ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s assessment of NW Holdings' and NW Natural's financial condition, including the principal factors that affect results of operations. The discussion covers the years ended December 31, 2025, 2024, and 2023 and refers to the consolidated results of NW Holdings, the substantial majority of which consist of the operating results of NW Natural. When significant activity exists at NW Holdings that does not exist at NW Natural, additional disclosure has been provided. References in this discussion to "Notes" are to the Notes to the Consolidated Financial Statements in Item 8 of this report.
NW Natural's natural gas distribution activities are reported in the NWN Gas Utility segment, which was previously referred to as the natural gas distribution (NGD) segment prior to 2025, serving customers in Oregon and southwest Washington. The NWN Gas Utility segment also includes NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp, the NWN Gas Utility-portion of NW Natural's Mist storage facility in Oregon, and NW Natural RNG Holding Company, LLC, a holding company established to invest in the development and procurement of regulated renewable natural gas for NW Natural.
SiEnergy Gas Utility, which was acquired on January 7, 2025, is a regulated natural gas distribution utility and serves residential and commercial customers in the greater metropolitan areas of Houston, Dallas, and Austin, Texas. SiEnergy also includes a natural gas transmission utility serving customers in the greater metropolitan areas of Dallas and Austin, Texas. SiEnergy activities are reported in the SiEnergy Gas Utility segment.
NWN Water Utility is a regulated water and wastewater utility serving residential and commercial customers in Oregon, Washington, Idaho, Texas, and Arizona. The activities of NWN Water are reported in the NWN Water segment, which also includes non-regulated water and wastewater services businesses in Oregon, Washington and Idaho, and an equity method investment in Avion Water Company, Inc. In addition, NWN Water provides water services to communities throughout the Pacific Northwest and California.
Other activities for NW Holdings, aggregated and reported as NW Holdings Other, include NWN Renewables and its non-regulated renewable natural gas activities; NW Natural's interstate storage and asset management activities and appliance retail center; and NNG Financial's investment in Kelso-Beaver Pipeline (KB Pipeline), which is accounted for under the equity method.
See Note 4 for further discussion of our business segments and other, as well as our direct and indirect wholly-owned subsidiaries.
Non-GAAP Financial Measures
In addition to presenting diluted earnings per share for NW Holdings, we present diluted earnings per share for each of our segments (Segment EPS), which is a non-GAAP financial measure. We calculate Segment EPS by dividing the net income of each of our segments calculated in accordance with GAAP by the number of diluted shares outstanding for NW Holdings. We use Segment EPS to analyze our financial performance because we believe it provides useful information to our investors, analysts and creditors in evaluating our financial condition and results of operations of each of our segments. We believe investors find Segment EPS to be a useful indicator of our performance.
Segment EPS should not be considered a substitute for, or superior to, diluted earnings per share or other measures calculated in accordance with U.S. GAAP. Moreover, Segment EPS has limitations in it does not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than how such measures are calculated in this report, limiting the usefulness of those measures for comparative purposes. A reconciliation of Segment EPS to diluted earnings per share is provided below.
Diluted EPS - Total (1)
NWN Gas Utility (2)
SiEnergy Gas Utility (2)
NWN Water Utility (2)
NW Holdings Other (2)
(1) Total Diluted EPS is equal to the sum of Diluted EPS for NWN Gas Utility, SiEnergy, NWN Water and NW Holdings Other.
(2) Non-GAAP financial measure. See Non-GAAP Financial Measures--Segment Earnings Per Share for definition, reconciliation and additional information.
EXECUTIVE SUMMARY
NW Holdings' financial results and highlights for the year include:
In millions
Amount
Amount
Amount
Consolidated
Net income
Diluted EPS
• For the year ended December 31, 2025, net income increased by $34.4 million or $0.74 per diluted share.
• The increase in net income is primarily driven by new rates at NW Natural in Oregon, effective November 1, 2024 and October 31, 2025. In addition, we acquired SiEnergy in January 2025, and implemented new rates at our largest water utility in Arizona. These benefits were partially offset by an increase in interest expense, operations and maintenance expense, and depreciation expense.
• Customer growth was 11.1%, driven by the Texas gas utility acquisitions and organic water growth.
• Capital expenditures were $466.9 million, as we continue to invest in our utility systems to support safety and reliability.
NW Natural's financial results and highlights for the year include:
In millions
Amount
Amount
Amount
Consolidated
Net income
• For the year ended December 31, 2025, net income increased by $35.2 million.
• The increase in net income is primarily driven by new rates in Oregon, effective November 1, 2024 and October 31, 2025. This benefit was partially offset by increases in depreciation expense, income tax expense and operations and maintenance expense.
• Capital Expenditures were $355.1 million due primarily to continued investments to support the safety and reliability of the NW Natural Gas Utility.
RESULTS OF SEGMENTS
NWN GAS UTILITY SEGMENT RESULTS.
NWN Gas Utility margin results are primarily affected by customer growth, revenues from rate-base additions, and, to a certain extent, by changes in delivered volumes due to weather and customers’ gas usage patterns. In addition to NW Natural's local gas distribution business, the NWN Gas Utility segment also includes the portion of the Mist underground storage facility used to serve NWN Gas Utility customers, the North Mist gas storage operations, NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp., and NW Natural RNG Holding Company, LLC.
In thousands, except per share data
Margin (1)
Operating expenses:
Operations and maintenance
General taxes
Depreciation
Other operating expenses
Total operating expenses
Income from operations
Other income (expense), net
Interest expense, net
Income before income taxes
Income tax expense
Net income
EPS (2)
(1) See NWN Gas Utility Margin Table below for additional detail.
(2) Non-GAAP financial measure. See Non-GAAP Financial Measures—Segment Earnings Per Share for definition, reconciliation and additional information.
2025 COMPARED TO 2024 . The primary factors contributing to the $32.9 million increase in NWN Gas Utility net income were as follows:
• $78.9 million increase in margin driven primarily by new rates on November 1, 2024 and October 31, 2025 for Oregon customers; partially offset by a decrease in the amortization of deferred balances. See the NWN Gas Utility margin table below for additional margin detail.
The increase in margin was partially offset by the following items:
• $19.4 million increase in depreciation expense due to additional capital investments;
• $11.8 million increase in income tax due to higher pre-tax income; and
• $11.0 million increase in operations and maintenance expenses due primarily to higher payroll and benefit costs and an increase in contract labor costs, partially offset by the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case.
Total natural gas sold and delivered in 2025 decreased 5% over 2024 primarily due to lower usage from residential and commercial sales customers, pulp and paper industrial sales and transportation customers, and 20% warmer than average weather in 2025 compared to 17% warmer than average weather in 2024.
2024 COMPARED TO 2023 . The primary factors contributing to the $16.9 million decrease in net income were as follows:
• $18.2 million decrease in other income, net driven by higher pension non-service costs, lower interest income from invested cash, lower regulatory interest income and a decline in the equity portion of AFUDC;
• $13.7 million decrease due to the disallowance of undepreciated line extension costs as ordered in the 2024 Oregon general rate case; and
• $10.1 million increase in depreciation expense due to additional capital investments; partially offset by
• $26.3 million increase in margin primarily due to new rates on November 1, 2024 for Oregon customers; partially offset by lower usage from warmer comparative weather for customers not covered under the weather normalization mechanism. See the NWN Gas Utility margin table below for additional margin detail.
Total natural gas sold and delivered in 2024 decreased 3% over 2023 primarily due to 17% warmer than average weather in 2024 compared to 8% warmer than average weather in 2023.
NATURAL GAS UTILITY MARGIN TABLE. The following table summarizes the composition of gas volumes, revenues, and cost of sales:
Favorable (Unfavorable)
In thousands, except degree day and customer data
Volumes (therms):
Residential and commercial sales
Industrial sales and transportation
Total volumes sold and delivered
Operating revenues:
Residential and commercial sales
Industrial sales and transportation
Other distribution revenues
Other regulated services
Total operating revenues
Less: Cost of gas
Less: Environmental remediation expense
Less: Revenue taxes
Margin
Margin (1)
Residential and commercial sales
Industrial sales and transportation
Gain from gas cost incentive sharing (2)
Other margin
Other regulated services
Margin
Cost of Gas Sold
Volumes sold (therms) (3)
Average cost of gas (cents per therm)
Degree days (4)
Average (5)
Actual
Percent (warmer) colder than average weather
Meters - end of period:
Residential meters
Commercial meters
Industrial meters
Total number of meters
NWN Gas Utility meter growth:
Residential meters
Commercial meters
Industrial meters
Total meter growth
(1) Amounts reported as NWN Gas Utility margin for each category of meters are operating revenues less cost of gas, environmental remediation expense and revenue taxes, subject to earnings test considerations, as applicable.
(2) For additional information regarding NW Natural's gas cost incentive sharing mechanism, see "Results of Operations—Regulatory Matters—Rate Mechanisms—Purchased Gas Adjustment".
(3) This calculation excludes volumes delivered to industrial transportation customers.
(4) Heating degree days are units of measure reflecting temperature-sensitive consumption of natural gas, calculated by subtracting the average of a day's high and low temperatures from 59 degrees Fahrenheit.
(5) Average weather represents the 25-year average of heating degree days. Beginning October 31, 2025, average weather is calculated over the period June 1, 1999 through May 31, 2024, as determined in NW Natural's 2025 Oregon general rate case. From November 1, 2024 through October 30, 2025, average weather was calculated over the period June 1, 1998 through May 31, 2023, as determined in NW Natural's 2024 Oregon general rate case. From November 1, 2022 through October 31, 2024, average weather was calculated over the period June 1, 1996 through May 31, 2021, as determined in NW Natural’s 2022 Oregon general rate case.
SIENERGY GAS UTILITY SEGMENT RESULTS.
SiEnergy results and highlights include:
In thousands, except per share data
Margin (1)
Operating expenses:
Operations and maintenance
General taxes
Depreciation
Total operating expenses
Income from operations
Other income, net
Interest expense, net
Income before income taxes
Income tax expense
Net income
EPS (2)
(1) See SiEnergy Gas Utility Margin Table below for additional detail.
(2) Non-GAAP financial measure. See Non-GAAP Financial Measures--Segment Earnings Per Share for definition, reconciliation and additional information.
SiEnergy was acquired by NW Holdings on January 7, 2025. Results for the period from January 7, 2025 to December 31, 2025 are presented in the table above. SiEnergy acquired Pines on June 2, 2025, and Pines results from June 2, 2025 to December 31, 2025 are included in the table above. Prior to January 7, 2025, NW Holdings did not operate any assets that fall within its SiEnergy Gas Utility segment.
SIENERGY GAS UTILITY MARGIN TABLE. The following table summarizes the composition of gas volumes, revenues, and cost of sales:
In thousands, except degree day and customer data
Volumes (therms)
Residential and commercial sales
Transportation
Total volumes sold and delivered
Operating Revenues
Residential and commercial sales
Transportation
Other distribution revenues
Total operating revenues
Less: Cost of gas
Less: Revenue taxes
Margin
Margin (1)
Residential and commercial sales
Transportation
Other margin
Margin
Cost of Gas Detail
Volumes sold (therms) (2)
Average cost of gas (cents per therm)
Degree days (3)
Average (4)
Actual
Percent (warmer) colder than average weather (4)
Meters
As of December 31, 2025
Residential
Commercial
Total
(1) Amounts reported as SiEnergy margin for each category of meters are operating revenues less cost of gas and revenue taxes.
(2) This calculation excludes volumes delivered to transportation customers.
(3) Heating degree days are units of measure reflecting temperature-sensitive consumption of natural gas. SiEnergy calculates heating degree days by subtracting the average of a day's high and low temperatures from 65 degrees Fahrenheit.
(4) SiEnergy average weather represents the 10-year average of heating degree days. Beginning October 1, 2023 average weather is calculated over the period April 1, 2013 through March 31, 2023, as determined in SiEnergy's 2023 Texas general rate case.
NWN WATER UTILITY SEGMENT RESULTS.
NWN Water results and highlights include:
In thousands, except per share data
YTD Change
PY Change
Operating revenues
Operating expenses:
Operations and maintenance
General taxes
Revenue taxes
Depreciation
Other operating expenses
Total operating expenses
Income from operations
Other income, net
Interest expense, net
Income before income taxes
Income tax expense
Net income
EPS (1)
Connections
As of December 31, 2025
As of December 31, 2024
As of December 31, 2023
Growth
Growth
Water and wastewater
(1) Non-GAAP financial measure. See Non-GAAP Financial Measures--Segment Earnings Per Share for definition, reconciliation and additional information.
2025 COMPARED TO 2024. The primary factors contributing to the $8.7 million increase in net income were as follows:
• $13.6 million increase in operating revenues primarily driven by new rates at our largest utility in Arizona, additional revenues from the water acquisitions, and organic customer growth; partially offset by
• $4.4 million increase in operations and maintenance expenses primarily due to acquisitions and organic growth; and
• $1.4 million increase in income tax expense due primarily to higher pre-tax income.
