Significant accounting policies are described in Note 2 of the 2023 Form 10-K. There were no material changes to those accounting policies during the three months ended March 31, 2024 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. Accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by these regulatory authorities in accordance with U.S. GAAP. The businesses in which customer rates are regulated have approved cost-based rates which are intended to allow such businesses to earn a reasonable return on invested capital.

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
	March 31,				December 31,
In thousands	2024		2023		2023
NW Natural:
Current:
Unrealized loss on derivatives(1)	$	52,677	$	44,370	$	98,661
Gas costs	8,279		51,296		9,301
Environmental costs(2)	9,864		6,947		9,950
Decoupling(3)	958		—		2,288
Pension balancing(4)	7,131		7,131		7,131
Income taxes	2,208		2,208		2,208
Washington Climate Commitment Act compliance	19,761		—		20,537
COVID-19 deferrals and expenses, net	4,798		787		9,685
Other(5)	21,965		13,807		18,509
Total current - NW Natural	127,641		126,546		178,270
Other (NW Holdings)	25		—		—
Total current - NW Holdings	$	127,666	$	126,546	$	178,270
Non-current:
Unrealized loss on derivatives(1)	$	12,744	$	15,382	$	28,055
Pension balancing(4)	25,016		30,613		27,460
Income taxes	9,930		10,540		10,731
Pension and other postretirement benefit liabilities	112,791		101,413		114,010
Environmental costs(2)	112,464		99,541		118,619
Gas costs	1,319		6,546		1,917
Decoupling(3)	—		—		1,017
Washington Climate Commitment Act compliance	4,223		6,312		—
COVID-19 deferrals and expenses, net	1,128		12,815		1,080
Other(5)	29,452		28,232		30,529
Total non-current - NW Natural	309,067		311,394		333,418
Other (NW Holdings)	106		25		25
Total non-current - NW Holdings	$	309,173	$	311,419	$	333,443


	Regulatory Liabilities
	March 31,				December 31,
In thousands	2024		2023		2023
NW Natural:
Current:
Gas costs	$	13,753	$	5,670	$	6,375
Unrealized gain on derivatives(1)	5,420		8,890		11,184
Decoupling(3)	10,137		12,606		7,612
Income taxes	4,726		5,143		4,726
Asset optimization revenue sharing	13,192		19,040		31,583
Washington Climate Commitment Act compliance	25,655		—		17,199
Other(5)	4,580		6,145		6,233
Total current - NW Natural	77,463		57,494		84,912
Other (NW Holdings)	196		29		50
Total current - NW Holdings	$	77,659	$	57,523	$	84,962
Non-current:
Gas costs	$	5,555	$	2,024	$	8,556
Unrealized gain on derivatives(1)	2,700		1,432		373
Decoupling(3)	3,673		3,931		2,118
Income taxes(6)	165,719		170,289		169,485
Accrued asset removal costs(7)	503,539		474,764		496,235
Asset optimization revenue sharing	—		—		2,325

Other(5)	18,567		15,908		15,855
Total non-current - NW Natural	699,753		668,348		694,947
Other (NW Holdings)	950		980		949
Total non-current - NW Holdings	$	700,703	$	669,328	$	695,896

(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 March 31, 2024 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 March 31, 2024, the amount invested in money market funds was $48.8 million at NW Natural and NW Holdings. As of March 31, 2023, the amount invested in money market funds was $107.6 million at NW Natural and $112.6 million at NW Holdings. These investments are measured using net asset value per share.

Restricted cash is primarily comprised of funds from public purpose charges for programs that assist low-income customers with bill payments or energy efficiency. These balances are included in other current assets in the NW Holdings and NW Natural balance sheets. There were no transfers between restricted cash and cash and cash equivalents during the three months ended March 31, 2024 and 2023.


	March 31,				December 31,
In thousands	2024		2023		2023
Cash and cash equivalents	$	72,375	$	140,821	$	32,920
Restricted cash included in other current assets	16,883		15,173		16,704
Cash, cash equivalents and restricted cash	$	89,258	$	155,994	$	49,624


	March 31,				December 31,
In thousands	2024		2023		2023
Cash and cash equivalents	$	61,906	$	129,731	$	19,841
Restricted cash included in other current assets	16,858		15,173		16,679
Cash, cash equivalents and restricted cash	$	78,764	$	144,904	$	36,520

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, 2023		Three Months Ended March 31, 2024				March 31, 2024
In thousands	Beginning Balance		Provision recorded, net of adjustments		Write-offs recognized, net of recoveries		Ending Balance
Allowance for uncollectible accounts:
Residential	$	2,397	$	935	$	(192)	$	3,140
Commercial	501		93		(63)		531
Industrial	65		(9)		—		56
Accrued unbilled and other	265		(31)		(15)		219
Total NW Natural	3,228		988		(270)		3,946
Other - NW Holdings	227		8		—		235
Total NW Holdings	$	3,455	$	996	$	(270)	$	4,181

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.

NW Natural is subject to greenhouse gas (GHG) emission reduction requirements under the Washington Climate Commitment Act (CCA) regulations. 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 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 March 31, 2024, NW Natural had $39.5 million of emissions allowances for compliance in Washington recorded as inventory.

The CCA allows for the sale of 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 2023 and 2024, NW Natural consigned no-cost allowances to Washington auctions and received a total of $18.6 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 emission allowances NW Natural would need to purchase to satisfy the obligations. Under the Washington program, NW Natural has recognized a $24.0 million liability as of March 31, 2024. A portion of the costs to comply with the Washington program are currently being recovered from utility customers through rates beginning January 1, 2024. NW Natural recognized $24.0 million of deferred costs as of March 31, 2024.

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.

SEGMENT REPORTING. In November 2023, the FASB issued ASU 2023-07, which requires additional disclosures about significant segment expenses. The disclosures are required beginning with our annual report for the year ending December 31, 2024. The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

IMPROVEMENTS TO INCOME TAX DISCLOSURES. In December 2023, the FASB issued ASU 2023-09, which requires additional disclosures about income taxes. The disclosures are required beginning with our annual report for the year ending December 31, 2025. The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.