lost revenues. Further, because our pipeline, storage and distribution facilities are in or near populated areas, including residential areas, commercial business centers, and industrial sites, any loss of human life or adverse financial outcomes resulting from such events could be significant. We could be subject to lawsuits, claims, and criminal and civil enforcement actions. Additionally, we may not be able to maintain the level or types of insurance we desire, and the insurance coverage we do obtain may contain large deductibles or fail to cover certain hazards or cover all potential losses. The occurrence of any operating risks not covered by insurance could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. 21 SAFETY REGULATION RISK. NW Holdings and NW Natural may experience increased federal, state and local regulation of the safety of our systems and operations, which could adversely affect NW Holdings’ or NW Natural’s operating costs and financial results. The safety and protection of the public, our customers and our employees is and will remain our top priority. We are committed to consistently monitoring, maintaining, and upgrading our distribution systems and storage operations to ensure that RNG, natural gas and water is acquired, stored and delivered safely, reliably and efficiently. Natural gas operators are subject to robust, ongoing federal, state and local regulatory oversight, which intensifies in response to incidents. For example, the 2020 Protecting our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act) prompted PHSMA to issue three rulemakings impacting transmission lines, gathering lines, and valve automation in response to past incidents in other parts of the country. Regulations issued in 2024 by PHMSA contain requirements related to the detection and repair of leaks and safety of gas distribution pipelines. In addition, our workplaces are subject to the requirements of the Department of Transportation, through the Federal Motor Carrier Safety Administration, and the Occupational Safety and Health Administration, as well as state and local statutes and regulations that regulate the protection of the health and safety of workers. The failure to comply with these requirements or general industry standards, including keeping adequate records or preventing occupational injuries or exposure, could expose us to civil or criminal liability, enforcement actions, and regulatory fines and penalties that may not be recoverable through our rates and could have a material adverse effect on our business, financial condition, results of operations and cash flows. We intend to work diligently with industry associations and federal and state regulators to comply with these regulations and other new laws. We expect there to be increased costs associated with compliance, and those costs could be significant. If these costs are not recoverable in our customer rates, they could have a negative impact on NW Holdings’ and NW Natural’s operating costs and financial results. RELIANCE ON THIRD PARTIES TO SUPPLY OR OPTIMIZE NATURAL GAS, RNG AND ENVIRONMENTAL ATTRIBUTES OR CREDITS RISK. We rely on third parties to supply or optimize natural gas, RNG, storage or pipeline capacity, and environmental attributes or credits in our NGD segment, and limitations on our ability to obtain supplies, engage in effective optimization, or failure to receive expected supplies, could have an adverse impact on NW Holdings’ or NW Natural’s financial results. Our ability to secure natural gas, RNG and environmental attributes or credits depends upon its ability to purchase and receive delivery of them from third parties. We, and in some cases our suppliers, do not have control over the availability of natural gas, RNG or environmental attributes or credits, competition for those supplies, disruptions in those supplies, priority allocations on transmission pipelines, markets for those supplies, or pricing and other terms related to such supplies. Additionally, third parties that we may rely on may fail to deliver supplies for which it has contracted. For example, in October, 2018, a 36-inch pipeline near Prince George, British Columbia owned by Enbridge ruptured, disrupting natural gas flows from Canada into Washington while the ruptured pipeline and an adjacent pipeline were assessed and the ruptured pipeline was repaired. Once repaired, pressurization levels for those pipelines were reduced for a significant period of time for assessment and testing. If we are unable or limited in our ability to obtain natural gas, RNG or environmental attributes or credits from our current suppliers or new sources, we may not be able to meet customers' gas requirements or regulatory or compliance requirements, and would likely incur costs associated with actions necessary to mitigate service disruptions or regulatory compliance, which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations. We also contract with an independent energy marketing company to provide asset management services regarding storage and pipeline capacity when those assets are not serving the needs of NGD business customers. We may not be able to fully direct these transactions, or the counterparty to these arrangements may act contrary to our interests, become financially distressed or have economic or other business interests or goals that are inconsistent with ours. Failure to effectively optimize our assets could result in a negative impact on NW Holdings' and NW Natural’s financial condition, revenues and results of operations. SINGLE TRANSPORTATION PIPELINE RISK. NW Natural relies on a single pipeline company for the transportation of gas to its service territory, a disruption, limitation, or inadequacy of which could adversely impact its ability to meet customers’ gas requirements, which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations. NW Natural’s distribution system is directly connected to a single interstate pipeline, which is owned and operated by Northwest Pipeline. The pipeline’s gas flows are bi-directional, transporting gas into the Portland metropolitan market from two directions: (1) the north, which brings supplies from the British Columbia and Alberta supply basins; and (2) the east, which brings supplies from the Alberta and the U.S. Rocky Mountain supply basins. If there is a rupture or inadequate capacity in, or supplies to maintain adequate pressures in, the pipeline, NW Natural may not be able to meet its customers’ gas requirements and we would likely incur costs associated with actions necessary to mitigate service disruptions, both of which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations. THIRD PARTY PIPELINE RISK. NW Natural’s gas storage business depends on third-party pipelines that connect our storage facilities to interstate pipelines, the failure or unavailability of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. 22 Our gas storage facilities are reliant on the continued operation of a third-party pipeline and other facilities that provide delivery options to and from our storage facilities. Because we do not own all of these pipelines, their operations are not within our control. If the third-party pipeline to which we are connected were to become unavailable for current or future withdrawals or injections of natural gas due to repairs, damage to the infrastructure, lack of capacity or other reasons, our ability to operate efficiently and satisfy our customers’ needs could be compromised, thereby potentially having an adverse impact on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. WORKFORCE RISK. NW Holdings’ and NW Natural’s businesses are heavily dependent on being able to attract and retain qualified employees and maintain a competitive cost structure with market-based salaries and employee benefits, and workforce disruptions could adversely affect NW Holdings’ or NW Natural’s operations and results. NW Holdings’ and NW Natural’s ability to implement our business strategy and serve our customers is dependent upon our continuing ability to attract and retain diverse, talented professionals and a technically skilled workforce, and being able to transfer the knowledge and expertise of our workforce to new and increasingly diverse employees as our largely older workforce retires. A significant portion of our workforce is currently eligible or will reach retirement eligibility within the next five years, which will require that we attract, train and retain skilled workers to prevent loss of institutional knowledge or skills gaps. We face competition for qualified personnel with specific skillsets. This competition may result in increased pressure on wages or other challenges in recruiting or retaining personnel. Without an appropriately skilled workforce, our ability to provide quality service and meet our regulatory requirements will be challenged and this could negatively impact NW Holdings' and NW Natural’s earnings. Additionally, approximately half of NW Natural workers are represented by the OPEIU Local No. 11 AFL-CIO and are covered by a collective bargaining agreement that extends to May 31, 2028. Disputes with the union representing NW Natural employees over terms and conditions of their agreement, or failure to timely and effectively renegotiate the agreement upon its expiration, could result in instability in our labor relationship or other labor disruptions or work stoppages that could impact the timely delivery of gas and other services from our utility and storage facilities, which could strain relationships with customers and state regulators and cause a loss of revenues. The collective bargaining agreements may also limit our flexibility in dealing with NW Natural’s workforce, and the ability to change work rules and practices and implement other efficiency-related improvements to successfully compete in today’s challenging marketplace, which may negatively affect NW Holdings’ and NW Natural’s financial condition and results of operations. Environmental Risks ENVIRONMENTAL LIABILITY RISK. Certain of NW Natural’s, and possibly NW Holdings’, properties and facilities may pose environmental risks requiring remediation, the costs of which are difficult to estimate and which could adversely affect NW Holdings’ and NW Natural’s financial condition, results of operations, and cash flows. NW Natural owns, or previously owned, properties that require environmental remediation or other action. NW Holdings or NW Natural may now, or in the future, own other properties that require environmental remediation or other action. NW Natural and NW Holdings accrue all material loss contingencies relating to these properties. A regulatory asset at NW Natural has been recorded for estimated costs pursuant to a deferral order from the OPUC and WUTC. In addition to maintaining regulatory deferrals, NW Natural settled with most of its historical liability insurers for only a portion of the costs it has incurred to date and expects to incur in the future. To the extent amounts NW Natural recovered from insurance are inadequate and it is unable to recover these deferred costs in utility customer rates, NW Natural would be required to reduce its regulatory assets which would result in a charge to earnings in the year in which regulatory assets are reduced. In addition, in Oregon, the OPUC approved the SRRM, which limits recovery of deferred amounts to those amounts which satisfy an annual prudence review and an earnings test that requires NW Natural to contribute additional amounts toward environmental remediation costs above approximately $10 million in years in which NW Natural earns above its authorized ROE. To the extent NW Natural earns more than its authorized ROE in a year, it would be required to cover environmental expenses greater than the $10 million with those earnings that exceed its authorized ROE. The OPUC ordered a review of the SRRM in 2018 or when we obtain greater certainty of environmental costs, whichever occurred first. We submitted information for review in 2018, and believe we could be subject to further review. Similarly, in October 2019, the WUTC authorized an ECRM, which allows for recovery of certain past deferred and future prudently incurred remediation costs allocable to Washington through application of insurance proceeds and collections from customers, subject to an annual prudence determination. These ongoing prudence reviews, or with respect to the SRRM, the earnings test, or the periodic review could reduce the amounts NW Natural is allowed to recover, and could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. Moreover, we may have disputes with regulators and other parties as to the severity of particular environmental matters, what remediation efforts are appropriate, whether natural resources were damaged, and the portion of the costs or claims NW Natural or NW Holdings should bear. We cannot predict with certainty the amount or timing of future expenditures related to environmental investigations, remediation or other action, the portions of these costs allocable to NW Natural or NW Holdings, or disputes or litigation arising in relation thereto. Environmental liability estimates are based on current remediation technology, industry experience gained at similar sites, an assessment of probable level of responsibility, and the financial condition of other potentially responsible parties. However, it is difficult to estimate such costs due to uncertainties surrounding the course of environmental remediation, the preliminary nature of certain site investigations, natural recovery of the site, unavoidable limitations associated with environmental investigations and remedial technologies, evolving science, the application of environmental laws that impose joint and several liabilities on all 23 potentially responsible parties, and changes in federal, state or local environmental statutes, regulations or policies. These uncertainties and disputes arising therefrom could lead to further adversarial administrative proceedings or litigation, with associated costs and uncertain outcomes, all of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. ENVIRONMENTAL REGULATION COMPLIANCE RISK. NW Holdings and NW Natural are subject to environmental regulations, compliance with which or failure to comply with, could adversely affect our operations or financial results. NW Holdings and NW Natural are subject to laws, regulations and other legal requirements enacted or adopted by federal, state and local governmental authorities relating to protection of the environment, including those legal requirements that govern discharges of substances into the air and water, the management and disposal of hazardous substances and waste, groundwater quality and availability, plant and wildlife protection, the emitting of greenhouse gases, and other aspects of environmental regulation. For example, our natural gas operations are subject to reporting requirements to a number of governmental authorities including, but not limited to, the Environmental Protection Agency (EPA), the Oregon Department of Environmental Quality (ODEQ), and the Washington State Department of Ecology regarding greenhouse gas emissions. We are also required to reduce emissions of GHGs over time in accordance with the recently issued Oregon Climate Protection Program (CPP) and the Washington Climate Commitment Act (CCA). We expect that compliance with any form of regulation of GHG emissions will require additional resources and legislative or regulatory tools and will increase costs. The developing and changing guidance to implement the CCA and CPP, evolving carbon credit markets and other regulatory tool options, decades-long timeframes for compliance, likely changing and evolving laws and energy policy, and evolving technological advancements, all make it difficult to accurately predict long-term tools for and costs of compliance. Increased compliance costs or additional operating restrictions resulting from current and future additional environmental regulations at the local, state or national level may or may not be recoverable in customer rates, through insurance or otherwise. If these costs are not recoverable, or if these regulations reduce the desirability, availability, or cost-competitiveness of natural gas, they could have an adverse effect on NW Holdings’ or NW Natural’s operations or financial condition. Furthermore, failure to comply with such laws or regulations could subject us to possible enforcement actions, financial liability or litigation, any of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. GLOBAL CLIMATE CHANGE RISK. Our businesses may be subject to physical risks associated with climate change, all of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. Climate change may cause physical risks, including an increase in sea level, intensified storms, water scarcity, wildfire susceptibility and intensity and changes in weather conditions, such as changes in precipitation, average temperatures and extreme wind or other extreme weather events or climate conditions. Moreover, a significant portion of the nation’s gas infrastructure is located in areas susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to gas supply interruptions and price spikes. Fire risk is also significant in the western United States, including in our service territory, and may be elevated by warmer air temperatures, drought, wind and land management practices. Climate change may increase the likelihood and magnitude of damages that may be caused by fires, which may adversely affect our financial condition, results of operations, and cash flows. These and other physical changes could result in disruptions to natural gas production and transportation systems potentially increasing the cost of gas and affecting our natural gas businesses’ ability to procure or transport gas to meet customer demand. These changes could also affect our distribution systems resulting in increased maintenance and capital costs, disruption of service, regulatory actions and lower customer satisfaction. Similar disruptions could occur in NW Holdings’ water utility and unregulated RNG businesses. To the extent we are unable to recover these costs, or if higher rates resulting from our recovery of such costs result in reduced demand for our services, our future business, financial condition, or financial results could be adversely impacted. Additionally, to the extent that climate change adversely impacts the economic health or weather conditions of our service territory directly, it could adversely impact customer demand or our customers’ ability to pay. Such physical risks could have an adverse effect on NW Holdings’ or NW Natural’s financial condition, results of operations, and cash flows. PUBLIC PERCEPTION AND POLICY RISK. Changes in public sentiment or public policy with respect to natural gas, including through local, state or federal laws or legislation or other regulation (including ballot initiatives, executive orders or regulatory codes) or litigation, could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. There are a number of international, federal, state, and local legislative, legal, regulatory and other initiatives being proposed and adopted in an attempt to measure, control or limit the effects of global warming and climate change, including greenhouse gas (GHG) emissions such as carbon dioxide, nitrous oxide, and methane. Legislation or other forms of public policy or regulation that aim to reduce GHG emissions at the federal, state, or local level have and could continue to take a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, additional charges to fund energy efficiency activities or other regulatory actions, and incentives or mandates to conserve energy, or use renewable energy sources. Federal, state, or local governments may provide tax advantages and other subsidies to support alternative energy sources, withdraw funding from fossil fuel sources, mandate the use of specific fuels or technologies, prohibit the use of natural gas, or promote research into new technologies to reduce the cost and increase the scalability of alternative energy sources. For example, during his administration, former President Biden issued a number of executive orders, and a wide range of federal agencies took action aimed at addressing 24 climate change and other environmental matters. Federal legislation passed under the Biden administration, such as the Inflation Reduction Act of 2022 (IRA), included several climate and energy provisions. Upon taking office in January, 2025, President Trump issued several executive orders aimed at revoking Biden-era climate policies. We expect there to be a number of additional changes related to climate policy under the Trump Administration, including additional executive orders, federal regulations, programs and other federal actions, however, we cannot currently predict when or if the Trump Administration or Congress will act, the form of the action, the extent to which any such action may replace or revoke prior administration policies, or the impact of those actions on our business. At the state level, effective beginning in 2023, the State of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that provides an overall limit for GHG emissions from major sources in the state and declines yearly to 95% below 1990 levels by 2050. NW Natural is currently subject to the CCA. Similarly, in Oregon, In November 2024, the ODEQ issued final cap and reduce rules for its Climate Protection Program (CPP), which became effective January 1, 2025. The CPP establishes a program to limit GHG emissions from covered entities, including natural gas utilities, by 50% by 2035 and 90% by 2050 from a 2017-2019 baseline. In addition, the State of Washington has implemented, and the State of Oregon and some local jurisdictions have considered or are considering, building codes that could have the effect of disfavoring or disallowing natural gas in residential or commercial new construction or conversions, including locations within our service territory. For example, the Eugene City Council continues to develop a plan to address GHG emissions, align incentives around GHG emissions and to engage in a number of actions, including identifying potential revenue sources, like a gas supplier tax. Similarly, some jurisdictions and advocates are evaluating restricting the use of natural gas and certain natural gas appliances inside homes contending that there are detrimental indoor health effects associated with the use of natural gas. Such current or future legislation, regulation or other initiatives (including executive orders, ballot initiatives or ordinances) could impose on our natural gas businesses operational requirements or restrictions, additional charges to fund energy efficiency initiatives, or levy a tax based on carbon content. In addition, certain jurisdictions, including San Francisco, Seattle, and New York have enacted measures to ban or discourage the use of new natural gas hookups in residential or other buildings. Other jurisdictions, including several in our service territory, have considered or are currently considering similar restrictions or other measures discouraging the use of natural gas, such as limitations or bans on the use of natural gas in new construction, requiring the conversion of buildings to electric heat, or adopting policies or incentives to encourage the use of electricity in lieu of natural gas. Such restrictions could adversely impact customer growth or usage and could adversely impact our ability to recover costs and maintain reasonable customer rates. In addition, certain states, cities, local jurisdictions and private parties have initiated lawsuits against companies related to climate change impacts, GHG emissions or climate-related disclosures. We have been named as a defendant in two such legal proceedings, each as described in more detail in Note 17 to the Consolidated Financial Statements. While we intend to diligently defend against such claims, we cannot predict the outcome of such litigation. Such climate-related claims or actions could be costly to defend and could negatively impact our business, reputation, financial condition, and results of operations. NW Natural believes natural gas has an important role in moving the Pacific Northwest to a lower carbon future, and to that end is developing programs and measures to reduce carbon emissions. However, NW Natural’s efforts may not happen quickly enough to keep pace with legislation or other regulation, legal changes or public sentiment, or may be more costly or not be as effective as expected. Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed policies, regulations, restrictions or programs, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our customer growth, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, increase the likelihood of litigation, reduce our access to capital, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements which may or may not be recoverable in customer rates, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings’ or NW Natural’s business operations, financial condition and results of operations. Business Continuity and Technology Risks BUSINESS CONTINUITY RISK. NW Holdings and NW Natural may be adversely impacted by local or national disasters, pandemics, political unrest, terrorist activities, cyber-attacks or data breaches, and other extreme events to which we may not be able to promptly respond, which could adversely affect NW Holdings’ or NW Natural’s operations or financial condition. Local or national disasters (including but not limited to earthquakes, wildfires, floods, storms, landslides), pandemics, political unrest, terrorist activities, cyber-attacks and data breaches, power outages, and other extreme events are a threat to our assets and operations. Companies in critical infrastructure industries face a heightened risk due to being the target of, and having heightened exposure to, acts of terrorism or sabotage, including physical and security breaches of our physical infrastructure and information technology or operational technology systems in the form of cyber-attacks or other forms of attacks. These attacks could, among other things, target or impact our technology or mechanical systems that operate our distribution, transmission or storage facilities and result in a disruption in our operations, damage to our system and inability to meet customer requirements. In addition, the threat of terrorist activities could lead to increased economic instability and volatility in the price of RNG, natural gas or other necessary commodities that could affect our operations. Threatened or actual national disasters, pandemics or terrorist activities may also disrupt capital or bank markets and our ability to raise capital or obtain debt financing, or impact our suppliers or our customers directly, including increasing volatility in the price of natural gas or reducing demand for natural gas or water. Local disaster, pandemics, or civil unrest could result in disruption of our infrastructure or facilities, increase our operating 25 costs, or result in part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business. Local disruption may also limit our ability to collect on overdue accounts or disconnect gas or water service for nonpayment beyond an amount or period of time acceptable to us. A slow or inadequate response to events may have an adverse impact on our operations and earnings. We may not be able to maintain sufficient insurance to cover all risks associated with local and national disasters, pandemic illnesses, terrorist activities, cyber-attacks and other attacks or events. Additionally, large scale natural disasters or terrorist attacks could destabilize the insurance industry making the insurance we do have unavailable, which could increase the risk that an event could adversely affect NW Holdings’ or NW Natural’s operations or financial results. Similarly, business disruptions may limit, delay or block public utility commissions’ ability to approve or authorize applications or other requests we may make with respect to our regulated businesses. Any of these occurrences, or the resulting economic effects could have a material adverse effect on our business, outlook, financial condition, and results of operations and cash flows. RELIANCE ON TECHNOLOGY RISK. NW Holdings’ and NW Natural’s efforts to integrate, consolidate and streamline each of their operations has resulted in increased reliance on technology, the failure of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. NW Holdings and NW Natural have undertaken, and will continue to undertake, a variety of initiatives to integrate, standardize, centralize and streamline operations. These efforts have resulted in greater reliance on technological tools such as, at NW Natural: an enterprise resource planning system, technology associated with gas operations, a digital dispatch system, an automated meter reading system, a web-based ordering and tracking system, and other similar technological tools and initiatives. Our future success will depend, in part, on our ability to anticipate and adapt to technological changes in a cost-effective manner and to offer, on a timely basis, services that meet customer demands and evolving industry standards. New technologies may emerge that could be superior to, or may not be compatible with, some of our existing technologies, and may require us to make significant expenditures to remain competitive. We continue to implement technology to improve our business processes and customer interactions. In addition, our various existing information technology systems require periodic modifications, upgrades and/or replacement. For example, NW Natural has recently implemented upgrades to its SAP system and intends to replace its customer information system in the near future. There are various risks associated with these systems in addition to upgrades and replacements, including hardware and software failure, communications failure, data distortion or destruction, unauthorized access to data, misuse of proprietary or confidential data, unauthorized control through electronic means, programming mistakes and other inadvertent errors or deliberate human acts. In addition, we are dependent on a continuing flow of important components and appropriately skilled individuals to maintain and upgrade our information technology systems. Our suppliers have previously faced disruptions, such as during the COVID-19 pandemic, and may face additional production or import delays due to natural disasters, strikes, lock-outs, political unrest, pandemics or other such circumstances. Technology services provided by third-parties also could be disrupted due to events and circumstances beyond our control which could adversely impact our business, financial condition and results of operations. Any modifications, upgrades, system maintenance or replacements subject us to inherent costs and risks, including potential disruption of our internal control structure, substantial capital expenditures, additional administrative and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have an adverse effect on our business and operations, if not anticipated and appropriately mitigated. There is also risk that we may not be able to recover all costs associated with projects to improve our technological capabilities, which may adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. CYBERSECURITY RISK. NW Holdings’ and NW Natural’s status as an infrastructure services provider coupled with its reliance on technology could result in a security breach which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. Although we take precautions to protect our technology systems and are not aware of any material security breaches to date, there is no guarantee that the procedures we have implemented to protect against unauthorized access to secured data and systems, including our operational technology and information technology systems, are adequate to safeguard against all security breaches or other cyberattacks. Additionally, the facilities and systems of clients, suppliers and third-party service providers also could be vulnerable to cyber risks and attacks, and such third party systems may be interconnected to our systems. Therefore, an event caused by cyberattacks or other malicious act at an interconnected third party could impact our business and facilities similarly. As these potential cyber security attacks become more common and sophisticated, we could be required to incur costs to strengthen our systems or maintain insurance coverage against potential losses. Moreover, a variety of regulatory agencies are focused on cybersecurity risks, and specifically in critical infrastructure sectors. For example, the Transportation Security Administration (TSA) has published security directives and in November 2024, proposed formal rules mandating cybersecurity actions for critical pipeline owners and operators. Failure to meet the requirements of these directives or other cybersecurity regulations could result in fines or other penalties. We are continuing to evaluate the potential costs of implementation of these directives, and there is no assurance that we will be able to continue to recover in rates costs associated with such compliance. 