2024 COMPARED TO 2023. The primary factors contributing to the $4.4 million increase in net income were as follows:
• $13.2 million increase in operating revenues primarily driven by new rates at our largest utility in Arizona, organic customer growth, and additional revenues from the water acquisitions; and
• $2.2 million decrease in interest expense due primarily to lower long-term debt balances as $50.0 million of NWN Water debt matured in March 2024 and was not replaced at NWN Water; partially offset by
• $7.2 million increase in operations and maintenance expenses primarily due to acquisitions;
• $2.2 million increase in depreciation expense due primarily to acquisitions; and
• $1.6 million increase in income tax expense due primarily to higher pre-tax income.
NW HOLDINGS OTHER RESULTS.
NW Holdings' activities in Other includes activities of NW Natural Renewables Holdings, LLC (NWN Renewables), which is engaged in non-regulated renewable natural gas activities; NNG Financial and its pipeline assets; and NWN Energy including its wholly-owned subsidiary NW Natural Gas Storage, LLC (NWN Gas Storage), which was formerly involved in a gas storage business. Other also includes corporate revenues and expenses that cannot be allocated to other operations, including certain business development activities. NW Holdings Other also includes NW Natural Other activities which includes activities in Interstate Storage Services and third-party asset management services, appliance retail center operations, and corporate operating and non-operating revenues and expenses that cannot be allocated to NWN Gas Utility operations.
Other results and highlights include:
In thousands, except per share data
YTD Change
PY Change
Operating revenues
Operating expenses:
Cost of gas
Operations and maintenance
General taxes
Depreciation
Other operating expenses
Total operating expenses
Income from operations
Other income, net
Interest expense, net
Loss before income taxes
Income tax expense (benefit)
Net loss
EPS (1)
(1) Non-GAAP financial measure. See Non-GAAP Financial Measures--Segment Earnings Per Share for definition, reconciliation and additional information.
2025 COMPARED TO 2024. The primary factors contributing to the $20.9 million, increase in net loss were as follows:
• $35.0 million increase in interest expense due primarily to higher long-term debt at NW Holdings from bonds issued in December 2024, Junior Subordinated Debentures issued in March 2025 and higher commercial paper balances;
• $8.7 million increase in operations and maintenance expenses due primarily to transaction and business development costs; partially offset by
• $16.2 million increase primarily from NWN Renewables operating revenues net of cost of gas.
2024 COMPARED TO 2023. The primary factors contributing to the $2.4 million increase in net loss were as follows:
• $2.8 million increase in interest expense due primarily to higher long-term debt at NW Holdings from bonds issued in March 2024; and
• $2.2 million increase in operations and maintenance expenses due primarily to transaction and business development costs; partially offset by
• $3.0 million increase in operating revenues primarily driven by higher gas storage revenues.
CURRENT ECONOMIC AND POLITICAL CONDITIONS . Current economic and political conditions are reviewed and monitored on an ongoing basis for potential impacts to our business. This includes changes in inflation and interest rates, tariffs or trade restrictions, geopolitical uncertainty, supply chain disruptions, and other regulatory, physical or cyber related risks impacting our business. Further, we review U.S. federal, state and local policies, executive orders, rules, initiatives and other changes to fiscal, tax, regulation, environmental, climate and other federal policies including federal shutdowns that may impact our businesses, all of which could impact the conditions in which we operate.
We continue to evaluate the effect of additional tariffs on our businesses, specifically natural gas imports at our gas utilities. SiEnergy, located in Texas, does not import natural gas. NWN Gas Utility imported approximately 60% of our natural gas from Canada in 2025. NWN Gas Utility's third-party asset manager imports the majority of NWN Gas Utility's gas each year and is not subject to tariffs because they are a United States-Mexico-Canada Agreement (USMCA) certified importer of record. NWN Gas Utility is a USMCA certified importer. We’ve evaluated tariffs across our businesses and at this time, we do not anticipate the currently implemented tariffs to have a material impact on our businesses. We continue to evaluate the potential impact of efforts to impose new or modified tariffs and the legal proceedings that may impact them.
During 2025, supply chain conditions stabilized and lead times generally returned to normalized levels. For critical equipment and materials, we undertake extensive planning and make purchases in advance or maintain the appropriate amount of inventory to support our businesses.
For all of our businesses, we continuously monitor interest rates and financing options. Our regulated utilities generally recover interest expense on their long-term debt through their authorized cost of capital.
See the discussion in " Results of Operations ", " Regulatory Matters " and " Financial Condition " below for additional detail regarding all significant activity that occurred during 2025.
Regulatory Matters
NWN GAS UTILITY
NW Natural's natural gas distribution business is subject to regulation by the OPUC and WUTC with respect to, among other matters, rates and terms of service, systems of accounts, and issuances of securities by NWN Natural Gas Utility. In 2025, approximately 88% of NWN Gas Utility customers were located in Oregon, with the remaining 12% in Washington. Earnings and cash flows from natural gas distribution operations are largely determined by rates set in general rate cases and other proceedings in Oregon and Washington. They are also affected by weather, the local economies in Oregon and Washington, the pace of customer growth in the residential, commercial, and industrial markets, legislation policy, customer preferences and NWN Gas Utility's ability to remain price competitive, control expenses, and obtain reasonable and timely regulatory recovery of its natural gas distribution-related costs, including operating expenses and investment costs in plant and other regulatory assets. NW Natural continuously evaluates the need for rate cases in its jurisdictions. See " Most Recent Completed Rate Cases " below.
Most Recent Completed Rate Cases
2025 OREGON RATE CASE. On October 24, 2025, the OPUC issued a final order in the Rate Case approving three prior multi-party stipulations and resolving the remaining open items in the Rate Case. New rates authorized by the OPUC were effective October 31, 2025. The final order provided for a total revenue requirement increase of $20.7 million over revenues from existing rates, which includes approximately $4.8 million related to an updated depreciation study. The revenue requirement is based on the following assumptions:
• Capital structure of 50% common equity and 50% long-term debt;
• Cost of long-term debt of 4.74%
• Return on equity of 9.5%, and
• Overall cost of capital of 7.12%
Average rate base after final adjustments for completed capital projects was $2.27 billion or an increase of $180.1 million since the last rate case.
WASHINGTON . On October 21, 2021, the WUTC issued an order concluding NW Natural's general rate case filed in December 2020 (WUTC Order). The WUTC Order provides for an annual revenue requirement increase over two years, consisting of a 6.4% or $5.0 million increase in the first year beginning November 1, 2021 (Year One), and up to a 3.5% or $3.0 million increase in the second year beginning November 1, 2022 (Year Two). The increase is based on the following assumptions:
• Cost of capital of 6.814%; and
• Average rate base of $194.7 million, an increase of $20.9 million since the last rate case for capital expenditures already expended at the time of filing, with an additional expected $31.2 million increase in Year One, and an additional expected $21.4 million increase in Year Two, with the increases in Year One and Year Two relating to expected capital expenditures in those years.
The WUTC Order does not specify the underlying inputs to the cost of capital, including capital structure and return on equity. New rates authorized by the WUTC Order were effective November 1, 2021. In September 2023, NW Natural received a letter of compliance from the WUTC acknowledging that the Year Two rates are no longer subject to review and refund.
NW Natural continuously evaluates the need for rate cases in its jurisdictions.
Regulatory Proceeding Updates
2025 WASHINGTON RATE CASE. On August 29, 2025, NW Natural filed a request for a general rate increase with the WUTC under Washington's multi-year rate plan statute.
This multi-year rate plan filing includes requested increases in the annual revenue requirement over three years, consisting of a $25.6 million revenue increase in the first year beginning August 1, 2026 (Year 1), an $8.6 million revenue increase in the second year beginning August 1, 2027 (Year 2) and an $8.3 million revenue increase in the third year beginning August 1, 2028 (Year 3). The filing is based upon the following assumptions or requests:
Year 1
Year 2
Year 3
Revenue Requirement Increase
$25.6 million
$8.6 million
$8.3 million
Capital Structure
• 48.0% long-term debt
• 1.0% short-term debt
• 51.0% common equity
• 48.0% long-term debt
• 1.0% short-term debt
• 51.0% common equity
• 48.0% long-term debt
• 1.0% short-term debt
• 51.0% common equity
Return on Equity
Overall Rate of Return
Average Rate Base
$341.8 million (1)
$381.4 million
$422.7 million
(1) Represents an increase of $94.5 million since the last rate case.
The filing reflects the effects of inflation, an updated depreciation study, and long-planned investments primarily supporting system safety and reliability, including investments at NW Natural's Mist gas storage facility, modernization of metering infrastructure and replacement of end-of-life information technology.
NW Natural’s filing will be reviewed by the WUTC and other stakeholders. The process is anticipated to take up to 11 months with new rates expected to take effect August 1, 2026.
Rate Mechanisms
During 2025 and 2024, NW Natural's key approved rates and recovery mechanisms for each service area included:
Oregon
Washington
2025 Rate Case (effective 10/31/2025)
2024 Rate Case (effective 11/1/2024)
2021 Rate Case
(effective 11/1/2021)
Authorized Rate Structure:
Return on Equity
Rate of Return
Debt/Equity Ratio
Key Regulatory Mechanisms:
Purchased Gas Adjustment (PGA)
Gas Cost Incentive Sharing
Decoupling
Weather Normalization (WARM)
RNG Automatic Adjustment Clause
Environmental Cost Recovery
Interstate Storage and Asset Management Sharing
** The WUTC Order does not specify the underlying inputs to the cost of capital, including capital structure and return on equity.
Annually, or more often if circumstances warrant, NW Natural reviews all regulatory assets for recoverability. If NW Natural should determine all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Natural would be required to write-off the net unrecoverable balances against earnings in the period such a determination was made.
PURCHASED GAS ADJUSTMENT. Rate changes are established for NW Natural each year under purchased gas adjustment (PGA) mechanisms in Oregon and Washington to reflect changes in the expected cost of natural gas commodity purchases. The PGA filings include costs for gas purchases, gas commodity deriv ative contracts, gas storage costs, gas reserves costs, pipeline demand costs, renewable natural gas and its environmental attributes, including renewable thermal certificates, and temporary rate adjustments, which amortize balances of deferred regulatory accounts.
In September 2025, NW Natural filed its annual PGAs and received OPUC and WUTC approval in October. The PGA rate changes became effective on October 31, 2025, in Oregon and on November 1, 2025 in Washington. Rates vary between states due to different rate structures, rate mechanisms and hedging policies.
Each year, NW Natural hedges gas prices on a portion of NW Natural's annual sales requirement based on normal weather, including both physical and financial hedges. As of December 31, 2025, NW Natural's forecasted sales volume was hedged at approxima tely 79% in total for the 2025-26 gas year, including 64% in financial hedges and 15% in physical gas supplies. The total hedged was approximately 84% in Oregon and 33% in Washington.
For the subsequent two gas years, NW Natural is hedged in total between 15% and 26% for annual requirements . Hedge levels are subject to change based on actual load volumes, which depend to a certain extent on weather, economic conditions, and estimated gas reserve production. Also, gas storage inventory levels may increase or decrease with storage expansion, changes in storage contracts with third parties, variations in the heat content of the gas, and/or storage recall by NW Natural. We will continue to monitor gas prices as we fill storage and look at hedging plans for future gas years. Gas purchases and hedges entered into for the upcoming PGA year will be included in the Company’s PGA filings in Oregon and Washington.
Under the current PGA mechanism in Oregon, there is an incentive sharing provision whereby NW Natural is required to select each year an 80% deferral or a 90% deferral of higher or lower actual gas costs compared to estimated PGA prices, such that the impact on NW Natural's current earnings from the incentive sharing is either 20% or 10% of the difference between actual and estimated gas costs, respectively. For the 2025-26 and 2024-25 gas years, NW Natural selected the 90% deferral option. Under the Washington PGA mechanism, NW Natural defers 100% of the higher or lower actual gas costs, and those gas cost differences are passed on to customers through the annual PGA rate adjustment.
As of May 1, 2025, 0.2 million therms per day of deliverability and 0.3 Bcf of associated non-utility Mist gas storage capacity was recalled to serve core customers. Customer rate increases related to this recall began for Oregon customers on October 31, 2025, and November 1, 2025 for Washington customers.
CLIMATE COMMITMENT ACT. Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly. The program began January 1, 2023. In December 2024, the WUTC re-authorized a CCA cost recovery mechanism with a rate effective date of January 1, 2025. Under this mechanism, NW Natural recovers CCA costs and will defer any difference between forecasted and actual costs in the following year. Additionally, under the approved tariff, proceeds from the sale of allowances, which is required under the CCA, would be used to offset CCA compliance costs for low-income customers. Any remaining proceeds would benefit other customers through fixed bill credits or use in other carbon reduction programs.
Additionally in December 2023, the WUTC approved a request to modify NW Natural's CCA deferral to allow for the recovery of interest from customers based on the actual cash paid for purchases of allowances, less proceeds received from the sale of allowances.
