Revenue

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer

REVENUE

The following tables present disaggregated revenue from continuing operations:

	Three Months Ended September 30,
In thousands	NGD		Other (NW Natural)		NW Natural		Other (NW Holdings)		NW Holdings
2020
Natural gas sales	$	78,427	$	—	$	78,427	$	—	$	78,427
Gas storage revenue, net	—		2,482		2,482		—		2,482
Asset management revenue, net	—		939		939		—		939
Appliance retail center revenue	—		1,185		1,185		—		1,185
Other revenue	333		—		333		4,917		5,250
Revenue from contracts with customers	78,760		4,606		83,366		4,917		88,283
Alternative revenue	395		—		395		—		395
Leasing revenue	4,606		—		4,606		—		4,606
Total operating revenues	$	83,761	$	4,606	$	88,367	$	4,917	$	93,284
2019
Natural gas sales	$	80,480	$	—	$	80,480	$	—	$	80,480
Gas storage revenue, net	—		2,333		2,333		—		2,333
Asset management revenue, net	—		1,208		1,208		—		1,208
Appliance retail center revenue	—		988		988		—		988
Other revenue	247		—		247		2,725		2,972
Revenue from contracts with customers	80,727		4,529		85,256		2,725		87,981
Alternative revenue	(2,607)		—		(2,607)		—		(2,607)
Leasing revenue	4,943		—		4,943		—		4,943
Total operating revenues	$	83,063	$	4,529	$	87,592	$	2,725	$	90,317

	Nine Months Ended September 30,
In thousands	NGD		Other (NW Natural)		NW Natural		Other (NW Holdings)		NW Holdings
2020
Natural gas sales	$	469,113	$	—	$	469,113	$	—	$	469,113
Gas storage revenue, net	—		7,267		7,267		—		7,267
Asset management revenue, net	—		1,999		1,999		—		1,999
Appliance retail center revenue	—		3,547		3,547		—		3,547
Other revenue	1,002		—		1,002		11,353		12,355
Revenue from contracts with customers	470,115		12,813		482,928		11,353		494,281
Alternative revenue	5,288		—		5,288		—		5,288
Leasing revenue	13,837		—		13,837		—		13,837
Total operating revenues	$	489,240	$	12,813	$	502,053	$	11,353	$	513,406
2019
Natural gas sales	$	488,681	$	—	$	488,681	$	—	$	488,681
Gas storage revenue, net	—		7,856		7,856		—		7,856
Asset management revenue, net	—		3,174		3,174		—		3,174
Appliance retail center revenue	—		3,562		3,562		—		3,562
Other revenue	351		—		351		4,428		4,779
Revenue from contracts with customers	489,032		14,592		503,624		4,428		508,052
Alternative revenue	(16,126)		—		(16,126)		—		(16,126)
Leasing revenue	7,182		—		7,182		—		7,182
Total operating revenues	$	480,088	$	14,592	$	494,680	$	4,428	$	499,108

NW Natural's revenue represents substantially all of NW Holdings' revenue and is recognized for both registrants when the obligation to customers is satisfied and in the amount expected to be received in exchange for transferring goods or providing services. Revenue from contracts with customers contains one performance obligation that is generally satisfied over time, using the output method based on time elapsed, due to the continuous nature of the service provided. The transaction price is determined by a set price agreed upon in the contract or dependent on regulatory tariffs. Customer accounts are settled on a monthly basis or paid at time of sale and based on historical experience. It is probable that we will collect substantially all of the consideration to which we are entitled. We evaluated the probability of collection in accordance with the current expected credit losses standard.

NW Holdings and NW Natural do not have any material contract assets, as net accounts receivable and accrued unbilled revenue balances are unconditional and only involve the passage of time until such balances are billed and collected. NW Holdings and NW Natural do not have any material contract liabilities.

Revenue taxes are included in operating revenues with an equal and offsetting expense recognized in operating expense in the consolidated statements of comprehensive income. Revenue-based taxes are primarily franchise taxes, which are collected from NGD customers and remitted to taxing authorities.