26 In addition, our businesses could experience breaches of security pertaining to sensitive customer, employee, and vendor information maintained by us in the normal course of business, which could adversely affect our reputation, diminish customer confidence, disrupt operations, materially increase the costs we incur to protect against these risks, and subject us to possible financial liability or increased regulation or litigation. All of these risks could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. Financial and Economic Risks HOLDING COMPANY DIVIDEND RISK. As a holding company, NW Holdings depends on its operating subsidiaries, including NW Natural, to meet financial obligations and the ability of NW Holdings to pay dividends on its common stock is dependent on the receipt of dividends and other payments from its subsidiaries, including NW Natural. As a holding company, NW Holdings’ only significant assets are the stock and membership interests of its operating subsidiaries, which at this time is primarily NW Natural. NW Holdings’ direct and indirect subsidiaries are separate and distinct legal entities, managed by their own boards of directors, and have no obligation to pay any amounts to their respective shareholders, whether through dividends, loans or other payments. The ability of these companies to pay dividends or make other distributions on their common stock is subject to, among other things: their results of operations, net income, cash flows and financial condition, as well as the success of their business strategies and general economic and competitive conditions; the prior rights of holders of existing and future debt securities and any future preferred stock issued by those companies; and any applicable legal restrictions. In addition, the ability of NW Holdings’ subsidiaries to pay upstream dividends and make other distributions is subject to applicable state law and regulatory restrictions. Under the OPUC and WUTC regulatory approvals for the holding company formation, if NW Natural ceases to comply with credit and capital structure requirements approved by the OPUC and WUTC, it will not, with limited exceptions, be permitted to pay dividends to NW Holdings. Under the OPUC and WUTC orders authorizing the holding company reorganization, NW Natural may not pay dividends or make distributions to NW Holdings if NW Natural’s credit ratings and common equity levels fall below specified ratings and levels. If NW Natural’s long-term secured credit ratings are below A- for S&P and A3 for Moody’s, dividends may be issued so long as NW Natural’s common equity is 45% or above. If NW Natural’s long-term secured credit ratings are below BBB for S&P and Baa2 for Moody’s, dividends may be issued so long as NW Natural’s common equity is 46% or above. Dividends may not be issued if NW Natural’s long-term secured credit ratings fall to BB+ or below for S&P or Ba1 or below for Moody’s, or if NW Natural’s common equity is below 44%. The ratio is measured using common equity and long-term debt excluding imputed debt or debt-like lease obligations, and is determined on a preceding or projected 13-month basis. EMPLOYEE BENEFIT RISK. The cost of providing pension and postretirement healthcare benefits is subject to changes in pension assets and liabilities, changing employee demographics and changing actuarial assumptions, which may have an adverse effect on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows. Until NW Natural closed the pension plans to new hires, which for non-union employees was in 2006 and for union employees was in 2009, it provided pension plans and postretirement healthcare benefits to eligible full-time utility employees and retirees. Approximately 22% of NW Natural’s current utility employees were hired prior to these dates, and therefore remain eligible for these plans. Other businesses we acquire may also have pension plans. The costs to NW Natural, or the other applicable businesses we may acquire, for providing such benefits is subject to change in the market value of the pension assets, changes in employee demographics including longer life expectancies, increases in healthcare costs, current and future legislative changes, and various actuarial calculations and assumptions. The actuarial assumptions used to calculate our future pension and postretirement healthcare expenses may differ materially from actual results due to significant market fluctuations and changing withdrawal rates, wage rates, interest rates and other factors. These differences may result in an adverse impact on the amount of pension contributions, pension expense or other postretirement benefit costs recorded in future periods. Sustained declines in equity markets and reductions in bond rates may have a material adverse effect on the value of the pension fund assets and liabilities. In these circumstances, NW Natural may be required to recognize increased contributions and pension expense earlier than it had planned to the extent that the value of pension assets is less than the total anticipated liability under the plans, which could have a negative impact on NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows. HEDGING RISK. NW Holdings’ and NW Natural’s risk management policies and hedging activities cannot eliminate the risk of commodity price movements and other financial market risks, and hedging activities may expose us to additional liabilities for which rate recovery may be disallowed, which could result in an adverse impact on NW Holdings’ and NW Natural’s operating revenues, costs, derivative assets and liabilities and operating cash flows. Our gas purchasing requirements expose us to risks of commodity price movements, while our use of debt and equity financing exposes us to interest rate, liquidity and other financial market risks. We attempt to manage these exposures with both physical hedges, including our storage and gas reserves transactions, which are hedges backed by physical gas supplies, and financial hedges, such as gas swaps and interest rate hedging arrangements. We may also enter into other types of financial and physical hedging arrangements from time to time. While we have risk management procedures for hedging in place, they may not always work as planned and cannot entirely eliminate the risks associated with hedging. Additionally, our hedging activities may cause 27 us to incur additional expenses to obtain the hedge. We do not hedge our entire interest rate or commodity cost exposure, and the unhedged exposure will vary over time. Gains or losses experienced through NW Natural’s hedging activities, including carrying costs, generally flow through NW Natural’s PGA mechanism or are recovered in future general rate cases. However, the hedge transactions NW Natural enters into for utility purposes are subject to a prudence review by the OPUC and WUTC, and, if found imprudent, those expenses may be, and have been previously, disallowed, which could have an adverse effect on NW Holdings’ or NW Natural’s financial condition and results of operations. In addition, our actual business requirements and available resources may vary from forecasts, which are used as the basis for hedging decisions and could cause our exposure to be more or less than anticipated. Moreover, if NW Natural’s derivative instruments and hedging transactions do not qualify for regulatory deferral or hedge accounting treatment under U.S. GAAP, NW Holdings’ or NW Natural’s results of operations and financial condition could be adversely affected. NW Holdings and NW Natural also have credit and performance exposure to derivative counterparties. Counterparties owing NW Holdings, NW Natural or their respective subsidiaries money, physical natural gas, RNG or environmental attributes could breach their obligations. Should the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements to meet our normal business requirements. In that event, NW Holdings’ or NW Natural’s financial results could be adversely affected. Additionally, under most of NW Natural’s hedging arrangements, a downgrade of its senior unsecured long-term debt credit rating could allow its counterparties to require NW Natural to post cash, a letter of credit or other form of collateral, which would expose NW Natural to additional costs and may trigger significant increases in borrowing from its credit facilities or equity contribution needs from NW Holdings, if the credit rating downgrade is below investment grade. Further, based on current interpretations, each of NW Holdings, NW Natural and NWN Water is not considered a "swap dealer" or "major swap participant" in 2024, so we are exempt from certain requirements under the Dodd-Frank Act. If we are unable to claim this exemption, we could be subject to higher costs for our derivatives activities, and such higher costs could have a negative impact on NW Holdings’ and NW Natural’s operating costs and financial results. GAS PRICE RISK. Higher natural gas commodity prices and volatility in the price of gas may adversely affect our NGD business, whereas lower gas price volatility may adversely affect NW Natural’s gas storage business, negatively affecting NW Holdings’ and NW Natural’s results of operations and cash flows. The cost of natural gas is affected by a variety of factors, including weather, changes in demand, the level of production and availability of natural gas supplies, transportation constraints, availability and cost of pipeline capacity, federal, state and local energy and environmental policy, regulation and legislation, natural disasters and other catastrophic events, national and worldwide economic and political conditions, and the price and availability of alternative fuels. In recent years, we have experienced increased pricing and volatility in the current and forward gas markets. In addition, potential tariffs or trade restrictions could impact the price of natural gas that we import from Canada. At our gas businesses, the cost we pay for natural gas is generally passed through to customers through an annual purchased gas rate adjustment. If gas prices were to increase significantly and remain higher, it could raise the cost of energy to our customers, potentially causing those customers to conserve or switch to alternate sources of energy. Sustained significant price increases could also cause new home builders and commercial developers to select alternative energy sources. Decreases in the volume of gas we sell could reduce NW Holdings or NW Natural’s earnings, and a decline in customers could slow growth in future earnings. Additionally, notwithstanding NW Natural’s current rate structure, higher gas costs could result in increased pressure on the OPUC or the WUTC to seek other means to reduce NW Natural’s rates, which also could adversely affect NW Holdings’ and NW Natural’s results of operations and cash flows. Temporary gas price increases can also adversely affect NW Holdings’ and NW Natural’s operating cash flows, liquidity and results of operations. In Oregon, a portion (10% or 20%) of any difference between the estimated average PGA gas cost in rates and the actual average gas cost incurred is recognized as current income or expense. Temporary or sustained higher gas prices may also cause us to experience an increase in short-term debt and temporarily reduce liquidity because it pays suppliers for gas when it is purchased, which can be in advance of when these costs are recovered through rates. Significant increases in the price of gas can also slow collection efforts as customers experience increased difficulty in paying their higher energy bills, leading to higher than normal delinquent accounts receivable resulting in greater expense associated with collection efforts and increased bad debt expense. INABILITY TO ACCESS CAPITAL MARKET RISK. NW Holdings’ or NW Natural’s inability to access capital, or significant increases in the cost of capital, could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations. NW Holdings’ and NW Natural’s ability to obtain adequate and cost effective short-term and long-term financing depends on maintaining investment grade credit profiles, perceptions of our business in capital markets, and the existence of liquid and stable financial markets. NW Holdings relies on access to equity, debt, and bank markets to finance equity contributions to subsidiaries and other business requirements. NW Natural relies on access to capital and bank markets, including commercial paper and bond markets, to finance its operations, construction expenditures and other business requirements, and to refinance maturing debt that cannot be funded entirely by internal cash flows. Disruptions in capital markets, including but not limited to, pandemics, political unrest, inflationary pressures, recessionary pressures, or rising interest rates could adversely affect our ability to access short-term and long-term financing or refinance maturing indebtedness. Our access to funds under committed 28 credit facilities, which are currently provided by a number of banks, is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity. Disruptions in the bank or capital financing markets as a result of economic uncertainty, changing or increased regulation of the financial sector, or failure of major financial institutions, or disruptions in credit markets, could adversely affect NW Holdings’ and NW Natural’s access to capital and negatively impact our ability to run our businesses, achieve NW Natural’s authorized rate of return, and make strategic investments. Furthermore, recent trends toward investments that are perceived to be “green” or “sustainable” could shift capital away from, or increase the cost of capital for, our natural gas business. We believe our business is an important component of a lower carbon future and are striving to reduce emissions from our systems. Nevertheless, perceptions in the financial markets could differ or outpace our progress toward reducing emissions and result in a shift funding away from, or limit or restrict certain forms of funding for, natural gas businesses. Similarly, public policy developments impacting natural gas, including through local, state or federal laws or legislation or other regulation (including ballot initiatives, executive orders or regulatory codes) or litigation could impact our ability to access capital. NW Natural is currently rated by S&P and Moody’s, and NW Holdings is currently rated by S&P. A negative change in their respective credit ratings, particularly below investment grade, could adversely affect our cost of borrowing and access to sources of liquidity and capital. Such a downgrade could further limit our access to borrowing under available credit lines. Additionally, downgrades in NW Natural’s current credit ratings below investment grade could cause additional delays in NW Natural's ability to access the capital markets while it seeks supplemental state regulatory approval, which could hamper its ability to access credit markets on a timely basis. NW Holdings' credit profile is largely supported by NW Natural’s credit ratings and any negative change in NW Natural’s credit ratings would likely negatively impact NW Holdings’ access to sources of liquidity and capital and cost of borrowing. A credit downgrade could also require additional support in the form of letters of credit, cash or other forms of collateral and otherwise adversely affect NW Holdings' or NW Natural’s financial condition and results of operations. IMPAIRMENT OF LONG-LIVED ASSETS OR GOODWILL RISK . Impairments of the value of long-lived assets or goodwill could have a material effect on NW Holdings’ or NW Natural’s financial condition, or results of operations. NW Holdings and NW Natural review the carrying value of long-lived assets other than goodwill whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. The determination of recoverability is based on the undiscounted net cash flows expected to result from the operation of such assets. Projected cash flows depend on the future operating costs and projected revenues associated with the asset. We review the carrying value of goodwill annually or whenever events or changes in circumstances indicate that such carrying value may not be recoverable. A goodwill impairment analysis begins with a qualitative analysis of events and circumstances. If the qualitative assessment indicates that the carrying value may be at risk, we will perform a quantitative assessment and recognize a goodwill impairment for any amount in which the fair value of a reporting unit exceeds its fair value. NW Holdings' total goodwill was $183.8 million as of December 31, 2024 and $163.3 million as of December 31, 2023, which all related to water and wastewater acquisitions. There have been no impairments recognized for the water and wastewater acquisitions to date. Any impairment charge taken with respect to our long-lived assets or goodwill could be material and could have a material effect on NW Holdings’ or NW Natural’s financial condition and results of operations. CUSTOMER CONSERVATION RISK. Customers’ conservation efforts may have a negative impact on NW Holdings’ and NW Natural’s revenues. An increasing national focus on energy conservation, including improved building practices and appliance efficiencies may result in increased energy conservation by customers. This can decrease our sales of natural gas and adversely affect NW Holdings’ or NW Natural’s results of operations because revenues are collected mostly through volumetric rates, based on the amount of gas sold. In Oregon, NW Natural has a conservation tariff which is designed to recover lost utility margin due to declines in residential and small commercial customers’ consumption. However, NW Natural does not have a conservation tariff in Washington that provides it this margin protection on sales to customers in that state. Similar conservation risks exist for water utilities. Customers’ conservation efforts may have a negative impact on NW Holdings' and NW Natural’s financial condition, revenues and results of operations. ECONOMIC RISK. Changes in the economy and in the financial markets may have a negative impact on our financial condition and results of operations. If an economic slowdown occurs, our financial condition, results of operations, and cash flows could be adversely affected. Moreover, fluctuations and uncertainties in the economy make it challenging for us to accurately forecast and plan future business activities and to identify risks that may affect our business, financial condition, and operating results. Changes in economic activity in our markets and in global financial markets can result in lower demand for energy, increased incidence of customers’ inability to pay or delay in paying utility bills or increase in customer bankruptcies, less new housing construction or fewer conversions to natural gas, higher levels of residential foreclosures or vacancies, uncertainty regarding energy prices and the capital and commodity markets, increased credit risk and supply chain uncertainty. We are evaluating and monitoring current economic conditions, which include but are not limited to: inflation and interest rates, supply chain disruptions, and other 29 regulatory, physical or cyber related risks impacting our business. These and other macroeconomic conditions may adversely impact the markets in which we operate and could cause the local, national or global economy to enter a period of recession. We cannot predict the timing, strength, or duration of any future economic slowdown or recession. If the economy or the markets in which we operate decline from present levels, it may have an adverse effect on our business, financial condition, and results of operations. WEATHER RISK. Warmer than average weather may have a negative impact on our revenues and results of operations. We are exposed to weather risk in our natural gas businesses. A majority of NW Natural’s gas volume is driven by gas sales to space heating residential and small commercial customers during the winter heating season. Current NW Natural rates are based on an assumption of average weather. Warmer than average weather typically results in lower gas sales. Colder weather typically results in higher gas sales. Although the effects of warmer or colder weather on utility margin in Oregon are expected to be mitigated through the operation of NW Natural’s weather normalization mechanism, weather variations from normal could adversely affect utility margin because NW Natural may be required to purchase more or less gas at spot rates, which may be higher or lower than the rates assumed in its PGA. Additionally, extreme weather events, such as those that occurred in NW Natural’s service territory in February 2021 and January 2024 can result in the purchase of higher levels of gas at significantly higher spot rates. Also, a portion of NW Natural’s Oregon residential and commercial customers (usually less than 10%) have opted out of the weather normalization mechanism, and approximately 12% of its customers are located in Washington where it does not have a weather normalization mechanism. SiEnergy, our gas utility in Texas similarly maintains a weather normalization mechanism, however, this mechanism may not fully mitigate the impact of warmer or colder than expected weather in Texas. These effects could have an adverse effect on NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows. Water Business Risks WATER SECTOR BUSINESS. NW Holdings' water, wastewater and water services businesses are subject to a number of risks in addition to the risks described above. Although the water businesses are not currently expected to materially contribute to the results of operations of NW Holdings, these businesses are subject to risks, in addition to those described above, including: • contamination of water supplies, including water provided to customers with naturally occurring or human-made substances or other hazardous materials, or disruptions to water treatment processes; • interruptions in water supplies and service, weather conditions, natural disasters and droughts; • insufficient water supplies, limitations on or disputes with respect to water rights or supplies, or the inability to secure water rights or supplies at a reasonable cost; • disruptions to the wastewater collection and treatment process, including spills, overflows or system failures; • wastewater discharges by third parties that contain unanticipated levels of chemical or other pollutants; • reliance on third parties for water supplies and transportation of such water supplies; • the ability to attract and retain customers to our water services business and competition for customers’ business; • conservation efforts by customers; • regulatory and legal requirements, including environmental, health and safety laws and regulations; • operational risks, including customer and employee safety; and • the outcome of rate cases and other regulatory proceedings. Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations. INVESTMENT RISK. NW Holdings’ expectations with respect to the financial results of its investments in water, wastewater and water services operations are based on various assumptions and beliefs that may not prove accurate, resulting in failures or delays in achieving expected returns or performance. NW Holdings’ expansion into the water sector is an important component of its growth strategy. Although NW Holdings expects its water and wastewater utility operations and water services businesses will result in various benefits, including expanding customer bases, providing investment opportunities through infrastructure development and enhancing regulatory relationships within the local communities served, NW Holdings may not be able to realize these or other benefits. Achieving the anticipated benefits is subject to a number of uncertainties, including whether the businesses acquired can be operated in the manner intended and whether costs to finance the acquisitions and investments will be consistent with expectations, as well as whether investments in the water sector can reach scale in a reasonable period of time. Events outside of our control, including but not limited to regulatory changes or developments, could adversely affect our ability to realize the anticipated benefits from building NW Holdings’ water platform. The integration of newly acquired water, wastewater or water services businesses, particularly over noncontiguous geographic regions, may be unpredictable, subject to delays or changed circumstances, and such businesses may not perform in accordance with our expectations. In addition, anticipated costs, level of management’s attention and internal resources to achieve the integration of or operate the acquired businesses may differ significantly from our current estimates resulting in failures or delays in achieving expected returns or performance. We have previously acquired, and from time to time may make further investments in unregulated businesses on the water platform, including wastewater and water services businesses, which may result in additional uncertainty or volatility of earnings from these businesses. If NW Holdings' 30 expectations regarding the financial results of its investments in water, wastewater or water services operations prove to be inaccurate, it may adversely affect NW Holdings' financial position or results of operations. Non-Regulated RNG Risks INVESTMENT RISK. NW Holdings’ expectations with respect to the financial results of its investments in non-regulated RNG investments are based on various assumptions and beliefs that may not prove accurate, resulting in failures or delays in achieving expected returns. NW Holdings’ expansion into the non-regulated RNG business is an important component of its growth strategy. Although NW Holdings expects this expansion will result in various benefits, including providing renewable fuels to support decarbonization in the utility, commercial, industrial and transportation sectors, NW Holdings may not be able to realize these or other benefits. Achieving the anticipated benefits is subject to a number of uncertainties, including whether the investments can be made at an expected scale, whether the investments can be monetized in the manner intended, and whether costs to finance the investments will be consistent with expectations. Events outside of our control, including but not limited to market or regulatory changes or developments, could adversely affect our ability to realize the anticipated benefits from building NW Holdings’ non-regulated RNG platform. The establishment and growth of a non-regulated RNG business may be unpredictable, subject to uncertainties or changed circumstances, and such business may not perform in accordance with our expectations. In addition, anticipated costs, level of management’s attention and internal resources to achieve the integration of the acquired investments may differ significantly from our current estimates resulting in failures or delays in achieving expected returns or performance. As part of our business model, we may purchase RNG from third parties in a variety of structures, including on a volumes-produced basis. Conversely, we may sell RNG in a variety of structures, including on a fixed-volume basis. This model could result in a mismatch between our purchased RNG portfolio and RNG volumes we have contracted to sell at any one time, which could result in our obligation to procure additional RNG at then-market prices or to pay damages to satisfy RNG sales contracts to which we are a party, which amounts could be significant. For example, the RNG purchase contract between Ohio Renewables and a subsidiary of EDL is on a volumes-produced basis, whereas Ohio Renewables’ contract for the sale of RNG from 2025 through 2042 is a fixed-volume contract. We could additionally experience technological challenges; ineffective scalability or inability to achieve production volumes consistent with our expectations and marketing arrangements; construction delays or cost overruns; disputes with third party business partners; risks related to markets for RNG and its associated attributes (including changes in market regulation, behavior, or prices); the inability to receive expected tax or regulatory treatment; unsuccessful business models; or unexpected operating costs. If NW Holdings’ expectations regarding the financial results of its investments in non-regulated RNG prove to be inaccurate, it may adversely affect NW Holdings’ financial position or results of operations. RENEWABLES BUSINESS RISK. NW Natural Renewables is an unregulated subsidiary of NW Holdings established to pursue unregulated renewable natural gas activities. These activities are subject to a number of risks in addition to the risks described above. Our Renewables business is subject to risks, in addition to those described above, including: • unpredictable production levels or performance or gas quality below expected levels, which may impact our ability to accept or deliver RNG under our contractual agreements; • construction risks or delays, including due to inclement weather, supply chain or labor disruptions or otherwise; • cost overruns and the need to commit more capital than initially budgeted as a result of environmental, construction, technological or other complications; • weather conditions; • changes in energy commodity prices, including pricing of, and volatility in markets for, RNG and its associated attributes; • equipment failure, difficulties or delays in repairing or replacing equipment, technical difficulties or otherwise higher than expected operating costs; • regulatory, policy, and legal requirements, including environmental, health and safety laws and regulations or regulations that may impact the value of RNG and its associated attributes or our ability to deliver RNG in the manner contemplated under our contractual arrangements; • changes to laws or policies that may reduce demand for, or desirability of, RNG or its associated attributes; • reliance on third parties, including for pipeline interconnection and for a sufficient supply of waste for conversion to RNG; • catastrophic events such as fires, explosions, earthquakes, droughts, acts of terrorism and other force majeure events that may impact the Renewables business, its customers, suppliers, or other business partners; and • failures or delays in obtaining necessary land rights, permits, approvals or other consents required to construct and operate projects. Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS We have no unresolved staff comments. 