Significant accounting policies are described in Note 2 of the 2022 Form 10-K. There were no material changes to those accounting policies during the nine months ended September 30, 2023 other than those set forth in this Note 2. The following are current updates to certain critical accounting policy estimates and new accounting standards.

NW Holdings' principal business is to operate as a holding company for NW Natural and its other subsidiaries. NW Natural's principal business is the distribution of natural gas, which is regulated by the OPUC and WUTC. NW Natural also has natural gas storage services, which are regulated by the FERC, and to a certain extent by the OPUC and WUTC. Additionally, certain of NW Holdings' subsidiaries own water businesses, which are regulated by the public utility commission in the state in which the water utility is located, which is currently Oregon, Washington, Idaho, Texas and Arizona. Wastewater businesses, to the extent they are regulated, are generally regulated by the public utility commissions in the state in which the wastewater utility is located, which is currently Texas and Arizona.

In applying regulatory accounting principles, NW Holdings and NW Natural capitalize or defer certain costs and revenues as regulatory assets and liabilities pursuant to orders of the applicable state public utility commission, which provide for the recovery of revenues or expenses from, or refunds to, utility customers in future periods, including a return or a carrying charge in certain cases.


	Regulatory Assets
	September 30,				December 31,
In thousands	2023		2022		2022
NW Natural:
Current:
Unrealized loss on derivatives(1)	$	46,603	$	19,594	$	28,728
Gas costs	11,361		52,115		61,223
Environmental costs(2)	7,047		9,461		7,392
Decoupling(3)	3,480		114		—
Pension balancing(4)	7,131		7,131		7,131
Income taxes	2,208		2,399		2,208
COVID-19 deferrals and expenses, net	11,127		—		789
Other(5)	19,568		14,016		10,020
Total current - NW Natural	$	108,525	$	104,830	$	117,491


Non-current:
Unrealized loss on derivatives(1)	$	21,085	$	18,824	$	20,838
Pension balancing(4)	29,450		34,928		32,997
Income taxes	10,540		11,168		10,943
Pension and other postretirement benefit liabilities	101,413		107,722		101,413
Environmental costs(2)	108,941		82,667		104,253
Gas costs	718		3,369		22,355
Decoupling(3)	212		—		—
Washington Climate Commitment Act compliance	12,513		—		—
COVID-19 deferrals and expenses, net	1,811		15,147		14,555
Other(5)	25,957		27,771		33,053
Total non-current - NW Natural	$	312,640	$	301,596	$	340,407
Other (NW Holdings)	25		64		25
Total non-current - NW Holdings	$	312,665	$	301,660	$	340,432


	Regulatory Liabilities
	September 30,				December 31,
In thousands	2023		2022		2022
NW Natural:
Current:
Gas costs	$	5,030	$	944	$	4,121
Unrealized gain on derivatives(1)	22,679		62,882		194,236
Decoupling(3)	8,616		13,272		14,026
Income taxes	5,946		7,318		7,166
Asset optimization revenue sharing	29,938		23,461		26,368
Washington Climate Commitment Act proceeds	9,365		—		—
Other(5)	6,752		3,649		2,636
Total current - NW Natural	$	88,326	$	111,526	$	248,553
Other (NW Holdings)	50		25		29
Total current - NW Holdings	$	88,376	$	111,551	$	248,582
Non-current:
Gas costs	$	252	$	50	$	12,644
Unrealized gain on derivatives(1)	5,430		8,008		5,045
Decoupling(3)	588		884		3,814
Income taxes(6)	171,843		179,319		174,212
Accrued asset removal costs(7)	489,006		460,666		467,742
Asset optimization revenue sharing	—		—		8,401
Washington Climate Commitment Act proceeds	654		—		—
Other(5)	14,542		13,638		16,741
Total non-current - NW Natural	$	682,315	$	662,565	$	688,599
Other (NW Holdings)	947		982		979
Total non-current - NW Holdings	$	683,262	$	663,547	$	689,578

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

We believe all costs incurred and deferred at September 30, 2023 are prudent. All regulatory assets are reviewed annually for recoverability, or more often if circumstances warrant. If we should determine that all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Holdings and NW Natural would be required to write-off the net unrecoverable balances in the period such determination is made.

Cash and cash equivalents include cash on hand plus highly liquid investment accounts with original maturity dates of three months or less. These investments are readily convertible to cash with fair value approximating cost. As of September 30, 2023, the amount invested in money market funds was $132.6 million at NW Natural and NW Holdings. These investments are measured using net asset value per share.


	September 30,				December 31,
In thousands	2023		2022		2022
Cash and cash equivalents	$	156,616	$	108,556	$	29,270
Restricted cash included in other current and non-current assets	14,864		11,714		11,694
Cash, cash equivalents and restricted cash	$	171,480	$	120,270	$	40,964


	September 30,				December 31,
In thousands	2023		2022		2022
Cash and cash equivalents	$	145,073	$	11,386	$	12,977
Restricted cash included in other current assets	14,838		11,714		11,694
Cash, cash equivalents and restricted cash	$	159,911	$	23,100	$	24,671

Accounts receivable consist primarily of amounts due for natural gas sales and transportation services to NGD customers, plus amounts due for gas storage services. NW Holdings and NW Natural establish allowances for uncollectible accounts (allowance) for trade receivables, including accrued unbilled revenue, based on the aging of receivables, collection experience of past due account balances including payment plans, and historical trends of write-offs as a percent of revenues. A specific allowance is established and recorded for large individual customer receivables when amounts are identified as unlikely to be partially or fully recovered. Inactive accounts are written-off against the allowance after they are 120 days past due or when deemed uncollectible. Differences between the estimated allowance and actual write-offs will occur based on a number of factors, including changes in economic conditions, customer creditworthiness, and natural gas prices. The allowance for uncollectible accounts is adjusted quarterly, as necessary, based on information currently available.