EARNINGS TEST REVIEW . NW Natural is subject to an annual earnings review in Oregon to determine if the NWN Gas Utility business is earning above its authorized ROE threshold. If NWN Gas Utility business earnings exceed a specific ROE level, then 33% of the amount above that level is required to be deferred or refunded to customers. Under this provision, if NW Natural selects the 80% deferral gas cost option, then NW Natural retains all earnings up to 150 basis points above the currently authorized ROE. If NW Natural selects the 90% deferral option, then it retains all earnings up to 100 basis points above the currently authorized ROE. For the 2024-25 and 2025-26 gas years, NW Natural selected the 90% deferral option. The ROE threshold is subject to adjustment annually based on movements in long-term interest rates. For calendar years 2023, 2024, and 2025, the ROE threshold was 10.40%. NWN Gas Utility filed the 2024 earnings test in April 2025, indicating no customer credit adjustment based on results, which was approved by the OPUC in July 2025. NW Natural does not expect a customer credit adjustment for 2025 based on preliminary results of the earnings test. We expect to file the earnings test in the second quarter of 2026.
DECOUPLING . In Oregon, NW Natural has a decoupling mechanism that covers residential and some commercial sales customers. Decoupling is intended to break the link between revenue and the quantity of gas consumed by customers, removing any financial incentive to discourage customers’ efforts to conserve energy. This mechanism employs a use-per-customer decoupling calculation, which adjusts margin revenues to account for the difference between actual and expected customer
volumes. The margin adjustment resulting from differences between actual and expected volumes under the decoupling component is recorded to a deferral account, which is included in the annual PGA filing. The 2025 Oregon general rate case reset the Oregon decoupling baseline usage per customer.
WARM . In Oregon, NW Natural has an approved weather normalization mechanism (WARM), which is applied to residential and small commercial customer bills. This mechanism is designed to help stabilize the collection of fixed costs by adjusting residential and small commercial customer billings based on temperature variances from average weather, with rate decreases when the weather is colder than average and rate increases when the weather is warmer than average. The mechanism is applied to bills from December through mid-May of each heating season. The mechanism adjusts the margin component of customers’ rates to reflect average weather, which uses the 25-year average temperature for each day of the billing period. Daily average temperatures and 25-year average temperatures are based on a set point temperature of 59 degrees Fahrenheit for residential customers and 58 degrees Fahrenheit for commercial customers. The collections of any unbilled WARM amounts due to tariff caps and floors are deferred and earn a carrying charge until collected, or returned, along with the PGA the following year. Residential and small commercial customers in Oregon are allowed to opt out of the weather normalization mechanism, and as of December 31, 2025, 7% of total eligible customers had opted out. NW Natural does not have a weather normalization mechanism approved for Washington customers, which account for about 12% of total customers.
INDUSTRIAL TARIFFS . The OPUC and WUTC have approved tariffs covering NWN Gas Utility service to major industrial customers, which are intended to give NW Natural certainty in the level of gas supplies needed to serve this customer group. The approved terms include, among other things, an annual election period, special pricing provisions for out-of-cycle changes, and a requirement that industrial customers complete the term of their service election under NW Natural's annual PGA tariff.
ENVIRONMENTAL COST DEFERRAL AND RECOVERY. NW Natural has authorizations in Oregon and Washington to defer costs related to remediation of properties that are owned or were previously owned by NW Natural. In Oregon, a Site Remediation and Recovery Mechanism (SRRM) is currently in place to recover prudently incurred costs allocable to Oregon customers, subject to an earnings test. Effective beginning November 1, 2019, the WUTC authorized an Environmental Cost Recovery Mechanism (ECRM) for recovery of prudently incurred costs allocable to Washington customers.
Oregon SRRM
Under the Oregon SRRM collection process, there are three types of deferred environmental remediation expense:
• Pre-review - This class of costs represents remediation spend that has not yet been deemed prudent by the OPUC. Carrying costs on these remediation expenses are recorded at NW Natural's authorized cost of capital. NW Natural anticipates the prudence review for annual costs and approval of the earnings test prescribed by the OPUC to occur by the third quarter of the following year.
• Post-review - This class of costs represents remediation spend that has been deemed prudent and allowed after applying the earnings test, but is not yet included in amortization. NW Natural earns a carrying cost on these amounts at a rate equal to the five-year treasury rate plus 100 basis points.
• Amortization - This class of costs represents amounts included in current customer rates for collection and is calculated as one-fifth of the post-review deferred balance. NW Natural earns a carrying cost equal to the amortization rate determined annually by the OPUC, which approximates a short-term borrowing rate. NW Natural included $10.2 million and $8.8 million of deferred remediation expense approved by the OPUC for collection during the 2025-26 and 2024-25 PGA years, respectively.
In addition, the SRRM also provides for the annual collection of $5.0 million from Oregon customers through a tariff rider. As it collects amounts from customers, NW Natural recognizes these collections as revenue net of any earnings test adjustments and separately amortizes an equal and offsetting amount of the deferred regulatory asset balance through the environmental remediation operating expense line shown separately in the operating expenses section of the Consolidated Statements of Comprehensive Income (Loss). See Note 17 for more information on our environmental matters.
The SRRM earnings test is an annual review of adjusted NWN Gas Utility ROE compared to authorized NWN Gas Utility ROE. To apply the earnings test NW Natural must first determine what if any costs are subject to the test through the following calculation:
Annual spend
Less: $5.0 million base rate rider
Prior year carry-over (1)
$5.0 million insurance + interest on insurance
Total deferred annual spend subject to earnings test
Less: over-earnings adjustment, if any
Add: deferred interest on annual spend (2)
Total amount transferred to post-review
(1) Prior year carry-over results when the prior year amount transferred to post-review is negative. The negative amount is carried over to offset annual spend in the following year.
(2) Deferred interest is added to annual spend to the extent the spend is recoverable.
To the extent the NWN Gas Utility business earns at or below its authorized ROE as defined in the SRRM, the total amount transferred to post-review is recoverable through the SRRM. To the extent more than authorized ROE is earned in a year, the amount transferred to post-review would be reduced by those earnings that exceed its authorized ROE. For 2025, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2026. No earnings test adjustment is expected for 2025.
Washington ECRM
The ECRM established by the WUTC order effective November 1, 2019 permits NW Natural’s recovery of environmental remediation expenses allocable to Washington customers. These expenses represent 3.32% of costs associated with remediation of sites that historically served both Oregon and Washington customers. The order allows for recovery of past deferred and future prudently incurred remediation costs allocable to Washington through application of insurance proceeds and collections from customers. Prudently incurred costs that were deferred from the initial deferral authorization in February 2011 through June 2019 were fully offset with insurance proceeds, with any remaining insurance proceeds to be amortized over a 10.5 year period. On an annual basis, NW Natural will file for a prudence determination and a request to recover remediation expenditures in excess of insurance amortizations in the following year's customer rates. After insurance proceeds are fully amortized, if in a particular year the request to collect deferred amounts exceeds one percent of Washington normalized revenues, then the excess will be collected over three years with interest.
LOW INCOME DISCOUNT TARIFFS.
Oregon
NW Natural has an income-qualifying residential bill discount program, approved by the OPUC.The income threshold for program participation is at or below 60 percent of Oregon state median income (SMI). The program provides a bill discount for income-qualifying residential customers at four discount tier levels based on household income compared to SMI. Participating customers can self-certify their income and household size to qualify for the program directly with NW Natural or their local Community Action Agency. Costs for the bill discount program include simultaneous recovery from all customers. Costs for the bill discount program, inclusive of start-up and administrative costs of the program, are recoverable in rates. The amount deferred to a regulatory liability as of December 31, 2025 was $1.8 million.
Washington
NW Natural has an income-qualifying residential bill discount program, approved by the WUTC. The Washington program is similar to the Oregon program. The income threshold for the Washington program participation is based on the greater of area median income (AMI) or federal poverty level (FPL). The amount deferred to a regulatory asset as of December 31, 2025 was $0.1 million.
RENEWABLE NATURAL GAS AND AUTOMATIC ADJUSTMENT CLAUSE. Oregon Senate Bill 98 (SB 98) enables natural gas utilities to procure or develop RNG, including hydrogen, on behalf of their Oregon customers. The legislation and rules set voluntary goals for adding as much as 30% RNG into the state’s pipeline system by 2050; enables gas utilities to invest in and own the cleaning and conditioning equipment required to bring raw biogas and landfill gas up to pipeline quality, as well as the facilities to connect to the local gas distribution system; and allowing up to 5% of a utility’s revenue requirement to be used to cover the incremental cost or investment in RNG infrastructure.
Further, the law supports all forms of renewable natural gas including renewable hydrogen, which is made from excess wind, solar and hydro power. Renewable hydrogen can be used for the transportation system, industrial use, or blended into the natural gas pipeline system.
Investments in RNG facilities are recovered through an automatic adjustment clause that allows recovery of NW Natural's investments in RNG projects, including operating costs, to be added to rates annually on November 1st, following a prudence review. The RNG recovery mechanism allows NW Natural to defer for recovery or credit the differences between the forecasted and actual costs of the RNG projects, subject to an earnings test that includes deadbands at 50 basis points below and above NW Natural's authorized ROE. For 2025, NW Natural has performed this test, which is anticipated to be submitted to the OPUC in May 2026. No earnings test adjustment is expected for 2025. For RNG procurement contracts, NW Natural seeks recovery of the costs along with the PGA, subject to a prudence review.
NW Natural has two investments in RNG facilities totaling $16.9 million as of December 31, 2025 . OPUC has approved these investments for recovery in rates.
METER MODERNIZATION PROGRAM. In January 2024, NW Natural filed a request with the OPUC and WUTC to defer the incremental costs to replace or upgrade approximately 500,000 meters over four years. The deferral was approved by the WUTC in February 2024 and by the OPUC in February 2025. The amount deferred to a regulatory asset as of December 31, 2025 was approximately $0.5 million.
INTEGRATED RESOURCE PLAN (IRP). NW Natural generally files a full IRP biennially for Oregon and Washington with the OPUC and WUTC, respectively. NW Natural jointly filed its 2025 IRP for both Oregon and Washington on August 1, 2025. The 2025 IRP evaluates several scenarios based on a range of inputs and outlines the least-cost least-risk portfolio of resources required to meet future demand and environmental compliance obligations. With respect to IRPs generally, the WUTC issues letters of compliance and Oregon acknowledges the IRP Action Plan individually or in total. NW Natural anticipates decisions from both the OPUC and WUTC in the first half of 2026.
The development of an IRP filing is an extensive and complex process that engages multiple stakeholders in an effort to build a robust and commonly understood analysis. The final product is intended to provide a long-term outlook of the supply-side and demand-side resource requirements for reliable and low-cost natural gas service while also meeting NW Natural's environmental compliance requirements. The IRP examines and analyzes uncertainties in the planning process to evaluate risk, including potential changes in governmental and regulatory policies.
OREGON ENERGY FAIRNESS AND AFFORDABILITY ACT. In 2025, the State of Oregon enacted the Oregon Energy Fairness and Affordability Act (HB 3179). HB 3179 authorizes the OPUC to consider broader economic indicators when evaluating rate proposals and limits the frequency and timing of rate increases for electric and natural gas utilities. Specifically, NW Natural and other utilities are restricted from filing a new general rate case within 18 months of the effective date of the last general rate increase until the earlier of January 2, 2027 or when the OPUC implements rules for multi-year rate plans. Utilities are permitted to seek cost deferral during this 18-month period. HB 3179 only allows utilities to increase rates from April 1 through October 31 (outside of the winter heating season) and requires utilities to, at least annually, publish forecasts of expected rate adjustments for the following 12 months. Additionally, under HB 3179 the OPUC has the authority to approve the issuance of rate recovery bonds to finance or refinance certain eligible utility capital expenditures, including a capital investment that will cause residential rates to increase by more than five percent. We expect that the new requirements may impact the timing and structure of future rate filings.
ALTERNATIVE RATE MECHANISM (ARM). On November 25, 2025, NW Natural filed a request to the OPUC for an alternative rate mechanism for the recovery of costs associated with certain capital expenditures placed into service prior to October 31, 2026, including certain discrete projects over $1 million, information technology and services capital expenditures and public works projects. NW Natural’s request includes an annual revenue requirement increase of $15.6 million and a proposed effective date of October 31, 2026. The request remains subject to review by the OPUC and other stakeholders and approval by the OPUC.
SIENERGY GAS UTILITY
Most Recently Completed Rate Case
SiEnergy Gas Utility's natural gas distribution business is located in Texas and primarily serves customers in the Houston, Dallas, and Austin metropolitan areas. Under Texas' regulatory paradigm, original jurisdiction over natural distribution rates is shared between the Railroad Commission of Texas (RRC) and the municipalities where the utility provides service. The RRC has exclusive original jurisdiction over natural gas utility rates in areas outside of municipalities. A municipality has original jurisdiction over the rates, operations and services provided by any gas utility distributing natural gas within city or town limits, unless it has surrendered its original jurisdiction to the RRC. However, any municipal rate decision can be appealed to the RRC, which will conduct its own review, including compiling a new evidentiary record. SiEnergy's last general rate case was settled in 2023 with new rates effective in September 2023. As part of the black box settlement, SiEnergy's annual revenue requirement increased by $5.5 million based on an approved net plant amount of approximately $151.6 million through March 31, 2023. Given the nature of the black box settlement, SiEnergy's authorized rate of return and capital structure were not specified.
SiEnergy does not currently have any open or ongoing general rate cases and is continuously evaluating the need for future general rate cases.