31 ITEM 1C. CYBERSECURITY Processes of Addressing Cybersecurity Threats Cybersecurity is critical to our business. As an energy infrastructure company, we face a variety of cybersecurity threats that range from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, that target critical infrastructure sectors. We recognize the critical importance of maintaining the safety and security of our systems and data and have a holistic process for overseeing and managing cybersecurity and related risks. The process is supported by management and overseen by our Board of Directors. One of the tools used by management and our Board of Directors in managing business risks is an annual enterprise risk management (ERM) assessment to identify and manage key existing and emerging risks our company faces. Our ERM process is designed to identify significant risks relevant to the company and assess the characteristics and circumstances of the risks to identify both the potential impacts to our company of a particular risk and the velocity with which the risk may manifest. Cybersecurity is among the risks identified in our ERM assessment and has been embedded in the Company’s operating procedures, internal controls and information systems. In addition to our overall ERM process, we have developed and implemented a cybersecurity risk management program and processes intended to detect, assess, manage, and develop resiliency against material risks from cybersecurity threats. Our cybersecurity program utilizes a risk-based approach and includes written cybersecurity and information technology processes and procedures, including a cybersecurity incident response plan that involves procedures for responding to cybersecurity incidents. We design and assess our program informed by various cybersecurity frameworks, such as the National Institute of Standards and Technology (NIST) and leverage a widely-adopted risk assessment model to identify, measure and prioritize cybersecurity and technology risks. The goal of our program is to prevent, identify, escalate, investigate, resolve and recover from identified incidents and security incidents in a timely manner. Our cybersecurity program also incorporates intelligence sharing capabilities about emerging threats within the utility industry and other industries through collaboration with peer companies and specialized consultants and advisors, public-private partnerships with government intelligence agencies, including the FBI, CISA, and the Department of Energy Office of Cybersecurity, Energy Security and Emergency Response, and geopolitical briefings. We also leverage third-party benchmarking, the results from regular internal and third-party audits, technology partner resources, threat intelligence feeds, and other similar resources to inform our cybersecurity processes and allocate resources. Beginning in May 2021, the Department of Homeland Security’s (DHS) and the Transportation Security Administration (TSA) released two directives, with several updates, applicable to certain owners and operators of pipeline facilities, including NW Natural. These directives cumulatively require owners and operators to implement cybersecurity incident reporting to the DHS, designate two cybersecurity coordinators, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies; implement a significant number of specified cyber security controls and processes; and clarifying Operational Technology (OT) scope and providing a risk- and outcome-based framework. We made significant additional and accelerated investments in cybersecurity in response to the TSA directives. In November 2024, the TSA proposed regulations with the aim of making the security directives permanent by incorporating them into the US Code of Federal Regulations. Our cybersecurity program has several fundamental tenants, including security governance, cybersecurity risk management, compliance, defensibility, zero-trust architecture and cloud security. We utilize multilayered defenses and continuous monitoring with data analytics to detect anomalies and search for cyber threats in our system. Key components of our cybersecurity risk management program include: • risk assessments designed to help identify cybersecurity risks to our critical systems, information, services, and our broader technology environment; • the use of external service providers with specific expertise, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel and senior management, as well as periodic experiential learning through “phishing simulations”; • segmentation of, and back-ups for, certain of our sensitive systems and data; • third-party cyber risk management process for vendors including, among other things, a security assessment, contracting program, and ongoing monitoring for vendors based on their risk profile; and • physical security around our sensitive infrastructure and cybersystems. In accordance with our program and processes, we regularly assess risks from cybersecurity and technology threats and monitor our information systems for potential vulnerabilities. We conduct regular reviews and tests of our information security program and also utilize audits by our internal audit team and third-party consultants, table-top exercises, penetration and vulnerability testing, data recovery testing, simulations, and other exercises to evaluate the effectiveness of our information security program 32 and improve our security measures and planning. We are continuously working to evolve our oversight processes to mature how we identify and manage cybersecurity risks, and we perform periodic maturity assessments to measure our progress. As a regulated energy infrastructure company, for decades we have used an incident command system (ICS) as a standardized approach to the command, control and coordination of a variety of emergency situations. In the event of emergencies, including cybersecurity events, we stand up a cross-functional Incident Command Team (ICT) to respond to the emergency. We exercise and train the ICT for a variety of emergencies, including cyber events on a regular basis. At this time, we have not identified any risks from known previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations or financial condition. With a majority of our business in energy and infrastructure, we face sophisticated and rapidly evolving attempts to overcome our security measures and protections. The occurrence of both intentional and unintentional incidents could occur in the future. We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See Item 1A, "Risk Factors” above for additional information on risks related to our business, including for example risks related to cyber attacks, information and system breaches, technology disruptions and failures, and our reliance on technology. Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated oversight of cybersecurity and other information technology risks to the Audit Committee. The Audit Committee oversees management’s implementation of the cybersecurity risk management program. The Audit Committee receives regular reports from management on our cybersecurity risks. Additionally, management updates the Audit Committee as necessary, regarding any cybersecurity incidents. The Audit Committee reports to the full Board regarding the Audit Committee’s areas of oversight, including those related to cybersecurity. The full Board also receives briefings from management on our cybersecurity risk management program periodically. Additionally, our Board receives presentations on cybersecurity topics from our IT management team or external experts as part of the Board’s ongoing education. Our management team, including our Cybersecurity management team, has primary responsibility for our overall cybersecurity risk management program, and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Cybersecurity management team is led by Brian Fellon, our Vice President, Chief Information Officer and Chief Information Security Officer (VP, CIO and CISO). Mr. Fellon joined NW Natural and was appointed to his role by the Board of Directors in September 2024. Mr. Fellon reports to our Chief Financial Officer. He has 28 years of experience in information technology. Prior to joining NW Natural, Mr. Fellon served as Director of Information Technology at Puget Sound Energy in Bellevue, Washington from 2016 to September 2024, where he was responsible for applications services, artificial intelligence and data. Mr. Fellon is supported by our Director of Cybersecurity and Compliance, and his team. Collectively our team has certifications from various organizations such as American Society for Industrial Security, AXELOS, Cloud Security Alliance, Information Systems Audit and Control Association, International Information System Security Certification Consortium and SANS Institute. Our cybersecurity and compliance team regularly collects data on cybersecurity threats and risk areas, monitors our systems, and conducts testing to assess our processes and procedures and the threat landscape. Our VP, CIO and CISO receives regular updates on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation. In the event of an incident, we intend to utilize our ICT and follow our detailed incident program and processes, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying relevant functional areas, as well as senior leadership and the Board, as appropriate. 33 ITEM 2. PROPERTIES NW Natural's Natural Gas Distribution Properties NW Natural's natural gas pipeline system consists of approximately 14,400 miles of distribution mains, approximately 700 miles of transmission mains and approximately 10,300 miles of service lines located in its territory in Oregon and southwest Washington. In addition, the pipeline system includes service regulators and meters, as well as district regulators and metering stations. Natural gas pipelines are located in public rights-of-way pursuant to franchise agreements, ordinances, or other legal rights, or on lands of others pursuant to easements obtained from the owners of such lands. NW Natural also holds permits for the crossing of numerous railroads, navigable waterways and smaller tributaries throughout our entire service territory. NW Natural owns service building facilities in Portland, Oregon, as well as various satellite service centers, garages, warehouses, and other buildings necessary and useful in the conduct of its business. Resource centers are maintained on owned or leased premises at convenient points in the distribution system to provide service within NW Natural's service territory. NW Natural commenced a 20-year lease in March 2020 for a headquarters and operations center in Portland, Oregon. NW Natural's Mortgage and Deed of Trust (Mortgage) is a first mortgage lien on certain gas properties owned from time to time by NW Natural, including substantially all of the property constituting NW Natural's natural gas distribution plant balances. These properties are used in the NGD segment. NW Natural's Natural Gas Storage Properties NW Natural holds leases and other property interests in approximately 12,000 net acres of underground natural gas storage in Oregon and easements and other property interests related to pipelines associated with these facilities. NW Natural owns rights to depleted gas reservoirs near Mist, Oregon that are continuing to be developed and operated as underground gas storage facilities. NW Natural also holds all future storage rights in certain other areas of the Mist gas field in Oregon in addition to other leases and property interests. NW Natural owns LNG storage facilities in Portland and near Newport, Oregon. A portion of these properties are used in the NGD segment. NWN Water's Distribution Properties NWN Water owns and maintains water distribution pipes, storage, wells and other infrastructure and wastewater treatment facilities, and holds related leases and other property interests in Oregon, Washington, Idaho, Texas, Arizona and California. Pipelines are located in municipal streets or alleys pursuant to franchise or occupation ordinances, in county roads or state highways pursuant to agreements or permits granted pursuant to statute, or on lands of others pursuant to easements obtained from the owners of such lands. These properties are used by entities that are aggregated and reported as other under NW Holdings. We consider all of our properties currently used in our operations, both owned and leased, to be well maintained, in good operating condition, and, along with planned additions, adequate for our present and foreseeable future needs. ITEM 3. LEGAL PROCEEDINGS Other than the proceedings disclosed in Note 17 to Consolidated Financial Statements, we have only nonmaterial litigation in the ordinary course of business. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES NW Holdings' common stock is listed and trades on the New York Stock Exchange under the symbol NWN. There is no established public trading market for NW Natural's common stock. As of February 18, 2025, there were 3,808 holders of record of NW Holdings' common stock and NW Holdings was the sole holder of NW Natural's common stock. For more information regarding cash dividends declared on our common stock and dividend policies, see "Financial Condition - Liquidity and Capital Resources " in Item 7 of this Annual Report on Form 10-K. Unregistered Sales of Equity Securities On October 2, 2024, NW Holdings issued a total of 11,182 unregistered shares of NW Holdings common stock as holdback consideration payable to the sellers in connection with the acquisition of Rose Valley Water Company in Arizona. On December 16, 2024, NW Holdings issued a total of 2,179 unregistered shares to the sellers as an earnout payment in connection with the same transaction. On October 2, 2023 and December 22, 2023, NW Holdings issued a total of 175,674 and 141 unregistered shares of common stock, respectively, to the sellers as closing consideration and post-closing purchase price adjustment payment in connection with the acquisition of Rose Valley Water Company. In aggregate, NW Holdings has issued 189,176 unregistered shares of common stock in 2023 and 2024 in connection with its acquisition of Rose Valley Water Company. On December 30, 2024, NW Holdings issued a total of 22,965 unregistered shares of NW Holdings common stock as holdback consideration payable to the sellers in connection with the acquisition of Hiland Water Corp. in Oregon. On October 31, 2023 and December 29, 2023, NW Holdings issued a total of 9,158 and 142,292 unregistered shares of common stock, respectively, to the sellers as closing consideration in connection with the acquisition of Hiland Water Corp. In aggregate, NW Holdings has issued 174,415 unregistered shares of common stock in 2023 and 2024 in connection with the acquisition of Hiland Water Corp. These transactions were exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as transactions not involving a public offering. Issuer Purchases of Equity Securities The following table provides information about purchases of NW Holdings' equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Balance forward 2,124,528 $ 150,000,000 10/01/24-10/31/24 — $ — — — 11/01/24-11/30/24 — $ — — — 12/01/24-12/31/24 — $ — — — Total — 2,124,528 $ 150,000,000 (1) During the quarter ended December 31, 2024, no shares of common stock were purchased on the open market to meet the requirements of NW Holdings' Dividend Reinvestment and Direct Stock Purchase Plan. During the quarter ended December 31, 2024, no shares of NW Holdings common stock were purchased on the open market to meet the requirements of share-based compensation programs. (2) During the quarter ended December 31, 2024, no shares of NW Holdings common stock were repurchased pursuant to the Board approved share repurchase program. Effective May 23, 2024, NW Holdings' Board authorized a new share repurchase program under which NW Holdings may repurchase in open market or privately negotiated transactions up to an aggregate of 5 million shares or an amount not to exceed $150 million. The new share repurchase program is authorized to continue until the program is used, terminated or replaced. The repurchase program replaces the Company’s previously authorized share repurchase program, which commenced in 2000 and authorized the repurchase of up to 2.8 million shares, or an amount not to exceed $100 million, in the aggregate. For more information on our share repurchase program, see Note 5. ITEM 6. RESERVED Not applicable. 35 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management’s assessment of NW Holdings' and NW Natural's financial condition, including the principal factors that affect results of operations. The discussion covers the years ended December 31, 2024, 2023, and 2022 and refers to the consolidated results of NW Holdings, the substantial majority of which consist of the operating results of NW Natural. When significant activity exists at NW Holdings that does not exist at NW Natural, additional disclosure has been provided. References in this discussion to "Notes" are to the Notes to the Consolidated Financial Statements in Item 8 of this report. NW Natural's natural gas distribution activities are reported in the natural gas distribution (NGD) segment. The NGD segment also includes NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp, the NGD-portion of NW Natural's Mist storage facility in Oregon, and NW Natural RNG Holding Company, LLC. Other activities aggregated and reported as other at NW Natural include the non-NGD storage activity at Mist as well as asset management services and the appliance retail center operations. Other activities aggregated and reported as other at NW Holdings include NNG Financial's investment in Kelso-Beaver Pipeline (KB Pipeline); NW Natural Renewables Holdings, LLC and its non-regulated renewable natural gas activities; and NWN Water, which through itself or its subsidiaries, owns and continues to pursue investments in the water, wastewater, and water services sectors. See Note 4 for further discussion of our business segment and other, as well as our direct and indirect wholly-owned subsidiaries. NON-GAAP FINANCIAL MEASURES. In addition to presenting the results of operations and earnings amounts in total, certain financial measures are expressed in cents per share, which are non-GAAP financial measures. All references in this section to earnings per share (EPS) are on the basis of diluted shares. We use such non-GAAP financial measures to analyze our financial performance because we believe they provide useful information to our investors, analysts, and creditors in evaluating our financial condition and results of operations. Our non-GAAP financial measures should not be considered a substitute for, or superior to, measures calculated in accordance with U.S. GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than how such measures are calculated in this report, limiting the usefulness of those measures for comparative purposes. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided below. 2024 2023 2022 Diluted EPS - Total (1) $ 2.03 $ 2.59 $ 2.54 Diluted EPS - NGD segment (2) 1.98 2.59 2.34 Diluted EPS - NW Holdings - other (2) 0.05 — 0.20 (1) Total Diluted EPS is equal to the sum of Diluted EPS - NGD segment and Diluted EPS - NW Holdings – other. (2) Non-GAAP financial measure 36 EXECUTIVE SUMMARY NW Holdings' financial results and highlights for the year include: • Reported net income of $78.9 million or $2.03 per share (diluted) for 2024 compared to $93.9 million or $2.59 per share (diluted) in the prior year, a decline primarily due to a regulatory disallowance and regulatory lag at NW Natural for the first 10 months of 2024 until new Oregon gas utility rates were effective on November 1, 2024 ; • Added nearly 10,000 gas and water utility connections in the last twelve months for a combined growth rate of 1.1% as of December 31, 2024 mainly driven by residential customer growth across both our natural gas and water businesses; • Invested $394.4 million in our utility systems to support greater reliability and resiliency; • Filed an Oregon general rate case for NW Natural requesting a $59.4 million revenue requirement increase to support long-planned investments in safety and reliability; • Closed ICH water acquisition adding wastewater and recycled water customers across Oregon, Idaho and California; • Announced acquisition of SiEnergy, a high-growth gas utility located in Texas, in November 2024 and subsequently closed the acquisition in January 2025 ; • EDL completed two unregulated RNG facilities and commenced delivery of RNG to NW Natural Renewables; and • Increased our dividend for the 69 th consecutive year to an annual indicated dividend rate of $1.96 per share. Key financial highlights for NW Holdings include: 2024 2023 2022 In millions Amount Per Share Amount Per Share Amount Per Share Consolidated net income $ 78.9 $ 2.03 $ 93.9 $ 2.59 $ 86.3 $ 2.54 Key financial highlights for NW Natural include: 2024 2023 2022 In millions Amount Amount Amount Consolidated net income $ 89.0 $ 104.7 $ 91.6 Natural gas distribution margin 601.3 575.0 505.9 2024 COMPARED TO 2023. Consolidated net income decreased $15.7 million at NW Natural primarily due to the following factors: • $18.2 million decrease in other income, net primarily due to higher pension costs, lower interest income from invested cash, lower regulatory interest income and a decline in the equity portion of Allowance for Funds Used During Construction (AFUDC); • $13.7 million decrease due to the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case; • $10.1 million increase in depreciation expense from continued capital investments in our system for safety and reliability; • $2.7 million increase in interest expense, net primarily due to higher short and long-term debt balances; and • $2.0 million increase in general taxes primarily driven by higher regulatory commission fees; partially offset by • $26.3 million increase in NGD segment margin driven by new rates on November 1, 2024 for Oregon, the amortization of deferred balances and customer growth; partially offset by lower usage from warmer comparative weather for customers not covered under the weather normalization mechanism; • $3.1 million increase in gas storage revenue; and • $1.4 million decrease in operations and maintenance expenses (excluding the regulatory disallowance) due to lower contract labor costs and lower bad debt expense, partially offset by higher amortization expense related to cloud computing arrangements. Consolidated net income decreased $15.0 million at NW Holdings primarily due to the following factors: • $15.7 million decrease in consolidated net income at NW Natural as discussed above; partially offset by • $0.7 million increase in other net income primarily reflecting a $4.4 million increase in net income from water and wastewater subsidiaries, partially offset by $2.3 million of acquisition costs related to SiEnergy and higher interest expense at the holding company. 2023 COMPARED TO 2022. Consolidated net income increased $13.2 million at NW Natural primarily due to the following factors: • $69.1 million increase in NGD segment margin driven by new rates in Oregon and Washington, actual gas prices that were lower than what was estimated in the 2022-2023 PGA, amortization of deferred balances (which is mostly offset in operations and maintenance expenses and interest expense), and customer growth; and • $15.8 million increase in other income, net primarily due to interest income from invested cash and the equity portion of AFUDC, and lower pension costs; partially offset by • $39.8 million increase in operations and maintenance expenses due to higher payroll costs, higher contract labor, the amortization of deferred balances (which is mostly offset in revenues), information technology costs and amortization expense related to cloud computing arrangements; • $14.3 million increase in interest expense, net primarily due to higher long-term debt balances; 37 • $6.5 million increase in depreciation expense due to additional capital investments; • $4.8 million increase in general taxes primarily driven by higher property and payroll taxes; and • $4.6 million increase in income tax expense due to higher pre-tax income. Consolidated net income increased $7.6 million at NW Holdings primarily due to the following factors: • $13.2 million increase in consolidated net income at NW Natural as discussed above; partially offset by • $5.6 million decrease in other net income primarily reflecting higher interest expense at the holding and water companies. CURRENT ECONOMIC AND POLITICAL CONDITIONS . We continuously review and monitor current economic conditions, which include but are not limited to: inflation and interest rates, supply chain disruptions, and other regulatory, physical or cyber related risks impacting our business. Over the prior two years, we experienced higher material and labor costs across our businesses resulting from high levels of inflation. In 2024, inflation has come down from these prior year highs and we have started to experience more traditional price impacts in 2024. Lead times on materials have returned to normal levels in 2024 for most inventory items. We continue to look for opportunities through advanced planning to ensure inventory levels are appropriately maintained. With the improved lead times we have been able to also increase inventory turnover and reduce the amounts of inventory needed on hand in 2024. NW Holdings and NW Natural monitor interest rates and financing options for all of its businesses. While short-term rates increased considerably starting in 2022 and through 2023, the U.S. Federal Reserve started reducing short-term rates in the second half of 2024 from the highs experienced in 2023. Long-term interest rates also increased in 2022 from historically low levels, however long-term rates have since stabilized and maintained a consistent level over the past two years and are down from their highest levels in 2023. NW Natural generally recovers interest expense on its long-term debt through its authorized cost of capital. Certain working capital items, such as the cost of gas, are deferred and accrue interest in Oregon and Washington. Additionally, short-term debt is incorporated in the capital structure in Washington. NW Natural Water's regulated water and wastewater utilities generally recover interest expense from long-term debt through their respective authorized cost of capital. We continue to monitor a wide range of new policies, executive orders, rules, initiatives and other changes to fiscal, tax, regulation, environmental, climate and other federal policies that may impact NW Natural and NW Holdings under the new U.S. Governmental Administration. Similarly, we could face significant legislative, regulatory and other policy changes at the state level or in the local jurisdictions in which we operate. See the discussion in " Results of Operations ", " Regulatory Matters " and " Financial Condition " below for additional detail regarding all significant activity that occurred during 2024. DIVIDENDS NW Holdings dividend highlights include: Per common share 2024 2023 2022 Dividends paid $ 1.9525 $ 1.9425 $ 1.9325 In January 2025, the Board of Directors of NW Holdings declared a quarterly dividend on NW Holdings common stock of $0.4900 per share, payable on February 14, 2025, to shareholders of record on January 31, 2025, reflecting an indicated annual dividend rate of $1.96 per share. See "Financial Condition - Liquidity and Capital Resources " for more information regarding the NW Holdings and NW Natural dividend policies and regulatory conditions on NW Natural dividends to its parent, NW Holdings. RESULTS OF OPERATIONS Regulatory Matters Regulation and Rates NATURAL GAS DISTRIBUTION . NW Natural's natural gas distribution business is subject to regulation by the OPUC and WUTC with respect to, among other matters, rates and terms of service, systems of accounts, and issuances of securities by NW Natural. In 2024, approximately 88% of NGD customers were located in Oregon, with the remaining 12% in Washington. Earnings and cash flows from natural gas distribution operations are largely determined by rates set in general rate cases and other proceedings in Oregon and Washington. They are also affected by weather, the local economies in Oregon and Washington, the pace of customer growth in the residential, commercial, and industrial markets, federal, state and local energy, policy, customer preferences and NW Natural's ability to remain price competitive, control expenses, and obtain reasonable and timely regulatory recovery of its natural gas distribution-related costs, including operating expenses and investment costs in plant and other regulatory assets. See " Most Recent Completed Rate Cases " below. 38 MIST INTERSTATE GAS STORAGE . NW Natural's interstate storage activity at Mist is subject to regulation by the OPUC, WUTC, and the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, rates and terms of service. The OPUC also regulates intrastate storage services at Mist, while FERC regulates interstate storage services at Mist. The FERC uses a maximum cost of service model which allows for gas storage prices to be set at or below the cost of service as approved by each agency in our last regulatory filing. The OPUC Schedule 80 rates are tied to the FERC rates, and are updated whenever NW Natural modifies FERC maximum rates. See " Most Recent Completed Rate Cases " below. OTHER. The wholly-owned regulated water businesses of NWN Water, a wholly-owned subsidiary of NW Holdings, are subject to regulation by the utility commissions in the states in which they are located, which currently includes Oregon, Washington, Arizona, Idaho, and Texas. The wholly-owned regulated wastewater businesses of NWN Water are subject to regulation by the utility commissions in the states in which they are located, which currently includes Texas and Arizona. Most Recent Completed Rate Cases OREGON . On December 29, 2023, NW Natural filed a request for a general rate case (Rate Case) with the OPUC. On October 25, 2024, the OPUC issued an order approving two stipulations and resolving the remaining open items in the Rate Case. The final order provided for a total revenue requirement increase of $93.3 million over revenues from existing rates, which includes $9.6 million related to an updated depreciation study. The revenue requirement is based on the following assumptions: • Capital structure of 50% common equity and 50% long-term debt; • Return on equity of 9.4%; • Cost of capital of 7.056%; • Cost of long-term debt of 4.712%; and • Average rate base of $2.09 billion or an increase of $334 million since the last rate case. In addition to the above, the OPUC ordered the phase out of NW Natural’s line extension allowance by November 1, 2027. Additionally, the OPUC ordered a downward adjustment to rate base of $13.7 million of undepreciated line extension costs, which resulted in a non-cash, pre-tax charge of $13.7 million in the fourth quarter of 2024. In December 2024, NW Natural filed an appeal with the Oregon Court of Appeals, challenging the determination and the authority of the OPUC to take these actions. New rates authorized by the OPUC order were effective November 1, 2024. On October 24, 2022, the OPUC issued an order for rates effective November 1, 2022, which authorized a return on equity (ROE) of 9.4%, a cost of capital of 6.836%, and a capital structure of 50% common equity and 50% long-term debt. The OPUC further adopted an automatic adjustment clause that allows for NW Natural’s RNG project costs to be added to rates annually on November 1 st . From November 1, 2020 through October 31, 2022, the OPUC authorized rates to customers based on an ROE of 9.4% and a cost of capital of 6.965% with a capital structure of 50% common equity and 50% long-term debt. The OPUC also authorized NW Natural to recover the expense associated with the Oregon Corporate Activity Tax (CAT) as a component of base rates. WASHINGTON . On October 21, 2021, the WUTC issued an order concluding NW Natural's general rate case filed in December 2020 (WUTC Order). The WUTC Order provides for an annual revenue requirement increase over two years, consisting of a 6.4% or $5.0 million increase in the first year beginning November 1, 2021 (Year One), and up to a 3.5% or $3.0 million increase in the second year beginning November 1, 2022 (Year Two). The increase is based on the following assumptions: • Cost of capital of 6.814%; and • Average rate base of $194.7 million, an increase of $20.9 million since the last rate case for capital expenditures already expended at the time of filing, with an additional expected $31.2 million increase in Year One, and an additional expected $21.4 million increase in Year Two, with the increases in Year One and Year Two relating to expected capital expenditures in those years. The WUTC Order does not specify the underlying inputs to the cost of capital, including capital structure and return on equity. New rates authorized by the WUTC Order were effective November 1, 2021. In September 2023, NW Natural received a letter of compliance from the WUTC acknowledging that the Year Two rates are no longer subject to review and refund. FERC. NW Natural is required under its Mist interstate storage certificate authority and rate approval orders to file every five years either a petition for rate approval or a cost and revenue study to change or justify maintaining the existing rates for its interstate storage services. NW Natural filed a rate petition with the FERC in August 2023 and the revised rates were effective beginning September 1, 2023. NW Natural continuously evaluates the need for rate cases in its jurisdictions. Regulatory Proceeding Updates 2025 OREGON RATE CASE. On December 30, 2024, NW Natural filed a request for a general rate increase with the OPUC. The filing includes a requested $59.4 million annual revenue requirement increase, or an approximate 5.79% increase over current customer rates. The request is based upon the following assumptions or requests: • Capital structure of 48% long-term debt and 52% equity; 39 • Return on equity of 10.4%; • Cost of capital of 7.658%; and • Average rate base of $2.29 billion. The filing includes approximately $10 million related to an updated depreciation study and an increase in average rate base of $204 million compared to the last rate case for several long-planned investments by NW Natural including the following: • Supporting reinforcement, safety and reliability of NW Natural's distribution systems and operating facilities; • Upgrading technology to, among other things, further modernize NW Natural’s information technology infrastructure, and enhance cybersecurity protections, and • Investing in components of NW Natural’s Mist gas storage facility, which supports service during winter heating months. NW Natural’s filing will be reviewed by the OPUC and other stakeholders. The process is anticipated to take up to 10 months with new rates expected to take effect November 1, 2025. Rate Mechanisms During 2024 and 2023, NW Natural's key approved rates and recovery mechanisms for each service area included: Oregon Washington 2024 Rate Case (effective 11/1/2024) 2022 Rate Case (effective 11/1/2022) 2021 Rate Case (effective 11/1/2021) Authorized Rate Structure: Return on Equity 9.4% 9.4% ** Rate of Return 7.1% 6.8% 6.8% Debt/Equity Ratio 50%/50% 50%/50% ** Key Regulatory Mechanisms: Purchased Gas Adjustment (PGA) X X X Gas Cost Incentive Sharing X X Decoupling X X Weather Normalization (WARM) X X RNG Automatic Adjustment Clause X X Environmental Cost Recovery X X X Interstate Storage and Asset Management Sharing X X X ** The WUTC Order does not specify the underlying inputs to the cost of capital, including capital structure and return on equity. Annually, or more often if circumstances warrant, NW Natural reviews all regulatory assets for recoverability. If NW Natural should determine all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Natural would be required to write-off the net unrecoverable balances against earnings in the period such a determination was made. PURCHASED GAS ADJUSTMENT. Rate changes are established for NW Natural each year under purchased gas adjustment (PGA) mechanisms in Oregon and Washington to reflect changes in the expected cost of natural gas commodity purchases. The PGA filings include costs for gas purchases, gas commodity derivative contracts, gas storage costs, gas reserves costs, pipeline demand costs, renewable natural gas and its environmental attributes, including renewable thermal certificates, and temporary rate adjustments, which amortize balances of deferred regulatory accounts. In September 2024, NW Natural filed its annual PGAs and received OPUC and WUTC approval in October 2024. PGA rate changes were effective November 1, 2024. Rates may vary between states due to different rate structures, rate mechanisms and hedging policies. Each year, NW Natural hedges gas prices on a portion of NW Natural's annual sales requirement based on normal weather, including both physical and financial hedges. NW Natural entered the 2024-25 gas year with total forecasted sales volume hedged at approxima tely 80% , including 64% in financial hedges and 16% in physical gas supplies. The total hedged was approximately 86% in Oregon and 32% in Washington. For the subsequent two gas years, NW Natural was hedged in total between 13% and 31% for annual requirements , which consists of between 14% and 34% in Oregon and 0% and 10% in Washington. Hedge levels are subject to change based on actual load volumes, which depend to a certain extent on weather, economic conditions, and gas reserve production. Also, gas storage inventory levels may increase or decrease with storage expansion, changes in storage contracts with third parties, 40 variations in the heat content of the gas, and/or storage recall by NW Natural. Gas purchases and hedges entered into for the upcoming PGA year will be included in the Company’s PGA filings in Oregon and Washington. Under the current PGA mechanism in Oregon, there is an incentive sharing provision whereby NW Natural is required to select each year an 80% deferral or a 90% deferral of higher or lower actual gas costs compared to estimated PGA prices, such that the impact on NW Natural's current earnings from the incentive sharing is either 20% or 10% of the difference between actual and estimated gas costs, respectively. For the 2024-25 and 2023-24 gas years, NW Natural selected the 90% deferral option. Under the Washington PGA mechanism, NW Natural defers 100% of the higher or lower actual gas costs, and those gas cost differences are passed on to customers through the annual PGA rate adjustment. As of May 1, 2024, 0.2 million therms per day of deliverability and 1.15 Bcf of associated non-utility Mist gas storage capacity was recalled to serve core customers. Customer rate increases related to this recall began on November 1, 2024. CLIMATE COMMITMENT ACT. Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly. The program began January 1, 2023. In December 2024, the WUTC re-authorized a CCA cost recovery mechanism with a rate effective date of January 1, 2025. Under this mechanism, NW Natural recovers CCA costs and will defer any difference between forecasted and actual costs in the following year. Additionally, under the approved tariff, proceeds from the sale of allowances, which is required under the CCA, would be used to offset CCA compliance costs for low-income customers. Any remaining proceeds would benefit other customers through fixed bill credits or use in other carbon reduction programs. Additionally in December 2023, the WUTC approved a request to modify NW Natural's CCA deferral to allow for the recovery of interest from customers based on the actual cash paid for purchases of allowances, less proceeds received from the sale of allowances. EARNINGS TEST REVIEW . NW Natural is subject to an annual earnings review in Oregon to determine if the NGD business is earning above its authorized ROE threshold. If NGD business earnings exceed a specific ROE level, then 33% of the amount above that level is required to be deferred or refunded to customers. Under this provision, if NW Natural selects the 80% deferral gas cost option, then NW Natural retains all earnings up to 150 basis points above the currently authorized ROE. If NW Natural selects the 90% deferral option, then it retains all earnings up to 100 basis points above the currently authorized ROE. For the 2023-24 and 2024-25 gas years, NW Natural selected the 90% deferral option. The ROE threshold is subject to adjustment annually based on movements in long-term interest rates. For calendar years 2022, 2023, and 2024, the ROE threshold was 10.40% in all periods. There were no refunds required for 2022 and 2023. NW Natural does not expect a refund for 2024 based on results, and anticipates filing its 2024 earnings test in May 2025. GAS RESERVES. In 2011, the OPUC approved the Encana gas reserves transaction to provide long-term gas price protection for NGD business customers and determined costs under the agreement would be recovered on an ongoing basis through the annual PGA mechanism. Gas produced from NW Natural's interests is sold at then prevailing market prices, and revenues from such sales, net of associated operating and production costs and amortization, are included in cost of gas. The cost of gas, including a carrying cost for the rate base investment made under the original agreement, is included in NW Natural's annual Oregon PGA filing, which allows NW Natural to recover these costs through customer rates. The net investment under the original agreement earns a rate of return. In 2014, NW Natural amended the original gas reserves agreement in response to Encana's sale of its interest in the Jonah field located in Wyoming to Jonah Energy. Under the amended agreement with Jonah Energy, NW Natural has the option to invest in additional wells on a well-by-well basis with drilling costs and resulting gas volumes shared at the amended proportionate working interest for each well in which NW Natural invests. Volumes produced from the additional wells drilled after the amended agreement are included in NW Natural's Oregon PGA at a fixed rate of $0.4725 per therm. NW Natural has not participated in additional wells since 2014. DECOUPLING . In Oregon, NW Natural has a decoupling mechanism that covers residential and some commercial sales customers. Decoupling is intended to break the link between revenue and the quantity of gas consumed by customers, removing any financial incentive to discourage customers’ efforts to conserve energy. This mechanism employs a use-per-customer decoupling calculation, which adjusts margin revenues to account for the difference between actual and expected customer volumes. The margin adjustment resulting from differences between actual and expected volumes under the decoupling component is recorded to a deferral account, which is included in the annual PGA filing. The 2024 Oregon general rate case reset the Oregon decoupling baseline usage per customer. WARM . In Oregon, NW Natural has an approved weather normalization mechanism (WARM), which is applied to residential and small commercial customer bills. This mechanism is designed to help stabilize the collection of fixed costs by adjusting residential and small commercial customer billings based on temperature variances from average weather, with rate decreases when the weather is colder than average and rate increases when the weather is warmer than average. The mechanism is applied to bills from December through mid-May of each heating season. The mechanism adjusts the margin component of customers’ rates to reflect average weather, which uses the 25-year average temperature for each day of the billing period. Daily average temperatures and 25-year average temperatures are based on a set point temperature of 59 degrees Fahrenheit for 41 residential customers and 58 degrees Fahrenheit for commercial customers. The collections of any unbilled WARM amounts due to tariff caps and floors are deferred and earn a carrying charge until collected, or returned, in the PGA the following year. Residential and small commercial customers in Oregon are allowed to opt out of the weather normalization mechanism, and as of December 31, 2024, 7% of total eligible customers had opted out. NW Natural does not have a weather normalization mechanism approved for Washington customers, which account for about 12% of total customers. See "Business Segment— Natural Gas Distribution " below. INDUSTRIAL TARIFFS . The OPUC and WUTC have approved tariffs covering NGD service to major industrial customers, which are intended to give NW Natural certainty in the level of gas supplies needed to serve this customer group. The approved terms include, among other things, an annual election period, special pricing provisions for out-of-cycle changes, and a requirement that industrial customers complete the term of their service election under NW Natural's annual PGA tariff. ENVIRONMENTAL COST DEFERRAL AND RECOVERY. NW Natural has authorizations in Oregon and Washington to defer costs related to remediation of properties that are owned or were previously owned by NW Natural. In Oregon, a Site Remediation and Recovery Mechanism (SRRM) is currently in place to recover prudently incurred costs allocable to Oregon customers, subject to an earnings test. Effective beginning November 1, 2019, the WUTC authorized an Environmental Cost Recovery Mechanism (ECRM) for recovery of prudently incurred costs allocable to Washington customers. Oregon SRRM Under the Oregon SRRM collection process, there are three types of deferred environmental remediation expense: • Pre-review - This class of costs represents remediation spend that has not yet been deemed prudent by the OPUC. Carrying costs on these remediation expenses are recorded at NW Natural's authorized cost of capital. NW Natural anticipates the prudence review for annual costs and approval of the earnings test prescribed by the OPUC to occur by the third quarter of the following year. • Post-review - This class of costs represents remediation spend that has been deemed prudent and allowed after applying the earnings test, but is not yet included in amortization. NW Natural earns a carrying cost on these amounts at a rate equal to the five-year treasury rate plus 100 basis points. • Amortization - This class of costs represents amounts included in current customer rates for collection and is calculated as one-fifth of the post-review deferred balance. NW Natural earns a carrying cost equal to the amortization rate determined annually by the OPUC, which approximates a short-term borrowing rate. NW Natural included $8.8 million and $9.6 million of deferred remediation expense approved by the OPUC for collection during the 2024-25 and 2023-24 PGA years, respectively. In addition, the SRRM also provides for the annual collection of $5.0 million from Oregon customers through a tariff rider. As it collects amounts from customers, NW Natural recognizes these collections as revenue net of any earnings test adjustments and separately amortizes an equal and offsetting amount of the deferred regulatory asset balance through the environmental remediation operating expense line shown separately in the operating expenses section of the Consolidated Statements of Comprehensive Income (Loss). See Note 17 for more information on our environmental matters. The SRRM earnings test is an annual review of adjusted NGD ROE compared to authorized NGD ROE. To apply the earnings test NW Natural must first determine what if any costs are subject to the test through the following calculation: Annual spend Less: $5.0 million base rate rider Prior year carry-over (1) $5.0 million insurance + interest on insurance Total deferred annual spend subject to earnings test Less: over-earnings adjustment, if any Add: deferred interest on annual spend (2) Total amount transferred to post-review (1) Prior year carry-over results when the prior year amount transferred to post-review is negative. The negative amount is carried over to offset annual spend in the following year. (2) Deferred interest is added to annual spend to the extent the spend is recoverable. To the extent the NGD business earns at or below its authorized ROE as defined in the SRRM, the total amount transferred to post-review is recoverable through the SRRM. To the extent more than authorized ROE is earned in a year, the amount transferred to post-review would be reduced by those earnings that exceed its authorized ROE. For 2024, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2025. No earnings test adjustment is expected for 2024. Washington ECRM The ECRM established by the WUTC order effective November 1, 2019 permits NW Natural’s recovery of environmental remediation expenses allocable to Washington customers. These expenses represent 3.32% of costs associated with 42 remediation of sites that historically served both Oregon and Washington customers. The order allows for recovery of past deferred and future prudently incurred remediation costs allocable to Washington through application of insurance proceeds and collections from customers. Prudently incurred costs that were deferred from the initial deferral authorization in February 2011 through June 2019 were fully offset with insurance proceeds, with any remaining insurance proceeds to be amortized over a 10.5 year period. On an annual basis, NW Natural will file for a prudence determination and a request to recover remediation expenditures in excess of insurance amortizations in the following year's customer rates. After insurance proceeds are fully amortized, if in a particular year the request to collect deferred amounts exceeds one percent of Washington normalized revenues, then the excess will be collected over three years with interest. INTERSTATE STORAGE AND ASSET MANAGEMENT SHARING . On an annual basis, NW Natural credits amounts to Oregon and Washington customers as part of a regulatory incentive sharing mechanism related to net revenues earned from Mist gas storage for assets developed in advance of utility customer needs, and asset management revenues. In January 2025, the OPUC approved the annual 2025 bill credit for Oregon customers' share of interstate storage and asset management activities totaling approximately $15.5 million, which was credited to customers' bills in February 2025. This includes revenue generated for the November 2023 through October 2024 PGA year. Credits are given to customers in Washington as reductions in rates through the annual PGA filing in November. The following table presents the credits to NGD customers: In millions 2024 2023 2022 Oregon $ 28.9 $ 23.5 $ 41.1 Washington 2.4 2.9 1.5 LOW INCOME DISCOUNT TARIFFS. Oregon In July 2022, NW Natural received approval from the OPUC for an income-qualifying residential bill discount program. The income threshold for program participation is at or below 60 percent of Oregon state median income (SMI). The program provides a bill discount for income-qualifying residential customers at four discount tier levels based on household income compared to SMI, with higher discounts given for lower income levels. The bill discount percentages were modified effective November 1, 2024 and they are presented in the table below. Participating customers can self-certify their income and household size to qualify for the program directly with NW Natural or their local Community Action Agency. The program was available for qualifying customers starting November 1, 2022. Costs for the bill discount program include simultaneous recovery from all customers. Costs for the bill discount program, inclusive of start-up and administrative costs of the program, are recoverable in rates. The amount deferred to a regulatory asset as of December 31, 2024 was $2.8 million. Total Household Income Bill Discount Percentage Tier 0 At or below 15% SMI 85% Tier 1 16% - 30% of SMI 50% Tier 2 31% - 45% of SMI 30% Tier 3 46% - 60% of SMI 15% Washington In December 2023, NW Natural received approval from the WUTC for an income-qualifying residential bill discount program. The program was available for qualifying customers starting January 1, 2024. The Washington program is similar to the Oregon program, with the exception of the discount tier levels shown below. The income threshold for the Washington program participation is based on the greater of area median income (AMI) or federal poverty level (FPL). The amount deferred to a regulatory asset as of December 31, 2024 was $0.3 million. Total Household Income Bill Discount Percentage Tier 0 At or below 60% FPL 80% Tier 1 61% - 120% of FPL 40% Tier 2 121% - 150% of FPL 20% Tier 3 Greater of 80% AMI or 151% - 200% of FPL 15% RENEWABLE NATURAL GAS AND AUTOMATIC ADJUSTMENT CLAUSE. Oregon Senate Bill 98 (SB 98) enables natural gas utilities to procure or develop RNG on behalf of their Oregon customers. SB 98 and the rules outline the following parameters for the RNG program including: setting voluntary goals for adding as much as 30% renewable natural gas into the state’s pipeline system by 2050; enabling gas utilities to invest in and own the cleaning and conditioning equipment required to bring raw biogas and landfill gas up to pipeline quality, as well as the facilities to connect to the local gas distribution system; and allowing up to 5% of a utility’s revenue requirement to be used to cover the incremental cost or investment in renewable natural gas infrastructure. 43 Further, the law supports all forms of renewable natural gas including renewable hydrogen, which is made from excess wind, solar and hydro power. Renewable hydrogen can be used for the transportation system, industrial use, or blended into the natural gas pipeline system. NW Natural has two investments in RNG facilities the OPUC has approved for recovery in rates. The first investment is in Lexington Renewables Energy, LLC where the OPUC approved recovery through an automatic adjustment clause that allows for NW Natural's investments in RNG projects, including operating costs, to be added to rates annually on November 1st, following a prudence review. The RNG recovery mechanism allows NW Natural to defer for recovery or credit the differences between the forecasted and actual costs of the RNG projects, subject to an earnings test that includes deadbands at 50 basis points below and above NW Natural's authorized ROE. For 2024, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2025. No earnings test adjustment is expected for 2024. The second investment is in Dakota City Renewable Energy LLC where the OPUC also approved the investment through an automatic adjustment clause that allows NW Natural to begin recovering the investment costs and expenses of the facility. The Dakota City investment is subject to the earnings test requirements under the RNG recovery mechanism discussed above and is subject to a production risk-sharing mechanism based on the expected per unit of production. NW Natural is required to share 25% of the costs above this threshold. For RNG procurement contracts, NW Natural seeks recovery of the costs in the PGA and other filings, subject to a prudence review. METER MODERNIZATION PROGRAM. In January 2024, NW Natural filed a request with the OPUC and WUTC to defer the incremental costs to replace approximately 600,000 meters over four years. The deferral was granted by the WUTC in the first quarter of 2024. The filing is pending with the OPUC. The amount deferred to a regulatory asset as of December 31, 2024 was approximately $1.4 million. INTEGRATED RESOURCE PLAN (IRP). NW Natural generally files a full IRP biennially for Oregon and Washington with the OPUC and WUTC, respectively. NW Natural jointly filed its 2022 IRP for both Oregon and Washington on September 23, 2022. The 2022 IRP evaluates several varying scenarios based on a range of inputs and outlines the least-cost resources required to meet future demand and environmental compliance obligations. With respect to IRPs generally, the WUTC issues letters of compliance and Oregon acknowledges the IRP Action Plan. In August 2023, NW Natural received a letter of compliance from the WUTC acknowledging compliance of the 2022 IRP. The OPUC issued their order on NW Natural's 2022 IRP in August 2023. The development of an IRP filing is an extensive and complex process that engages multiple stakeholders in an effort to build a robust and commonly understood analysis. The final product is intended to provide a long-term outlook of the supply-side and demand-side resource requirements for reliable and low-cost natural gas service while also meeting NW Natural's environmental compliance requirements. The IRP examines and analyzes uncertainties in the planning process to evaluate risk, including potential changes in governmental and regulatory policies. The CCA that was passed in Washington is an example of a new policy that resulted in compliance requirements that need to be included in the planning process. We currently expect to file our next full IRP with Oregon and Washington in 2025. PIPELINE SECURITY. In May and July 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two security directives applicable to certain owners and operators of natural gas pipeline facilities (including local distribution companies). The first directive require owners and operators to implement cybersecurity incident reporting to the DHS, designate a cybersecurity coordinator, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies. The second directive requires entities to implement a significant number of specified cybersecurity controls and processes. The TSA updated the second directive as well as clarifying Operational Technology (OT) scope and providing a risk- and outcome-based framework. The TSA continues to renew both directives and is in the process of formulating regulations with the aim of rendering the security directives permanent. NW Natural is currently evaluating and implementing the security directives and related deliverables. NW Natural frequently updates the TSA on its progress on achieving the security directives. NW Natural received approval from the OPUC and WUTC to defer the costs associated with complying with the TSA's security directives. As of December 31, 2024, NW Natural has invested approximately $46.9 million in information and operational technology. A majority of the capital investment was included in rate base starting November 1, 2022 in Oregon. NW Natural continues to evaluate the potential effect of these directives on our operations and facilities and will continue to monitor for any clarifications or amendments to these directives. We may seek to request recovery from customers of any additional costs incurred to the extent that incremental expenses and capital expenditures are incurred in the future. WATER AND WASTEWATER UTILITIES. NWN Water currently serves an estimated 190,000 people through approximately 76,000 connections across six states. NWN Water continues to pursue acquisitions of regulated water and wastewater utilities: 44 • In the first quarter of 2023, NWN Water signed a purchase agreement for a water utility with approximately 700 connections in Texas. After completing a fair market valuation process through the Public Utility Commission of Texas (PUCT), NWN Water filed the application with the PUCT in the first quarter of 2024. The acquisition is expected to close in the first quarter of 2025. • In the second quarter of 2024, NWN Water signed a purchase agreement for three water utilities with approximately 200 connections in Oregon. The OPUC approved the application in August 2024 and the acquisition closed in November 2024. • In the fourth quarter of 2024, NWN Water signed a purchase agreement for a water utility with approximately 1,500 connections in Texas. NWN Water filed its notice of intent to seek fair market valuation with the PUCT in October 2024. For our regulated water and wastewater utilities, we have been executing general rate cases. • In October 2023, Foothills water and sewer utilities filed general rate cases with the ACC. The parties filed a settlement agreement in July 2024 and amended agreement in September 2024, which were approved by the ACC in October 2024. Rates were effective on November 1, 2024. • In February 2024, Cascadia Water filed a general rate case with the WUTC. Cascadia Water and the WUTC filed a settlement agreement in January 2025 and rates are expected to be effective by May 1, 2025. • In March 2024, Sunriver Water filed a general rate case with the OPUC and rates were effective on November 1, 2024. • In June 2024, Avion Water filed a general rate case with the OPUC and rates were effective on February 1, 2025. • In December 2024, Gem State Water filed a general rate case with the IPUC. The IPUC suspended the effective date of rates pending further review. • In January 2025, Falls Water filed a general rate case with the IPUC. Environmental Regulation and Legislation Matters In recent years, there has been an international and domestic focus on climate change and the contribution of GHG emissions, most notably methane and carbon dioxide, to climate change. In response, there have been increasing efforts at the international, federal, state, and local level to regulate GHG emissions. Legislation or other forms of regulation have taken, and could continue to take, a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, additional charges to fund energy efficiency activities or other regulatory actions, incentives or mandates to conserve energy or use renewable energy sources, tax advantages and other subsidies to support alternative energy sources, a reduction in rate recovery for construction costs related to the installation of new customer services or other new infrastructure investments, mandates for the use of specific fuels or technologies, bans on specific fuels or technologies, or promotion of research into new technologies to reduce the cost and increase the scalability of alternative energy sources. These efforts have included, and could continue to include, legislation, legislative proposals, directed government funding, new regulations at the federal, state, and local level, and penalties for noncompliance, as well as private and other third-party litigation related to GHG emissions or regulation thereof. We recognize certain of our businesses, including our natural gas business, are likely to be affected by current or future regulation seeking to regulate GHG emissions. Federal A number of federal agencies currently regulate GHG emissions. For example, the EPA regulates GHG emissions pursuant to the Clean Air Act and requires the annual reporting of GHG emissions from certain industries, specified emission sources, and facilities. Under this reporting rule, local natural gas distribution companies like NW Natural are required to report system throughput to the EPA on an annual basis. The EPA also has required additional GHG reporting regulations to which NW Natural is subject, requiring the annual reporting of fugitive emissions from operations. During his administration, former President Biden issued a number of executive orders directing agencies to conduct a general review of regulations and executive actions related to the environment and reestablished a framework for considering the social cost of carbon as part of certain agency cost-benefit analyses for new regulations. Federal legislation passed under the Biden administration, such as the Inflation Reduction Act of 2022 (IRA), included several climate and energy provisions. In addition, under the Biden administration, a number of federal agencies including the Securities and Exchange Commission (SEC), the Federal Trade Commission, the Federal Energy and Regulatory Commission, PHMSA, and the Commodities Futures Trading Commission (CFTC), had taken or were expected to take, actions related to climate change. Other federal regulatory agencies, including the U.S. Department of Energy, were additionally beginning to address matters related to GHG emissions that may include changes in their regulatory oversight approach, policies and rules. Upon taking office in January 2025, President Trump issued executive orders directing the U.S. Ambassador to the United Nations to withdraw from the Paris Agreement on Climate and declaring a “national energy emergency” in the United States. He issued other executive orders described as seeking to promote energy exploration and production in the United States, reducing permitting and other regulatory requirements related to energy exploration and production, freezing certain funding and regulatory rulemaking related to climate-related regulation, and revoking Biden administration executive orders that are related to climate policy. We expect there to be a number of additional changes related to climate policy under the Trump Administration, including additional executive orders, federal regulations, programs and other federal actions. We are currently evaluating the effect of various changes in federal climate policy, regulation and law, and cannot currently predict when or if the Trump Administration or Congress will act, the form of the action, or the impact of those actions on our business. 45 Washington State In 2024, Washington comprised approximately 10% of NW Natural’s revenues, as well as 2% and 13% of new meters from commercial and residential customers, respectively. Effective February, 2021, building codes in Washington state require new residential homes to achieve higher levels of energy efficiency based on specified carbon emissions assumptions, which calculate electric appliances to have lower on-site GHG emissions than comparable gas appliances. This increases the cost of new home construction incorporating natural gas depending on a number of factors including home size, equipment configurations, and building envelope measures. Additionally, in March, 2024, the Washington State Building Code Council (SBCC) implemented rules that would have the effect of restricting or eliminating the use of gas space and water heating in new commercial and residential construction, with certain exceptions in residential construction for natural gas-fired heat pumps and hybrid fuel systems. Subsequently, Washington Ballot initiative I-2066 passed in November 2024. I-2066 was described on the ballot as prohibiting state and local governments from restricting access to natural gas, prohibiting the SBCC from discouraging or penalizing the use of natural gas in any building, requiring providers of natural gas to provide energy services regardless of the other energy sources available, and prohibiting the WUTC from approving any multiyear rate plan requiring or incentivizing a natural gas company to terminate natural gas service or make such natural gas service cost-prohibitive. The SBCC rules, as well as the effect of I-2066 on the validity of the March 2024 SBBC’s rules and the February 2021 Washington buildings codes, are currently subject to legal challenge by a number of companies, organizations and utilities, including NW Natural. In 2022, the state of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly beginning January 1, 2023, resulting in an overall reduction of GHG emissions to 95% below 1990 levels by 2050. The Washington Department of Ecology has adopted rules to create a cap-and-invest program, under which entities, including natural gas and electric utilities, large manufacturing facilities, and transportation and other fuel providers, which are subject to the CCA must either reduce their emissions, purchase qualifying offsets (including RNG) or obtain allowances to cover any remaining emissions. NW Natural is subject to the CCA, has received an order authorizing deferral of CCA costs from the WUTC, and is currently recovering CCA compliance costs in rates. Oregon In November 2024, the ODEQ issued final cap and reduce rules for its Climate Protection Program (CPP), which became effective in January 1, 2025. The CPP establishes a program to limit GHG emissions from covered entities, including natural gas utilities, by 50% by 2035 and 90% by 2050 from a 2017-2019 baseline. The first compliance period for the CPP concludes December 31. 