Balance Sheet Components (Notes)

3 Months Ended

Mar. 31, 2022

Inventories

PGE’s inventories, which are recorded at average cost, consist primarily of materials and supplies for use in operations, maintenance, and capital activities, as well as fuel, which includes natural gas, coal, and oil, for use in the Company’s generating plants. Periodically, PGE assesses whether inventories are recorded at the lower of average cost or net realizable value.

Accounts Receivable, Net

Accounts receivable, net includes $90 million and $117 million of unbilled revenues as of March 31, 2022 and December 31, 2021, respectively. Accounts receivable, net is net of an allowance for credit losses of $28 million and $26 million as of March 31, 2022 and December 31, 2021, respectively. The following summarizes activity in the allowance for credit losses (in millions):


	Three Months Ended March 31,
	2022
Balance as of beginning of period	$	26
Increase in provision	6
Amounts written off	(6)
Recoveries	2
Balance as of end of period	$	28

Other Current Assets

Other current assets consist of the following (in millions):


	March 31, 2022		December 31, 2021
Prepaid expenses	$	92	$	66

Assets from price risk management activities	265		102
Margin deposits	14		37


Other current assets	$	371	$	205

Assets from price risk management activities and related unrealized gains increased during the three months ended March 31, 2022 due to increases in wholesale natural gas and electricity prices. For further information, see Note 5, Risk Management.

Electric Utility Plant, Net

Electric utility plant, net consists of the following (in millions):


	March 31, 2022		December 31, 2021
Electric utility plant	$	11,931	$	11,838
Construction work-in-progress	349		313
Total cost	12,280		12,151
Less: accumulated depreciation and amortization	(4,218)		(4,146)
Electric utility plant, net	$	8,062	$	8,005

Accumulated depreciation and amortization in the table above includes accumulated amortization related to intangible assets of $457 million and $446 million as of March 31, 2022 and December 31, 2021, respectively. Amortization expense related to intangible assets was $15 million for the three months ended March 31, 2022 and 2021, respectively. The Company’s intangible assets primarily consist of computer software development and hydro licensing costs.

Pelton/Round Butte failed sale/leaseback—Under terms of an agreement (the “Agreement”) approved by the OPUC in 2000, PGE had a 66.67% ownership interest in the 455 MW Pelton/Round Butte hydroelectric project on the Deschutes River (Pelton/Round Butte), with the remaining interest held by the Confederated Tribes of the Warm Springs Reservation of Oregon (CTWS). In the Agreement, the CTWS had an option to purchase an additional undivided 16.66% ownership interest in Pelton/Round Butte in 2021. On June 30, 2021, the CTWS notified PGE of their intent to exercise this purchase option. Under the terms of the purchase option, on January 1, 2022, PGE completed the sale of the additional undivided interest in the project at a net book value of $37 million, with no gain or loss recognized on the sale. Under terms of the Agreement, the CTWS has a second option in 2036 to purchase an undivided 0.02% interest in Pelton/Round Butte. If the second option is exercised, the CTWS’ ownership percentage would exceed 50%. PGE remains the operator of the project.

PGE is obligated to purchase 100% of the CTWS’ share of the project’s output under a Power Purchase Agreement (PPA) through 2040. The exercise of the purchase option on January 1, 2022 was evaluated as a sale-leaseback arrangement, and PGE determined that the transaction did not qualify for sale-leaseback accounting. As a result, the transaction is deemed a failed sale-leaseback and accounted for as a financing arrangement. PGE will continue to record the tangible utility asset within Electric utility plant, net on the condensed consolidated balance sheets as if it were the legal owner and will continue to recognize depreciation expense over the estimated useful life. A financing obligation of $25 million was recorded in Other noncurrent liabilities in the first quarter of 2022. Proceeds from the failed sale-leaseback of $25 million were recorded as a financing activity while proceeds from the sale of intangible property of $11 million and from the sale of CWIP of $1 million were recorded as an investing activity on the condensed consolidated statements of cash flow. The monthly PPA payments are split between interest expense and a reduction of the principal portion of the financing obligation. Any material differences between expense recognition and timing of payments is deferred as a regulatory asset or liability in order to match what is being recovered in customer prices for ratemaking purposes.