Regulatory Proceeding Updates
TEXAS HOUSE BILL 4384 . In June 2025, Texas House Bill 4384 was signed into law, allowing gas utilities in Texas to defer, and later recover, specific costs related to property, plant and equipment placed in service, but not yet reflected in base rates, including depreciation, ad valorem taxes, and carrying cost. The RRC is required to adopt rules to implement the new law within 270 days of the effective date. SiEnergy applied the new provisions to property, plant and equipment placed in service but not yet reflected in rates in 2025. The impact is not material for 2025.
CUSTOMER RATE RELIEF BONDS . In February 2022, the RRC issued a Financing Order to the Texas Public Financing Authority (TPFA) authorizing the issuance of the customer rate relief bonds to securitize the aggregated extraordinary costs associated with Winter Storm Uri for all participating natural gas utilities. In March 2023, the bonds were issued by the TPFA and $18.8 million of proceeds were received by SiEnergy. The majority of the proceeds were used to pay down the related long-term debt. SiEnergy began billing and collecting customer rate relief charges from customers in October 2023. Customer rate relief charges collected by SiEnergy are owned by the TPFA and are remitted to the TPFA on a monthly basis.
WNA. SiEnergy's service areas utilize weather normalization mechanisms (WNA). These mechanisms are designed to reduce the delivery charge component of customer's bills for the additional volumes used when actual HDDs exceed normalized HDDs and to increase the delivery charge component of customers' bills for the reduction in volumes used when actual HDDs are less than normal HDDs.
NWN WATER UTILITY
NWN Water currently serves an estimated 201,000 people through approximately 81,000 connections across six states. The wholly-owned regulated water businesses of NWN Water are subject to regulation by the utility commissions in the states in which they are located, which currently includes Oregon, Washington, Arizona, Idaho, and Texas. The wholly-owned regulated wastewater businesses of NWN Water are subject to regulation by the utility commissions in the states in which they are located, which currently includes Texas and Arizona. In addition, NWN Water includes wholly-owned unregulated wastewater businesses in Oregon, Washington, and Idaho. NWN Water continues to pursue acquisitions of regulated water and wastewater utilities:
Most Recently Completed Rate Cases
• Foothills Utilities completed a general rate case in Arizona with the Arizona Corporation Commission (ACC) with new rates effective November 1, 2024. The rate case resulted in a $0.9 million revenue requirement increase for water customers and a $3.0 million revenue requirement increase for sewer customers based on a regulated capital structure of 55% equity and 45% debt and a 9.55% ROE.
• Sunriver Water completed a general rate case in Oregon with the OPUC with new rates effective November 1, 2024. The rate case resulted in a $0.4 million revenue requirement increase for water customers based on a capital structure of 50% Equity and 50% Debt and a 9.5% ROE.
• Avion Water, a regulated water company in Oregon, for which NWN Water owns approximately 47.9%, completed a general rate case with the OPUC with new rates effective February 1, 2025. The rate case resulted in a $1.3 million revenue requirement increase based on a capital structure of 51.35% Equity and 48.65% Debt and a 9.5% ROE.
• Suncadia Water, a regulated water company in Washington, completed a general rate case with the WUTC with new rates effective July 1, 2025. The rate case resulted in a $0.3 million revenue requirement increase based on a settlement with all parties.
• Gem State Water, a regulated water company in Idaho, completed a general rate case with the IPUC with new rates effective August 1, 2025. The rate case resulted in a $0.4 million revenue requirement increase based on a capital structure of 55% Equity and 45% Debt and a 9.8% ROE.
• Falls Water, a regulated water company in Idaho, completed a general rate case with the IPUC with new rates effective September 1, 2025. The rate case resulted in a $0.6 million revenue requirement increase based on a capital structure of 55% Equity and 45% Debt and a 9.8% ROE.
• Cascadia Water, a regulated water company in Washington State, completed a general rate case with the WUTC with new rates effective October 21, 2025. The rate case resulted in a $1.1 million revenue requirement increase for water customers.
• South Coast Water, a regulated water company in Oregon, completed a general rate case with the OPUC with new rates effective August, 15, 2025. The rate case resulted in a $0.023 million revenue requirement increase and a 9.5% ROE.
• Seavey Loop Water, a regulated water company in Oregon, completed a general rate case with the OPUC with new rates effective October, 1st, 2025. The rate case resulted in a $0.043 million revenue requirement increase and a 9.5% ROE.
Regulatory Proceeding Updates
• Foothills Utilities implemented, effective June 24, 2025, a surcharge associated with its new wastewater reclamation facility that is designed to recover an additional $0.75 million of revenue requirement annually.
• Blue Topaz water utility in Texas received approval of the acquisition of a water utility with approximately 700 connections in Texas. After completing a fair market valuation process through the Public Utility Commission of Texas (PUCT), NWN Water filed the application with the PUCT in the first quarter of 2024. The acquisition closed in the first quarter of 2025.
• Blue Topaz water utility in Texas sought approval of the acquisition of a water utility with approximately 1,500 connections in Texas. After completing a fair market valuation process through the PUCT, Blue Topaz filed the application in the second quarter of 2025. The acquisition closed in the fourth quarter of 2025.
• Salmon Valley Water, Sunstone Water, Lakeshore Water, Seavey Loop Water, and South Coast Water, regulated water companies in Oregon, filed a consolidated general rate case in the fourth quarter of 2025. The rate case is ongoing.
OTHER
MIST INTERSTATE GAS STORAGE . NW Natural's interstate storage activities at its Mist Storage facility are subject to regulation by the OPUC, WUTC, and the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, rates and terms of service. The OPUC also regulates intrastate storage services at Mist, while FERC regulates interstate storage services at Mist. The FERC uses a maximum cost of service model which allows for gas storage prices to be set at or below the cost of service as approved by each agency in their last regulatory filing. The OPUC Schedule 80 rates are tied to the FERC rates, and are updated whenever NW Natural modifies FERC maximum rates. NW Natural is required under its Mist interstate storage certificate authority and rate approval orders to file every five years either a petition for rate approval or a cost and revenue study to change or justify maintaining the existing rates for its interstate storage services. NW Natural filed a rate petition with the FERC in August 2023 and the revised rates were effective beginning September 1, 2023.
Non-utility Mist storage capacity of 1.15 Bcf and 0.28 Bcf were recalled as of December 31, 2024, and 2025, respectively, to serve core utility customer needs. Customer rate impacts of this recall began on November 1, 2024, and 2025.
INTERSTATE STORAGE AND ASSET MANAGEMENT SHARING . On an annual basis, NW Natural credits amounts to Oregon and Washington customers as part of a regulatory incentive sharing mechanism related to net revenues earned from Mist gas storage for assets developed in advance of utility customer needs, and asset management revenues. In January 2026, the OPUC approved the annual 2026 bill credit for Oregon customers' share of interstate storage and asset management activities totaling approximately $23.2 million, which was credited to customers' bills in February 2026. This includes revenue generated for the November 2024 through October 2025 PGA year. Credits are given to customers in Washington as reductions in rates through the annual PGA filing in November.
The following table presents the credits to NWN Gas Utility customers:
In millions
Oregon
Washington
Other Legislative Matters
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. OBBBA includes a range of tax reform provisions. We completed our evaluation of the legislation and do not expect it to have a material impact on our results of operations, liquidity or capital resources.
Environmental Regulation and Legislation Matters
Certain of our businesses, including our natural gas businesses, are subject to or likely to be affected by current or future legislation, regulation, directed government funding, penalties for non-compliance, litigation and other forms of policies or actions seeking to regulate GHG emissions, including, but not limited to: GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, efficiency standards, charges to fund energy efficiency activities or other regulatory actions, incentives or mandates to conserve energy or use renewable energy sources, tax advantages or other subsidies to support alternative energy sources, a reduction in rate recovery for construction costs related to the installation of new customer services or other new infrastructure investments, mandates for the use of specific fuels or technologies, bans on specific fuels or technologies, or promotion of research into new technologies to reduce the cost and increase the scalability of alternative energy sources.
Federal
Historically, federal agencies have regulated GHG emissions. For example, under the Clean Air Act, our natural gas distribution businesses have been required to report system throughput to the EPA on an annual basis. The EPA also has required additional GHG reporting regulations applicable to NW Natural, requiring the annual reporting of fugitive emissions from operations. Although the EPA has revoked the endangerment findings for GHG emissions and has announced proposed rules rescinding these reporting requirements, we were subject to these reporting requirements in 2025 and remain subject to such requirements until the EPA’s rules are finalized and become effective.
Upon taking office in January 2025, President Trump has advanced federal policies to promote energy independence and revoke Biden administration climate initiatives. In addition, the recently enacted One Big Beautiful Bill Act (OBBBA) includes provisions that phase out tax credits for certain renewable fuels projects. There is also litigation regarding cancelled federal funds for renewable energy projects. We expect continued changes to climate policy under the Trump Administration, such as additional executive orders, regulations, programs and other federal actions. We are currently evaluating these developments but cannot predict the timing, form, or potential impact of future federal actions on our business.
Washington State
In 2025, Washington comprised approximately 8% of NW Natural’s revenues, as well as 2% and 13% of new meters from commercial and residential customers, respectively.
Effective February 2021, Washington state building codes (WSEC-2018) require new residential homes to meet energy efficiency standards based on carbon emissions assumptions that consider electric appliances to have lower on-site GHG emissions than comparable gas appliances. This increases the cost of constructing new homes with natural gas depending on a number of factors including home size, equipment configurations, and building envelope measures. In March 2024, rules enacted by the Washington State Building Code Council (SBCC) (WSEC-2021) took effect that modified the 2021 codes, and collectively, these rules generally have the effect of restricting or eliminating the use of gas space and water heating in new commercial and residential construction. The SBCC rules are currently subject to pending legal challenges.
In November 2024, Washington Ballot initiative I-2066 was passed. I-2066 was described on the ballot as prohibiting state and local governments from restricting access to natural gas, prohibiting the SBCC from discouraging or penalizing the use of natural gas in any building, requiring providers of natural gas to provide energy services regardless of the other energy sources available, and prohibiting the Washington Utilities and Transportation Commission (WUTC) from approving any multiyear rate plan requiring or incentivizing a natural gas company to terminate natural gas service or make such natural gas service cost-prohibitive. Although the SBCC has indicated that the current SBCC codes will remain in place while the SBCC investigates any changes necessary under I-2066, the King County Washington Superior Court recently issued a ruling declaring I-2066 invalid under the Washington state constitution. Washington State and the Building Industry Association of Washington have appealed such litigation, which is pending in the Washington Supreme Court. We cannot currently predict the ultimate outcome of such appeal, or if there will be any further changes to the SBCC codes.
In 2022, the state of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that includes an overall limit for GHG emissions from major sources in the state that declines yearly beginning January 1, 2023, resulting in an overall reduction of GHG emissions to 95% below 1990 levels by 2050. The Washington Department of Ecology has adopted rules to create a cap-and-invest program, under which entities, including natural gas and electric utilities, large manufacturing facilities, and transportation and other fuel providers which are subject to the CCA must either reduce their emissions, purchase qualifying offsets (including RNG) or obtain allowances to cover any remaining emissions. NW Natural is subject to the CCA, has received an order authorizing deferral of CCA costs from the WUTC, and is currently recovering CCA compliance costs in rates.
Oregon
In November 2024, the Environmental Quality Commission of the Oregon Department of Environmental Quality (ODEQ) issued final cap and reduce rules for its Climate Protection Program (CPP), which became effective on January 1, 2025. The CPP establishes a program to limit GHG emissions from covered entities, including natural gas utilities, by 50% by 2035 and 90% by 2050 from a 2017-2019 baseline. The first compliance period for the CPP concludes December 31, 2027. ODEQ previously promulgated CPP rules in December 2021, but the Oregon Court of Appeals invalidated these previous CPP rules in December 2023 for the agency’s failure to comply with rulemaking requirements under state law. NW Natural received an order from the OPUC authorizing deferral of costs under the prior CPP and current CPP. NW Natural will continue to pursue recovery of costs associated with compliance with the current CPP in rates. NW Natural is recovering in rates costs associated with RNG acquired pursuant to Senate Bill 98, which also supports compliance under CPP.
On October 25, 2024, the OPUC issued its final order related to our 2024 Oregon General Rate Case, approving the parties’ Stipulations and resolving remaining open items. The OPUC also ordered the phase out of NW Natural’s line extension allowance and ordered a downward adjustment to rate base of undepreciated line extension costs. NW Natural filed an appeal with the Oregon Court of Appeals on December 23, 2024, challenging the determination and the authority of the OPUC to take these actions and this litigation remains pending.
Local Jurisdictions and Other Advocacy
Advocacy groups have indicated a willingness to pursue municipal ordinances and ballot measures or other local activities disincentivizing gas infrastructure. A number of cities or counties across the country have taken action, and several in our service territory are considering actions such as limitations, penalties, or bans on the use of natural gas in new construction or otherwise. For example, local jurisdictions in our service territory have considered plans to address GHG emissions and engage in a number of actions, including identifying potential revenue sources, like a gas supplier tax or a carbon impact fee. Similarly, some jurisdictions and advocates are seeking to ban the use of natural gas and certain natural gas appliances inside homes, contending that there are detrimental indoor health effects associated with the use of natural gas.