2027. ODEQ previously promulgated CPP rules in December 2021 (former CPP rules invalidated by the Court of Appeals in December 2023 (Prior CPP)). NW Natural received an order from the OPUC authorizing deferral of Prior CPP compliance costs, and we also expect to pursue inclusion in rates of current CPP compliance costs. The CPP rules are subject to legal challenge. Local Jurisdictions and Other Advocacy In addition to legislative activities at the state level, advocacy groups have indicated a willingness to pursue municipal ordinances and ballot measures or other local activities. A number of cities across the country, and several in our service territory are taking action or currently considering actions such as limitations or bans on the use of natural gas in new construction or otherwise. For example, the Eugene City Council directed its City Manager to develop a plan to address GHG emissions and align incentives around GHG emissions and to engage in a number of actions, including identifying potential revenue sources as well as potential consequences of implementing the prior directive. Similarly, some jurisdictions and advocates are seeking to ban the use of natural gas and certain natural gas appliances inside homes contending that there are detrimental indoor health effects associated with the use of natural gas. NW Natural is actively engaged with federal, state and local policymakers, consumers, customers, small businesses and other business coalitions, economic development practitioners, and other advocates in our service territory and is working with these communities to communicate the role that direct use natural gas, and in the coming years, RNG and hydrogen, can play in pursuing more effective policies to reduce GHGs while supporting reliability, resiliency, energy choice, equity, and energy affordability. NW Natural Decarbonization Initiatives and Compliance Actions Our residential customers are currently paying less for their natural gas today than they did 20 years ago. We expect that compliance with any form of regulation of GHG emissions will require additional resources and legislative or regulatory tools, and will increase costs. The developing and changing guidance to implement the CCA and CPP, evolving carbon credit markets and other regulatory tool options, decades-long timeframes for compliance, likely changing and evolving laws and energy policy, and evolving technological advancements, all make it difficult to accurately predict long-term tools for and costs of compliance. We are currently including costs of compliance with the CCA in rates. Compliance costs represent a 4.6% increase on a residential bill, which represents a 7.5% decrease from the prior year. Low income customers do not participate in these compliance costs and are not impacted. We are not currently able to quantify the extent to which limitations on natural gas use, or declining line extension allowances provided in rates to cover construction costs for new services, will affect new meter additions, or to what extent carbon 46 compliance costs included in rates will affect the competitiveness of our business and the demand for natural gas service. All of these developments could negatively affect our gas utility customer growth. However, at the same time natural gas utilities will be subject to GHG emissions regulation, we expect that other energy source providers will be subject to similar, or in some cases stricter or more rapid, compliance requirements that are likely to affect their cost and competitiveness relative to natural gas as well. For example, in June 2021, the State of Oregon enacted HB 2021, a clean electricity bill that requires the state’s two largest investor-owned electric utilities and retail electricity service suppliers to reduce GHG emissions associated with electricity sold to Oregon customers to 100 percent below baseline levels by 2040 with interim steps, including an 80 percent reduction by 2030 and 90 percent reduction by 2035. This bill does not replace the separate renewable portfolio standards previously established in Oregon, which sets requirements for how much of the electricity used in Oregon must come from renewable resources. In Washington, SB 5116, the Clean Energy Transformation Act, requires all electric utilities in Washington to transition to carbon-neutral electricity by 2030 and to 100 percent carbon-free electricity by 2045. We expect compliance with these and other laws will increase the cost of energy for electric customers in our service territory. We are not able to determine at this time whether increased electricity costs will make natural gas use more or less competitive on a relative basis. We expect these and other trends to drive innovation of, and demand for, technological developments and innovative new products that reduce GHG emissions. Research and development are occurring across the energy sector, including in the gas sector with work being conducted on gas heat pumps, higher efficiency water and space heating appliances including hybrid systems, carbon capture utilization and storage developments, continued development of technologies related to RNG, and various forms of hydrogen for different applications, among others. Business Segment - Natural Gas Distribution (NGD) NGD margin results are primarily affected by customer growth, revenues from rate-base additions, and, to a certain extent, by changes in delivered volumes due to weather and customers’ gas usage patterns. In Oregon, NW Natural has a conservation tariff (also called the decoupling mechanism), which adjusts margin up or down each month through a deferred regulatory accounting adjustment designed to offset changes resulting from increases or decreases in average use by residential and commercial customers. NW Natural also has a weather normalization tariff in Oregon, WARM, which adjusts customer bills up or down to offset changes in margin resulting from above- or below-average temperatures during the winter heating season. Residential and commercial customers in Oregon are allowed to opt out of the weather normalization mechanism, and as of December 31, 2024, approximately 7% of total eligible customers had opted out. NW Natural does not have a weather normalization mechanism approved for Washington customers, which account for about 12% of total customers. The decoupling and WARM mechanisms are designed to reduce, but not eliminate, the volatility of customer bills and natural gas distribution revenue. See "Regulatory Matters— Rate Mechanisms " above. 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, NWN Gas Reserves, which is a wholly owned subsidiary of Energy Corp., and NW Natural RNG Holding Company, LLC. The NGD business is primarily seasonal in nature due to higher gas usage by residential and commercial customers during the cold winter heating months. Other categories of customers experience seasonality in their usage but to a lesser extent. Seasonality affects the comparability of the results of operations of the NGD business across quarters but not across years. NGD segment highlights include: Dollars and therms in millions, except EPS data 2024 2023 2022 NGD net income $ 77.1 $ 94.0 $ 79.7 Diluted EPS - NGD segment $ 1.98 $ 2.59 $ 2.34 Gas sold and delivered (in therms) 1,171 1,207 1,252 NGD margin (1) $ 601.3 $ 575.0 $ 505.9 (1) See Natural Gas Distribution Margin Table below for additional detail. 2024 COMPARED TO 2023 . NGD net income was $77.1 million in 2024 compared to $94.0 million in 2023. The primary factors contributing to the decrease in NGD net income were as follows: • $18.2 million decrease in other income, net driven by higher pension non-service costs, lower interest income from invested cash, lower regulatory interest income and a decline in the equity portion of AFUDC; • $13.7 million decrease due to the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case; • $10.1 million increase in depreciation expense from continued capital investments in our system for safety and reliability; • $2.8 million increase in interest expense primarily due to higher short and long-term debt balances; and • $2.0 million increase in general taxes primarily driven by higher regulatory commission fees; partially offset by • $26.3 million increase in NGD margin primarily due to: ▪ $25.8 million increase due to new customer rates in Oregon that went into effect November 1, 2024; ▪ $3.7 million increase due to the amortization of deferred balances primarily related to COVID-19, cybersecurity, and ERP upgrades; and ▪ $2.2 million increase driven by customer growth; partially offset by 47 ▪ $4.3 million decrease due to lower usage from warmer comparative weather for customers not covered under the weather normalization mechanism; and ▪ $1.8 million decline in gains on the Oregon gas cost incentive sharing mechanism due to market prices more closely approximating prices embedded in the PGA and higher than estimated gas costs during the cold weather event in January 2024; and • $2.1 million decrease in NGD operations and maintenance expenses (excluding the regulatory disallowance) due to lower contract labor costs and lower bad debt expense, partially offset by higher amortization expense related to cloud computing arrangements. Total natural gas sold and delivered in 2024 decreased 3% over 2023 primarily due to 17% warmer than average weather in 2024 compared to 8% warmer than average weather in 2023. 2023 COMPARED TO 2022 . NGD net income was $94.0 million in 2023 compared to $79.7 million in 2022. The primary factors contributing to the increase in NGD net income were as follows: • $69.1 million increase in NGD margin primarily due to: ▪ $47.5 million increase due to new customer rates in Oregon and Washington that went into effect November 1, 2022; ▪ $9.4 million increase due to actual gas prices that were lower than what was estimated in the 2022-2023 PGA; ▪ $9.2 million increase due to the amortization of deferred balances primarily related to COVID-19, cybersecurity, and ERP upgrades (which is mostly offset in operations and maintenance expenses and interest expense; and ▪ $4.6 million increase driven by customer growth; partially offset by ▪ $2.4 million decrease due to warmer than average weather for customers not covered under the weather normalization mechanism. • $15.8 million increase in other income, net driven by interest income from invested cash and the equity portion of AFUDC, and lower pension costs; partially offset by • $40.0 million increase in NGD operations and maintenance expenses due to higher payroll costs, higher contract labor, the amortization of deferred balances (which is mostly offset in revenues), information technology costs and amortization expense related to cloud computing arrangements; • $14.3 million increase in interest expense primarily due to higher long-term debt balances; • $6.5 million increase in depreciation expense due to additional capital investments in the distribution system, including several significant information technology projects that were placed into service in September 2022; and • $4.9 million higher income tax expense reflecting higher pre-tax income. Total natural gas sold and delivered in 2023 increased 4% over 2022 primarily due to 8% warmer than average weather in 2023 compared to 1% colder than average weather in 2022. 48 NATURAL GAS DISTRIBUTION MARGIN TABLE. The following table summarizes the composition of NGD gas volumes, revenues, and cost of sales: Favorable (Unfavorable) In thousands, except degree day and customer data 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 NGD volumes (therms): Residential and commercial sales 708,873 735,755 766,592 (26,882) (30,837) Industrial sales and transportation 461,966 470,919 485,745 (8,953) (14,826) Total NGD volumes sold and delivered 1,170,839 1,206,674 1,252,337 (35,835) (45,663) Operating revenues: Residential and commercial sales $ 968,676 $ 1,015,072 $ 881,370 $ (46,396) $ 133,702 Industrial sales and transportation 83,060 97,886 86,810 (14,826) 11,076 Other distribution revenues 4,435 4,540 1,944 (105) 2,596 Other regulated services 19,517 18,902 19,628 615 (726) Total operating revenues 1,075,688 1,136,400 989,752 (60,712) 146,648 Less: Cost of gas 412,320 500,061 429,861 87,741 (70,200) Less: Environmental remediation expense 14,053 12,899 12,389 (1,154) (510) Less: Revenue taxes 48,037 48,432 41,627 395 (6,805) NGD margin $ 601,278 $ 575,008 $ 505,875 $ 26,270 $ 69,133 NGD margin (1) Residential and commercial sales $ 540,947 $ 512,479 $ 455,686 $ 28,468 $ 56,793 Industrial sales and transportation 34,101 34,748 33,543 (647) 1,205 Gain (loss) from gas cost incentive sharing 2,624 4,459 (4,917) (1,835) 9,376 Other margin 4,096 4,426 1,943 (330) 2,483 Other regulated services 19,510 18,896 19,620 614 (724) NGD margin $ 601,278 $ 575,008 $ 505,875 $ 26,270 $ 69,133 Degree days (2) Average (3) 2,702 2,686 2,686 16 — Actual 2,255 2,480 2,712 (9) % (9) % Percent (warmer) colder than average weather (17) % (8) % 1 % NGD meters - end of period: Residential meters 735,117 728,915 724,287 6,202 4,628 Commercial meters 69,362 69,273 69,139 89 134 Industrial meters 1,050 1,062 1,071 (12) (9) Total number of meters 805,529 799,250 794,497 6,279 4,753 NGD meter growth: Residential meters 0.9 % 0.6 % Commercial meters 0.1 % 0.2 % Industrial meters (1.1) % (0.8) % Total meter growth 0.8 % 0.6 % (1) Amounts reported as NGD margin for each category of meters are operating revenues less cost of gas, environmental remediation expense and revenue taxes. (2) Heating degree days are units of measure reflecting temperature-sensitive consumption of natural gas, calculated by subtracting the average of a day's high and low temperatures from 59 degrees Fahrenheit. (3) Average weather represents the 25-year average of heating degree days. Beginning November 1, 2024, average weather is calculated over the period June 1, 1998 through May 31, 2023, as determined in NW Natural's 2024 Oregon general rate case. From November 1, 2022 through October 31, 2024, average weather was calculated over the period June 1, 1996 through May 31, 2021, as determined in NW Natural's 2022 Oregon general rate case. From November 1, 2020 through October 31, 2022, average weather was calculated over the period June 1, 1994 through May 31, 2019, as determined in NW Natural’s 2020 Oregon general rate case. 49 Residential and Commercial Sales The primary factors that impact results of operations in the residential and commercial markets are customer growth, seasonal weather patterns, energy prices, competition from other energy sources, and economic conditions in our service areas. The impact of weather on margin is significantly reduced through NW Natural's weather normalization mechanism in Oregon; approximately 81% of NW Natural's total customers are covered under this mechanism. The remaining customers either opt out of the mechanism or are located in Washington, which does not have a similar mechanism in place. For more information on the weather mechanism, see "Regulatory Matters—Rate Mechanisms— WARM " above. NGD residential and commercial sales highlights include: In millions 2024 2023 2022 Volumes (therms): Residential sales 439.3 455.7 478.1 Commercial sales 269.6 280.1 288.5 Total volumes 708.9 735.8 766.6 Operating revenues: Residential sales $ 663.4 $ 685.5 $ 595.0 Commercial sales 305.3 329.6 286.4 Total operating revenues $ 968.7 $ 1,015.1 $ 881.4 NGD Margin: Residential margin $ 393.0 $ 371.3 $ 328.2 Commercial margin 147.9 141.2 127.5 Total NGD margin $ 540.9 $ 512.5 $ 455.7 2024 COMPARED TO 2023 . NGD residential and commercial operating revenue decreased $46.4 million and NGD margin increased $28.4 million compared to the prior year. The increase in NGD margin was primarily driven by new customer rates in Oregon that took effect on November 1, 2024 and 0.9% growth in residential customer meters. Sales volumes decreased 26.9 million therms, or 4%, due to lower usage driven by comparatively warmer weather. 2023 COMPARED TO 2022 . NGD residential and commercial operating revenue increased $133.7 million and NGD margin increased $56.8 million compared to the prior year. The increase was primarily driven by new customer rates in Oregon and Washington that took effect on November 1, 2022 and 0.6% growth in residential customer meters. Sales volumes decreased 30.8 million therms, or 4%, due to lower usage driven by comparatively warmer weather. Industrial Sales and Transportation Industrial customers have the option of purchasing sales or transportation services. Under the sales service, the customer buys the gas commodity from NW Natural. Under the transportation service, the customer buys the gas commodity directly from a third-party gas marketer or supplier. The NGD gas commodity cost is primarily a pass-through cost to customers; therefore, NGD profit margins are not materially affected by an industrial customer's decision to purchase gas from third parties. Industrial and large commercial customers may also select between firm and interruptible service options, 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 which becomes effective November 1, special charges for changes between elections, and in some cases, a minimum or maximum volume requirement before changing options. NGD industrial sales and transportation highlights include: In millions 2024 2023 2022 Volumes (therms): Firm and interruptible sales 94.2 102.3 104.4 Firm and interruptible transportation 367.8 368.6 381.3 Total volumes 462.0 470.9 485.7 NGD Margin: Firm and interruptible sales $ 13.8 $ 14.1 $ 13.6 Firm and interruptible transportation 20.3 20.6 19.9 Total NGD margin $ 34.1 $ 34.7 $ 33.5 50 2024 COMPARED TO 2023 . NGD industrial sales and transportation margin decreased $0.6 million compared to the prior year primarily driven by lower sales and transportation volumes. Sales volumes decreased 8.9 million therms, or 2%, primarily due to lower usage from multiple customers, most notably in the pulp and paper, forest products, chemical manufacturing and food processing industries. 2023 COMPARED TO 2022 . NGD industrial sales and transportation margin increased $1.2 million compared to the prior year primarily driven by new rates in Oregon and Washington that took effect on November 1, 2022, partially offset by lower sales volumes. Sales volumes decreased 14.8 million therms, or 3%, primarily due to lower usage from multiple customers, most notably in the primary metals, pulp and paper, glass, stone and clay, and chemical manufacturing industries. Other Regulated Services Margin Other Regulated Services primarily consist of lease revenues from NW Natural's North Mist storage facility as well as other lease revenues for compressed natural gas assets. See Note 7 for more information regarding North Mist expansion lease accounting. Other regulated services margin highlights include: In millions 2024 2023 2022 North Mist storage services $ 19.2 $ 18.6 $ 19.4 Other services 0.3 0.3 0.2 Total other regulated services $ 19.5 $ 18.9 $ 19.6 2024 COMPARED TO 2023 . Other regulated services margin increased $0.6 million compared to the prior year primarily due to an increase in storage service revenue from the North Mist facility. North Mist service revenue increased due to an increase in billing rates from higher operating expenses in 2024. 2023 COMPARED TO 2022 . Other regulated services margin decreased $0.7 million compared to the prior year due to lower depreciation rates for the North Mist facility beginning November 1, 2022. Cost of Gas Cost of gas as reported by the NGD segment includes gas purchases, gas storage costs, gas commodity derivatives contracts, pipeline demand costs, seasonal demand cost balancing adjustments, renewable natural gas and its attributes, including renewable thermal certificates, regulatory gas cost deferrals, gas reserves costs, and company gas use. The OPUC and WUTC generally require natural gas commodity costs to be billed to customers at the actual cost incurred, or expected to be incurred. Customer rates are set each year so that if cost estimates were met the NGD business would not earn a profit or incur a loss on gas commodity purchases; however, in Oregon we have the incentive sharing mechanism described under "Regulatory Matters—Rate Mechanisms— Purchased Gas Adjustment " above. In addition to the PGA incentive sharing mechanism, gains and losses from hedge contracts entered into after annual PGA rates are effective for Oregon customers are also required to be shared and therefore may impact net income. Further, NW Natural also has a regulatory agreement whereby it earns a rate of return on its investment in the gas reserves acquired under the original agreement with Encana and includes gas from the amended gas reserves agreement at a fixed rate of $0.4725 per therm, which are also reflected in NGD margin. See "Application of Critical Accounting Policies and Estimates— Derivative Instruments and Hedging Activities " below. Cost of gas highlights include: In millions, except where indicated 2024 2023 2022 Cost of gas $ 412.3 $ 500.1 $ 429.9 Volumes sold (therms) (1) 803.0 838.1 871.0 Average cost of gas (cents per therm) $ 0.51 $ 0.60 $ 0.49 Gain (loss) from gas cost incentive sharing (2) $ 2.6 $ 4.5 $ (4.9) (1) This calculation excludes volumes delivered to industrial transportation customers. (2) For a discussion of the gas cost incentive sharing mechanism, see "Regulatory Matters—Rate Mechanisms— Purchased Gas Adjustment " above. 2024 COMPARED TO 2023 . Cost of gas decreased $87.8 million, or 18%, primarily due to a 16% decrease in the average cost of gas and a 4% decrease in volumes sold. Volumes sold decreased 35.1 million due to lower usage from customers driven by comparatively warmer weather. The gain from the Oregon gas cost incentive sharing mechanism declined $1.9 million due to market prices more closely approximating prices embedded in the PGA and higher than estimated gas costs during the cold weather event in January 2024. 2023 COMPARED TO 2022 . Cost of gas increased $70.2 million, or 16%, primarily due to a 21% increase in the average cost of gas with these higher gas costs embedded in the 2022-2023 PGA. Volumes sold decreased 32.9 million, or 4%, due to lower usage from customers driven by comparatively warmer weather. 51 Other Other activities aggregated and reported as other at NW Holdings include NNG Financial's investment in Kelso-Beaver Pipeline (KB Pipeline); NW Natural Renewables Holdings, LLC and its non-regulated renewable natural gas activities; NWN Water, which owns and continues to pursue investments in the water, wastewater and water services sectors; and NWN Water's investment in Avion Water Company, Inc. (Avion Water). Other activities aggregated and reported as other at NW Natural include the non-NGD storage activity at Mist as well as asset management services and the appliance retail center operations. See Note 4 for further discussion of our business segment and other, as well as our direct and indirect wholly-owned subsidiaries. See Note 13 for information on our Avion Water investment. At Mist, NW Natural provides gas storage services to customers in the interstate and intrastate markets using storage capacity that has been developed in advance of NGD customers’ requirements. Pre-tax income from gas storage at Mist and asset management services is subject to revenue sharing with NGD customers. Under this regulatory incentive sharing mechanism, NW Natural retains 80% of pre-tax income from Mist gas storage services and asset management services when the underlying costs of the capacity being used are not included in NGD business rates. The remaining 20% is credited to a deferred regulatory account for credit to NGD customers. To the extent that the capacity used is included in NGD rates, NW Natural retains 10% of pre-tax income from such storage and asset management services and 90% is credited to NGD business customers. The following table presents the results of activities aggregated and reported as other for both NW Holdings and NW Natural: In millions, except EPS data 2024 2023 2022 NGD net income $ 77.1 $ 94.0 $ 79.7 NW Natural - other net income 11.9 10.7 11.9 NW Natural net income 89.0 104.7 91.6 NW Holdings - other net loss (10.1) (10.9) (5.3) NW Holdings net income $ 78.9 $ 93.8 $ 86.3 NW Holdings - other net income (loss) (1) $ 1.8 $ (0.2) $ 6.6 Diluted earnings per share - NW Holdings - other $ 0.05 $ — $ 0.20 (1) NW Holdings - other net income (loss) is equal to the sum of NW Natural - other net income and NW Holdings – other net loss. 2024 COMPARED TO 2023 . Other net income increased $2.0 million and $1.2 million at NW Holdings and NW Natural, respectively. The increase at NW Natural was primarily due to higher revenue from gas storage operations, partially offset by lower asset management revenue. The increase at NW Holdings was driven by a $4.4 million increase in net income from water and wastewater subsidiaries, partially offset by $2.3 million of acquisition costs related to SiEnergy and higher interest expense at the holding company. 2023 COMPARED TO 2022 . Other net income decreased $6.8 million and $1.2 million at NW Holdings and NW Natural, respectively. The decrease at NW Natural was primarily due to lower sales at the appliance retail center. The decrease at NW Holdings was driven by higher interest expense at the holding and water companies, partially offset by a gain recognized from a settlement agreement. Consolidated Operations Operations and Maintenance Operations and maintenance highlights include: In millions 2024 2023 2022 NW Natural $ 257.0 $ 244.7 $ 204.8 Other NW Holdings operations and maintenance 37.7 29.1 19.9 NW Holdings $ 294.7 $ 273.8 $ 224.7 2024 COMPARED TO 2023 . Operations and maintenance expense increased $12.3 million at NW Natural primarily due to the following: • $13.7 million increase due to the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case; and • $1.4 million increase in amortization expense related to cloud computing arrangements; partially offset by • $1.7 million decrease in contract labor costs; and • $1.1 million decrease in bad debt expense. Operations and maintenance expense increased $20.9 million at NW Holdings primarily due to the following: • $12.3 million increase in operations and maintenance expense at NW Natural as discussed above; and 52 • $8.6 million increase in other NW Holdings operations and maintenance expense primarily due to $7.2 million of higher costs associated with recently acquired water and wastewater subsidiaries and $1.5 million of higher operating expenses at the holding company, primarily related to SiEnergy acquisition costs. 2023 COMPARED TO 2022 . Operations and maintenance expense increased $39.8 million at NW Natural primarily due to the following: • $10.6 million increase related to higher payroll costs; • $7.9 million increase in contract labor for safety and reliability and support for information technology system upgrades; • $7.7 million increase due to the amortization of deferred balances (which is mostly offset in revenues) primarily related to COVID-19, cybersecurity and information technology system upgrades; • $6.0 million increase in information technology licensing costs and maintenance; • $5.4 million increase in amortization expense related to cloud computing arrangements; and • $1.9 million increase in bad debt expense. Operations and maintenance expense increased $49.1 million at NW Holdings primarily due to the following: • $39.8 million increase in operations and maintenance expense at NW Natural as discussed above; and • $9.3 million increase in other NW Holdings operations and maintenance expense primarily due to costs associated with recently acquired water and wastewater subsidiaries and business development costs at the holding company. Depreciation Depreciation highlights include: In millions 2024 2023 2022 NW Natural $ 129.6 $ 119.5 $ 113.0 Other NW Holdings depreciation 8.3 6.1 3.7 NW Holdings $ 137.9 $ 125.6 $ 116.7 2024 COMPARED TO 2023 . Depreciation expense increased $10.1 million for NW Natural, primarily due to additional capital investments in the distribution system, such as installing new mains and meters, replacing equipment, and upgrading and improving facilities. In addition, NW Natural continued to invest in information technology in 2024. Depreciation expense increased $12.3 million for NW Holdings, primarily due to a $2.2 million increase in other NW Holdings depreciation related to water and wastewater subsidiaries and a $10.1 million increase at NW Natural as discussed above. 2023 COMPARED TO 2022 . Depreciation expense increased $6.5 million for NW Natural, primarily due to additional capital investments in the distribution system, such as installing new mains and services and replacing regulating equipment, as well as upgrading and improving the transmission system for mains. In addition, NW Natural placed several significant information technology projects into service in September 2022 and continued to invest in information technology projects in 2023. Depreciation expense increased $8.9 million for NW Holdings, primarily due to a $2.4 million increase in other NW Holdings depreciation related to water and wastewater subsidiaries and a $6.5 million increase at NW Natural as discussed above. Other Income (Expense), Net Other income (expense), net highlights include: In millions 2024 2023 2022 NW Natural total other income (expense), net $ (2.8) $ 15.4 $ (0.4) Other NW Holdings activity 1.7 2.5 1.6 NW Holdings total other income (expense), net $ (1.1) $ 17.9 $ 1.2 Other income (expense), net primarily consists of regulatory interest, pension and other postretirement non-service costs, gains from company-owned life insurance, the equity portion of AFUDC, interest income and donations. 2024 COMPARED TO 2023 . Other income, net decreased $18.2 million at NW Natural primarily due to $6.6 million of higher pension non-service costs, $4.1 million of lower interest income from a lower level of invested cash, $2.6 million of lower regulatory interest income and a $2.6 million decline from the equity portion of AFUDC. Costs related to our defined benefit pension plan for 2024 increased compared to the prior year due to an increase in amortization of actuarial losses. In addition to the $18.2 million decrease at NW Natural, NW Holdings experienced an additional $2.7 million decrease from a settlement gain recognized in 2023, which was partially offset by a decrease in the amount of contributions made by NW Holdings to fund community outreach initiatives in 2024. 2023 COMPARED TO 2022 . Other income, net increased $15.8 million at NW Natural primarily due to $5.5 million of interest income from invested cash, $4.1 million from higher equity AFUDC interest income, and $5.8 million of lower pension costs. 53 Costs related to our defined benefit pension plan for 2023 decreased compared to the prior year due to a decrease in amortization of actuarial losses. Other income, net increased $16.7 million at NW Holdings driven by the increase at NW Natural discussed above and a $2.7 million gain recognized from a settlement agreement with a third party to settle outstanding receivables, partially offset by contributions to fund community outreach initiatives at NW Holdings. Interest Expense, Net Interest expense, net highlights include: In millions 2024 2023 2022 NW Natural $ 63.3 $ 60.6 $ 46.3 Other NW Holdings interest expense 16.8 16.0 6.9 NW Holdings $ 80.1 $ 76.6 $ 53.2 2024 COMPARED TO 2023 . Interest expense, net, increased $2.7 million at NW Natural primarily due to higher interest expense on a higher level of short and long-term debt, partially offset by the debt portion of AFUDC. Interest expense, net, increased $3.5 million at NW Holdings due to the increase at NW Natural discussed above and higher interest expense on a higher level of long-term debt at NW Holdings. 