Battery storage agreement—In the first quarter of 2022, PGE commenced a finance lease for an energy storage agreement with a 20-year term, related to the Wheatridge Renewable Energy Facility. The Company recorded a lease liability and right-of-use asset of $29 million in PGE’s condensed consolidated balance sheets.

Regulatory Assets and Liabilities

Regulatory assets and liabilities consist of the following (in millions):


	March 31, 2022					December 31, 2021
	Current			Noncurrent		Current			Noncurrent
Regulatory assets:
Price risk management	$	—		$	8	$	—		$	55
Pension and other postretirement plans	—			128		—			131

Debt issuance costs	—			23		—			23
Trojan decommissioning activities	—			93		—			90
February 2021 ice storm and damage	—			71		—			67
Power cost adjustment mechanism	—			28		—			29
2020 Labor Day wildfire	—			38		—			45
COVID-19	—			35		—			36
Other	20			67		24			57
Total regulatory assets	$	20		$	491	$	24		$	533
Regulatory liabilities:
Asset retirement removal costs	$	—		$	1,063	$	—		$	1,047
Deferred income taxes	—			205		—			208

Asset retirement obligations	—			44		—			43

Price risk management	205			—		55			—
Other	46			67		51			62
Total regulatory liabilities	$	251	*	$	1,379	$	106	*	$	1,360

* Included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets.

On April 25, 2022, the OPUC issued Order 22-129 on PGE’s 2022 General Rate Case (GRC), which adopted all stipulations agreed to by the parties to the proceeding, including the annual revenue requirement, cost of capital, capitalization ratio, and the elimination of the decoupling mechanism. Key elements of the OPUC’s Order also included:

•establishment of a balancing account for the Company’s major storm damage recovery mechanism;

•denial of PGE’s proposal for a secondary phase of the 2022 GRC regarding the Faraday capital improvement project. PGE can pursue recovery in the Company’s next GRC;

•establishment of a deferral that would require PGE to defer and refund, subject to an earnings test, the revenue requirement associated with Boardman included in customer prices following plant closure in 2020; and

•creation of an earnings test for the deferrals for the 2020 Labor Day wildfire and the February 2021 ice storm and damage that is to be applied on a year-by-year basis.

As a result of the earnings tests outlined in the OPUC’s Order, the Company has released deferrals associated with the year ended 2020, resulting in a pre-tax, non-cash charge to earnings for the three months ended March 31, 2022 in the estimated amount of $17 million. PGE does not expect to exceed its regulated return on equity under the earnings test methodology approved by the OPUC for 2021 and 2022.

February 2021 ice storm and damage represents the costs not previously included for recovery in customer prices related to major storm damage incurred. Such costs were incurred to repair damage to PGE’s transmission and

distribution systems and restore power to customers as a result of the historic storms that ultimately led Oregon’s Governor to declare a state of emergency on February 13, 2021. On February 15, 2021, the Company filed an application for authorization to defer emergency restoration costs for the February storms (Docket UM 2156). PGE received OPUC Order No. 22-020 approving the February storms deferral in the first quarter of 2022. While the Company believes the full amount of the deferral is probable of recovery as PGE’s prudently incurred costs were in response to the unique and unprecedented nature of the storms, the OPUC has significant discretion in making the final determination of recovery. The OPUC’s conclusions of overall prudence, including an earnings test, could result in a portion, or all, of PGE’s deferral being disallowed for recovery. Such disallowance would be recognized as a charge to earnings.