The payment term of our NGD receivables is generally 15 days. For these short-term receivables, it is not expected that forecasted economic conditions would significantly affect the loss estimates under stable economic conditions. For extreme situations like a financial crisis, natural disaster, and the economic slowdown caused by the COVID-19 pandemic, we enhanced our review and analysis.

For the residential and commercial uncollectible provision, we primarily followed our standard methodology, which includes assessing historical write-off trends and current information on delinquent accounts. Beginning October 1, 2022, new collection rules from the OPUC applied to residential and commercial customers. This included enhanced protections for low-income customers, a return to pre-pandemic time payment arrangements terms, revised disconnection rules during the heating season, and other items. As a result of these Oregon rule changes and our recent collection process experience, we augmented our provision review for accounts in the following categories: closed or inactive accounts aged less than 120 days, accounts on payment plans, and all other open accounts not on payment plans. For industrial accounts, we continue to assess the provision on an account-by-account basis with specific reserves taken as necessary. NW Natural will continue to closely monitor and evaluate our accounts receivable and the provision for uncollectible accounts.


	As of						As of
	December 31, 2022		Nine Months Ended September 30, 2023				September 30, 2023
In thousands	Beginning Balance		Provision recorded, net of adjustments		Write-offs recognized, net of recoveries		Ending Balance
Allowance for uncollectible accounts:
Residential	$	2,155	$	1,802	$	(2,468)	$	1,489
Commercial	400		264		(372)		292
Industrial	188		(105)		(1)		82
Accrued unbilled and other	336		2		(116)		222
Total NW Natural	3,079		1,963		(2,957)		2,085
Other - NW Holdings	217		10		—		227
Total NW Holdings	$	3,296	$	1,973	$	(2,957)	$	2,312

NW Natural currently holds two net investments in sales-type leases, with substantially all of the net investment balance related to the North Mist natural gas storage agreement with Portland General Electric (PGE) which is billed under an OPUC-approved rate schedule. See Note 7 for more information on the North Mist lease. Due to the nature of this service, PGE may recover the costs of the lease through general rate cases. Therefore, we expect the risk of loss due to the credit of this lessee to be remote. As such, no allowance for uncollectibility was recorded for our sales-type lease receivables. NW Natural will continue monitoring the credit health of the lessees and the overall economic environment, including the economic factors closely tied to the financial health of our current and future lessees.

Under Oregon's CPP, emission reduction compliance mechanisms include: 1) compliance instruments distributed by the state, 2) Community Climate Investment (CCI) Credits, which act similar to carbon offsets, and 3) supplying alternative gaseous fuels, such as renewable natural gas and hydrogen.

Under Washington's CCA, emission reduction compliance mechanisms include: 1) allowances distributed at no cost by the state, 2) purchasing allowances at state-run auctions or secondary markets, 3) purchasing carbon offsets, and 4) supplying alternative gaseous fuels, such as renewable natural gas and hydrogen.

NW Natural will account for all purchased Oregon CCI Credits and Washington allowances as inventory at the lower of cost or market. Any compliance instruments or allowances that are acquired through government allocations at no cost will be accounted for as inventory at no cost. As of September 30, 2023, NW Natural had $18.3 million of emissions allowances for compliance in Washington recorded as inventory and no CCI Credits in Oregon.

The compliance programs allow for the sale of the compliance instruments or allowances, and as a result, should NW Natural sell these it will recognize revenue when title to the instrument or allowance is transferred to a counterparty, and NW Natural will recognize expense at the time of recognition of the related sale. In September 2023, NW Natural consigned no-cost allowances to a Washington auction and received $10.0 million in cash, which proceeds were recorded as a regulatory liability for the benefit of customers.

We measure the compliance obligation, which is based on emissions, at the carrying value of inventory held plus the fair value of any additional CCI Credits or emission allowances NW Natural would need to purchase to satisfy the obligations. As of September 30, 2023, NW Natural has not recognized a liability under the Oregon program for the purchase of CCI Credits. Under the Washington program, NW Natural has recognized a $12.1 million liability as of September 30, 2023. We expect that the costs to comply with the Oregon and Washington programs will be recovered from utility customers through rates. As a result, NW Natural recognized $12.5 million of deferred costs as of September 30, 2023.

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

JOINT VENTURE FORMATIONS. In August 2023, the FASB issued ASU 2023-05, which requires a joint venture to initially measure all contributions received upon its formation at fair value. The standard is effective for all joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

INSIDER TRADING ARRANGEMENTS. In December 2022, the SEC adopted the final rule under SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures, which requires new disclosures regarding insider trading policies and procedures, the use of certain insider trading plans and director and executive compensation regarding equity compensation awards made close in time to disclosure of material nonpublic information. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

SHARE REPURCHASES. In May 2023, the SEC adopted the final rule under SEC Release No. 34-97424, Share Repurchase Disclosure Modernization, requiring disclosures related to issuers’ share repurchases that will provide investors with enhanced information to assess the purposes and effects of the repurchases. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

CYBERSECURITY DISCLOSURES. In July 2023, the SEC issued a final rule that requires new disclosures regarding cybersecurity risk management, strategy, governance, and incidents. The disclosures are required beginning with our annual report for the year ending December 31, 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.