2023 COMPARED TO 2022 . Interest expense, net, increased $14.3 million at NW Natural primarily due to higher interest expense on a higher level of long-term debt, partially offset by a lower level of short-term debt. Interest expense, net, increased $23.3 million at NW Holdings due to the increase at NW Natural discussed above and higher interest expense on a higher level of long-term debt at NW Holdings and NWN Water. Income Tax Expense NW Holdings income tax expense highlights include: In millions 2024 2023 2022 Income tax expense $ 31.1 $ 32.4 $ 29.1 Effective tax rate 28.3 % 25.6 % 25.2 % NW Natural income tax expense highlights include: In millions 2024 2023 2022 Income tax expense $ 34.6 $ 35.7 $ 31.0 Effective tax rate 28.0 % 25.4 % 25.3 % 2024 COMPARED TO 2023 . The effective tax rate increased 2.7% and 2.6% at NW Holdings and NW Natural, respectively. The increase in the effective tax rate is primarily related to a regulatory tax benefit that was fully amortized in customer rates in 2023. The decrease in income tax expense is primarily due to lower pre-tax income in the current period compared to the prior year. 2023 COMPARED TO 2022 . The effective tax rate increased 0.4% and 0.1% at NW Holdings and NW Natural, respectively. The increase in the effective tax rate is primarily due to higher pre-tax income in the current period compared to the prior year. FINANCIAL CONDITION Capital Structure NW Holdings' long-term goal is to maintain a strong and balanced consolidated capital structure. NW Natural has historically targeted a regulatory capital structure of 50% common equity and 50% long-term debt, which is consistent with approved regulatory allocations in Oregon, which has an allocation of 50% common equity and 50% long-term debt without recognition of short-term debt. NW Natural has requested a 52% common equity and 48% long-term debt in its current rate case, which has not yet been decided. When additional capital is required, debt or equity securities are issued depending on both the target capital structure and market conditions. These sources of capital are also used to fund long-term debt retirements and short-term commercial paper maturities. See " Liquidity and Capital Resources " below and Note 9. Achieving our target capital structure and maintaining sufficient liquidity to meet operating requirements is necessary to maintain attractive credit ratings and provide access to the capital markets at reasonable costs. 54 NW Holdings' consolidated capital structure, excluding short-term debt, was as follows: December 31, 2024 2023 Common equity 44.8 % 44.9 % Long-term debt (including current maturities) 55.2 55.1 Total 100.0 % 100.0 % NW Natural's consolidated capital structure, excluding short-term debt, was as follows: December 31, 2024 2023 Common equity 49.2 % 47.5 % Long-term debt (including current maturities) 50.8 52.5 Total 100.0 % 100.0 % As of December 31, 2024 and 2023, NW Holdings' consolidated capital structure included common equity of 42.4% and 43.5%, long-term debt of 51.4% and 48.3%, and short-term debt including current maturities of long-term debt of 6.2% and 8.2%, respectively. As of December 31, 2024 and 2023, NW Natural's consolidated capital structure included common equity of 46.9% and 47.2%, long-term debt of 47.2% and 52.2%, and short-term debt including current maturities of long-term debt of 5.9% and 0.6%, respectively. During 2024, NW Natural's capital structure changed primarily due to the increase in short-term debt and capital contributions from NW Holdings. NW Holdings' capital structure changed primarily due to the issuance of long-term debt and common stock at NW Holdings. See further di scussion below in "Cash Flows — Financing Activities " . Liquidity and Capital Resources At December 31, 2024 and December 31, 2023, NW Holdings had approximately $38.5 million and $32.9 million, and NW Natural had approximately $20.0 million and $19.8 million, of cash and cash equivalents, respectively. In order to maintain sufficient liquidity during periods when capital markets are volatile, NW Holdings and NW Natural may elect to maintain higher cash balances and add short-term borrowing capacity. NW Holdings and NW Natural may also pre-fund their respective capital expenditures when long-term fixed rate environments are attractive. NW Holdings and NW Natural expect to have ample liquidity in the form of cash on hand and from operations and available credit capacity under credit facilities to support funding needs. ATM Equity Program 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. In August 2024, the Finance Committee of the NW Holdings' Board of Directors authorized NW Holdings' sale of an additional $200 million in the aggregate gross sales price under the ATM equity program, with the result that a total of $400 million in the aggregate gross sales price has been authorized for issuance and sale under the ATM equity program. NW Holdings is under no obligation to offer and sell common stock under the ATM equity program, which the Finance Committee of the NW Holdings' Board of Directors has authorized through August 2027. Any shares of common stock offered under the ATM equity program are registered on NW Holdings’ universal shelf registration statement filed with the SEC, which expires in August 2027, or will be registered on a subsequent registration statement to be filed by NW Holdings. During the year ended December 31, 2024, NW Holdings issued and sold 2,382,750 shares of common stock pursuant to the ATM equity program resulting in cash proceeds of $90.3 million, net of fees and commissions paid to agents of $1.6 million. As of December 31, 2024, NW Holdings had $151.6 million of equity available for issuance under the program. NW Holdings For NW Holdings, short-term liquidity is primarily provided by cash balances, dividends from its operating subsidiaries, in particular NW Natural, available cash from a multi-year credit facility, and short-term credit facilities. NW Holdings also has a universal shelf registration statement filed with the SEC for the issuance of debt and equity securities. NW Holdings long-term debt and equity issuances are primarily used to provide equity contributions to NW Holdings’ operating subsidiaries for operating and capital expenditures and other corporate purposes. NW Natural also has a universal shelf registration statement filed with the SEC for the issuance of debt securities. NW Holdings' issuance of securities is not subject to regulation by state public utility commissions, but the dividends from NW Natural to NW Holdings are subject to regulatory ring-fencing provisions. NW Holdings guarantees the debt of its wholly-owned subsidiary, NWN Water. See " Long-Term Debt " below for more information regarding NWN Water debt. As part of the ring-fencing conditions agreed upon with the OPUC and WUTC in connection with the holding company reorganization, NW Natural may not pay dividends or make distributions to NW Holdings if NW Natural’s credit ratings and common equity ratio, defined as the ratio of equity to long-term debt, fall below specified levels. If NW Natural’s long-term 55 secured credit ratings are below A- for S&P and A3 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 45% or more. If NW Natural’s long-term secured credit ratings are below BBB for S&P and Baa2 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 46% or more. Dividends may not be issued if NW Natural’s long-term secured credit ratings are BB+ or below for S&P or Ba1 or below for Moody’s, or if NW Natural’s common equity ratio is below 44%, where the ratio is measured using common equity and long-term debt excluding imputed debt or debt-like lease obligations. In each case, common equity ratios are determined based on a preceding or projected 13-month average. In addition, there are certain OPUC notice requirements for dividends in excess of 5% of NW Natural’s retained earnings. Additionally, if NW Natural’s common equity (excluding goodwill and equity associated with non-regulated assets), on a preceding or projected 13-month average basis, is less than 46% of NW Natural’s capital structure, NW Natural is required to notify the OPUC, and if the common equity ratio falls below 44%, file a plan with the OPUC to restore its equity ratio to 44%. This condition is designed to ensure NW Natural continues to be adequately capitalized under the holding company structure. Under the WUTC order, the average common equity ratio must not exceed 56%. At December 31, 2024 and 2023, NW Natural satisfied the ring-fencing provisions described above. Based on several factors, including current cash reserves, committed credit facilities, its ability to receive dividends from its operating subsidiaries, in particular NW Natural, and an expected ability to issue long-term debt and equity securities in the capital markets, NW Holdings believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, investing, and financing activities as discussed in " Cash Flows " below. NW HOLDINGS DIVIDENDS. Quarterly dividends have been paid on common stock each year since NW Holdings’ predecessor’s stock was first issued to the public in 1951. Annual common stock dividend payments per share, adjusted for stock splits, have increased each year since 1956. The declarations and amount of future dividends to shareholders will depend upon earnings, cash flows, financial condition, NW Natural’s ability to pay dividends to NW Holdings and other factors. The amount and timing of dividends payable on common stock is at the sole discretion of the NW Holdings Board of Directors. NW Natural For the NGD business segment, short-term borrowing requirements typically peak during colder winter months when the NGD business borrows money to cover the lag between natural gas purchases and bill collections from customers. Short-term liquidity for the NGD business is primarily provided by cash balances, internal cash flow from operations, proceeds from the sale of commercial paper notes, as well as available cash from multi-year credit facilities, short-term credit facilities, company-owned life insurance policies, the sale of long-term debt, and equity contributions from NW Holdings. NW Natural's long-term debt and contributions from NW Holdings are primarily used to finance NGD capital expenditures, refinance maturing debt, and provide temporary funding for other general corporate purposes of the NGD business. Based on its current debt ratings (see " Credit Ratings " below), NW Natural has been able to issue commercial paper and long-term debt at attractive rates. In the event NW Natural is not able to issue new long-term debt due to adverse market conditions or other reasons, NW Natural expects that near-term liquidity needs can be met using internal cash flows, issuing commercial paper, receiving equity contributions from NW Holdings, or drawing upon a committed credit facility. NW Natural also has a universal shelf registration statement filed with the SEC for the issuance of secured and unsecured debt securities. In the event senior unsecured long-term debt ratings are downgraded, or outstanding derivative positions exceed a certain credit threshold, counterparties under derivative contracts could require NW Natural to post cash, a letter of credit, or other forms of collateral, which could expose NW Natural to additional cash requirements and may trigger increases in short-term borrowings while in a net loss position. NW Natural was not required to post collateral at December 31, 2024. See Note 15 below. Other items that may have a significant impact on NW Natural's liquidity and capital resources include NW Natural's pension contribution requirements and environmental expenditures. PENSION CONTRIBUTIONS. NW Natural expects to make contributions to its company-sponsored defined benefit plan, which is closed to new employees, over the next several years under applicable laws and regulations. See "Application of Critical Accounting Policies— Pensions and Postretirement Benefits " below and Note 10 for more information. ENVIRONMENTAL EXPENDITURES. NW Natural expects to continue using cash resources to fund environmental liabilities for future environmental remediation or action. NW Natural has authorizations in Oregon and Washington to defer costs related to remediation of properties that are owned or were previously owned by NW Natura l. In Oregon, a Site Remediation and Recovery Mechanism (SRRM) is currently in place to recover prudently incurred costs allocable to Oregon customers, subject to an earnings test. On October 21, 2019 the WUTC authorized an Environmental Cost Recovery Mechanism (ECRM) for recovery of prudently incurred costs allocable to Washington customers beginning November 1, 2019. S ee Note 17 and "Results of Operations—Regulatory Matters— Environmental Cost Deferral and Recovery " above. Based on several factors, including current credit ratings, NW Natural's commercial paper program, current cash reserves, committed credit facilities, and an expected ability to issue long-term debt and receive equity contributions from NW Holdings, 56 NW Natural believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, and investing and financing activities as discussed in " Cash Flows " below. NW NATURAL DIVIDENDS. The declarations and amount of future dividends to NW Holdings will depend upon earnings, cash flows, financial condition, the satisfaction of OPUC and WUTC regulatory ring-fencing restrictions, and other factors. The amount and timing of dividends payable on common stock is subject to approval of the NW Natural Board of Directors. Gas and Pipeline Capacity Purchase Agreements NW Natural has signed agreements providing for the reservation of firm pipeline capacity under which it is required to make monthly payments for contracted capacity. The pricing component of the monthly payment is established, subject to change, by U.S. or Canadian regulatory bodies, or is established directly with private counterparties, as applicable. In addition, NW Natural has entered into long-term agreements to release firm pipeline capacity. NW Natural also enters into short-term and long-term gas purchase agreements. Refer to Note 16 for gas and pipeline capacity purchase commitments. NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings established to pursue unregulated RNG activities. In September 2021, a subsidiary of NW Natural Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to secure RNG supply from two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities). The first facility was completed and commenced delivery of RNG to Ohio Renewables in September 2024. Upon reaching this milestone, Ohio Renewables paid $26.0 million to the EDL subsidiary. The second facility was completed and commenced delivery of RNG to Ohio Renewables in December 2024 at which point Ohio Renewables made an additional payment of $25.4 million to the EDL subsidiary. Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period at a contractually specified price. Under the amended agreements, we currently estimate the amount of RNG purchases based on prices and quantities specified in the agreements to be as follows: approximately $18.9 million in 2025, $18.9 million in 2026, $22.8 million in 2027, $22.8 million in 2028, $24.1 million in 2029 and $532.6 million thereafter. Gas Sale Agreements Ohio Renewables has contracted to sell RNG produced by the EDL Facilities up to certain specified volumes in each of calendar years 2024 through 2026 to an investment-grade counterparty. We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 2,430,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period. Ohio Renewables additionally has contracted to sell a fixed-volume of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2042. Amounts to be delivered under this agreement are estimated to be 112,500 MMbtu in 2025, 375,000 MMbtu in 2026, 1,950,000 MMbtu annually in 2027 through 2034, and 2,775,000 MMbtu annually in years 2035 through 2042. Under the current contract, if less than 75% of the contracted volumes of RNG are not delivered on an annual basis, Ohio Renewables is obligated to pay the per MMbtu price for volumes between the amount delivered and 75% of the contracted volumes on an annual basis. Other Purchase Agreements Other purchase commitments primarily consist of remaining balances under existing purchase orders and gas storage agreements. At December 31, 2024, the amount due over the duration of the purchase agreements totaled $22.5 million. Except for these certain purchase commitments, NW Holdings and NW Natural have no material off-balance sheet financing arrangements. Short-Term Debt 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, 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. 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. 57 At December 31, 2024 and 2023, NW Natural's short-term debt consisted of the following: December 31, 2024 December 31, 2023 In millions Balance Outstanding Weighted Average Interest Rate (1) Balance Outstanding Weighted Average Interest Rate (1) NW Natural: Commercial paper $ 136.5 4.8 % $ 16.8 5.5 % Other (NW Holdings): Credit agreement 33.6 5.5 % 73.0 6.4 % NW Holdings $ 170.1 $ 89.8 (1) Weighted average interest rate on outstanding short-term debt Credit Agreements NW Holdings NW Holdings has a $200 million sustainability-linked credit agreement, with a feature that allows it to request increases in the total commitment amount, up to a maximum of $300 million. In December 2024, the maturity date of the agreement was extended to November 2, 2027, with an available extension of commitments for one additional one-year period, subject to lender approval. All lenders under the NW Holdings credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2024 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 200 Total $ 200 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Holdings if the lender defaulted due to lack of funds or insolvency; however, NW Holdings does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings. There was $33.6 million and $73.0 million of outstanding balances under the NW Holdings agreement at December 31, 2024 and 2023, respectively. The NW Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $40 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. The credit agreement requires NW Holdings to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. NW Holdings was in compliance with this covenant at December 31, 2024 and 2023, with consolidated indebtedness to total capitalization ratios of 57.6% and 56.5%, respectively. 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. A change in NW Holdings' 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. Rather, interest rates on any loans outstanding under the credit agreements are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreements when ratings are changed. NW Holdings maintains a credit rating with S&P of A- and does not currently maintain ratings with Moody's. NW Holdings had no letters of credit issued and outstanding at December 31, 2024 and 2023. NW Natural NW Natural has a sustainability-linked multi-year credit agreement for unsecured revolving loans totaling $400 million, with a feature that allows NW Natural to request increases in the total commitment amount, up to a maximum of $600 million. In December 2024, the maturity date of the agreement was extended to November 3, 2027 with an available extension of commitments for one additional one-year period, subject to lender approval. 58 All lenders under the NW Natural credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2024 as follows: In millions Lender rating, by category Loan Commitment AA/Aa $ 400 Total $ 400 Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Natural if the lender defaulted due to lack of funds or insolvency; however, NW Natural does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings. The NW Natural credit agreement permits the issuance of letters of credit in an aggregate amount of up to $60 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. There were no outstanding balances under this credit agreement at December 31, 2024 or 2023. The credit agreement requires NW Natural to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. NW Natural was in compliance with this covenant at December 31, 2024 and 2023, with consolidated indebtedness to total capitalization ratios of 53.1% and 52.8%, respectively. 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. Rather, interest rates on any loans outstanding under the credit agreement are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreement when ratings are changed. See " Credit Ratings " below. NW Natural had no letters of credit outstanding at December 31, 2024 and one letter of credit outstanding at December 31, 2023. In December 2023, NW Natural issued a $15 million letter of credit through its existing credit agreement, which expired January 5, 2024. Letters of Credit Facility In January 2024, NW Natural entered into an Uncommitted Letter of Credit and Reimbursement Agreement (LC Reimbursement Agreement), pursuant to which NW Natural agreed to reimburse each Lender acting as an issuing bank (Issuing Bank) thereunder for disbursements in respect of letters of credit (Letters of Credit) issued pursuant to the LC Reimbursement Agreement from time to time. The Company expects to use Letters of Credit issued under the facility created by the LC Reimbursement Agreement (LC Facility) primarily to support its participation in Washington Climate Commitment Act cap-and-invest program auctions. Although there is no expressly stated maximum amount of Letters of Credit that can be issued or outstanding under the LC Facility, under current regulatory authority from the OPUC, the aggregate sum of Letters of Credit outstanding and available to be drawn under the LC Reimbursement Agreement may not exceed $100 million at any one time. The Issuing Banks have no commitment to issue Letters of Credit under the LC Facility and will have the discretion to limit and condition the terms for the issuance of Letters of Credit (including maximum face amounts) in their sole discretion. The LC Reimbursement Agreement requires NW Natural to maintain certain ratings with S&P and Moody’s. NW Natural must also notify the Administrative Agent and Lenders of any change in the S&P or Moody’s Ratings, although any such change is not an event of default. The LC Reimbursement Agreement prohibits NW Natural from permitting Consolidated Indebtedness to be greater than 70% of Total Capitalization, each as defined therein and calculated as of the end of each fiscal quarter of NW Natural. Failure to comply with this financial covenant would constitute an Event of Default under the LC Reimbursement Agreement. The occurrence of this or any other Event of Default would entitle the Administrative Agent to require cash collateral for the LC Exposure, as defined in the LC Reimbursement Agreement, and to exercise all other rights and remedies available to it and the Lenders under the Credit Documents, as defined in the LC Reimbursement Agreement, and under applicable law. There were no letter of credits issued or outstanding under the LC reimbursement agreement at December 31, 2024. Credit Ratings NW Natural's credit ratings are a factor of liquidity, potentially affecting access to the capital markets including the commercial paper market. NW Natural's credit ratings also have an impact on the cost of funds, and may have an impact on the need to post collateral under financial derivative contracts. 59 The following table summarizes NW Natural's current credit ratings: S&P Moody's Commercial paper (short-term debt) A-1 P-2 Senior secured (long-term debt) AA- A2 Senior unsecured (long-term debt) n/a Baa1 Issuer credit rating A+ n/a Ratings outlook Stable Stable In November 2024, S&P revised NW Holdings' rating from A to A- and ratings outlook from "negative" to "stable." The above credit ratings and ratings outlook are dependent upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of or reference to these credit ratings is not a recommendation to buy, sell or hold NW Holdings or NW Natural securities. Each rating should be evaluated independently of any other rating. As part of the ring-fencing conditions agreed upon with the OPUC and WUTC, NW Holdings and NW Natural are required to maintain separate credit ratings, long-term debt ratings, and preferred stock ratings, if any. Long-Term Debt Note Purchase Agreement In December 2023, NW Holdings entered into a Note Purchase Agreement between NW Holdings and the institutional investors named as purchasers therein. The Note Purchase Agreement provides for the issuance of (i) $100.0 million aggregate principal amount of NW Holdings’ 5.78% Senior Notes, Series A, due March 7, 2028 (5.78% Notes) and (ii) $50.0 million aggregate principal amount of NW Holdings’ 5.84% Senior Notes, Series B, due March 7, 2029 (5.84% Notes) in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The 5.78% Notes and the 5.84% Notes were issued in March 2024, pursuant to the Note Purchase Agreement. The proceeds from the Note Purchase Agreement were used to settle an existing term loan at NW Holdings for $100.0 million and make an equity contribution to NWN Water, which was used to settle an existing term loan for $50.0 million. Issuance of Long-Term Debt In December 2024, NW Holdings issued and sold (i) $90.0 million in aggregate principal amount of its 5.52% Senior Notes, Series C, due December 19, 2029 (the 5.52% Notes), and (ii)$45.0 million in aggregate principal amount of its 5.86% Senior Notes, Series D, due December 19, 2034 (the 5.86% Notes, together with the 5.52% Notes, the Notes), to certain institutional investors pursuant to a Note Purchase Agreement dated December 19, 2024 (the Note Purchase Agreement), in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The 5.52% Notes and the 5.86% Notes bear interest at the rate of 5.52% and 5.86%, respectively, per annum, payable semi-annually on June 19 and December 19 of each year, commencing June 19, 2025, and will mature on December 19, 2029, and December 19, 2034, respectively. The 5.52% Notes and the 5.86% Notes will be subject to prepayment at the option of NW Holdings, in whole or in part, (i) at any time at a price equal to 100% of the principal amount thereof, plus the applicable “make-whole” premium and accrued and unpaid interest thereon to the date of prepayment, and (ii) at any time on or after November 19, 2029 and September 19, 2034, respectively, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of prepayment, but without the payment of a “make-whole” premium, in each case, so long as there is no Default or Event of Default under the Note Purchase Agreement. Interest Rate Swap Agreement In January 2023, NWN Water entered into an interest rate swap agreement with a major financial institution for $55.0 million that effectively converted variable-rate debt to a fixed rate of 3.80%. Interest payments made between the effective date and expiration date are hedged by the swap agreement. The interest rate swap agreement expires in June 2026, along with the variable-rate debt. Retirement of Long-Term Debt The following NW Natural debentures were retired in the periods indicated: Year Ended December 31, In millions 2024 2023 2022 NW Natural First Mortgage Bonds: 3.542% Series due 2023 $ — $ 50 $ — 5.620% Series due 2023 — 40 — Total $ — $ 90 $ — 60 In March 2024, NW Holdings retired a $100.0 million credit agreement and NWN Water retired a $50.0 million credit agreement. Maturities and Interest on Long-Term Debt Maturities and payment of interest on long-term debt for each of the annual periods through December 31, 2029 and thereafter are as follows: In millions Long-term debt maturities Interest on long-term debt NW Natural: 2025 $ 30.0 $ 62.9 2026 55.0 60.9 2027 64.7 57.7 2028 10.0 54.8 2029 50.0 53.6 Thereafter 1,165.0 773.1 NW Natural Total 1,374.7 1,063.0 Other NW Holdings: 2025 0.8 19.1 2026 55.8 17.7 2027 0.9 16.4 2028 100.8 13.5 2029 140.6 9.2 Thereafter 47.2 13.5 Other NW Holdings Total 346.1 89.4 NW Holdings: 2025 30.8 82.0 2026 110.8 78.6 2027 65.6 74.1 2028 110.8 68.3 2029 190.6 62.8 Thereafter 1,212.2 786.6 NW Holdings Total $ 1,720.8 $ 1,152.4 Bankruptcy Ring-fencing Restrictions As part of the ring-fencing conditions agreed upon with the OPUC and WUTC, NW Natural is required to have one director who is independent from NW Natural management and from NW Holdings and to issue one share of NW Natural preferred stock to an independent third party. NW Natural was in compliance with both of these ring-fencing provisions as of December 31, 2024 and 2023. NW Natural may file a voluntary petition for bankruptcy only if approved unanimously by the Board of Directors of NW Natural, including the independent director, and by the holder of the preferred share. Cash Flows Operating Activities Changes in our operating cash flows are primarily affected by net income or loss, changes in working capital requirements, and other cash and non-cash adjustments to operating results. In millions 2024 2023 2022 NW Natural cash provided by operating activities $ 230.7 $ 281.9 $ 145.2 NW Holdings cash provided by operating activities 200.3 279.9 147.7 2024 COMPARED TO 2023 . The significant factors contributing to the $51.1 million decrease at NW Natural cash flow provided by operating activities were as follows: • $64.8 million decrease in accounts receivable due to comparatively warmer weather in the current year; • $20.5 million increase in contributions to our defined benefit pension plan; • $18.4 million increase in asset optimization revenue sharing bill credits to customers; and • $15.7 million decrease in net income; partially offset by • $22.8 million decrease in accounts payable resulting from payments of higher priced gas in the prior year; • $21.6 million decrease in inventories due to higher priced gas and more gas withdrawn from storage in the prior year; and • $16.6 million increase in the decoupling mechanism primarily due to lower usage driven by comparatively warmer weather. 61 The $79.7 million decrease in cash provided by operating activities at NW Holdings was primarily driven by the factors discussed above. In addition, Ohio Renewables paid $51.4 million to a subsidiary of EDL in connection with two RNG facilities. 2023 COMPARED TO 2022 . The significant factors contributing to the $136.7 million increase at NW Natural cash flow provided by operating activities were as follows: • $126.6 million decrease in accounts receivable due to colder weather in December 2022; • $40.0 million decrease in net deferred gas costs due to the recovery of higher priced gas in 2022; • $30.6 million decrease in asset optimization revenue sharing bill credits; and • $19.9 million increase due to a compliance obligation related to the Washington CCA; partially offset by • $64.9 million decrease in accounts payable resulting from payments of higher priced gas purchased in December 2022; and • $22.3 million decrease in the decoupling mechanism. The $132.3 million increase in cash provided by operating activities at NW Holdings was primarily driven by the factors discussed above. NW Natural made $20.5 million of cash contributions to its qualified defined benefit pension plans during the year ended December 31, 2024 and no cash contributions during the year ended December 31, 2023. 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. The amount and timing of future c ontributions will depend on market interest rates and investment returns on the plans’ assets. See Note 10. NW Holdings and NW Natural have lease and purchase commitments relating to our operating activities that are financed with cash flows from operations. For information on cash flow requirements related to leases and other purchase commitments, see Note 7 and Note 16. Investing Activities In millions 2024 2023 2022 NW Natural cash used in investing activities $ (357.6) $ (290.5) $ (320.3) NW Holdings cash used in investing activities (429.0) (335.5) (435.5) 2024 COMPARED TO 2023 . Cash used in investing activities increased $67.2 million at NW Natural and $93.5 million at NW Holdings, respectively. The increase at NW Natural and NW Holdings is primarily driven by higher capital expenditures as we continue to invest in our natural gas, water and wastewater utility systems. In addition, NWN Water completed the acquisition of Infrastructure Capital Holdings in 2024 and paid $29.9 million in cash consideration. 2023 COMPARED TO 2022 . Cash used in investing activities decreased $29.8 million at NW Natural and $100.0 million at NW Holdings, respectively. The decrease at NW Natural is primarily driven by a decrease in capital expenditures related to two significant information technology projects that were placed into service in the prior year. The decrease in cash used in investing activities at NW Holdings is driven by lower capital expenditures at NW Natural and less cash used for water and wastewater acquisitions. NW Holdings capital expenditures for 2025 are expected to be in the range of $450 million to $500 million and for the six-year period from 2025 to 2030 are expected to range from $2.5 billion to $2.7 billion. NW Natural capital expenditures for 2025 are expected to be in the range of $330 million to $360 million and for the six-year period from 2025 to 2030 are expected to be approximately 70% of NW Holdings expected cap-ex range. SiEnergy capital expenditures for 2025 are expected to be in the range of $65 million to $75 million. NW Natural Water capital expenditures for 2025 are expected to be in the range of $55 million to $65 million. The timing and amount of the core capital expenditures and proj ects for 2025 and the next six years coul d change based on regulation, growth, and cost estimates. Additional investments in our infrastructure during and after 2025 that are not incorporated in the estimates provided above will depend largely on additional regulations, growth, and expansion opportunities. Required funds for the investments are expected to be internally generated or financed with long-term debt or equity, as appropriate. Financing Activities In millions 2024 2023 2022 NW Natural cash provided by financing activities $ 119.8 $ 20.4 $ 178.9 NW Holdings cash provided by financing activities 227.1 64.2 301.6 62 2024 COMPARED TO 2023 . Cash provided by financing activities increased $99.4 million at NW Natural primarily driven by higher short-term debt borrowings, lower long-term debt maturities and higher cash contributions from NW Holdings, partially offset by lower long-term debt issuances. Cash provided by financing activities increased $162.9 million at NW Holdings primarily driven by higher short-term debt borrowings and higher proceeds from common stock issuances, partially offset by higher long-term debt maturities and lower long-term debt issuances. 