Segment Information

12 Months Ended

Dec. 31, 2011

Disclosure Segment Information [Abstract]

Segment Information Text Block

4.       Segment Information

We operate in two primary reportable business segments, local gas distribution and gas storage.  We also have other investments and business activities not specifically related to one of these two reporting segments, which we aggregate and report as “other.”  We refer to our local gas distribution business as the “utility,” and our “gas storage” and “other” business segments as “non-utility.” Our gas storage segment includes NWN Gas Storage, which is a wholly-owned subsidiary of NWN Energy, Gill Ranch, which is a wholly-owned subsidiary of NWN Gas Storage, the non-utility portion of our Mist underground storage facility in Oregon (Mist) and third-party asset management services. Our “other” segment includes NNG Financial and our equity investment in PGH, which is pursuing development ofthe Palomar pipeline project (see Other, below).

Local Gas Distribution

Our 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. As a regulated utility, we are responsible for building and maintaining a safe and reliable pipeline distribution system, purchasing sufficient gas supplies from producers and marketers, contracting for firm and interruptible transportation of gas over interstate pipelines to bring gas from the supply basins into our service territory, and re-selling the gas to customers subject to rates, terms and conditions approved by the OPUC or WUTC.  Gas distribution also includes taking customer-owned gas and transporting it from interstate pipeline connections, or city gates, to the customers' end-use facilities for a fee, which is approved by the OPUC or WUTC.  Approximately 90 percent of our customers are located in Oregon and 10 percent in Washington. On an annual basis, residential and commercial customers typically account for 50 to 60 percent of our utility's total volumes delivered and 80 to 90 percent of our utility's margin.Industrial customers account for the remaining 40 to 50 percent of volumes and 5 to 15 percent of margin.  The remaining 10 percent or less of margin is derived from miscellaneous services, gains or lossesfrom an incentive gas cost sharing mechanism and other fees.

Industrial customers we serve include: pulp, paper and other forest products; the manufacture of electronic, electrochemical and electrometallurgical products; the processing of farm and food products; the production of various mineral products; metal fabrication and casting; the production of machine tools, machinery and textiles; the manufacture of asphalt, concrete and rubber; printing and publishing; nurseries; government and educational institutions; and electric generation.  No individual customer or industry group accounts for a significant portion of our utility revenues or margins.

Gas Storage

Our gas storage business segment includes natural gas storage services provided to customers primarily from two underground natural gas storage facilities, our Gill Ranch gas storage facility, which commenced commercial operations in October 2010, and the non-utility portion of our Mist gas storage facility. In addition to earning revenue from customer storage contracts, we also use an independent energy marketing company to provide asset management services for utility and non-utility capacity under contractual arrangement, the results of which are included in this business segment.   For the years ended December 31, 2011, 2010 and 2009, this business segment derived a majority of its revenues from asset management services and from firm and interruptible gas storage contracts.  

Mist Gas Storage Facility.Earnings from non-utility assets at the Mist facility are primarily related to firm storage capacity revenues. Earnings for the gas storage segmentinclude revenues, net of amounts shared with core utility customers, from management of utility assets at Mist and upstream capacity when not needed to serve core utility customers. In Oregon, the gas storage segment retains 80 percent of the pre-tax income from these services when the costs of the capacity have not been included in utility rates, or 33 percent of the pre-tax income when the costs have been included in utility rates. The remaining 20 percent and 67 percent, respectively, are credited to a deferred regulatory account for creditingback to core utility customers.  We have a similar sharing mechanism in Washington for revenue derived from storage and third party asset management services.

Gill Ranch Gas Storage Facility.Gill Ranch has a joint project agreement with Pacific Gas and Electric Company (PG&E) toown the Gill Ranch underground natural gas storage facility near Fresno, California. Gill Ranch has a 75 percent undivided ownership interest in the facility, which offers storage services to the California market at market-based rates, subject to CPUC regulation including, but not limited to, service terms and conditions and tariff regulations.

Other

We have non-utility investments and other business activities which are aggregated and reported as a business segment called “other.”  Although in the aggregate these investments and activities are currently not material to consolidated operations, we identify and report them as a stand-alone segment based on our organizational structure and decision-making process because these business investments and activities are not specifically related to our utility or gas storage segments.  This segment primarily consists of an equity method investment in a joint venture to build and operate an interstate gas transmission pipeline in Oregon (Palomar) and other pipeline assets in NNG Financial. For more on information on Palomar, see Note 12.  This segment also includes some operating and non-operating revenues and expenses of the parent company that cannot be allocated to utility operations.

NNG Financial holds certain non-utility financial investments, but its assets primarily consist of an active, wholly-owned subsidiary which owns a 10 percent interest in an 18-mile interstate natural gas pipeline. NNG Financial's total assets were $1.1 million at both December 31, 2011 and 2010.

Segment Information Summary

The following table presents summary financial information about the reportable segments for the years ended 2011, 2010 and 2009.  Inter-segment transactions are insignificant.

Thousands		Utility		Gas Storage		Other		Total
2011
Net operating revenues	$	342,970	$	26,354	$	109	$	369,433
Depreciation and amortization		63,843		6,161		-		70,004
Income from operations		135,722		9,090		33		144,845
Net income		60,527		4,101		(730)		63,898
Total assets at December 31, 2011		2,435,888		294,637		16,049		2,746,574
2010
Net operating revenues	$	346,148	$	21,249	$	184	$	367,581
Depreciation and amortization		62,661		2,463		-		65,124
Income from operations		145,688		11,855		62		157,605
Net income		66,262		6,110		295		72,667
Total assets at December 31, 2010		2,310,388		282,945		23,283		2,616,616
2009
Net operating revenues	$	357,005	$	19,738	$	144	$	376,887
Depreciation and amortization		61,472		1,342		-		62,814
Income from operations		142,228		16,442		46		158,716
Net income		65,960		8,923		239		75,122