Power Cost Adjustment Mechanism—PGE is subject to a Power Cost Adjustment Mechanism (PCAM), as approved by the OPUC. Pursuant to the PCAM, future customer prices can be adjusted to reflect a portion of the difference between: i) NVPC forecast each year and included in customer prices (baseline NVPC); and ii) actual NVPC for the year. NVPC consists of the cost of power purchased and fuel used to generate electricity to meet PGE’s retail load requirements, as well as the cost of settled electric and natural gas financial contracts, all of which is classified as Purchased power and fuel in the Company’s condensed consolidated statements of income, and is net of wholesale sales, which are classified as Revenues, net in the condensed consolidated statements of income. The Company is subject to a portion of the business risk or benefit associated with the difference between actual and baseline NVPC by application of an asymmetrical deadband, which ranges from $15 million below to $30 million above baseline NVPC. To the extent actual NVPC, subject to certain adjustments, is outside the deadband range, the PCAM provides for 90% of the excess variance to be collected from, or refunded to, customers. Pursuant to a regulated earnings test, a refund will occur only to the extent that it results in PGE’s actual regulated return on equity (ROE) for the given year being no less than 1% above the Company’s latest authorized ROE, while a collection will occur only to the extent that it results in PGE’s actual regulated ROE for that year being no greater than 1% below the Company’s authorized ROE. Any estimated refund to customers pursuant to the PCAM is recorded as a reduction in Revenues, net in PGE’s condensed consolidated statements of income, while any estimated collection from customers is recorded as a reduction in Purchased power and fuel expense. For the year ended December 31, 2021, actual NVPC was $62 million above baseline NVPC, and therefore PGE deferred $28 million which represents 90% of the excess variance expected to be collected from customers.

2020 Labor Day Wildfire—In 2020, Oregon experienced one of the most destructive wildfire seasons on record, with over one million acres of land burned that ultimately led Oregon’s Governor to declare a state of emergency on August 20, 2020. As a result, PGE has incurred costs to replace and rebuild PGE facilities damaged by the fires, as well as addressing fire-damaged vegetation and other resulting debris and hazards both in and outside of PGE’s property and right-of-way. Ongoing costs include replacing equipment, enhanced tree and brush clearing, and making emergency plans in close partnership with local, state, and federal land and emergency management agencies to further expand the use of a public safety power shutoff, if the need should arise. On October 20, 2020, the OPUC formally approved PGE’s request for deferral of such costs (Docket UM 2115). As of March 31, 2022 and December 31, 2021, PGE’s cumulative deferred costs related to the wildfire response was $38 million and $45 million, respectively. On April 25, 2022, the OPUC issued Order 22-129 related to PGE’s 2022 General Rate Case (GRC), and among other provisions, established an earnings test for the 2020 Labor Day Wildfire deferral. Pursuant to the earnings tests outlined in the OPUC’s Order, the Company has released deferrals associated with the year ended 2020, resulting in a pre-tax charge to earnings for the three months ended March 31, 2022 in the estimated amount of $15 million. The charge was recorded to Generation, transmission and distribution expenses in the condensed consolidated statements of income. PGE believes amounts deferred as of March 31, 2022 are probable of recovery as the Company’s prudently incurred costs were in response to the unique and unprecedented nature of the wildfire events leading to the deferral. The OPUC has significant discretion in making the final determination of recovery. The OPUC’s conclusion of overall prudence, including an earnings test, could result in a portion, or all, of PGE’s deferrals being disallowed for recovery. Such disallowance would be recognized as a charge to earnings.

COVID-19—The COVID-19 pandemic led Oregon’s Governor to declare a state of emergency on March 8, 2020. Due to the adverse impacts of COVID-19 on economic activity, PGE has experienced an increase in bad debt expense, lost revenue, and other incremental costs. On March 20, 2020, PGE filed an application with the OPUC for deferral of lost revenue and certain incremental costs, such as bad debt expense, related to COVID-19. PGE, other utilities under the OPUC’s jurisdiction, intervenors, and OPUC staff held discussions regarding the scope of costs incurred by utilities that may qualify for deferral under Docket UM 2114, Investigation into the Effects of the COVID-19 Pandemic on Utility Customers. The result of such discussions was an Energy Term Sheet (Term Sheet), which dictates costs in scope for deferral but is silent on the timing of recovery of such costs. On September 24, 2020, the Commission adopted a proposed OPUC Staff motion for Staff to execute stipulations incorporating the terms of the Term Sheet. PGE’s deferral application was approved by the Commission on October 20, 2020 with final stipulations for the Term Sheet approved on November 3, 2020. As of March 31, 2022 and December 31, 2021, PGE’s deferred balance was $35 million and $36 million, respectively, comprised primarily of bad debt expense in excess of what is currently considered and collected in customer prices. Pursuant to the earnings tests outlined in the OPUC’s Order in the 2022 GRC, the Company has released deferrals associated with the year ended 2020, resulting in a pre-tax charge to earnings for the three months ended March 31, 2022 in the estimated amount of $2 million. Amortization of any deferred costs will remain subject to OPUC review prior to amortization in customer prices and would be subject to an earnings test. PGE believes amounts deferred are probable of recovery as the Company’s prudently incurred costs were in response to the unique nature of the COVID-19 pandemic health emergency. The OPUC has significant discretion in making the final determination of recovery. The OPUC’s conclusion of overall prudence, including an earnings review, could result in a portion, or all, of PGE’s deferrals being disallowed for recovery. Such disallowance would be recognized as a charge to earnings.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in millions):