2023 COMPARED TO 2022 . Cash provided by financing activities decreased $158.5 million at NW Natural attributable to lower cash contributions from NW Holdings and the retirement of short and long-term debt, partially offset by an increase in long-term debt issuances. Cash provided by financing activities decreased $237.4 million at NW Holdings attributable to lower proceeds from common stock issuances and the retirement of short and long-term debt, partially offset by an increase in long-term debt issuances. Pension Cost and Funding Status of Qualified Retirement Plans NW Natural's pension costs are determined in accordance with accounting standards for compensation and retirement benefits. See “Application of Critical Accounting Policies and Estimates – Pensions and Postretirement Benefits ” below. Pension expense for NW Natural's qualified defined benefit plan, which is allocated between operations and maintenance expenses and capital expenditures, totaled $4.1 million in 2024, a change of $6.5 million from 2023. The fair market value of pension assets in this plan increased to $284.1 million at December 31, 2024 from $283.4 million at December 31, 2023. The increase was due to an increase in employer contributions of $20.5 million and a gain on plan assets of $4.9 million, partially offset by benefit payments of $24.6 million. Contributions made to NW Natural's company-sponsored qualified defined benefit pension plan are based on actuarial assumptions and estimates, tax regulations, and funding requirements under federal law. The qualified defined benefit pension plan was underfunded by $88.7 million at December 31, 2024. 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 did not make any plan contributions during 2023. NW Natural made $20.5 million of cash contributions to its qualified defined benefit pension plans during the year ended December 31, 2024. The amount and timing of future contributions will depend on market interest rates and investment returns on the plan's assets. See Note 10 for information regarding employer contributions and estimated future benefit payments and other pension disclosures. Contingent Liabilities Loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable in accordance with accounting standards for contingencies. See “Application of Critical Accounting Policies and Estimates— Environmental Contingencies ” below. At December 31, 2024, NW Natural's total estimated liability related to environmental sites was $160.0 million. See Note 17 and "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery " above. New Accounting Pronouncements For a description of recent accounting pronouncements that may have an impact on our financial condition, results of operations, or cash flows, see Note 2. APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing financial statements in accordance with U.S. GAAP, management exercises judgment to assess the potential outcomes and related accounting impacts in the selection and application of accounting principles, including making estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses, and related disclosures in the financial statements. Management considers critical accounting policies to be those which are most important to the representation of financial condition and results of operations and which require management’s most difficult and subjective or complex judgments, including accounting estimates that could result in materially different amounts if reported under different conditions or used different assumptions. Our most critical estimates and judgments for both NW Holdings and NW Natural include accounting for: • regulatory accounting; • revenue recognition; • derivative instruments and hedging activities; • pensions and postretirement benefits; • income taxes; • environmental contingencies; and • impairment of long-lived assets and goodwill. 63 Management has discussed its current estimates and judgments used in the application of critical accounting policies with the Audit Committees of the Boards of NW Holdings and NW Natural. Within the context of critical accounting policies and estimates, management is not aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. Regulatory Accounting The NGD segment is regulated by the OPUC and WUTC, which establish the rates designed to recover specific costs of providing regulatory services, and, to a certain extent, set forth special accounting treatment for certain regulatory transactions for which NW Natural records regulatory assets and liabilities. In general, the same accounting principles as non-regulated companies reporting under U.S. GAAP are used. However, authoritative guidance for regulated operations (regulatory accounting) requires different accounting treatment for regulated companies to show the effects of such regulation. For example, NW Natural accounts for the cost of gas using a PGA deferral and cost recovery mechanism, which is submitted for approval annually to the OPUC and WUTC. See "Results of Operations—Regulatory Matters—Rate Mechanisms— Purchased Gas Adjustment " above. There are other expenses and revenues that the OPUC or WUTC may require NW Natural to defer for recovery or refund in future periods. Regulatory accounting requires NW Natural to account for these types of deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet. When the recovery of these regulatory assets from, or refund of regulatory liabilities to, customers is approved, NW Natural recognizes the expense or revenue on the income statement at the same time the adjustment to amounts is included in rates charged to customers. The conditions that must be satisfied to adopt the accounting policies and practices of regulatory accounting include: • an independent regulator sets rates; • the regulator sets the rates to cover specific costs of delivering service; and • the service territory lacks competitive pressures to reduce rates below the rates set by the regulator. Because NW Natural's NGD operations satisfy all three conditions, NW Natural continues to apply regulatory accounting to NGD operations. Future accounting changes, regulatory changes, or changes in the competitive environment could require NW Natural to discontinue the application of regulatory accounting for some or all of our regulated businesses. This would require the write-off of those regulatory assets and liabilities that would no longer be probable of recovery from or refund to customers. Based on current accounting and regulatory competitive conditions, NW Natural believes it is reasonable to expect continued application of regulatory accounting for NGD activities. Further, it is reasonable to expect the recovery or refund of NW Natural's regulatory assets and liabilities at December 31, 2024 through future customer rates. If it is determined that all or a portion of these regulatory assets or liabilities no longer meet the criteria for continued application of regulatory accounting, then NW Natural would be required to write-off the net unrecoverable balances against earnings in the period such determination is made. The net balance in regulatory asset and liability accounts was a net liability of $333.4 million and a net liability of $268.2 million as of December 31, 2024 and 2023, respectively. See Note 2 for more detail on regulatory balances. Revenue Recognition Revenues, which are derived primarily from the sale, transportation, and storage of natural gas, are recognized upon the delivery of gas commodity or services rendered to customers. Accrued Unbilled Revenue For a description of the policy regarding accrued unbilled revenue, most of which relates to the NGD business at NW Natural, see Note 2. The following table presents changes in key metrics if the estimated percentage of unbilled volume at December 31 was adjusted up or down by 1%: 2024 In millions Up 1% Down 1% Unbilled revenue increase (decrease) (1) $ 1.4 $ (1.4) Margin increase (decrease) (1) 0.2 (0.2) Net income before tax increase (decrease) (1) 0.1 (0.1) (1) Includes impact of regulatory mechanisms including decoupling mechanism and excludes the impact of unbilled revenue from water services. Derivative Instruments and Hedging Activities NW Holdings and NW Natural have financial derivative policies that set forth guidelines for using financial derivative instruments to support prudent risk management strategies. These policies specifically prohibit the use of derivatives for speculative purposes. Financial derivative contracts are utilized to hedge most of our natural gas sale requirements. These contracts include swaps, options, and combinations of option contracts. NW Natural primarily uses these derivative financial instruments to manage commodity price variability. A small portion of NW Natural's derivative hedging strategy involves foreign currency exchange contracts. Derivative instruments are recorded on the balance sheet at fair value. If certain regulatory conditions are met, then the derivative instrument fair value is recorded together with an offsetting entry to a regulatory asset or liability account pursuant to 64 regulatory accounting, and no unrealized gain or loss is recognized in current income or loss. See " Regulatory Accounting " above for additional information. The gain or loss from the fair value of a derivative instrument subject to regulatory deferral is included in the recovery from, or refund to, NGD business customers in future periods. If a derivative contract is not subject to regulatory deferral, then the accounting treatment for unrealized gains and losses is recorded in accordance with accounting standards for derivatives and hedging which is either in current income or loss or in accumulated other comprehensive income or loss (AOCI or AOCL). Derivative contracts outstanding at December 31, 2024, 2023 and 2022 were measured at fair value using models or other market accepted valuation methodologies derived from observable market data. Estimates of fair value may change significantly from period-to-period depending on market conditions, notional amounts, and prices. These changes may have an impact on results of operations, but the impact would generally be mitigated due to the majority of derivative activities being subject to regulatory deferral treatment. For more information on derivative activity and associated regulatory treatment, see Note 2 and Note 15. The following table summarizes the amount of gains (losses) realized from commodity price transactions for the last three years: In millions 2024 2023 2022 NGD business net gain (loss) on commodity swaps $ (119.2) $ 125.5 $ 107.8 Realized gains and losses from commodity hedges shown above were recorded in cost of gas and were, or will be, included in annual PGA rates. NWN Water also used financial derivatives to hedge interest rate risk in the form of a pay-fixed interest rate swap. Unrealized gains and losses related to the interest rate swap agreement qualifies for cash flow hedge accounting and are recorded in AOCI on the consolidated balance sheet. Pensions and Postretirement Benefits NW Natural maintains a qualified non-contributory defined benefit pension plan, non-qualified supplemental pension plans for eligible executive officers and certain key employees, and other postretirement employee benefit plans covering certain non-union employees. NW Natural also has a qualified defined contribution plan (Retirement K Savings Plan) for all eligible employees. Only the qualified defined benefit pension plan and Retirement K Savings Plan have plan assets, which are held in qualified trusts to fund the respective retirement benefits. The qualified defined benefit retirement plan for union and non-union employees was closed to new participants several years ago. Non-union and union employees hired or re-hired after December 31, 2006 and 2009, respectively, and employees of certain NW Holdings subsidiaries are provided an enhanced Retirement K Savings Plan benefit. The postretirement Welfare Benefit Plan for non-union employees was also closed to new participants several years ago. Net periodic pension and postretirement benefit costs (retirement benefit costs) and projected benefit obligations (benefit obligations) are determined using a number of key assumptions, including discount rates, rate of compensation increases, retirement ages, mortality rates and an expected long-term return on plan assets. See Note 10. The vested benefit obligation for the defined benefit pension plan is the actuarial present value of the vested benefits to which the employee is entitled based on the employee's expected date of separation or retirement based on valuation assumptions. Accounting standards also require balance sheet recognition of unamortized actuarial gains and losses and prior service costs in AOCI or AOCL, net of tax. However, the retirement benefit costs related to qualified defined benefit pension and postretirement benefit plans are generally recovered in rates charged to NGD customers, which are set based on accounting standards for pensions and postretirement benefit expenses. As such, NW Natural received approval from the OPUC to recognize the unamortized actuarial gains and losses and prior service costs as a regulatory asset or regulatory liability based on expected rate recovery, rather than including it as AOCI or AOCL under common equity. See " Regulatory Accounting" above and Note 2, " Industry Regulation. " A number of factors, as discussed above, are considered in developing pension and postretirement benefit assumptions. For the December 31, 2024 measurement date, NW Natural reviewed and updated: • the weighted-average discount rate assumptions for pensions increased from 4.98% for 2023 to 5.56% for 2024, and the weighted-average discount rate assumptions for other postretirement benefits increased from 4.98% for 2023 to 5.53% for 2024. The new rate assumptions were determined for each plan based on a matching of benchmark interest rates to the estimated cash flows, which reflect the timing and amount of future benefit payments. Benchmark interest rates are drawn from the FTSE Above Median Curve, which consists of high quality bonds rated AA- or higher by S&P or Aa3 or higher by Moody’s; • the expected annual rate of future compensation is separately determined for bargaining unit and non-bargaining unit employees. The rate assumption ranges from 4.8% to 5.1% in 2025 and thereafter; • the expected long-term return on qualified defined benefit plan assets remained the same at 7.50% in 2023 and 2024; and • other key assumptions, which were based on actual plan experience and actuarial recommendations. 65 At December 31, 2024, the net pension liability (benefit obligations less market value of plan assets) for the defined benefit pension plan decreased $20.5 million compared to 2023. The decrease in the net pension liability is primarily due to the $19.8 million decrease to the pension benefit obligation and the $0.7 million increase in plan assets. The liability for non-qualified plans decreased $0.1 million and the liability for other postretirement benefits increased $0.6 million in 2024. The expected long-term rate of return on assets is based on a forward-looking capital markets model along with the defined benefit pension plan current and target asset allocation. The model inputs are based on future expected long-term total returns and historical volatilities for various asset classes, along with their historical correlations. The model considers current investment-grade yields for fixed income investments, and the same plus a risk premium for riskier assets such as common stocks. NW Natural believes its pension assumptions are appropriate based on plan design and an assessment of market conditions. The following shows the sensitivity of retirement benefit costs and benefit obligations to changes in certain actuarial assumptions: Dollars in millions Change in Assumption Impact on 2024 Retirement Benefit Costs Impact on Retirement Benefit Obligations at Dec. 31, 2024 Discount rate: (0.25) % Qualified defined benefit plans $ 1.1 $ 9.7 Non-qualified plans — 0.1 Other postretirement benefits — 0.5 Expected long-term return on plan assets: (0.25) % Qualified defined benefit plans 0.8 N/A Income Taxes Valuation Allowances Deferred tax assets are recognized to the extent that these assets are believed to be more likely than not to be realized. In making such a determination, available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. NW Holdings and NW Natural have determined that all recorded deferred tax assets are more likely than not to be realized as of December 31, 2024. See Note 11. Uncertain Tax Benefits The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in the jurisdictions in which we operate. A tax benefit from a material uncertain tax position will only be recognized when it is more likely than not that the position, or some portion thereof, will be sustained upon examination, including resolution of any related appeals or litigation processes, on the basis of the technical merits. NW Holdings and NW Natural participate in the Compliance Assurance Process (CAP) with the Internal Revenue Service (IRS). Under the CAP program companies work with the IRS to identify and resolve material tax matters before the federal income tax return is filed each year. No reserves for uncertain tax benefits were recorded during 2024, 2023, or 2022. See Note 11. Tax Legislation When significant proposed or enacted changes in income tax rules occur, we consider whether there may be a material impact to our financial position, results of operations, cash flows, or whether the changes could materially affect existing assumptions used in making estimates of tax related balances. The final tangible property regulations applicable to all taxpayers were issued on September 13, 2013 and were generally effective for taxable years beginning on or after January 1, 2014. In April 2023, the IRS published Revenue Procedure 2023-15 that provides a safe harbor method of income tax accounting for determining when expenditures for natural gas transmission and distribution property must be capitalized or are allowable as repair deductions. We have evaluated this new safe harbor and do not believe that the safe harbor method is materially different from NW Natural’s current repairs methodology or that this additional guidance would have a material effect on our financial condition and results of operations. Regulatory Matters Regulatory tax assets and liabilities are recorded to the extent it is probable they will be recoverable from, or refunded to, customers in the future. At December 31, 2024 and 2023, NW Natural had net regulatory income tax assets of $5.8 million and $8.0 million, respectively, representing future rate recovery of deferred tax liabilities resulting from differences in NGD plant financial statement and tax bases and NGD plant removal costs. These regulatory assets are currently being recovered through customer rates. At December 31, 2024 and 2023, regulatory income tax assets of $6.0 million and $4.9 million, respectively, were recorded by NW Natural, representing future rate recovery of deferred tax liabilities resulting from the equity portion of AFUDC. These regulatory assets are currently being recovered through customer rates. 66 At December 31, 2024 and 2023, regulatory liability balances, representing the estimated net benefit to NGD customers resulting from the change in deferred taxes as a result of the Tax Cut and Jobs Act (TCJA), of $169.5 million and $174.2 million, respectively, were recorded by NW Natural. These balances include a gross up for income taxes of $44.9 million and $46.1 million, respectively. These regulatory liabilities are currently being amortized as a reduction in customer rates. Environmental Contingencies Environmental liabilities are accounted for in accordance with accounting standards under the loss contingency guidance when it is probable that a liability has been incurred and the amount of the loss is reaso nably estimable. Amounts recorded for environmental contingencies take numerous factors into consideration, including, among other variables, changes in enacted laws, regulatory orders, estimated remediation costs, interest rates, insurance proceeds, participation by other parties, timing of payments, and the input of legal counsel and third-party experts. Accordingly, changes in any of these variables or other factual circumstances could have a material impact on the amounts recorded for our environmental liabilities. For a complete discussion of environmental accounting policies refer to Note 2. For a discussion of current environmental sites and liabilities refer to Note 17. In addition, for information regarding the regulatory treatment of these costs and NW Natural's regulatory recovery mechanism, see "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery " above. Impairment of Long-Lived Assets and Goodwill Long-Lived Assets We review the carrying value of long-lived assets whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment of long-lived assets include a significant adverse change in the extent or manner in which the asset is used, a significant adverse change in legal factors or business climate that could affect the value of the asset, or a significant decline in the observable market value or expected future cash flows of the asset, among others. When such factors are present, we assess the recoverability by determining whether the carrying value of the asset will be recovered through expected future cash flows. An asset is determined to be impaired when the carrying value of the asset exceeds the expected undiscounted future cash flows from the use and eventual disposition of the asset. If an impairment is indicated, we record an impairment loss for the difference between the carrying value and the fair value of the long-lived assets. Fair value is estimated using appropriate valuation methodologies, which may include an estimate of discounted cash flows. Goodwill and Business Combinations In a business combination, goodwill is initially measured as any excess of the acquisition-date fair value of the consideration transferred over the acquisition-date fair value of the net identifiable assets acquired. The carrying value of goodwill is reviewed annually during the fourth quarter, or whenever events or changes in circumstance indicate that such carrying values may not be recoverable. NW Holdings' policy for goodwill assessments begins with a qualitative analysis in which events and circumstances are evaluated, including macroeconomic conditions, industry and market conditions, regulatory environments, and the overall financial performance of the reporting unit. If the qualitative assessment indicates that the carrying value may be at risk of recoverability, a quantitative evaluation is performed to measure the carrying value against the fair value of the reporting unit. This evaluation may involve the assessment of future cash flows and other subjective factors for which uncertainty exists and could impact the estimation of future cash flows. These factors include, but are not limited to, the amount and timing of future cash flows, future growth rates, and the discount rate. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge. A qualitative assessment was performed during the fourth quarter of 2024 which indicated a quantitative assessment was not required; thus, no goodwill impairment was recorded. See Note 2 and Note 14 for additional information. Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at the acquisition date, and the fair value of any non-controlling interest in the acquiree. 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 there is substantial judgment or uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities. 67 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK NW Holdings and NW Natural are exposed to various forms of market risk including commodity supply risk, commodity price risk, interest rate risk, foreign currency risk, credit risk and weather risk. The following describes NW Holdings' and NW Natural's exposure to these risks, as applicable. Commodity Supply Risk NW Natural enters into spot, short-term, and long-term natural gas supply contracts, along with associated pipeline transportation contracts, to manage commodity supply risk. NW Natural has arranged for physical delivery of an adequate supply of gas, including gas in its Mist storage facility and other off-system storage facilities, to meet expected requirements of core NGD customers. NW Natural's long-term gas supply contracts are primarily index-based and subject to monthly re-pricing, a strategy that is intended to substantially mitigate credit exposure to physical gas counterparties. Absolute notional amounts under physical gas contracts related to open positions on derivative instruments were 561 million therms and 572 million therms as of December 31, 2024 and 2023, respectively. Commodity Price Risk Natural gas commodity prices are subject to market fluctuations due to unpredictable factors including weather, pipeline transportation congestion, drilling technologies, market speculation, governmental tariffs and other factors that affect supply and demand. Commodity price risk is primarily hedged with financial swaps, storage and physical gas reserves from a long-term investment in working interests in gas leases operated by Jonah Energy. These hedges are generally included in NW Natural's annual PGA filing for recovery, subject to a regulatory prudence review. Notional amounts under financial derivative contracts were $303.7 million and $405.7 million as of December 31, 2024 and 2023, respectively. The fair value of financial swaps, based on market prices at December 31, 2024, was an unrealized loss of $82.7 million, which would result in cash outflows of $71.3 million in 2025, $10.0 million in 2026, and $1.4 million in 2027. Interest Rate Risk NW Holdings and NW Natural are exposed to interest rate risk primarily associated with debt financing needed to fund capital requirements, including future contractual obligations and maturities of long-term and short-term debt. Interest rate risk is primarily managed through the issuance of fixed-rate debt with varying maturities. NW Holdings and NW Natural may also enter into financial derivative instruments, including interest rate swaps, options and other hedging instruments, to manage and mitigate interest rate exposure. NW Holdings and NWN Water entered into interest rate swaps transactions for a total notional amount of $155 million to manage variable interest rate risk in December 2022. Unrealized gains related to these interest rate swap agreements totaled $0.2 million and $0.2 million, net of tax, as of December 31, 2024 and 2023, respectively. Foreign Currency Risk The costs of certain pipeline fees are subject to changes in the value of the Canadian currency in relation to the U.S. currency. Foreign currency forward contracts are used to hedge against fluctuations in exchange rates for NW Natural's commodity-related demand and reservation charges paid in Canadian dollars. Notional amounts under foreign currency forward contracts were $10.3 million and $11.9 million as of December 31, 2024 and 2023, respectively. If all of the foreign currency forward contracts had been settled on December 31, 2024, a loss of $0.5 million would have been realized. See Note 15. Credit Risk Credit Exposure to Natural Gas Suppliers Certain gas suppliers have either relatively low credit ratings or are not rated by major credit rating agencies. To manage this supply risk, NW Natural purchases gas from a number of different suppliers at liquid exchange points. NW Natural evaluates and monitors suppliers’ creditworthiness and maintains the ability to require additional financial assurances, including deposits, letters of credit, or surety bonds, in case a supplier defaults. In the event of a supplier’s failure to deliver contracted volumes of gas, the NGD business would need to replace those volumes at prevailing market prices, which may be higher or lower than the original transaction prices. NW Natural expects these costs would be subject to its PGA sharing mechanism discussed above. Since most of NW Natural's commodity supply contracts are priced at the daily or monthly market index price tied to liquid exchange points, and NW Natural has adequate storage flexibility, NW Natural believes it is unlikely a supplier default would have a material adverse effect on its financial condition or results of operations. Credit Exposure to Financial Derivative Counterparties NW Natural did not have any counterparty credit exposure related to commodity swap counterparties based on their estimated fair value at December 31, 2024. NW Natural does not have credit exposure to financial commodity swap derivative counterparties when the value of contracts in an unrealized loss position exceeds that of contracts in an unrealized gain position. The net unrealized loss position occurs when forward market prices are lower than our hedge prices. NW Natural’s credit exposure also includes interest rate swap and foreign exchange forward counterparties, neither of which were significant at December 31, 2024. NW Natural's financial derivatives policy requires counterparties to have at least an investment-grade credit rating at the time the derivative instrument is entered into and specific limits on the potential financial exposure and duration based on each counterparty’s credit rating. NW Natural actively monitors and manages derivative credit exposure and places counterparties on hold for trading purposes or requires cash collateral, letters of credit, or guarantees as circumstances warrant. 68 The following table summarizes NW Natural's overall financial swap and option credit exposure, based on estimated fair value, and the corresponding counterparty credit ratings. The table uses credit ratings from S&P and Moody’s, reflecting the higher of the S&P or Moody’s rating or a middle rating if the entity is split-rated with more than one rating level difference: Financial Derivative Position by Credit Rating Unrealized Fair Value Gain (Loss) In millions 2024 2023 AA/Aa $ (71.9) $ (100.7) A/A (10.8) (14.8) Total $ (82.7) $ (115.5) In most cases, NW Natural also mitigates the credit risk of financial derivatives by having master netting arrangements with counterparties which provide for making or receiving net cash settlements. Transactions of the same type in the same currency that have settlement on the same day with a single counterparty are netted and a single payment is delivered or received depending on which party is due funds. Additionally, NW Natural has master contracts in place with each derivative counterparty, most of which include provisions for posting or calling for collateral. Generally, NW Natural can obtain cash or marketable securities as collateral with one day’s notice. Various collateral management strategies are used to reduce liquidity risk. The collateral provisions vary by counterparty but are not expected to result in the significant posting of collateral, if any. NW Natural has performed stress tests on the gas portfolio and concluded the liquidity risk from collateral calls is not material. Derivative credit exposure is primarily with investment grade counterparties rated AA-/Aa3 or higher. Contracts are diversified by counterparty, industry, sector and country to reduce credit and liquidity risk. At December 31, 2024, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 17% in the United States and 83% in Canada, based on counterparties' location. At December 31, 2023, financial derivative commodity credit risk on a volumetric basis was geographically concentrated 24% in the United States and 76% in Canada with our counterparties. Credit Exposure to Insurance Companies Credit exposure to insurance companies for loss or damage claims could be material. NW Holdings and NW Natural regularly monitor the financial condition of insurance companies who provide general liability insurance policy coverage to NW Holdings, NW Natural, their predecessors, and their subsidiaries. Weather Risk NW Natural has a weather normalization mechanism in Oregon; however, it is exposed to weather risk primarily from NGD business operations. A large percentage of NGD margin is volume driven, and current rates are based on an assumption of average weather. NW Natural's weather normalization mechanism in Oregon is for residential and small commercial customers, which is intended to stabilize the recovery of NGD business fixed costs and reduce fluctuations in customers’ bills due to colder or warmer than average weather. Customers in Oregon are allowed to opt out of the weather normalization mechanism. As of December 31, 2024, approximately 7% of Oregon customers had opted out. In addition to the Oregon customers opting out, Washington customers account for approximately 12% of our total customer base and are not covered by weather normalization. The combination of Oregon and Washington customers not covered by a weather normalization mechanism is 18% o f all customers. See "Results of Operations—Regulatory Matters—Rate Mechanisms— WARM " above. 