2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are described in Note 2 of the 2014 Form 10-K. There were no material changes to those accounting policies during the nine months ended September 30, 2015. The following are current updates to certain critical accounting policy estimates and new accounting standards.

Regulatory Accounting

In applying regulatory accounting in accordance with generally accepted accounting principles in the United States of America (GAAP), we capitalize or defer certain costs and revenues as regulatory assets and liabilities. These deferrals were as follows:



	Regulatory Assets
	September 30,				December 31,
In thousands	2015		2014		2014
Current:
Unrealized loss on derivatives⁽¹⁾	$	21,949	$	5,520	$	29,889
Gas costs	19,274		23,795		21,794
Environmental costs⁽²⁾	12,364		—		—
Decoupling⁽³⁾	19,391		11,847		2,219
Other⁽³⁾	9,734		11,088		14,660
Total current	$	82,712	$	52,250	$	68,562
Non-current:
Unrealized loss on derivatives⁽¹⁾	$	3,540	$	551	$	3,515
Pension balancing⁽⁴⁾	41,193		30,682		32,541
Income taxes	44,767		49,007		47,427
Pension and other postretirement benefit liabilities	189,111		118,485		201,845
Environmental costs⁽²⁾	37,443		51,861		58,859
Gas costs	2,098		1,936		5,971
Other⁽³⁾	15,801		10,799		18,750
Total non-current	$	333,953	$	263,321	$	368,908



	Regulatory Liabilities
	September 30,				December 31,
In thousands	2015		2014		2014
Current:
Gas costs	$	22,499	$	6,704	$	5,700
Unrealized gain on derivatives⁽¹⁾	2,939		5,320		240
Other⁽³⁾	8,689		11,328		13,165
Total current	$	34,127	$	23,352	$	19,105
Non-current:
Gas costs	$	6,357	$	410	$	2,507
Unrealized gain on derivatives⁽¹⁾	299		602		—
Accrued asset removal costs⁽⁵⁾	324,467		307,815		311,238
Other⁽³⁾	3,367		3,673		3,460
Total non-current	$	334,490	$	312,500	$	317,205


⁽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 utility rates as part of the annual Purchased Gas Adjustment (PGA) mechanism when realized at settlement.

⁽²⁾

Environmental costs relate to specific sites approved for regulatory deferral by the Public Utility Commission of Oregon (OPUC) and Washington Utilities and Transportation Commission (WUTC). In Oregon, we earn a carrying charge on cash amounts paid, whereas amounts accrued but not yet paid do not earn a carrying charge until expended. We also accrue a carrying charge on insurance proceeds for amounts owed to customers. In Washington, a carrying charge related to deferred amounts will be determined in a future proceeding. The current portion of environmental assets represents deferred costs to be recovered in Oregon rates beginning November 1, 2015. See Note 13.


⁽³⁾	These balances primarily consist of deferrals and amortizations under approved regulatory mechanisms. The accounts being amortized typically earn a rate of return or carrying charge.

⁽⁴⁾

The deferral of certain pension expenses above or below the amount set in rates was approved by the OPUC, with recovery of these deferred amounts through the implementation of a balancing account, which includes the expectation of lower net periodic benefit costs in future years. Deferred pension expense balances include accrued interest at the utility’s authorized rate of return, with the equity portion of interest income recognized when amounts are collected in rates.


⁽⁵⁾	Estimated costs of removal on certain regulated properties are collected through rates. See Note 2 of the 2014 Form 10-K.

Environmental Regulatory Accounting

On February 20, 2015 the OPUC issued an Order addressing outstanding implementation items related to the Site Remediation and Recovery Mechanism (SRRM). Under the Order, $15 million of $95 million in total environmental remediation expenses deferred through 2012 were disallowed. The OPUC found the $95 million to be prudent but disallowed this amount from rate recovery based on its determination of how an earnings test should apply to years between 2003 and 2012, with adjustments for other factors the OPUC deemed relevant. We recognized the $15 million pre-tax disallowance, or $9.1 million after-tax charge, during the first quarter of 2015. The charge was recorded in operations and maintenance expense. As a result of the order, we recognized $5.3 million pre-tax of interest income related to the equity earnings on our deferred environmental expenses. See Note 13.

New Accounting Standards

Recent Accounting Pronouncements

We consider the applicability and impact of all accounting standards updates (ASUs) issued by the Financial Accounting Standards Board (FASB). Accounting standards updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

BENEFIT PLAN ACCOUNTING. On July 31, 2015, the FASB issued ASU 2015-12, Plan Accounting: Defined Benefit Pension Plans, Defined Contribution Pension Plans, and Health and Welfare Benefit Plans. The ASU outlines a three part update. Only part two of the update applies to the Company, which simplifies the investment disclosure requirements for employee benefit plans by allowing certain disclosures at an aggregated level, reducing the number of ways assets must be grouped and analyzed, and no longer requiring investment strategy disclosures for certain investments. The new requirements are effective for the Company beginning January 1, 2016, with early adoption permitted. We will be required to apply the disclosure guidance retrospectively and do not expect the ASU to materially affect our financial statements and disclosures.

FAIR VALUE MEASUREMENT. On May 1, 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent). The ASU removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and also removes certain disclosure requirements. The new requirements are effective for the Company beginning January 1, 2016 with retrospective application to all periods presented required and early adoption permitted. We do not expect the ASU to materially affect our financial statements and disclosures.

INTANGIBLES - GOODWILL AND OTHER - INTERNAL-USE SOFTWARE. On April 15, 2015 the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The ASU provides customers guidance on how to determine whether a cloud computing arrangement includes a software license. The new requirements are effective for the Company beginning January 1, 2016. The ASU can be applied prospectively or retrospectively and early adoption is permitted. We intend to apply the guidance prospectively and do not expect the ASU to materially affect our financial statements and disclosures.

DEBT ISSUANCE COSTS. On April 7, 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of debt issuance costs in the balance sheet as a direct deduction from the associated debt liability. The new requirements are effective for the Company beginning January 1, 2016. Early adoption is permitted, and the new guidance will be applied on a retrospective basis. We do not expect the ASU to materially affect our financial statements and disclosures.

REVENUE RECOGNITION. On May 28, 2014, the FASB issued ASU 2014-09 Revenue From Contracts with Customers. The underlying principle of the guidance requires entities to recognize revenue depicting the transfer of goods or services to customers at amounts expected to be entitled to in exchange for those goods or services. The model provides a five-step approach to revenue recognition: (1) identify the contract(s) with the customer; (2) identify the separate performance obligations in the contract(s); (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The new requirements prescribe either a full retrospective or simplified transition adoption method. On August 12, 2015, the FASB deferred the effective date by one year to January 1, 2018 for annual reporting periods beginning after December 15, 2017. The FASB also permitted early adoption of the standard, but not before the original effective date of January 1, 2017. We are currently assessing the effect of this standard on our financial statements and disclosures.