PGE participates in the wholesale marketplace to balance its supply of power, which consists of its own generation combined with wholesale market transactions, to meet the needs of its retail customers, manage risk, and administer its existing long-term wholesale contracts. Wholesale market transactions include purchases and sales of both power and fuel resulting from economic dispatch decisions for Company-owned generation resources. As a result of this ongoing business activity, PGE is exposed to commodity price risk and foreign currency exchange rate risk, from which changes in prices and/or rates may affect the Company’s financial position, results of operations, or cash flows.

PGE utilizes derivative instruments to manage its exposure to commodity price risk and foreign exchange rate risk to reduce volatility in NVPC for its retail customers. Such derivative instruments, recorded at fair value on the condensed consolidated balance sheets, may include forwards, futures, swaps, and options contracts for electricity, natural gas, and foreign currency, with changes in fair value recorded in the condensed consolidated statements of income and comprehensive income. In accordance with the ratemaking and cost recovery processes authorized by the OPUC, the Company recognizes a regulatory asset or liability to defer the gains and losses from derivative activity until settlement of the associated derivative instrument. PGE may designate certain derivative instruments as cash flow hedges or may use derivative instruments as economic hedges. The Company does not intend to engage in trading activities for non-retail purposes.

For the nine months ended September 30, 2020, PGE’s actual net variable power costs (NVPC) were $70 million above the prescribed “deadband” limit of $30 million pursuant to the Company’s power cost adjustment mechanism (PCAM). PGE will not be pursuing regulatory recovery for amounts related to trading positions that resulted in realized losses of $127 million during the third quarter of 2020. These losses were the result of a convergence of increased wholesale electricity prices at various market hubs due to extreme weather conditions, constraints to

regional transmission facilities and changes in power supply in the West that occurred in August 2020. The Company no longer has net market exposure from these trading positions. As of September 30, 2020, all other outstanding positions and related regulatory accounting deferrals have been recorded in accordance with accounting for rate-regulated enterprises.


	September 30, 2020		December 31, 2019
Current assets:
Commodity contracts:
Electricity	$	9	$	9
Natural gas	48		16
Total current derivative assets(1)	57		25
Noncurrent assets:
Commodity contracts:
Electricity	2		7
Natural gas	22		6
Total noncurrent derivative assets(1)	24		13

Total derivative assets(2)	$	81	$	38
Current liabilities:
Commodity contracts:
Electricity	$	11	$	14
Natural gas	5		9
Total current derivative liabilities	16		23
Noncurrent liabilities:
Commodity contracts:
Electricity	138		105
Natural gas	—		3
Total noncurrent derivative liabilities	138		108

Total derivative liabilities(2)	$	154	$	131

(1) Total current derivative assets are included in Other current assets, and Total noncurrent derivative assets are included in Other noncurrent assets on the condensed consolidated balance sheets.

PGE’s net volumes related to its Assets and Liabilities from price risk management activities resulting from its derivative transactions, which are expected to deliver or settle at various dates through 2035, were as follows (in millions):

PGE has elected to report positive and negative exposures resulting from derivative instruments pursuant to agreements that meet the definition of a master netting arrangement gross on the condensed consolidated balance

sheets. In the case of default on, or termination of, any contract under the master netting arrangements, such agreements provide for the net settlement of all related contractual obligations with a given counterparty through a single payment. These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, receivables and payables arising from settled positions, and other forms of non-cash collateral, such as letters of credit. As of September 30, 2020, gross amounts included as Price risk management liabilities subject to master netting agreements was $2 million, comprised solely of natural gas contracts for which PGE posted no collateral. As of December 31, 2019, PGE had no material master netting arrangements.

Net realized and unrealized losses (gains) on derivative transactions not designated as hedging instruments are classified in Purchased power and fuel in the condensed consolidated statements of income and comprehensive income and were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Commodity contracts:
Electricity	$	113	$	36	$	160	$	18
Natural Gas	(47)		(9)		(51)		(13)
Foreign currency exchange	(1)		—		—		—

Net unrealized and certain net realized losses/(gains) presented in the table above are offset within the condensed consolidated statements of income and comprehensive income by the effects of regulatory accounting. Of the net amounts recognized in Net income for the three-month periods ended September 30, 2020 and 2019, net gains of $63 million and net losses of $24 million, respectively, have been offset. Net gains of $22 million and net losses of $5 million have been offset for the nine months ended September 30, 2020 and 2019, respectively.

Assuming no changes in market prices and interest rates, the following table indicates the year in which the net unrealized loss/(gain) recorded as of September 30, 2020 related to PGE’s derivative activities would become realized as a result of the settlement of the underlying derivative instrument (in millions):


	2020		2021		2022		2023		2024		Thereafter		Total
Commodity contracts:
Electricity	$	(4)	$	6	$	7	$	8	$	8	$	113	$	138
Natural gas	(14)		(40)		(10)		(1)		—		—		(65)
Net unrealized loss/(gain)	$	(18)	$	(34)	$	(3)	$	7	$	8	$	113	$	73

PGE’s secured and unsecured debt is currently rated at investment grade by Moody’s Investors Service (Moody’s) and S&P Global Ratings (S&P). Should Moody’s or S&P reduce their rating on the Company’s unsecured debt to below investment grade, PGE could be subject to requests by certain wholesale counterparties to post additional performance assurance collateral, in the form of cash or letters of credit, based on total portfolio positions with each of those counterparties. Certain other counterparties would have the right to terminate their agreements with the Company.

The aggregate fair value of derivative instruments with credit-risk-related contingent features that were in a liability position as of September 30, 2020 was $150 million, for which PGE has posted $10 million in collateral, consisting entirely of letters of credit. If the credit-risk-related contingent features underlying these agreements were triggered at September 30, 2020, the cash requirement to either post as collateral or settle the instruments immediately would have been $145 million. As of September 30, 2020, PGE had no cash collateral posted for derivative instruments with no credit-risk-related contingent features. Cash collateral for derivative instruments is classified as Margin deposits included in Other current assets on the Company’s condensed consolidated balance sheet.


	September 30, 2020		December 31, 2019
Assets from price risk management activities:
Counterparty A	11	%	35	%
Counterparty B	16		13
Counterparty C	21		11
Counterparty D	17		11
	65	%	70	%
Liabilities from price risk management activities:
Counterparty E	94	%	79	%

See Note 4, Fair Value of Financial Instruments, for additional information concerning the determination of fair value for the Company’s Assets and Liabilities from price risk management activities.