69 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS Page 1. Management's Reports on Internal Control Over Financial Reporting 71 2. Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 73 3. Consolidated Financial Statements: Consolidated Statements of Comprehensive Income (Loss) of Northwest Natural Holding Company for the Years Ended December 31, 2024, 2023, and 2022 77 Consolidated Balance Sheets of Northwest Natural Holding Company at December 31, 2024 and 2023 78 Consolidated Statements of Shareholders’ Equity of Northwest Natural Holding Company for the Years Ended December 31, 2024, 2023, and 2022 80 Consolidated Statements of Cash Flows of Northwest Natural Holding Company for the Years Ended December 31, 2024, 2023, and 2022 81 Consolidated Statements of Comprehensive Income (Loss) of Northwest Natural Gas Company for the Years Ended December 31, 2024, 2023, and 2022 83 Consolidated Balance Sheets of Northwest Natural Gas Company at December 31, 2024 and 2023 84 Consolidated Statements of Shareholder's Equity of Northwest Natural Gas Company for the Years Ended December 31, 2024, 2023, and 2022 86 Consolidated Statements of Cash Flows of Northwest Natural Gas Company for the Years Ended December 31, 2024, 2023, and 2022 87 Notes to Consolidated Financial Statements 88 4. Supplementary Data for the Years Ended December 31, 2024, 2023, and 2022: Financial Statement Schedules Schedule I - Condensed Financial Information of Northwest Natural Holding Company at December 31, 2024 and 2023, and for the Years Ended December 31, 2024, 2023, and 2022 133 Schedule II – Valuation and Qualifying Accounts and Reserves of Northwest Natural Holding Company and Northwest Natural Gas Company for the Years Ended December 31, 2024, 2023, and 2022 137 Supplemental Schedules Omitted All other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included elsewhere in the financial statements. 70 NW HOLDINGS MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING NW Holdings management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended. NW Holdings' internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). NW Holdings' internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions involving company assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the NW Holdings Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use, or disposition of NW Holdings' assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements or fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. NW Holdings management assessed the effectiveness of NW Holdings' internal control over financial reporting as of December 31, 2024. In making this assessment, NW Holdings management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on NW Holdings management's assessment and those criteria, NW Holdings management has concluded that it maintained effective internal control over financial reporting as of December 31, 2024. The effectiveness of internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this annual report. /s/ David H. Anderson David H. Anderson Chief Executive Officer /s/ Raymond Kaszuba III Raymond Kaszuba III Senior Vice President and Chief Financial Officer February 28, 2025 71 NW NATURAL MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING NW Natural management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended. NW Natural's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). NW Natural's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions involving company assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the NW Natural Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use, or disposition of NW Natural's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements or fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. NW Natural management assessed the effectiveness of NW Natural's internal control over financial reporting as of December 31, 2024. In making this assessment, NW Natural management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on NW Natural management's assessment and those criteria, NW Natural management has concluded that it maintained effective internal control over financial reporting as of December 31, 2024. /s/ David H. Anderson David H. Anderson Chief Executive Officer /s/ Raymond Kaszuba III Raymond Kaszuba III Senior Vice President and Chief Financial Officer February 28, 2025 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Northwest Natural Holding Company 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, 2024 and 2023, 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, 2024, 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, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 73 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for the Effects of Regulatory Matters As described in Note 2 to the consolidated financial statements, there were $512.6 million of regulatory assets and $846.3 million of regulatory liabilities as of December 31, 2024. The Company’s principal business is to operate as a holding company for Northwest Natural Gas Company (“NW Natural”) and its other subsidiaries. NW Natural's principal business is the distribution of natural gas, which is regulated; the accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by regulatory authorities. Customer rates are regulated and have approved cost-based rates which are intended to allow the Company to earn a return on invested capital. As disclosed by management, regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet. When the recovery of these regulatory assets from, or refund of regulatory liabilities to, customers is approved, management recognizes the expense or revenue on the income statement at the same time the adjustment to amounts is included in rates charged to customers. The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a critical audit matter are the high degree of auditor effort in performing procedures and evaluating audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities. 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 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, on a sample basis, the regulatory assets and liabilities, including those subject to rate cases and other proceedings, by considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents. /s/ PricewaterhouseCoopers LLP Portland, Oregon February 28, 2025 We have served as the Company’s auditor since 1997. 74 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholder of Northwest Natural Gas Company: 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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for the Effects of Regulatory Matters As described in Note 2 to the consolidated financial statements, there were $511.8 million of regulatory assets and $845.2 million of regulatory liabilities as of December 31, 2024. The Company’s principal business is the distribution of natural gas, which is regulated; the accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by regulatory authorities. Customer rates are regulated and have approved cost-based rates which are intended to allow the Company to earn a return on invested capital. As disclosed by management, regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet. When the recovery of these regulatory assets from, or refund of regulatory liabilities to, customers is approved, management recognizes the expense or revenue on the income statement at the same time the adjustment to amounts is included in rates charged to customers. The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a critical audit matter are the high degree of auditor effort in performing audit procedures and evaluating audit evidence obtained related to the recovery of regulatory assets and the settlement of regulatory liabilities. 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 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, 75 and (iii) testing, on a sample basis, the regulatory assets and liabilities, including those subject to rate cases and other proceedings, by considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents. /s/ PricewaterhouseCoopers LLP Portland, Oregon February 28, 2025 We have served as the Company’s auditor since 1997. 76 NORTHWEST NATURAL HOLDING COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, In thousands, except per share data 2024 2023 2022 Operating revenues $ 1,152,994 $ 1,197,475 $ 1,037,353 Operating expenses: Cost of gas 412,382 499,837 429,635 Operations and maintenance 294,658 273,766 224,667 Environmental remediation 14,054 12,899 12,389 General taxes 48,672 46,248 41,031 Revenue taxes 48,343 48,671 41,826 Depreciation 137,898 125,581 116,707 Other operating expenses 5,845 5,532 3,621 Total operating expenses 961,852 1,012,534 869,876 Income from operations 191,142 184,941 167,477 Other income (expense), net ( 1,108 ) 17,855 1,203 Interest expense, net 80,092 76,566 53,247 Income before income taxes 109,942 126,230 115,433 Income tax expense 31,071 32,362 29,130 Net income 78,871 93,868 86,303 Other comprehensive income (loss): Change in employee benefit plan liability, net of taxes of $ 40 for 2024, $ 443 for 2023, and $( 1,511 ) for 2022 ( 399 ) ( 1,233 ) 4,195 Amortization of non-qualified employee benefit plan liability, net of taxes of $( 210 ) for 2024, $( 148 ) for 2023, and $( 286 ) for 2022 584 410 795 Unrealized (loss) gain on interest rate swaps, net of taxes of $ 13 for 2024, $( 21 ) for 2023, and $( 47 ) for 2022 ( 36 ) 59 129 Comprehensive income $ 79,020 $ 93,104 $ 91,422 Average common shares outstanding: Basic 38,809 36,213 33,934 Diluted 38,869 36,265 33,984 Earnings per share of common stock: Basic $ 2.03 $ 2.59 $ 2.54 Diluted 2.03 2.59 2.54 See Notes to Consolidated Financial Statements 77 NORTHWEST NATURAL HOLDING COMPANY CONSOLIDATED BALANCE SHEETS As of December 31, In thousands 2024 2023 Assets: Current assets: Cash and cash equivalents $ 38,490 $ 32,920 Accounts receivable 124,480 121,341 Accrued unbilled revenue 94,400 83,138 Allowance for uncollectible accounts ( 3,474 ) ( 3,455 ) Regulatory assets 130,116 178,270 Derivative instruments 6,628 11,380 Inventories 106,954 112,571 Other current assets 60,180 65,275 Total current assets 557,774 601,440 Non-current assets: Property, plant, and equipment 4,918,919 4,556,609 Less: Accumulated depreciation 1,246,592 1,198,555 Total property, plant, and equipment, net 3,672,327 3,358,054 Regulatory assets 382,499 333,443 Derivative instruments 535 431 Other investments 82,236 102,951 Operating lease right of use asset, net 68,626 71,308 Assets under sales-type leases 125,653 129,882 Goodwill 183,804 163,344 Other non-current assets 160,862 106,239 Total non-current assets 4,676,542 4,265,652 Total assets $ 5,234,316 $ 4,867,092 See Notes to Consolidated Financial Statements 78 NORTHWEST NATURAL HOLDING COMPANY CONSOLIDATED BALANCE SHEETS As of December 31, In thousands, except share information 2024 2023 Liabilities and equity: Current liabilities: Short-term debt $ 170,110 $ 89,780 Current maturities of long-term debt 30,787 150,865 Accounts payable 133,270 145,361 Taxes accrued 16,176 15,454 Interest accrued 18,220 15,836 Regulatory liabilities 116,180 84,962 Derivative instruments 75,272 98,661 Operating lease liabilities 1,840 2,333 Other current liabilities 87,162 93,626 Total current liabilities 649,017 696,878 Long-term debt 1,679,355 1,425,435 Deferred credits and other non-current liabilities: Deferred tax liabilities 397,149 382,673 Regulatory liabilities 730,117 695,896 Pension and other postretirement benefit liabilities 130,397 158,116 Derivative instruments 13,307 28,055 Operating lease liabilities 75,914 77,167 Other non-current liabilities 173,689 119,034 Total deferred credits and other non-current liabilities 1,520,573 1,460,941 Commitments and contingencies (see Note 16 and Note 17) Equity: Common stock - no par value; authorized 100,000,000 shares; issued and outstanding 40,222,305 and 37,631,212 at December 31, 2024 and 2023, respectively 989,346 890,976 Retained earnings 402,925 399,911 Accumulated other comprehensive loss ( 6,900 ) ( 7,049 ) Total equity 1,385,371 1,283,838 Total liabilities and equity $ 5,234,316 $ 4,867,092 See Notes to Consolidated Financial Statements 79 NORTHWEST NATURAL HOLDING COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Equity In thousands Balance at December 31, 2021 $ 590,771 $ 355,779 $ ( 11,404 ) $ 935,146 Comprehensive income (loss) — 86,303 5,119 91,422 Dividends on common stock, $ 1.93 per share — ( 65,609 ) — ( 65,609 ) Stock-based compensation 3,228 — — 3,228 Shares issued pursuant to equity based plans 2,978 — — 2,978 Issuance of common stock, net of issuance costs 208,276 — — 208,276 Balance at December 31, 2022 805,253 376,473 ( 6,285 ) 1,175,441 Comprehensive income (loss) — 93,868 ( 764 ) 93,104 Dividends on common stock, $ 1.94 per share — ( 70,430 ) — ( 70,430 ) Stock-based compensation 3,598 — — 3,598 Shares issued in connection with business combinations 12,884 — — 12,884 Shares issued pursuant to equity based plans 2,328 — — 2,328 Issuance of common stock, net of issuance costs 66,913 — — 66,913 Balance at December 31, 2023 890,976 399,911 ( 7,049 ) 1,283,838 Comprehensive income (loss) — 78,871 149 79,020 Dividends on common stock, $ 1.95 per share — ( 75,857 ) — ( 75,857 ) Shares issued in connection with business combinations 1,429 — — 1,429 Stock-based compensation 3,231 — — 3,231 Shares issued pursuant to equity based plans 3,156 — — 3,156 Issuance of common stock, net of issuance costs 90,554 — — 90,554 Balance at December 31, 2024 $ 989,346 $ 402,925 $ ( 6,900 ) $ 1,385,371 See Notes to Consolidated Financial Statements 80 NORTHWEST NATURAL HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, In thousands 2024 2023 2022 Operating activities: Net income $ 78,871 $ 93,868 $ 86,303 Adjustments to reconcile net income to cash provided by operations: Depreciation 137,898 125,581 116,707 Amortization 20,162 17,641 15,873 Deferred income taxes 11,366 8,966 17,410 Qualified defined benefit pension plan expense (benefit) 4,062 ( 2,430 ) 5,351 Contributions to qualified defined benefit pension plans ( 20,460 ) — — Deferred environmental expenditures, net ( 23,307 ) ( 26,052 ) ( 18,160 ) Environmental remediation expense 14,054 12,899 12,389 Asset optimization revenue sharing bill credits ( 28,874 ) ( 10,471 ) ( 41,102 ) Regulatory disallowance of line extension allowances 13,700 — — Other 10,799 8,548 11,274 Changes in assets and liabilities: Receivables, net ( 15,302 ) 50,977 ( 76,454 ) Inventories ( 2,735 ) ( 24,105 ) ( 29,269 ) Income and other taxes 809 ( 1,246 ) 6,908 Accounts payable ( 14,144 ) ( 39,958 ) 24,508 Deferred gas costs 38,129 52,371 12,334 Asset optimization revenue sharing 14,539 22,637 28,937 Decoupling mechanism 5,173 ( 11,415 ) 10,922 Cloud-based software ( 22,393 ) ( 16,307 ) ( 23,908 ) Regulatory accounts 12,292 4,617 ( 5,784 ) RNG facility prepayment ( 51,427 ) — — Other, net 17,070 13,828 ( 6,567 ) Cash provided by operating activities 200,282 279,949 147,672 Investing activities: Capital expenditures ( 394,400 ) ( 327,347 ) ( 338,602 ) Acquisitions, net of cash acquired ( 29,816 ) ( 7,533 ) ( 94,279 ) Purchase of equity method investment ( 1,000 ) ( 1,000 ) ( 1,000 ) Other ( 3,770 ) 383 ( 1,579 ) Cash used in investing activities ( 428,986 ) ( 335,497 ) ( 435,460 ) 81 Year Ended December 31, 2024 2023 2022 Financing activities: Proceeds from common stock issued, net 90,374 66,495 208,561 Long-term debt issued 285,000 330,000 290,000 Long-term debt retired ( 150,000 ) ( 90,000 ) — Changes in other short-term debt, net 80,330 ( 168,540 ) ( 131,300 ) Cash dividend payments on common stock ( 72,852 ) ( 67,340 ) ( 62,771 ) Payment of financing fees ( 3,290 ) ( 2,200 ) ( 912 ) Shares withheld for tax purposes ( 1,319 ) ( 1,313 ) ( 1,141 ) Other ( 1,181 ) ( 2,894 ) ( 805 ) Cash provided by financing activities 227,062 64,208 301,632 (Decrease) increase in cash, cash equivalents and restricted cash ( 1,642 ) 8,660 13,844 Cash, cash equivalents and restricted cash, beginning of period 49,624 40,964 27,120 Cash, cash equivalents and restricted cash, end of period $ 47,982 $ 49,624 $ 40,964 Supplemental disclosure of cash flow information: Interest paid, net of capitalization $ 71,233 $ 80,197 $ 50,823 Income taxes paid, net of refunds 19,394 24,263 2,779 Non-cash activities: Shares issued in connection with business combinations $ 1,429 $ 12,884 $ — Debt assumed in connection with business combinations — 3,131 — See Notes to Consolidated Financial Statements 82 NORTHWEST NATURAL GAS COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, In thousands 2024 2023 2022 Operating revenues $ 1,100,497 $ 1,158,623 $ 1,014,339 Operating expenses: Cost of gas 412,320 500,061 429,861 Operations and maintenance 256,995 244,669 204,845 Environmental remediation 14,054 12,899 12,389 General taxes 46,953 44,980 40,151 Revenue taxes 48,037 48,432 41,627 Depreciation 129,602 119,514 112,957 Other operating expenses 2,809 2,423 3,135 Total operating expenses 910,770 972,978 844,965 Income from operations 189,727 185,645 169,374 Other income (expense), net ( 2,818 ) 15,358 ( 436 ) Interest expense, net 63,273 60,594 46,338 Income before income taxes 123,636 140,409 122,600 Income tax expense 34,618 35,672 31,036 Net income 89,018 104,737 91,564 Other comprehensive income (loss): Change in employee benefit plan liability, net of taxes of $ 40 for 2024, $ 443 for 2023, and $( 1,511 ) for 2022 ( 399 ) ( 1,233 ) 4,195 Amortization of non-qualified employee benefit plan liability, net of taxes of $( 210 ) for 2024, $( 148 ) for 2023, and $( 286 ) for 2022 584 410 795 Comprehensive income $ 89,203 $ 103,914 $ 96,554 See Notes to Consolidated Financial Statements 83 NORTHWEST NATURAL GAS COMPANY CONSOLIDATED BALANCE SHEETS As of December 31, In thousands 2024 2023 Assets: Current assets: Cash and cash equivalents $ 19,961 $ 19,841 Accounts receivable 119,976 117,216 Accrued unbilled revenue 91,508 81,524 Receivables from affiliates 591 824 Allowance for uncollectible accounts ( 2,788 ) ( 3,228 ) Regulatory assets 130,091 178,270 Derivative instruments 6,563 11,184 Inventories 105,031 110,855 Other current assets 53,781 60,138 Total current assets 524,714 576,624 Non-current assets: Property, plant, and equipment 4,706,719 4,393,759 Less: Accumulated depreciation 1,222,413 1,181,962 Total property, plant, and equipment, net 3,484,306 3,211,797 Regulatory assets 381,682 333,418 Derivative instruments 394 373 Other investments 63,938 86,145 Operating lease right of use asset, net 68,115 70,728 Assets under sales-type leases 125,653 129,882 Other non-current assets 107,493 102,410 Total non-current assets 4,231,581 3,934,753 Total assets $ 4,756,295 $ 4,511,377 See Notes to Consolidated Financial Statements 84 NORTHWEST NATURAL GAS COMPANY CONSOLIDATED BALANCE SHEETS As of December 31, In thousands 2024 2023 Liabilities and equity: Current liabilities: Short-term debt $ 136,510 $ 16,780 Current maturities of long-term debt 29,992 — Accounts payable 125,359 138,111 Payables to affiliates 3,487 14,850 Taxes accrued 15,759 15,293 Interest accrued 15,018 15,111 Regulatory liabilities 116,047 84,912 Derivative instruments 75,272 98,661 Operating lease liabilities 1,653 2,128 Other current liabilities 85,723 89,371 Total current liabilities 604,820 475,217 Long-term debt 1,335,407 1,364,732 Deferred credits and other non-current liabilities: Deferred tax liabilities 382,686 371,867 Regulatory liabilities 729,172 694,947 Pension and other postretirement benefit liabilities 130,397 158,116 Derivative instruments 13,307 28,055 Operating lease liabilities 75,591 76,757 Other non-current liabilities 160,865 109,066 Total deferred credits and other non-current liabilities 1,492,018 1,438,808 Commitments and contingencies (see Note 16 and Note 17) Equity: Common stock 719,903 644,903 Retained earnings 611,199 594,954 Accumulated other comprehensive loss ( 7,052 ) ( 7,237 ) Total equity 1,324,050 1,232,620 Total liabilities and equity $ 4,756,295 $ 4,511,377 See Notes to Consolidated Financial Statements 85 NORTHWEST NATURAL GAS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Equity In thousands Balance at December 31, 2021 $ 435,515 $ 553,696 $ ( 11,404 ) $ 977,807 Comprehensive income (loss) — 91,564 4,990 96,554 Dividends on common stock — ( 62,667 ) — ( 62,667 ) Capital contribution from parent 179,388 — — 179,388 Balance at December 31, 2022 614,903 582,593 ( 6,414 ) 1,191,082 Comprehensive income (loss) — 104,737 ( 823 ) 103,914 Dividends on common stock — ( 92,376 ) — ( 92,376 ) Capital contributions from parent 30,000 — — 30,000 Balance at December 31, 2023 644,903 594,954 ( 7,237 ) 1,232,620 Comprehensive income (loss) — 89,018 185 89,203 Dividends on common stock — ( 72,773 ) — ( 72,773 ) Capital contributions from parent 75,000 — — 75,000 Balance at December 31, 2024 $ 719,903 $ 611,199 $ ( 7,052 ) $ 1,324,050 See Notes to Consolidated Financial Statements 86 NORTHWEST NATURAL GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, In thousands 2024 2023 2022 Operating activities: Net income $ 89,018 $ 104,737 $ 91,564 Adjustments to reconcile net income to cash provided by operations: Depreciation 129,602 119,514 112,957 Amortization 19,692 17,282 15,678 Deferred income taxes 7,544 2,855 16,288 Qualified defined benefit pension plan expense (benefit) 4,062 ( 2,430 ) 5,351 Contributions to qualified defined benefit pension plans ( 20,460 ) — — Deferred environmental expenditures, net ( 23,307 ) ( 26,052 ) ( 18,160 ) Environmental remediation expense 14,054 12,899 12,389 Asset optimization revenue sharing bill credits ( 28,874 ) ( 10,471 ) ( 41,102 ) Regulatory disallowance of line extension allowances 13,700 — — Other 9,823 8,276 10,359 Changes in assets and liabilities: Receivables, net ( 13,374 ) 51,391 ( 75,177 ) Inventories ( 2,327 ) ( 23,884 ) ( 28,890 ) Income and other taxes ( 11,204 ) 4,124 6,729 Accounts payable ( 20,687 ) ( 43,531 ) 21,375 Deferred gas costs 38,129 52,371 12,334 Asset optimization revenue sharing 14,539 22,637 28,937 Decoupling mechanism 5,173 ( 11,415 ) 10,922 Cloud-based software ( 22,392 ) ( 16,307 ) ( 23,908 ) Regulatory accounts 12,921 4,645 ( 5,796 ) Other, net 15,109 15,227 ( 6,659 ) Cash provided by operating activities 230,741 281,868 145,191 Investing activities: Capital expenditures ( 353,906 ) ( 290,845 ) ( 318,686 ) Other ( 3,725 ) 384 ( 1,579 ) Cash used in investing activities ( 357,631 ) ( 290,461 ) ( 320,265 ) Financing activities: Long-term debt issued — 330,000 140,000 Long-term debt retired — ( 90,000 ) — Changes in other short-term debt, net 119,730 ( 153,420 ) ( 75,300 ) Cash contributions received from parent 75,000 30,000 179,388 Cash dividend payments on common stock ( 72,773 ) ( 92,376 ) ( 62,667 ) Payment of financing fees ( 311 ) ( 2,080 ) ( 843 ) Shares withheld for tax purposes ( 1,319 ) ( 1,313 ) ( 1,141 ) Other ( 529 ) ( 369 ) ( 524 ) Cash provided by financing activities 119,798 20,442 178,913 (Decrease) increase in cash, cash equivalents and restricted cash ( 7,092 ) 11,849 3,839 Cash, cash equivalents and restricted cash, beginning of period 36,520 24,671 20,832 Cash, cash equivalents and restricted cash, end of period $ 29,428 $ 36,520 $ 24,671 Supplemental disclosure of cash flow information: Interest paid, net of capitalization $ 56,989 $ 64,054 $ 44,813 Income taxes paid, net of refunds 38,720 27,745 5,990 See Notes to Consolidated Financial Statements 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION 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. This is a combined report of NW Holdings and NW Natural, which includes separate consolidated financial statements for each registrant. NW Natural's regulated natural gas distribution activities are reported in the natural gas distribution (NGD) segment. The NGD segment is NW Natural's core operating business and serves residential, commercial, and industrial customers in Oregon and southwest Washington. The NGD segment is the only reportable segment for NW Holdings and NW Natural. All other activities, water, wastewater and water services businesses, and other investments are aggregated and reported as other at their respective registrant. 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 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 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. The consolidated financial statements of NW Holdings and NW Natural are presented after elimination of all intercompany balances and transactions. Notes to the consolidated financial statements reflect the activity for both NW Holdings and NW Natural for all periods presented, unless otherwise noted. Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on our consolidated financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect reported amounts in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates, and changes would most likely be reported in future periods. Management believes the estimates and assumptions used are reasonable . Industry Regulation NW Holdings' principal business is to operate as a holding company for NW Natural and its other subsidiaries. NW Natural's principal business is the distribution of natural gas, which is regulated by the OPUC and WUTC. NW Natural also has natural gas storage services, which are regulated by the FERC, and to a certain extent by the OPUC and WUTC. Additionally, certain of NW Holdings' subsidiaries own water businesses, which are regulated by the public utility commission in the state in which the water utility is located, which is currently Oregon, Washington, Idaho, Texas and Arizona. Wastewater businesses, to the extent they are regulated, are generally regulated by the public utility commissions in the state in which the wastewater utility is located, which is currently Texas and Arizona. Accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by these regulatory authorities in accordance with U.S. GAAP. The businesses in which customer rates are regulated have approved cost-based rates which are intended to allow such businesses to earn a reasonable return on invested capital. In applying regulatory accounting principles, NW Holdings and NW Natural capitalize or defer certain costs and revenues as regulatory assets and liabilities pursuant to orders of the applicable state public utility commission, which provide for the recovery of revenues or expenses from, or refunds to, utility customers in future periods, including a return or a carrying charge in certain cases. 88 Amounts NW Natural deferred as regulatory assets and liabilities were as follows: Regulatory Assets In thousands 2024 2023 NW Natural: Current: Unrealized loss on derivatives (1) $ 75,272 $ 98,661 Gas costs 5,340 9,301 Environmental costs (2) 10,746 9,950 Decoupling (3) — 2,288 Pension balancing (4) 7,131 7,131 Income taxes 2,208 2,208 Washington Climate Commitment Act compliance 7,778 20,537 COVID-19 deferrals and expenses, net 778 9,685 Security and systems improvements 2,711 3,267 Industrial demand side management (5) 8,551 6,964 Other (6) 9,576 8,278 Total current - NW Natural 130,091 178,270 Other (NW Holdings) 25 — Total current - NW Holdings $ 130,116 $ 178,270 Non-current: Unrealized loss on derivatives (1) $ 13,307 $ 28,055 Pension balancing (4) 21,681 27,460 Income taxes 9,560 10,731 Pension and other postretirement benefit liabilities 111,236 114,010 Environmental costs (2) 167,086 118,619 Gas costs 1,442 1,917 Decoupling (3) — 1,017 Washington Climate Commitment Act compliance 22,136 — COVID-19 deferrals and expenses, net 927 1,080 Security and systems improvements 8,531 9,734 Industrial demand side management (5) 7,390 5,554 Other (6) 18,386 15,241 Total non-current - NW Natural 381,682 333,418 Other (NW Holdings) 817 25 Total non-current - NW Holdings $ 382,499 $ 333,443 89 Regulatory Liabilities In thousands 2024 2023 NW Natural: Current: Gas costs $ 35,947 $ 6,375 Unrealized gain on derivatives (1) 6,563 11,184 Decoupling (3) 8,726 7,612 Income taxes 4,726 4,726 Asset optimization revenue sharing 17,500 31,583 Washington Climate Commitment Act proceeds 36,595 17,199 Other (6) 5,990 6,233 Total current - NW Natural 116,047 84,912 Other (NW Holdings) 133 50 Total current - NW Holdings $ 116,180 $ 84,962 Non-current: Gas costs $ 14,220 $ 8,556 Unrealized gain on derivatives (1) 394 373 Decoupling (3) 2,872 2,118 Income taxes (7) 164,759 169,485 Accrued asset removal costs (8) 526,526 496,235 Asset optimization revenue sharing 2,073 2,325 Other (6) 18,328 15,855 Total non-current - NW Natural 729,172 694,947 Other (NW Holdings) 945 949 Total non-current - NW Holdings $ 730,117 $ 695,896 (1) Unrealized gains or losses on derivatives are non-cash items and therefore do not earn a rate of return or a carrying charge. These amounts are recoverable through natural gas distribution rates as part of the annual Purchased Gas Adjustment (PGA) mechanism when realized at settlement. (2) Refer to the Environmental Cost Deferral and Recovery table in Note 17 for a description of environmental costs. (3) This deferral represents the margin adjustment resulting from differences between actual and expected volumes. (4) Balance represents deferred net periodic benefit costs as approved by the OPUC. (5) Energy efficiency program for industrial sales customers in Oregon to provide assistance with reducing their gas usage. (6) Balances consist of deferrals and amortizations under approved regulatory mechanisms and typically earn a rate of return or carrying charge. (7) Balance represents excess deferred income tax benefits subject to regulatory flow-through. See Note 11. (8) Estimated costs of removal on certain regulated properties are collected through rates. See "Accounting Policies— Plant, Property, and Accrued Asset Removal Costs " below. The amortization period for NW Natural's regulatory assets and liabilities ranges from less than one year to an indeterminable period. Regulatory deferrals for gas costs payable are generally amortized over 12 months beginning each November 1 following the gas contract year during which the deferred gas costs are recorded. Similarly, most other regulatory deferred accounts are amortized over 12 months. However, certain regulatory account balances, such as income taxes, environmental costs, pension liabilities, and accrued asset removal costs, are large and tend to be amortized over longer periods once NW Natural has agreed upon an amortization period with the respective regulatory agency. We believe all costs incurred and deferred at December 31, 2024 are prudent. All regulatory assets are reviewed annually for recoverability, or more often if circumstances warrant. If we should determine that all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Holdings and NW Natural would be required to write-off the net unrecoverable balances in the period such determination is made. Regulatory interest income o f $ 5.4 million and $ 6.5 million and regulatory interest expense of $ 4.0 million and $ 2.9 million was recognized within other income (expense), net for the years ended December 31, 2024 and 2023, respectively. Environmental Regulatory Accounting See Note 17 for information about the SRRM and OPUC orders regarding implementation. New Accounting Standards NW Natural and NW Holdings consider the applicability and impact of all accounting standards updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on consolidated financial position or results of operations. 90 Recently Issued Accounting Pronouncements JOINT VENTURE FORMATIONS. In August 2023, the FASB issued ASU 2023-05, which requires a joint venture to initially measure all contributions received upon its formation at fair value. The standard is effective for all joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources. SEGMENT REPORTING. In November 2023, the FASB issued ASU 2023-07, which requires additional disclosures about significant segment expenses. The disclosures were required beginning with this annual report for the year ending December 31, 2024. The adoption of this standard did not have an impact on our results of operations, liquidity or capital resources. See Note 4. IMPROVEMENTS TO INCOME TAX DISCLOSURES. In December 2023, the FASB issued ASU 2023-09, which requires additional disclosures about income taxes. The disclosures are required beginning with our annual