Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure Stock Based Compensation [Abstract]

Stock Based Compensation [Text Block]

5. STOCK-BASED COMPENSATION

Our stock-based compensation plans include a Long-Term Incentive Plan (LTIP) under which various types of equity awards may be granted, an Employee Stock Purchase Plan, and a Restated Stock Option Plan (Restated SOP). The Restated SOP was terminated for new stock option grants in 2012. These plans are designed to promote stock ownership in NW Natural by employees and officers. For additional information on our stock-based compensation plans, see Note 6 in the 2013 Form 10-K and updates provided below.

Long-Term Incentive Plan

Performance-Based Stock Awards

LTIP performance shares incorporate a combination of market, performance, and service-based factors. During the first quarter of 2014, 43,625 performance-based shares were granted under the LTIP based on target-level awards and a weighted-average grant date fair value of $42.43 per share. Fair value for the market based portion of the LTIP was estimated as of the date of grant using a Monte-Carlo option pricing model based on the following assumptions:

Stock price on valuation date	$	41.78
Performance term (in years)	3.0
Quarterly dividends paid per share	$	0.460
Expected dividend yield	4.3		%
Dividend discount factor	0.8845

Performance-Based Restricted Stock Units (RSUs)

During the first quarter of 2014, 31,113 performance-based RSUs were granted under the LTIP with a weighted-average grant date fair value of $42.03 per share. As of March 31, 2014, there was $2.6 million of unrecognized compensation cost from grants of RSUs, which is expected to be recognized over a period extending through 2019. Generally, the RSUs awarded include a performance-based threshold and a vesting period of four years from the grant date. An RSU obligates the Company upon vesting to issue the RSU holder one share of common stock plus a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of that portion of the RSU. The fair value of the RSU is equal to the closing market price of the Company's common stock on the grant date.

Restated Stock Option Plan

As of March 31, 2014, there was $0.2 million of unrecognized compensation cost from grants of stock options issued in prior years, which is expected to be recognized in 2014. The Restated SOP was terminated for new option grants in 2012; however, options that had been granted before the Restated SOP was terminated will remain outstanding until the earlier of their expiration, forfeiture, or exercise. Any new grants of stock options would be made under the LTIP. No stock options were granted under the LTIP in the three months ended March 31, 2014.