Segment Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information [Text Block]

4. SEGMENT INFORMATION

We primarily operate in two 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 are aggregated and reported as other. We refer to our local gas distribution business as the utility, and our gas storage segment and other as non-utility. Our utility segment also includes the utility portion of our Mist underground storage facility and our North Mist gas storage expansion in Oregon and NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp. 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 Mist, and all third-party asset management services. Other includes NNG Financial and NWN Energy's equity investment in TWH, which is pursuing development of a cross-Cascades transmission pipeline project. Noindividual customer accounts for over 10% of our operating revenues.

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 89% of our customers are located in Oregon and 11% in Washington. On an annual basis, residential and commercial customers typically account for around 60% of our utility’s total volumes delivered and 90% of our utility’s margin. Industrial customers largely account for the remaining volumes and utility margin. A small amount of utility margin is also derived from miscellaneous services, gains or losses from an incentive gas cost sharing mechanism, and other service fees.

Industrial sectors 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.

Gas Storage

Our gas storage segment includes natural gas storage services provided to customers primarily from two underground natural gas storage facilities, our Gill Ranch gas storage facility, 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, the results of which are included in this business segment.

Mist Gas Storage Facility

Earnings from non-utility assets at our Mist facility in Oregon are primarily related to firm storage capacity revenues. Earnings for the Mist facility also include revenue, net of amounts shared with utility customers, from management of utility assets at Mist and upstream pipeline capacity when not needed to serve utility customers. We retain 80% of the pre-tax income from these services when the costs of the capacity have not been included in utility rates, or 33% of the pre-tax income when the costs have been included in utility rates. The remaining 20% and 67%, respectively, are recorded to a deferred regulatory account for crediting back to utility customers.

Gill Ranch Gas Storage Facility

Gill Ranch has a joint project agreement with Pacific Gas and Electric Company (PG&E) to own and operate the Gill Ranch underground natural gas storage facility near Fresno, California. Gill Ranch has a 75% undivided ownership interest in the facility and is also the operator of 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. Although this is a jointly owned property, each owner is independently responsible for financing its share of the Gill Ranch natural gas storage facility. Revenues are primarily related to firm storage capacity as well as asset management revenues.

Other

We have non-utility investments and other business activities, which are aggregated and reported as other. Other primarily consists of an equity method investment in TWH, which was formed to build and operate an interstate gas transmission pipeline in Oregon (TWP) and other pipeline assets in NNG Financial. For more information on TWP, see Note 12. Other also includes some corporate operating and non-operating revenues and expenses that cannot be allocated to utility operations.

NNG Financial's assets primarily consist of an active, wholly-owned subsidiary which owns a 10% interest in an 18-mile interstate natural gas pipeline. NNG Financial’s total assets were $0.5 million and $0.7 million at December 31, 2016 and 2015, respectively.

Segment Information Summary

Inter-segment transactions were insignificant for the periods presented. The following table presents summary financial information concerning the reportable segments:

In thousands	Utility		Gas Storage			Other			Total
2016
Operating revenues	$	650,477	$	25,266		$	224		$	675,967
Depreciation and amortization	76,289		6,000			—			82,289
Income (loss) from operations	130,570		9,136			(426		)	139,280
Net income	54,567		4,303			25			58,895
Capital expenditures	138,074		1,437			—			139,511
Total assets at December 31, 2016	2,806,627		256,333			16,841			3,079,801
2015
Operating revenues	$	702,210	$	21,356		$	225		$	723,791
Depreciation and amortization	74,410		6,513			—			80,923
Income from operations	119,215		5,032			1			124,248
Net income	53,391		174			138			53,703
Capital expenditures	115,272		3,048			—			118,320
Total assets at December 31, 2015	2,791,623		261,750			16,037			3,069,410
2014
Operating revenues	$	731,578	$	22,235		$	224		$	754,037
Depreciation and amortization	72,660		6,533			—			79,193
Income from operations	138,711		3,987			267			142,965
Net income (loss)	58,587		(364		)	469			58,692
Capital expenditures	117,322		2,770			—			120,092
Total assets at December 31, 2014	2,766,493		273,712			16,121			3,056,326

Utility Margin

Utility margin is a financial measure consisting of utility operating revenues, which are reduced by revenue taxes, the associated cost of gas, and environmental recovery revenues. The cost of gas purchased for utility customers is generally a pass-through cost in the amount of revenues billed to regulated utility customers. Environmental recovery revenues represent collections received from customers through our environmental recovery mechanism in Oregon. These collections are offset by the amortization of environmental liabilities, which is presented as environmental remediation expense in our operating expenses. By subtracting cost of gas and environmental remediation expense from utility operating revenues, utility margin provides a key metric used by our chief operating decision maker in assessing the performance of the utility segment. The gas storage segment and other emphasize growth in operating revenues as opposed to margin because they do not incur a product cost (i.e. cost of gas sold) like the utility and, therefore, use operating revenues and net income to assess performance.

The following table presents additional segment information concerning utility margin:

In thousands	2016		2015		2014
Utility margin calculation:
Utility operating revenues (1)	$	650,477	$	702,210	$	731,578
Less: Utility cost of gas	260,588		327,305		365,490
Environmental remediation expense	13,298		3,513		—
Utility margin	$	376,591	$	371,392	$	366,088

⁽¹⁾   Utility operating revenues include environmental recovery revenues, which are collections received from customers through our environmental recovery mechanism in Oregon, offset by environmental remediation expense. Collections under this mechanism began in November 2015.