Segment Information

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

We primarily operate in one reportable business segment, which is NW Natural's local gas distribution business and is referred to as the NGD segment. NW Natural and NW Holdings also have investments and business activities not specifically related to the NGD segment, which are aggregated and reported as other and described below for each entity.

Natural Gas Distribution

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

NW Natural

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

Earnings from Interstate Storage Services assets are primarily related to firm storage capacity revenues. Earnings from third-party asset management services also include revenue, net of amounts shared with NGD customers, from management of NGD assets at Mist and upstream pipeline capacity when not needed to serve NGD customers. Under the Oregon sharing mechanism, NW Natural retains 80% of the pre-tax income from these services when the costs of the capacity were not included in NGD rates, or 10% of the pre-tax income when the costs have been included in these rates. The remaining 20% and 90%, respectively, are recorded to a deferred regulatory account for crediting back to NGD customers.

NW Holdings

NW Holdings' activities in Other include all remaining activities not associated with NW Natural, specifically: NW Natural Water Company, LLC (NW Natural Water or NWN Water), which consolidates the water and wastewater utility operations and is pursuing other investments in the water and wastewater sector through itself and wholly-owned subsidiaries; NW Natural Water's equity investment in Avion Water Company, Inc.; NWN Gas Storage, a wholly-owned subsidiary of NWN Energy; other pipeline assets in NNG Financial; and NW Natural Renewables Holdings, LLC (NW Natural Renewables) and its non-regulated renewable natural gas activities. Other also includes corporate revenues and expenses that cannot be allocated to other operations, including certain business development activities.

Segment Information Summary

Inter-segment transactions were immaterial for the periods presented. The following table presents summary financial information concerning the reportable segment and other.

	Three Months Ended June 30,
In thousands	NGD		Other (NW Natural)		NW Natural		Other (NW Holdings)		NW Holdings
2023
Operating revenues	$	223,714	$	4,634	$	228,348	$	9,511	$	237,859
Depreciation	29,623		257		29,880		1,413		31,293
Income (loss) from operations	10,390		2,912		13,302		541		13,843
Net income (loss)	(271)		2,055		1,784		(540)		1,244
Capital expenditures	65,215		485		65,700		7,898		73,598
2022
Operating revenues	$	184,634	$	5,617	$	190,251	$	4,709	$	194,960
Depreciation	27,062		266		27,328		782		28,110
Income (loss) from operations	10,575		3,550		14,125		(586)		13,539
Net income (loss)	157		2,576		2,733		(1,018)		1,715
Capital expenditures	91,122		750		91,872		7,310		99,182

	Six Months Ended June 30,
In thousands	NGD		Other (NW Natural)		NW Natural		Other (NW Holdings)		NW Holdings
2023
Operating revenues	$	671,484	$	11,377	$	682,861	$	17,421	$	700,282
Depreciation	59,481		543		60,024		2,734		62,758
Income (loss) from operations	119,549		7,881		127,430		(79)		127,351
Net income (loss)	71,680		5,644		77,324		(4,409)		72,915
Capital expenditures	128,857		441		129,298		15,565		144,863
Total assets at June 30, 2023	4,176,376		53,538		4,229,914		306,791		4,536,705
2022
Operating revenues	$	526,032	$	10,843	$	536,875	$	8,386	$	545,261
Depreciation	54,435		530		54,965		1,574		56,539
Income (loss) from operations	96,238		6,438		102,676		(1,499)		101,177
Net income (loss)	55,547		4,602		60,149		(2,195)		57,954
Capital expenditures	155,402		787		156,189		11,507		167,696
Total assets at June 30, 2022	3,875,237		54,760		3,929,997		170,521		4,100,518
Total assets at December 31, 2022	4,392,699		60,019		4,452,718		295,608		4,748,326

Natural Gas Distribution Margin

NGD margin is the primary financial measure used by the Chief Operating Decision Maker (CODM), consisting of NGD operating revenues, reduced by the associated cost of gas, environmental remediation expense, and revenue taxes. The cost of gas purchased for NGD customers is generally a pass-through cost in the amount of revenues billed to regulated NGD customers. Environmental remediation expense represents collections received from customers through environmental recovery mechanisms in Oregon and Washington as well as adjustments for the Oregon environmental earnings test when applicable. This is offset by environmental remediation expense presented in operating expenses. Revenue taxes are collected from NGD customers and remitted to taxing authorities. The collections from customers are offset by the expense recognition of the obligation to the taxing authority. By subtracting cost of gas, environmental remediation expense, and revenue taxes from NGD operating revenues, NGD margin provides a key metric used by the CODM in assessing the performance of the NGD segment.

The following table presents additional segment information concerning NGD margin:

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2023		2022		2023		2022
NGD margin calculation:
NGD distribution revenues	$	218,988	$	179,727	$	662,049	$	516,214
Other regulated services	4,726		4,907		9,435		9,818
Total NGD operating revenues	223,714		184,634		671,484		526,032
Less: NGD cost of gas	102,490		79,776		308,295		225,420
Environmental remediation	2,140		2,272		7,515		6,970
Revenue taxes	9,159		8,208		28,134		21,532
NGD margin	$	109,925	$	94,378	$	327,540	$	272,110