NW Natural is actively engaged with federal, state and local policymakers, consumers, customers, small businesses and other business coalitions, economic development practitioners, and other advocates in our service territory and is working with these communities to communicate the role that direct use natural gas, and in the coming years, RNG and hydrogen, can play in pursuing more effective policies to reduce GHGs while supporting reliability, resiliency, energy choice, equity, and energy affordability.
NW Natural Climate Initiatives and Compliance Actions
We expect that compliance with any form of regulation of GHG emissions will require additional resources and legislative or regulatory tools and will increase costs. The evolving guidance to implement the CCA and CPP, evolving carbon credit markets, decades-long compliance timeframes, likely changes in law and policy, and technological advancements, all make it difficult to accurately predict long-term tools for and costs of compliance.
We are currently including costs of compliance with the CCA and CPP in rates. CCA compliance costs represent a 4.6% increase on residential bills starting on January 1, 2025. Low income customers do not participate in these compliance costs and are not impacted.
The first compliance period for the CPP has begun. Through 2025, NW Natural has not exceeded its limit on GHG emissions under the CPP. NW Natural is currently recovering in Oregon rates costs associated with RNG, as well as costs related to NW Natural’s transportation energy efficiency program, all of which support offset obligations under CPP.
Limitations on natural gas use, or declining line extension allowances provided in rates to cover construction costs for new services, carbon compliance costs included in rates reduce the competitiveness of our business and the demand for natural gas service. However, at the same time, other sources of energy are or will be subject to, GHG-related compliance requirements that are likely to affect their cost and competitiveness relative to natural gas. For example, Oregon’s HB 2021 and Washington’s SB 5116 require certain GHG emissions reductions from electric utilities. We expect compliance with these and other laws will increase the cost of energy for electric customers in our service territory. We are not able to determine at this time whether these developments will make natural gas use more or less competitive on a relative basis.
We further expect these and other trends to drive innovation of, and demand for, technological developments and innovative new products that reduce GHG emissions. Research and development are occurring across the energy sector, including in the gas sector with work being conducted on gas heat pumps, higher efficiency water and space heating appliances including hybrid systems, carbon capture utilization and storage developments, continued development of technologies related to RNG, and various forms of hydrogen for different applications, among others.
FINANCIAL CONDITION
Cash Flows
The following discussion of changes in cash flows refers to the consolidated results of NW Holdings, the substantial majority of which consist of the operating results of NW Natural. When significant activity exists at NW Holdings that does not exist at NW Natural, additional disclosure has been provided.
Operating Activities
Changes in our operating cash flows are primarily affected by net income or loss, changes in working capital requirements, and other cash and non-cash adjustments to operating results.
In millions
NW Holdings cash provided by operating activities
NW Natural cash provided by operating activities
2025 COMPARED TO 2024 . Cash provided by operating activities increased $68.8 million at NW Holdings and $34.4 million at NW Natural. The significant factors contributing to the increase at NW Natural were as follows:
• $35.2 million increase in net income;
• $32.4 million decrease in accounts receivable due to comparatively warmer weather at the end of the fiscal year;
• $30.5 million increase in deferred income taxes,
• $26.0 million increase in accounts payable resulting from increase in gas price from the prior year;
• $19.5 million increase in depreciation; and
• $13.3 million decrease on asset optimization revenue sharing bill credits, partially offset by
• $72.3 million decrease in deferred gas costs;
• $32.1 million decrease in decoupling mechanism primarily due to lower usage driven by comparatively warmer weather; and
• $23.1 million increase in inventories.
The $68.8 million increase in cash provided by operating activities at NW Holdings was primarily driven by the factors discussed above. Also, changes in income taxes provided $21.0 million less in operating cash flow to NW Holdings than at NW Natural and in the prior year, Ohio Renewables paid $51.4 million to a subsidiary of EDL in connection with two RNG facilities.
2024 COMPARED TO 2023 . The significant factors contributing to the $51.1 million decrease at NW Natural cash flow provided by operating activities were as follows:
• $64.8 million decrease in accounts receivable due to comparatively warmer weather in the current year;
• $20.5 million increase in contributions to our defined benefit pension plan;
• $18.4 million increase in asset optimization revenue sharing bill credits to customers; and
• $15.7 million decrease in net income; partially offset by
• $22.8 million decrease in accounts payable resulting from payments of higher priced gas in the prior year;
• $21.6 million decrease in inventories due to higher priced gas and more gas withdrawn from storage in the prior year; and
• $16.6 million increase in the decoupling mechanism primarily due to lower usage driven by comparatively warmer weather.
The $79.7 million decrease in cash provided by operating activities at NW Holdings was primarily driven by the factors discussed above. In addition, Ohio Renewables paid $51.4 million to a subsidiary of EDL in connection with two RNG facilities.
NW Natural made $11.3 million of cash contributions to its qualified defined benefit pension plan during the year ended December 31, 2025 and $20.5 million of cash contributions during the year ended December 31, 2024. The American Rescue Plan, which was signed into law on March 11, 2021, includes a provision for pension relief that extends the amortization period for required contributions from 7 to 15 years and provides for the stabilization of interest rates used to calculate future required contributions. The amount and timing of future c ontributions will depend on market interest rates and investment returns on the plans’ assets. See Note 10.
NW Holdings and NW Natural have lease and purchase commitments relating to our operating activities that are financed with cash flows from operations. For information on cash flow requirements related to leases and other purchase commitments, see Note 7 and Note 16.
Investing Activities
In millions
NW Holdings cash used in investing activities
NW Natural cash used in investing activities
2025 COMPARED TO 2024 . Cash used in investing activities increased $379.9 million at NW Holdings and decreased $0.1 million at NW Natural, respectively. The increase at NW Holdings is primarily driven by higher capital expenditures as we continue to invest in our natural gas, water and wastewater utility systems. In addition, NWN Holdings completed the acquisitions of SiEnergy and Pines in 2025 and paid a total of $331.5 million in cash consideration.
2024 COMPARED TO 2023 . Cash used in investing activities increased $67.2 million at NW Natural and $93.5 million at NW Holdings, respectively. The increase at NW Natural and NW Holdings is primarily driven by higher capital expenditures as we continue to invest in our natural gas, water and wastewater utility systems. In addition, NWN Water completed the acquisition of Infrastructure Capital Holdings in 2024 and paid $29.9 million in cash consideration.
The decrease in cash used in investing activities at NW Holdings is driven by lower capital expenditures at NW Natural and less cash used for water and wastewater acquisitions.
NW Holdings capital expenditures for 2026 are expected to be in the range of $500 million to $550 million and for the five-year period from 2026 to 2030 are expected to range from $2.6 billion to $2.9 billion. NW N atural capital expenditures for 2026 are expected to be in the range of $340 million to $370 million and for the five-year period from 2026 to 2030 are expected to be approximately $1.6 billion to $1.8 billion. SiEnergy capital expenditures for 2026 are expected to be in the range of $110 million to $120 million and for the five-year period from 2026 to 2030 are expected to be in the range of $750 million to $800 million. NW Natural Water capital expenditures for 2026 are expected to be in the range of $50 million to $60 million and for the five-year period from 2026 to 2030 are expected to be in the range of $250 million to $300 million.
The timing and amount of the core capital expenditures and proj ects for 2026 and the next six years coul d change based on regulation, growth, and cost estimates. Additional investments in our infrastructure during and after 2026 that are not incorporated in the estimates provided above will depend largely on additional regulations, growth, and expansion opportunities. Required funds for the investments are expected to be internally generated or financed with long-term debt or equity, as appropriate.
Financing Activities
In millions
NW Holdings cash provided by financing activities
NW Natural cash provided by financing activities
2025 COMPARED TO 2024 . Cash provided by financing activities increased $305.8 million at NW Holdings and decreased $23.2 million at NW Natural.
The increase in cash provided by financing activities at NW Holdings was primarily driven by higher issuances of long-term debt, partially offset by lower borrowings on short-term debt, lower proceeds from common stock issuances, and higher repayments of long-term debt.
The decrease in cash provided by financing activities at NW Natural was primarily attributable to an increase in short-term and long-term debt repayments, net of long-term debt issued, and cash contributions from NW Holdings.
2024 COMPARED TO 2023 . Cash provided by financing activities increased $99.4 million at NW Natural primarily driven by higher short-term debt borrowings, lower long-term debt maturities and higher cash contributions from NW Holdings, partially offset by lower long-term debt issuances.
Cash provided by financing activities increased $162.9 million at NW Holdings primarily driven by higher short-term debt borrowings and higher proceeds from common stock issuances, partially offset by higher long-term debt maturities and lower long-term debt issuances.
Capital Structure
NW Holdings' long-term goal is to maintain a strong and balanced consolidated capital structure. NW Natural targets a regulatory capital structure of 50% common equity and 50% long-term debt, which is consistent with approved regulatory allocations in Oregon, which has an allocation of 50% common equity and 50% long-term debt without recognition of short-term debt.
When additional capital is required, debt or equity securities are issued depending on both the target capital structure and market conditions. These sources of capital are also used to fund long-term debt retirements and short-term commercial paper maturities. See " Liquidity and Capital Resources " below and Note 9. Achieving our target capital structure and maintaining sufficient liquidity to meet operating requirements is necessary to maintain attractive credit ratings and provide access to the capital markets at reasonable costs.
NW Holdings' consolidated capital structure, excluding short-term debt, was as follows:
December 31,
Common equity
Long-term debt (including current maturities)
Total
NW Natural's consolidated capital structure, excluding short-term debt, was as follows:
December 31,
Common equity
Long-term debt (including current maturities)
Total
As of December 31, 2025 and 2024, NW Holdings' consolidated capital structure included common equity of 36.2% and 42.4%, long-term debt of 55.7% and 51.4%, and short-term debt including current maturities of long-term debt of 8.1% and 6.2%, respectively. As of December 31, 2025 and 2024, NW Natural's consolidated capital structure included common equity of 49.4% and 46.9%, long-term debt of 48.5% and 47.2%, and short-term debt including current maturities of long-term debt of 2.1% and 5.9%, respectively.
During 2025, NW Natural's capital structure changed primarily due to the increase in long-term debt and capital contributions from NW Holdings. NW Holdings' capital structure changed primarily due to the issuance of long-term debt and common stock at NW Holdings. See further di scussion below in "Cash Flows — Financing Activities " .
Liquidity and Capital Resources
At December 31, 2025 and 2024, NW Holdings had approximately $36.7 million and $38.5 million, and NW Natural had approximately $29.3 million and $20.0 million, of cash and cash equivalents, respectively. In order to maintain sufficient liquidity during periods when capital markets are volatile, NW Holdings and NW Natural may elect to maintain higher cash balances and add short-term borrowing capacity. NW Holdings and NW Natural may also pre-fund their respective capital expenditures when long-term fixed rate environments are attractive. NW Holdings and NW Natural expect to have ample liquidity in the form of cash on hand and from operations and available credit capacity under credit facilities to support funding needs.
ATM Equity Program
In August 2021, NW Holdings initiated an at-the-market (ATM) equity program by entering into an equity distribution agreement under which NW Holdings issued and sold from time to time shares of common stock, no par value, having an aggregate gross sales price of up to $200 million. In August 2024, the Finance Committee of the NW Holdings' Board of Directors authorized NW Holdings' sale of an additional $200 million in the aggregate gross sales price under the ATM equity program, with the result that a total of $400 million in the aggregate gross sales price has been authorized for issuance and sale under the ATM equity program. NW Holdings is under no obligation to offer and sell common stock under the ATM equity program. Any shares of common stock offered under the ATM equity program are registered on NW Holdings’ universal shelf registration statement filed with the SEC, which expires in August 2027, or will be registered on a subsequent registration statement to be filed by NW Holdings.
During the year ended December 31, 2025, NW Holdings issued and sold 1,178,509 shares of common stock pursuant to the ATM equity program resulting in cash proceeds of $47.4 million, net of fees and commissions paid to agents of $0.9 million. As of December 31, 2025, $103.4 million of equity remained available for issuance under the ATM equity program.
NW Holdings
For NW Holdings, short-term liquidity is primarily provided by cash balances, dividends from its operating subsidiaries, proceeds from the sale of commercial paper notes, as well as a multi-year credit facility, and short-term credit facilities. NW Holdings also has a universal shelf registration statement filed with the SEC for the issuance of debt and equity securities. NW Holdings long-term debt and equity issuances are primarily used to provide equity contributions to NW Holdings’ operating subsidiaries for operating and capital expenditures and other corporate purposes. NW Natural also has a universal shelf registration statement filed with the SEC for the issuance of debt securities. NW Holdings' issuance of securities is not subject to regulation by state public utility commissions, but the dividends from NW Natural to NW Holdings are subject to regulatory ring-fencing provisions. NW Holdings guarantees the debt of its wholly-owned subsidiary, NWN Water. See " Long-Term Debt " below for more information regarding NWN Water debt.