	March 31, 2022		December 31, 2021
Accrued employee compensation and benefits	$	47	$	67
Accrued taxes payable	37		46
Accrued interest payable	43		29
Accrued dividends payable	40		40
Regulatory liabilities—current	251		106
Margin deposits from wholesale counterparties	157		58
Other	105		111
Total accrued expenses and other current liabilities	$	680	$	457

Credit Facilities

As of March 31, 2022, PGE had a $650 million revolving credit facility scheduled to expire in September 2026. The Company has the ability to expand the revolving credit facility to $750 million, if needed, subject to the requirements of the agreement. Pursuant to the terms of the agreement, the revolving credit facility may be used for general corporate purposes, including as backup for commercial paper borrowings and to permit the issuance of standby letters of credit. PGE may borrow for one, three, or six months at a fixed interest rate established at the time of the borrowing, or at a variable interest rate for any period up to the then remaining term of the applicable credit facility. The revolving credit facility contains a provision that requires annual fees based on the Company’s unsecured credit ratings, and contains customary covenants and default provisions, including a requirement that limits consolidated indebtedness, as defined in the agreement, to 65% of total capitalization. As of March 31, 2022, PGE was in compliance with this covenant with a 56.0% debt-to-total capital ratio and the aggregate unused available credit capacity under the revolving credit facility was $650 million. In addition, the credit facility offers the potential for adjustments to interest rate margins and fees based on PGE’s achievement of certain annual sustainability-linked metrics related to its non-emitting generation capacity and the percentage of management comprised of women and employees who identify as black, indigenous, and people of color. The Company believes these potential adjustments will have an immaterial impact on PGE’s results of operations.

The Company has a commercial paper program under which it may issue commercial paper for terms of up to 270 days. The Company has elected to limit its borrowings under the revolving credit facility to cover any potential need to repay any commercial paper that may be outstanding at the time. As of March 31, 2022, PGE had no commercial paper outstanding.

PGE typically classifies borrowings under the revolving credit facility and outstanding commercial paper as Short-term debt on the condensed consolidated balance sheets.

In addition, PGE has three letter of credit facilities that provide a total capacity of $220 million under which the Company can request letters of credit for original terms not to exceed one year. The issuance of such letters of credit is subject to the approval of the issuing institution. Under these facilities, letters of credit for a total of $75 million were outstanding as of March 31, 2022. Letters of credit issued are not reflected on the Company’s condensed consolidated balance sheets.

Pursuant to an order issued by the FERC, the Company is authorized to issue short-term debt in an aggregate amount of up to $900 million through February 6, 2024.

Defined Benefit Retirement Plan Costs

Components of net periodic benefit cost under the defined benefit pension plan are as follows (in millions):


	Three Months Ended March 31,
		2022		2021
Service cost		$	4	$	5
Interest cost*		7		7
Expected return on plan assets*		(12)		(11)
Amortization of net actuarial loss*		4		5
Net periodic benefit cost		$	3	$	6

* The net expense portion of non-service cost components are included in Miscellaneous income (expense), net within Other income on the Company’s condensed consolidated statements of income and comprehensive income.