Natural Gas Distribution

Natural gas sales. NW Natural's primary source of revenue is providing natural gas to customers in the NGD service territory, which includes residential, commercial, industrial and transportation customers. NGD revenue is generally recognized over time upon delivery of the gas commodity or service to the customer, and the amount of consideration received and recognized as revenue is dependent on the Oregon and Washington tariffs. Customer accounts are to be paid in full each month, and there is no right of return or warranty for services provided. Revenues include firm and interruptible sales and transportation services, franchise taxes recovered from the customer, late payment fees, service fees, and accruals for gas delivered but not yet billed (accrued unbilled revenue). The accrued unbilled revenue balance is based on estimates of deliveries during the period from the last meter reading and management judgment is required for a number of factors used in this calculation, including customer use and weather factors.

We applied the significant financing practical expedient and have not adjusted the consideration NW Natural expects to receive from NGD customers for the effects of a significant financing component as all payment arrangements are settled annually. Due to the election of the right to invoice practical expedient, we do not disclose the value of unsatisfied performance obligations.

Alternative revenue. Weather normalization (WARM) and decoupling mechanisms are considered to be alternative revenue programs. Alternative revenue programs are considered to be contracts between NW Natural and its regulator and are excluded from revenue from contracts with customers.

Leasing revenue. Leasing revenue primarily consists of revenues from NW Natural's North Mist Storage contract with Portland General Electric (PGE) in support of PGE's gas-fired electric power generation facilities under an initial 30-year contract with options to extend, totaling up to an additional 50 years upon mutual agreement of the parties. The facility is accounted for as a sales-type lease with regulatory accounting deferral treatment. The investment is included in rate base under an established cost-of-service tariff schedule, with revenues recognized according to the tariff schedule and as such, profit upon commencement was deferred and will be amortized over the lease term. Leasing revenue also contains rental revenue from small leases of property owned by NW Natural to third parties. The majority of these transactions are accounted for as operating leases and the revenue is recognized over the term of the lease agreement. Lease revenue is excluded from revenue from contracts with customers. See Note 6 for additional information.

NW Natural Other

Gas storage revenue. NW Natural's other revenue includes gas storage activity, which includes Interstate Storage Services used to store natural gas for customers. Gas storage revenue is generally recognized over time as the gas storage service is provided to the customer and the amount of consideration received and recognized as revenue is dependent on set rates defined per the storage agreements. Noncash consideration in the form of dekatherms of natural gas is received as consideration for providing gas injection services to gas storage customers. This noncash consideration is measured at fair value using the average spot rate. Customer accounts are generally paid in full each month, and there is no right of return or warranty for services provided. Revenues include firm and interruptible storage services, net of the profit sharing amount refunded to NGD customers.

Asset management revenue. Revenues include the optimization of third-party storage assets and pipeline capacity and are provided net of the profit sharing amount refunded to NGD customers. Certain asset management revenues received are recognized over time using a straight-line approach over the term of each contract, and the amount of consideration received and recognized as revenue is dependent on a variable pricing model. Variable revenues earned above guaranteed amounts are estimated and recognized at the end of each period using the most likely amount approach. Additionally, other asset management revenues may be based on a fixed rate. Generally, asset management accounts are settled on a monthly basis.

As of September 30, 2020, unrecognized revenue for the fixed component of the transaction price related to gas storage and asset management revenue was approximately $61.9 million. Of this amount, approximately $4.4 million will be recognized during the remainder of 2020, $18.2 million in 2021, $14.5 million in 2022, $11.6 million in 2023, $7.8 million in 2024 and $5.4 million thereafter. The amounts presented here are calculated using current contracted rates.

Appliance retail center revenue. NW Natural owns and operates an appliance store that is open to the public, where customers can purchase natural gas home appliances. Revenue from the sale of appliances is recognized at the point in time in which the appliance is transferred to the third party responsible for delivery and installation services and when the customer has legal title to the appliance. It is required that the sale be paid for in full prior to transfer of legal title. The amount of consideration received and recognized as revenue varies with changes in marketing incentives and discounts offered to customers.

NW Holdings Other

NW Holdings' primary source of other revenue is providing water and wastewater services to customers. Water and wastewater service revenue is generally recognized over time upon delivery of the water commodity or service to the customer, and the amount of consideration received and recognized as revenue is dependent on the tariffs established in the state we operate. Customer accounts are to be paid in full each month, and there is no right of return or warranty for services provided.

We applied the significant financing practical expedient and have not adjusted the consideration we expect to receive from water distribution customers for the effects of a significant financing component as all payment arrangements are settled annually. Due to the election of the right to invoice practical expedient, we do not disclose the value of unsatisfied performance obligations.