As part of the ring-fencing conditions agreed upon with the OPUC and WUTC in connection with the holding company reorganization, NW Natural may not pay dividends or make distributions to NW Holdings if NW Natural’s credit ratings and common equity ratio, defined as the ratio of equity to long-term debt, fall below specified levels. If NW Natural’s long-term secured credit ratings are below A- for S&P and A3 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 45% or more. If NW Natural’s long-term secured credit ratings are below BBB for S&P and Baa2 for Moody’s, dividends may be issued so long as NW Natural’s common equity ratio is 46% or more. Dividends may not be issued if NW Natural’s long-term secured credit ratings are BB+ or below for S&P or Ba1 or below for Moody’s, or if NW Natural’s common equity ratio is below 44%, where the ratio is measured using common equity and long-term debt excluding imputed debt or debt-like lease obligations. In each case, common equity ratios are determined based on a preceding or projected 13-month average. In addition, there are certain OPUC notice requirements for dividends in excess of 5% of NW Natural’s retained earnings, or more than 10% of its retained earnings over a six-month period, and for special cash dividends paid in addition to regularly quarterly dividends.
Additionally, if NW Natural’s common equity (excluding goodwill and equity associated with non-regulated assets), on a preceding or projected 13-month average basis, is less than 46% of NW Natural’s capital structure, NW Natural is required to notify the OPUC, and if the common equity ratio falls below 44%, file a plan with the OPUC to restore its equity ratio to 44%. This condition is designed to ensure NW Natural continues to be adequately capitalized under the holding company structure. Under the WUTC order, the average common equity ratio must not exceed 56%.
At December 31, 2025 and 2024, NW Natural satisfied the ring-fencing provisions described above.
Based on several factors, including current cash reserves, committed credit facilities, its ability to receive dividends from its operating subsidiaries, in particular NW Natural, and an expected ability to issue long-term debt and equity securities in the capital markets, NW Holdings believes its liquidity is sufficient to meet anticipated cash requirements, including all contractual obligations, investing, and financing activities as discussed in " Cash Flows " above for at least the next 12 calendar months beginning January 1, 2026 and beyond such 12-month period based on NW Holdings' current business plans.
NW HOLDINGS DIVIDENDS. Quarterly dividends have been paid on common stock each year since NW Holdings’ predecessor’s stock was first issued to the public in 1951. Annual common stock dividend payments per share, adjusted for stock splits, have increased each year since 1956. The declarations and amount of future dividends to shareholders will depend upon earnings, cash flows, financial condition, NW Natural’s ability to pay dividends to NW Holdings and other factors. The amount and timing of dividends payable on common stock is at the sole discretion of the NW Holdings Board of Directors.
NW Holdings dividend highlights include:
Per common share
Dividends paid
In January 2026, the Board of Directors of NW Holdings declared a quarterly dividend on NW Holdings common stock of $0.4925 per share, payable on February 13, 2026, to shareholders of record on January 30, 2026, reflecting an indicated annual dividend rate of $1.97 per share.
NW Natural
For the NWN Gas Utility business segment, short-term borrowing requirements typically peak during colder winter months when NWN Gas Utility borrows money to cover the lag between natural gas purchases and bill collections from customers. Short-term liquidity for the NWN Gas Utility business is primarily provided by cash balances, internal cash flow from operations, proceeds from the sale of commercial paper notes, as well as available cash from multi-year credit facilities, short-term credit facilities, company-owned life insurance policies, the sale of long-term debt, and equity contributions from NW Holdings. NW Natural's long-term debt and contributions from NW Holdings are primarily used to finance NWN Gas Utility capital expenditures, refinance maturing debt, and provide temporary funding for other general corporate purposes of the NWN Gas Utility business.
Based on its current debt ratings (see " Credit Ratings " below), NW Natural has been able to issue commercial paper and long-term debt at attractive rates. In the event NW Natural is not able to issue new long-term debt due to adverse market conditions or other reasons, NW Natural expects that near-term liquidity needs can be met using internal cash flows, issuing commercial paper, receiving equity contributions from NW Holdings, or drawing upon a committed credit facility. NW Natural also has a universal shelf registration statement filed with the SEC for the issuance of secured and unsecured debt securities.
In the event NW Natural senior unsecured long-term debt ratings are downgraded, or outstanding derivative positions exceed a certain credit threshold, counterparties under derivative contracts could require NW Natural to post cash, a letter of credit, or other forms of collateral, which could expose NW Natural to additional cash requirements and may trigger increases in short-term borrowings while in a net loss position. NW Natural was not required to post collateral at December 31, 2025. See Note 15.
Other items that may have a significant impact on NW Natural's liquidity and capital resources include NW Natural's pension contribution requirements and environmental expenditures.
PENSION CONTRIBUTIONS. NW Natural expects to make contributions to its company-sponsored defined benefit plan, which is closed to new employees, over the next several years under applicable laws and regulations. See "Application of Critical Accounting Policies— Pensions and Postretirement Benefits " below and Note 10 for more information.
ENVIRONMENTAL EXPENDITURES. NW Natural expects to continue using cash resources to fund environmental liabilities for future environmental remediation or action. NW Natural has authorizations in Oregon and Washington to defer costs related to remediation of properties that are owned or were previously owned by NW Natura l. In Oregon, a Site Remediation and Recovery Mechanism (SRRM) is currently in place to recover prudently incurred costs allocable to Oregon customers, subject to an earnings test. On October 21, 2019 the WUTC authorized an Environmental Cost Recovery Mechanism (ECRM) for recovery of prudently incurred costs allocable to Washington customers beginning November 1, 2019. S ee Note 17 and "Results of Operations—Regulatory Matters— Environmental Cost Deferral and Recovery " above.
Based on several factors, including current credit ratings, NW Natural's commercial paper program, current cash reserves, committed credit facilities, and an expected ability to issue long-term debt and receive equity contributions from NW Holdings, NW Natural believes its liquidity is sufficient to meet anticipated near-term cash requirements, including all contractual obligations, and investing and financing activities as discussed in " Cash Flows " above.
NW NATURAL DIVIDENDS. The declarations and amount of future dividends to NW Holdings will depend upon earnings, cash flows, financial condition, the satisfaction of OPUC and WUTC regulatory ring-fencing restrictions, and other factors. The amount and timing of dividends payable on common stock is subject to approval of the NW Natural Board of Directors.
Gas and Pipeline Capacity Purchase Agreements
NW Natural has signed agreements providing for the reservation of firm pipeline capacity under which it is required to make monthly payments for contracted capacity. The pricing component of the monthly payment is established, subject to change, by U.S. or Canadian regulatory bodies, or is established directly with private counterparties, as applicable. In addition, NW Natural
has entered into long-term agreements to release firm pipeline capacity. NW Natural also enters into short-term and long-term gas purchase agreements. Refer to Note 16 for gas and pipeline capacity purchase commitments.
NWN Renewables is an unregulated subsidiary of NW Holdings established to pursue unregulated RNG activities. In September 2021, a subsidiary of NWN Renewables, Ohio Renewables, and a subsidiary of EDL, a global producer of sustainable distributed energy, executed agreements to secure RNG supply from two production facilities that are designed to convert landfill waste gases to RNG (EDL Facilities). The first facility was completed and commenced delivery of RNG to Ohio Renewables in September 2024. Upon reaching this milestone, Ohio Renewables paid approximately $26.0 million to the EDL subsidiary. The second facility was completed and commenced delivery of RNG to Ohio Renewables in December 2024 at which point Ohio Renewables made an additional payment of $25.4 million to the EDL subsidiary.
Alongside these development agreements, Ohio Renewables and the subsidiary of EDL executed agreements for Ohio Renewables to purchase up to an annual specified amount of RNG produced by the EDL Facilities over a 20-year period at a contractually specified price. In December 2025, Ohio Renewables entered into an agreement to purchase up to an annual specified amount of RNG produced by the EDL Facilities from a separate investment-grade counterparty over an 11-year period at a contractually specified price. Purchase volumes for each agreement are variable based on production, and purchases may not exceed contracted amounts. We currently estimate the amount of RNG purchases based on prices and estimated production volumes specified in the agreements to be $20.9 million in 2026, $31.4 million in 2027, $31.6 million in 2028, $30.8 million in 2029, $31.4 million in 2030 and $599.3 million thereafter through 2044. In 2025, purchases totaled $14.5 million.
NWN Renewables Gas Sale Agreements
Ohio Renewables has contracted to sell RNG produced by the EDL Facilities up to certain specified volumes in each of calendar years 2024 through 2026 to an investment-grade counterparty. We currently estimate RNG volumes to be sold pursuant to this agreement to be approximately 2,370,000 MMbtu over the life of the agreement, provided that such amounts of RNG are produced by the EDL Facilities during that period.
Ohio Renewables additionally has contracted to sell a fixed-volume amount of RNG under a long-term agreement with an investment-grade utility beginning in 2025 and extending through 2044. Amounts to be delivered under this agreement are estimated to be 375,000 MMbtu in 2026, 1,950,000 MMbtu annually in 2027 through 2030, 2,325,000 MMbtu annually in 2031 through 2034, 2,775,000 MMbtu annually in years 2035 through 2043 and 1,513,770 MMbtu in 2044. Under the current contract, if less than 75% of the contracted volumes of RNG are not delivered on an annual basis, Ohio Renewables is obligated to pay the per MMbtu price for volumes between the amount delivered and 75% of the contracted volumes on an annual basis.
Other Purchase Agreements
Other purchase commitments primarily consist of remaining balances under existing purchase orders and gas storage agreements. At December 31, 2025, the amount due over the duration of the purchase agreements totaled $50.0 million at NW Holdings. Except for these certain purchase commitments, NW Holdings and NW Natural have no material off-balance sheet financing arrangements.
Short-Term Debt
The primary source of short-term liquidity for NW Holdings is cash balances, dividends from its operating subsidiaries, in particular NW Natural, proceeds from the sale of commercial paper notes, available cash from a multi-year credit facility, and short-term credit facilities it may enter into from time to time.
The primary source of short-term liquidity for NW Natural is from the sale of commercial paper, available cash from a multi-year credit facility, and short-term credit facilities it may enter into from time to time. In addition to issuing commercial paper or entering into bank loans to meet working capital requirements, including seasonal requirements to finance gas purchases and accounts receivable, short-term debt may also be used to temporarily fund capital requirements. For NW Natural, commercial paper and bank loans are periodically refinanced through the sale of long-term debt or equity contributions from NW Holdings. Commercial paper, when outstanding, is sold through two commercial banks under an issuing and paying agency agreement and is supported by one or more unsecured revolving credit facilities. See “Credit Agreements” below.
At December 31, 2025 and 2024, NW Holdings' short-term debt consisted of the following:
December 31, 2025
December 31, 2024
In millions
Balance Outstanding
Weighted Average Interest Rate (1)
Balance Outstanding
Weighted Average Interest Rate (1)
Commercial Paper Borrowings - NW Holdings (2)
Commercial Paper Borrowings - NW Natural
NW Holdings Credit Agreement Loans
Total short-term debt
(1) Weighted average interest rate on outstanding short-term debt
(2) NW Holdings initiated a commercial paper program in March 2025.
Acquisition Bridge Facility
On January 7, 2025, NW Holdings entered into a 364-Day Term Loan Credit Agreement (the Acquisition Bridge Facility) among NW Holdings, as borrower, certain lenders parties thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, pursuant to which NW Holdings borrowed a $273.0 million senior unsecured term loan (the Bridge Loan), the proceeds of which were used to finance the SiEnergy acquisition, with any remaining proceeds to be used for working capital needs and for general corporate purposes. The Bridge Loan was repaid in full in March 2025.
Credit Agreements
NW Holdings
NW Holdings has a $250 million credit agreement with a feature that allows NW Holdings to request increases to the total commitment amount up to a maximum of $350 million (subject to lender approval). The maturity date of the agreement is November 3, 2030 (or, if such day is not a business day, the immediately preceding business day), with available extensions of commitments for two additional one-year periods, subject to lender approval.
All lenders under the NW Holdings credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2025 as follows:
In millions
Lender rating, by category
Loan Commitment
Total
Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Holdings if the lender defaulted due to lack of funds or insolvency; however, NW Holdings does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings. There were no outstanding balances under the NW Holdings agreement at December 31, 2025 and $33.6 million of outstanding balances under the NW Holdings agreement at December 31, 2024.
The NW Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $40 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. The credit agreement requires NW Holdings to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. NW Holdings was in compliance with this covenant at December 31, 2025 and 2024, with consolidated indebtedness to total capitalization ratios of 60.7% and 57.6%, respectively.
The NW Holdings credit agreement also requires NW Holdings to maintain debt ratings (which are defined by a formula using NW Natural's credit ratings in the event NW Holdings does not have a credit rating) with Standard & Poor's (S&P) and Moody's Investors Service, Inc. (Moody’s) and notify the lenders of any change in its senior unsecured debt ratings or senior secured debt ratings, as applicable, by such rating agencies. A change in NW Holdings' debt ratings by S&P or Moody’s is not an event of default, nor is the maintenance of a specific minimum level of debt rating a condition of drawing upon the credit agreement. Rather, interest rates on any loans outstanding under the credit agreements are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreements when ratings are changed. See " Credit Ratings " below.
NW Holdings had no letters of credit issued and outstanding at December 31, 2025 and 2024.
