Stock-based Compensation Expense

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-based Payment Arrangement [Text Block]

STOCK-BASED COMPENSATION EXPENSE

Pursuant to the Portland General Electric Company Stock Incentive Plan as amended and restated effective February 13, 2018 (the Plan), the Company may grant a variety of equity-based awards, including restricted stock units (RSUs) with time-based vesting conditions (time-based RSUs) and performance-based vesting conditions (performance-based RSUs), to non-employee directors, officers, or certain key employees. RSU activity is summarized in the following table:

	Units	Weighted Average Grant Date Fair Value
Nonvested units as of December 31, 2017	399,376	$	37.98
Granted	198,864	37.99
Forfeited	(8,556)	39.73
Vested	(160,771)	36.77
Nonvested units of December 31, 2018	428,913	38.43
Granted	210,555	49.06
Forfeited	(9,041)	41.68
Vested	(167,037)	37.52
Nonvested units as of December 31, 2019	463,390	43.52
Granted	202,883	56.45
Forfeited	(17,341)	50.27
Vested	(170,536)	45.67
Nonvested units as of December 31, 2020	478,396	48.00

A total of 4,687,500 shares of common stock were registered for issuance under the Plan, of which 2,737,180 shares remain available for future issuance as of December 31, 2020.

Outstanding RSUs provide for the payment of one Dividend Equivalent Right (DER) for each stock unit. Each DER represents an amount equal to dividends paid to shareholders on a share of PGE’s common stock and vests on the same schedule as the related RSU. The DERs are settled in shares of PGE common stock valued either at the closing stock price on the vesting date (for performance-based RSUs) or dividend payment date (for all other grants).

Time-based RSUs generally vest over a period of up to three years from the grant date. The fair value of time-based RSUs is measured based on the closing price of PGE common stock on the date of grant and charged to compensation expense on a straight-line basis over the requisite service period for the entire award. The total value of time-based RSUs vested was $1 million for the years ended December 31, 2020, 2019 and 2018.

Performance-based RSUs vest based on the extent to which performance goals are met at the end of a three-year performance period, subject to adjustment by the Compensation and Human Resources Committee of PGE’s Board of Directors. The number of RSUs that may vest under grants awarded in 2018 is based on two equally-weighted metrics: i) actual return on equity relative to allowed return on equity; and ii) a relative total shareholder return (TSR) of PGE’s common stock as compared to an index of peer companies during the performance period. Based on the attainment of the goals, the number of RSUs that vest can range from zero to 175% of the RSUs granted. The number of RSUs that may vest under grants awarded in 2019 and 2020 is based on three equally-weighted metrics: i) actual return on equity relative to allowed return on equity; ii) average EPS growth; and iii) power supply portfolio decarbonization—and relative TSR as a modifier to the total of the three equally-weighted metrics. Based on the attainment of the goals, the number of RSUs that vest can range from zero to 175% of the RSUs granted.

For return on equity, average EPS growth and carbon reduction metrics of the performance-based RSUs, fair value is measured based on the NYSE closing price of PGE common stock on the date of grant. For the TSR portion of the performance-based RSUs, fair value is determined using a Monte Carlo simulation with the following weighted average assumptions:

	2020					2019					2018
Risk-free interest rate				1.4	%				2.5	%				2.4	%
Expected term (in years)				2.9					3.0					3.0
Volatility	13.5	%	-	97.3	%	14.8	%	-	74.5	%	14.7	%	-	21.8	%

There is no expected dividend yield used in the valuation, as it is assumed that all dividends distributed during the performance period are reinvested in the Company’s underlying stock. The fair value of performance-based RSUs is charged to compensation expense on a straight-line basis over the requisite service period for the entire award based on the number of shares expected to vest. Stock-based compensation expense was calculated assuming the attainment of performance goals that would allow the weighted average vesting of 157.3%, 129.0%, and 69.0% of awarded performance-based RSUs for the respective 2020, 2019, and 2018 grants, with an estimated 5% forfeiture rate.

The total value of performance-based RSUs vested was $9 million for the year ended December 31, 2020, $7 million for 2019, and $4 million for 2018.

Stock-based compensation, included in Administrative and other expense in the consolidated statements of income, was $11 million for the year ended December 31, 2020, $9 million for 2019, and $5 million in 2018. Such amounts differ from those reported in the consolidated statements of shareholders’ equity for stock-based compensation due primarily to the impact from the income tax payments made on behalf of employees. The Company withholds a portion of the vested shares for the payment of income taxes on behalf of the employees. Not included in Administrative and other expenses in the consolidated statements of income, is the net impact from these income tax payments, partially offset by the issuance of DERs, resulting in a charge to shareholders’ equity of $2 million in 2020, 2019, and 2018.

As of December 31, 2020, unrecognized stock-based compensation expense was $13 million, which is expected to be recognized over a weighted average period of one to three years. No stock-based compensation costs have been capitalized.