NW Natural
NW Natural has a $400 million credit agreement, with a feature that allows NW Natural to request increases in the total commitment amount, up to a maximum of $600 million, subject to lender approval. The maturity date of the agreement is November 3, 2030 (or, if such day is not a business day, the immediately preceding business day), with available extensions of commitments for two additional one-year periods, subject to lender approval.
All lenders under the NW Natural credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2025 as follows:
In millions
Lender rating, by category
Loan Commitment
Total
Based on credit market conditions, it is possible one or more lending commitments could be unavailable to NW Natural if the lender defaulted due to lack of funds or insolvency; however, NW Natural does not believe this risk to be imminent due to the lenders' strong investment-grade credit ratings. There was no outstanding balances under the NW Natural agreement at December 31, 2025 and 2024.
The NW Natural credit agreement permits the issuance of letters of credit in an aggregate amount of up to $60 million. The principal amount of borrowings under the credit agreement is due and payable on the maturity date. There were no outstanding balances under this credit agreement at December 31, 2025 or 2024. The credit agreement requires NW Natural to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. NW Natural was in compliance with this covenant at December 31, 2025 and 2024, with consolidated indebtedness to total capitalization ratios of 50.6% and 53.1%, respectively.
The NW Natural credit agreement also requires NW Natural to maintain credit ratings with S&P and Moody’s and notify the lenders of any change in NW Natural's senior unsecured debt ratings or senior secured debt ratings, as applicable, by such rating agencies. A change in NW Natural's debt ratings by S&P or Moody’s is not an event of default, nor is the maintenance of a specific minimum level of debt rating a condition of drawing upon the credit agreement. Rather, interest rates on any loans outstanding under the credit agreement are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreement when ratings are changed. See " Credit Ratings " below.
NW Natural had no letters of credit outstanding at December 31, 2025 and 2024.
SiEnergy
On January 7, 2025, NW Holdings acquired all of the issued and outstanding limited liability company interests of SiEnergy. SiEnergy's subsidiary, SiEnergy Holdings, had a revolving credit facility (the SiEnergy Holdings Facility) that in aggregate had commitments of $5.0 million, including a letter of credit sublimit of $1.0 million. Loans extended under the SiEnergy Holdings Facility bore interest at a per annum rate equal to the sum of (a) either (i) the Base Rate, as defined in the Amended Credit Agreement (the Base Rate), or (ii) term SOFR with a one-, three- or six-month tenor; plus (b) the Applicable Margin. The Applicable Margin was 0.750% with respect to Base Rate loans and 1.750% with respect to SOFR loans. In August 2025, the SiEnergy Amended Credit Agreement was terminated and associated facilities are no longer available for financing.
On November 3, 2025, SiEnergy Holdings entered into a $75 million senior unsecured credit agreement, with a feature that allows SiEnergy to request increases in the total commitment amount, up to a maximum of $125 million, subject to lender approval. The maturity date of the SiEnergy Holdings credit agreement is November 3, 2030 (or, if such day is not a business day, the immediately preceding business day), with available extensions of commitments for two additional one-year periods, subject to lender approval. There were no outstanding balances under the SiEnergy agreement at December 31, 2025.
All lenders under the SiEnergy credit agreement are major financial institutions with committed balances and investment grade credit ratings as of December 31, 2025 as follows:
In millions
Lender rating, by category
Loan Commitment
Total
The SiEnergy Holdings credit agreement permits the issuance of letters of credit in an aggregate amount of up to $20 million. SiEnergy had no letters of credit outstanding at December 31, 2025.
The SiEnergy Holdings credit agreement requires SiEnergy Holdings to comply, and to cause certain of its subsidiaries to comply, with various affirmative and negative covenants, including a financial covenant requiring SiEnergy Holdings to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this or other applicable covenants or the occurrence of any other event of default, subject to, in certain instances, specified thresholds, cure periods and exceptions, would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. SiEnergy was in compliance with this covenant at December 31, 2025, with an indebtedness to total capitalization ratio of 33.4%.
The SiEnergy Holdings credit agreement also requires SiEnergy Holdings to maintain a credit rating with any one of S&P, Moody’s or certain other rating organizations with respect to SiEnergy Holdings' senior, unsecured, non-credit enhanced long-term credit ratings (or, if such debt is not rated, corporate credit rating) and to notify the lenders of any change in such ratings by such rating agencies. A change in SiEnergy Holdings' credit ratings is not an event of default, nor is the maintenance of a specific minimum level of credit rating a condition of drawing upon the credit agreement. Rather, interest rates on any loans outstanding and certain fee amounts under the credit agreement are determined based upon SiEnergy Holdings' credit ratings with S&P and Moody's and therefore, a change in the credit rating may increase or decrease the cost of any loans and the amounts of certain fees under the credit agreement when ratings are changed. See " Credit Ratings " below.
Letters of Credit Facility
In January 2024, NW Natural entered into an Uncommitted Letter of Credit and Reimbursement Agreement (LC Reimbursement Agreement), pursuant to which NW Natural agreed to reimburse each Lender acting as an issuing bank (Issuing Bank) thereunder for disbursements in respect of letters of credit (Letters of Credit) issued pursuant to the LC Reimbursement Agreement from time to time. The Company expects to use Letters of Credit issued under the facility created by the LC Reimbursement Agreement (LC Facility) primarily to support its participation in Washington Climate Commitment Act cap-and-invest program auctions.
Although there is no expressly stated maximum amount of Letters of Credit that can be issued or outstanding under the LC Facility, under current regulatory authority from the OPUC, the aggregate sum of Letters of Credit outstanding and available to be drawn under the LC Reimbursement Agreement may not exceed $100 million at any one time. The Issuing Banks have no commitment to issue Letters of Credit under the LC Facility and will have the discretion to limit and condition the terms for the issuance of Letters of Credit (including maximum face amounts) in their sole discretion.
The LC Reimbursement Agreement requires NW Natural to maintain certain ratings with S&P and Moody’s. NW Natural must also notify the Administrative Agent and Lenders of any change in the S&P or Moody’s Ratings, although any such change is not an event of default.
The LC Reimbursement Agreement prohibits NW Natural from permitting Consolidated Indebtedness to be greater than 70% of Total Capitalization, each as defined therein and calculated as of the end of each fiscal quarter of NW Natural. Failure to comply with this financial covenant would constitute an Event of Default under the LC Reimbursement Agreement. The occurrence of this or any other Event of Default would entitle the Administrative Agent to require cash collateral for the LC Exposure, as defined in the LC Reimbursement Agreement, and to exercise all other rights and remedies available to it and the Lenders under the Credit Documents, as defined in the LC Reimbursement Agreement, and under applicable law.
There were no letter of credits issued or outstanding under the LC reimbursement agreement at December 31, 2025. In January 2026, NW Natural issued a $100.0 million letter of credit under the LC Facility, which is expected to expire on March 13, 2026.
Credit Ratings
NW Holdings credit ratings are a factor of liquidity, potentially affecting access to the capital markets. NW Natural and SiEnergy's credit ratings also have an impact on the cost of funds.
The following table summarized NW Holdings' current credit ratings:
Commercial paper (short-term debt)
Junior subordinated debentures
BBB
Issuer credit rating
Ratings outlook
Stable
The following table summarizes NW Natural's current credit ratings:
Moody's
Commercial paper (short-term debt)
Senior secured (long-term debt)
Senior unsecured (long-term debt)
Baa1
Issuer credit rating
Ratings outlook
Stable
Stable
The following table summarizes SiEnergy's current credit ratings:
Issuer credit rating (SiEnergy Holding, LLC, formerly Si Investment Co., LLC)
BBB+
Issuer credit rating (SiEnergy Gas, LLC, formerly SiEnergy, L.P.)
BBB+
Senior secured notes (SiEnergy Gas, LLC, formerly SiEnergy, L.P.)
Ratings outlook
Stable
The above credit ratings and ratings outlook are dependent upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of or reference to these credit ratings is not a recommendation to buy, sell or hold NW Holdings or NW Natural securities. Each rating should be evaluated independently of any other rating.
As part of the ring-fencing conditions agreed upon with the OPUC and WUTC in connection with the holding company reorganization, NW Holdings and NW Natural are required to maintain separate credit ratings, long-term debt ratings, and preferred stock ratings, if any.
Long-Term Debt
Summary of Significant Debt Issuances
In millions
Year ended December 31, 2025
NW Holdings
Issuance Date
Maturity Date
Interest Rate
Amount
Unsecured Term Loan (a)(b)
January 2025
August 2026
SOFR + 90 bps Spread (c)
Junior Subordinated Debentures (d)(e)
March 2025
September 2055
SiEnergy (f)
Series A Senior Notes
August 2025
August 2030
Series B Senior Notes
August 2025
August 2035
Series C Senior Notes
August 2025
August 2055
NW Natural (g)
First Mortgage Bonds
December 2025
May 2036
First Mortgage Bonds
December 2025
December 2055
Total long-term debt issuance
(a) Proceeds were used to support working capital needs and for general corporate purposes.
(b) On November 3, 2025, an amendment to the Term Loan extended the maturity date to August 6, 2026. NW Holdings may prepay the Term Loan without premium or penalty (other than customary breakage costs, if applicable). Amounts prepaid may not be reborrowed.
(c) The Term Loan Agreement bears interest at a per annum rate equal to the sum of (x) either (i) term SOFR with a one-, three- or six-month tenor, plus an adjustment of 0.10%, or (ii) the Alternate Base Rate, as defined in the Term Loan Agreement, plus (y) the Applicable Margin, as defined in the Term Loan Agreement. The Applicable Margin is 0.90% per annum, for term SOFR loans, and 0.00% per annum, for Alternate Base Rate loans.
(d) Proceeds were used to repay the acquisition bridge facility entered into on January 7, 2025 by NW Holdings for the acquisitions of SiEnergy; any remaining proceeds were used for working capital needs and for general corporate purposes.
(e) The Company will pay interest on the Junior Subordinated Debentures (i) from and including the date of original issuance to, but not including, September 15, 2035, at an annual rate of 7.00% and (ii) from and including September 15, 2035, during each Interest Reset Period at an annual rate equal to the Five-Year Treasury Rate as of the most recent Reset Interest Determination Date plus 2.701%.
(f) Proceeds were used to repay SiEnergy's $148.8 million remaining balance on the Delayed Draw Term Loan Facility.
(g) Proceeds were used to support working capital needs and for general corporate purposes including repayment of debt.
NWN Water Interest Rate Swap Agreement
In January 2023, NWN Water entered into an interest rate swap agreement with a major financial institution for $55.0 million that effectively converted variable-rate debt to a fixed rate of 3.80%. Interest payments made between the effective date and expiration date are hedged by the swap agreement. The interest rate swap agreement expires in June 2026, along with the variable-rate debt.
Retirement of Long-Term Debt
NW Holdings
In March 2025, the Acquisition Bridge Facility used to finance the acquisition of SiEnergy was repaid in full.
NW Natural
The following NW Natural debentures were retired in the periods indicated:
Year Ended December 31,
In millions
NW Natural First Mortgage Bonds:
3.542% Series due 2023
5.620% Series due 2023
7.720% Series due 2025
6.520% Series due 2025
Total
SiEnergy
In August 2025, the proceeds of the senior notes issued by SiEnergy Gas, LLC in August 2025 (the August 2025 Notes) were used to extinguish the $148.8 million remaining balance of the SiEnergy Delayed Draw Term Loan Facility (SiEnergy DDTLF) (and the SiEnergy Revolving Credit Facility was terminated. The SiEnergy DDTLF and Revolving Credit Facility under SiEnergy’s Credit Agreement were acquired by NW Holdings on January 7, 2025 as part of the acquisition of all of the issued and outstanding limited liability company interests of SiEnergy.
The SiEnergy DDTLF had initial aggregate commitments, as amended, of $200.0 million . The SiEnergy DDTLF was scheduled to mature on December 22, 2026. Loans extended under the SiEnergy DDTLF bore interest at a per annum rate equal to the sum of (a) either (i) the Base Rate, as defined in the Amended Credit Agreement (the Base Rate), or (ii) term SOFR with a one-, three- or six-month tenor; plus (b) the Applicable Margin. The Applicable Margin was 0.750% with respect to Base Rate loans and 1.750% with respect to SOFR loans.
Maturities and Interest on Long-Term Debt
Maturities and payment of interest on long-term debt for each of the annual periods through December 31, 2030 and thereafter are as follows:
In millions
Long-term debt maturities
Interest on long-term debt
NW Holdings:
Thereafter
NW Holdings Total
NW Natural:
Thereafter
NW Natural Total
Bankruptcy Ring-fencing Restrictions
As part of the ring-fencing conditions agreed upon with the OPUC and WUTC, NW Natural is required to have one director who is independent from NW Natural management and from NW Holdings and to issue one share of NW Natural preferred stock to an independent third party. NW Natural was in compliance with both of these ring-fencing provisions as of December 31, 2025 and 2024. NW Natural may file a voluntary petition for bankruptcy only if approved unanimously by the Board of Directors of NW Natural, including the independent director, and by the holder of the preferred share.
Pension Cost and Funding Status of Qualified Retirement Plans
NW Natural's pension costs are determined in accordance with accounting standards for compensation and retirement benefits. See “Application of Critical Accounting Policies and Estimates – Pensions and Postretirement Benefits ” below. Pension expense for NW Natural's qualified defined benefit plan, which is allocated between operations and maintenance expenses and capital expenditures, totaled $10.4 million in 2025, a change of $6.3 million from 2024. The fair market value of pension assets in this plan increased to $302.3 million at December 31, 2025 from $284.1 million at December 31, 2024. The increase was due to employer contributions of $11.3 million and a gain on plan assets of $31.7 million, partially offset by benefit payments of $24.8 million.
Contributions made to NW Natural's company-sponsored qualified defined benefit pension plan are based on actuarial assumptions and estimates, tax regulations, and funding requirements under federal law. The qualified defined benefit pension plan was underfunded by $71.5 million at December 31, 2025. NW Natural made $11.3 million and $20.5 million of cash contributions to its qualified defined benefit pension plans during the years ended December 31, 2025, and December 31, 2024, respectively. The amount and timing of future contributions will depend on market interest rates and investment returns on the plan's assets. See Note 10 for information regarding employer contributions and estimated future benefit payments and other pension disclosures.
Contingent Liabilities
Loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable in accordance with accounting standards for contingencies. See “Application of Critical Accounting Policies and Estimates— Environmental Contingencies ” below. At December 31, 2025, NW Natural's total estimated liability related to environmental sites was $162.0 million. See Note 17 and "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery " above.
New Accounting Pronouncements
For a description of recent accounting pronouncements that may have an impact on our financial condition, results of operations, or cash flows, see Note 2.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing financial statements in accordance with U.S. GAAP, management exercises judgment to assess the potential outcomes and related accounting impacts in the selection and application of accounting principles, including making estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses, and related disclosures in the financial statements. Management considers critical accounting policies to be those which are most important to the representation of financial condition and results of operations and which require management’s most difficult and subjective or complex judgments, including accounting estimates that could result in materially different amounts if reported under different conditions or used different assumptions. Our most critical estimates and judgments for both NW Holdings and NW Natural include accounting for:
• regulatory accounting;
• revenue recognition;
• derivative instruments and hedging activities;
• pensions and postretirement benefits;
• income taxes;
• environmental contingencies; and
• impairment of long-lived assets and goodwill.
Management has discussed its current estimates and judgments used in the application of critical accounting policies with the Audit Committees of the Boards of NW Holdings and NW Natural. Within the context of critical accounting policies and estimates, management is not aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. For a description of recent accounting pronouncements that could have an impact on financial condition, results of operations or cash flows, see Note 2.
Regulatory Accounting
NWN Gas Utility, SiEnergy Gas Utility, and NWN Water include regulated entities. The NWN Gas Utility segment is regulated by the OPUC and WUTC, SiEnergy Gas is regulated by the RRC and the cities in which it provides service. Regulated entities at NWN Water are regulated by the utility commissions in the states in which they are located, including Oregon, Washington, Arizona, Idaho, and Texas. These commissions establish the rates designed to recover specific costs of providing regulatory services, and, to a certain extent, set forth special accounting treatment for certain regulatory transactions for which NW Natural, SiEnergy, and NWN Water record regulatory assets and liabilities. In general, the same accounting principles as non-regulated companies reporting under U.S. GAAP are used. However, authoritative guidance for regulated operations (regulatory accounting) requires different accounting treatment for regulated companies to show the effects of such regulation. For example, NW Natural accounts for the cost of gas using a PGA deferral and cost recovery mechanism, which is submitted for approval annually to the OPUC and WUTC. See "Results of Operations—Regulatory Matters—Rate Mechanisms— Purchased Gas Adjustment " above. There are other expenses and revenues that the OPUC or WUTC may require NW Natural to defer for recovery or refund in future periods. Regulatory accounting requires NW Natural to account for these types of deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet. When the recovery of these regulatory assets from, or refund of regulatory liabilities to, customers is approved, NW Natural, SiEnergy, or NWN Water recognize the expense or revenue on the income statement at the same time the adjustment to amounts is included in rates charged to customers.
The conditions that must be satisfied to adopt the accounting policies and practices of regulatory accounting include:
• an independent regulator sets rates;
• the regulator sets the rates to cover specific costs of delivering service; and
• the service territory lacks competitive pressures to reduce rates below the rates set by the regulator.
NWN Gas Utility, SiEnergy Gas Utility, and NWN Water satisfy all three conditions and apply regulatory accounting at these businesses. Future accounting changes, regulatory changes, or changes in the competitive environment could require NW Holdings or NW Natural to discontinue the application of regulatory accounting for some or all of our regulated businesses. This would require the write-off of those regulatory assets and liabilities that would no longer be probable of recovery from or refund to customers.
Based on current accounting and regulatory competitive conditions, NW Natural believes it is reasonable to expect continued application of regulatory accounting for NWN Gas Utility, SiEnergy Gas Utility, and NWN Water activities. Further, it is reasonable to expect the recovery or refund of regulatory assets and liabilities at December 31, 2025 through future customer rates at each applicable segment. If it is determined that all or a portion of these regulatory assets or liabilities no longer meet the criteria for continued application of regulatory accounting, then NW Natural SiEnergy, or NWN Water would be required to write-off the net unrecoverable balances against earnings in the period such determination is made. The net balance in regulatory asset and liability accounts at NW Natural was a net liability of $323.8 million and a net liability of $333.4 million as of December 31, 2025 and 2024, respectively. The net balance in regulatory asset and liability accounts at NW Holdings was a net liability of $328.4 million and a net liability of $333.7 million as of December 31, 2025 and 2024, respectively. See Note 2 for more detail on regulatory balances.
Revenue Recognition
Revenues, which are derived primarily from the sale, transportation, storage of natural gas, and sale of water are recognized upon the delivery of commodity or services rendered to customers.
Accrued Unbilled Revenue
For a description of the policy regarding accrued unbilled revenue, most of which relates to the NWN Gas Utility business at NW Natural, see Note 2. The following table presents changes in key metrics if the estimated percentage of unbilled volume at December 31 was adjusted up or down by 1%:
In millions
Down 1%
Unbilled revenue increase (decrease)
Margin increase (decrease)
Net income before tax increase (decrease)
Derivative Instruments and Hedging Activities
NW Holdings and NW Natural have financial derivative policies that set forth guidelines for using financial derivative instruments to support prudent risk management strategies. These policies specifically prohibit the use of derivatives for speculative purposes. Financial derivative contracts are utilized to hedge most of our natural gas sale requirements. These contracts include swaps, options, and combinations of option contracts. NW Natural primarily uses these derivative financial instruments to manage commodity price variability. A small portion of NW Natural's derivative hedging strategy involves foreign currency exchange contracts.
Derivative instruments are recorded on the balance sheet at fair value. If certain regulatory conditions are met, then the derivative instrument fair value is recorded together with an offsetting entry to a regulatory asset or liability account pursuant to regulatory accounting, and no unrealized gain or loss is recognized in current income or loss. See " Regulatory Accounting " above for additional information. The gain or loss from the fair value of a derivative instrument subject to regulatory deferral is included in the recovery from, or refund to, NWN Gas Utility business customers in future periods. If a derivative contract is not subject to regulatory deferral, then the accounting treatment for unrealized gains and losses is recorded in accordance with accounting standards for derivatives and hedging which is either in current income or loss or in accumulated other comprehensive income or loss (AOCI or AOCL). Derivative contracts outstanding at December 31, 2025, 2024 and 2023 were measured at fair value using models or other market accepted valuation methodologies derived from observable market data. Estimates of fair value may change significantly from period-to-period depending on market conditions, notional amounts, and prices. These changes may have an impact on results of operations, but the impact would generally be mitigated due to the majority of derivative activities being subject to regulatory deferral treatment. For more information on derivative activity and associated regulatory treatment, see Note 2 and Note 15.
The following table summarizes the amount of gains (losses) realized from commodity price transactions for the last three years:
In millions
NWN Gas Utility business net gain (loss) on commodity swaps
Realized gains and losses from commodity hedges shown above were recorded in cost of gas and were, or will be, included in annual PGA rates.
NWN Water also uses financial derivatives to hedge interest rate risk in the form of a pay-fixed interest rate swap. Unrealized gains and losses related to the interest rate swap agreement qualifies for cash flow hedge accounting and are recorded in AOCI on the consolidated balance sheet.
Pensions and Postretirement Benefits
NW Natural maintains a qualified non-contributory defined benefit pension plan, non-qualified supplemental pension plans for eligible executive officers and certain key employees, and other postretirement employee benefit plans covering certain non-union employees. NW Natural also has a qualified defined contribution plan (Retirement K Savings Plan) for all eligible employees. Only the qualified defined benefit pension plan and Retirement K Savings Plan have plan assets, which are held in qualified trusts to fund the respective retirement benefits. The qualified defined benefit retirement plan for union and non-union employees was closed to new participants several years ago. Non-union and union employees hired or re-hired after December 31, 2006 and 2009, respectively, and employees of certain NW Holdings subsidiaries are provided an enhanced Retirement K Savings Plan benefit. The postretirement Welfare Benefit Plan for non-union employees was also closed to new participants several years ago.
Net periodic pension and postretirement benefit costs (retirement benefit costs) and projected benefit obligations (benefit obligations) are determined using a number of key assumptions, including discount rates, rates of compensation increase, retirement ages, mortality rates and an expected long-term return on plan assets. See Note 10.
The vested benefit obligation for the defined benefit pension plan is the actuarial present value of the vested benefits to which the employee is entitled based on the employee's expected date of separation or retirement based on valuation assumptions.
Accounting standards also require balance sheet recognition of unamortized actuarial gains and losses and prior service costs in AOCI or AOCL, net of tax. However, the retirement benefit costs related to qualified defined benefit pension and postretirement benefit plans are generally recovered in rates charged to NWN Gas Utility customers, which are set based on accounting standards for pensions and postretirement benefit expenses. As such, NW Natural received approval from the OPUC to recognize the unamortized actuarial gains and losses and prior service costs as a regulatory asset or regulatory liability based on expected rate recovery, rather than including it as AOCI or AOCL under common equity. See " Regulatory Accounting" above and Note 2, " Industry Regulation. "
A number of factors, as discussed above, are considered in developing pension and postretirement benefit assumptions. For the December 31, 2025 measurement date, NW Natural reviewed and updated:
• the weighted-average discount rate assumptions for pensions decreased from 5.56% for 2024 to 5.35% for 2025, and the weighted-average discount rate assumptions for other postretirement benefits decreased from 5.53% for 2024 to 5.28% for 2025. The new rate assumptions were determined for each plan based on a matching of benchmark interest rates to the estimated cash flows, which reflect the timing and amount of future benefit payments. Benchmark interest rates are drawn from the FTSE Above Median Curve, which consists of high quality bonds rated AA- or higher by S&P or Aa3 or higher by Moody’s;
• the expected annual rate of future compensation is separately determined for bargaining unit and non-bargaining unit employees. The rate assumption ranges from 4.5% to 5.1% in 2025 and thereafter;
• the expected long-term return on qualified defined benefit plan assets remained the same at 7.50% in 2024 and 2025; and
• other key assumptions, which were based on actual plan experience and actuarial recommendations.
At December 31, 2025, the net pension liability (benefit obligations less market value of plan assets) for the defined benefit pension plan decreased $17.3 million compared to 2024. The decrease in the net pension liability is primarily due to the $1.0 million increase to the pension benefit obligation and the $18.3 million increase in plan assets. The liability for non-qualified plans decreased $9.8 million and the liability for other postretirement benefits increased $0.5 million in 2025.
The expected long-term rate of return on assets is based on a forward-looking capital markets model along with the defined benefit pension plan current and target asset allocation. The model inputs are based on future expected long-term total returns and historical volatilities for various asset classes, along with their historical correlations. The model considers current investment-grade yields for fixed income investments, and the same plus a risk premium for riskier assets such as common stocks.
NW Natural believes its pension assumptions are appropriate based on plan design and an assessment of market conditions. The following shows the sensitivity of retirement benefit costs and benefit obligations to changes in certain actuarial assumptions:
Dollars in millions
Change in Assumption
Impact on 2025 Retirement Benefit Costs
Impact on Retirement
Benefit Obligations at Dec. 31, 2025
Discount rate:
Qualified defined benefit plans
Non-qualified plans
Other postretirement benefits
Expected long-term return on plan assets:
Qualified defined benefit plans
Income Taxes
Valuation Allowances
Deferred tax assets are recognized to the extent that these assets are believed to be more likely than not to be realized. In making such a determination, available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. NW Holdings and NW Natural have determined that all recorded deferred tax assets are more likely than not to be realized as of December 31, 2025. See Note 11.
Uncertain Tax Benefits
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in the jurisdictions in which we operate. A tax benefit from a material uncertain tax position will only be recognized when it is more likely than not that the position, or some portion thereof, will be sustained upon examination, including resolution of any related appeals or litigation processes, on the basis of the technical merits. NW Holdings and NW Natural participate in the Compliance Assurance Process (CAP) with the Internal Revenue Service (IRS). Under the CAP program companies work with the IRS to identify and resolve material tax matters before the federal income tax return is filed each year. No reserves for uncertain tax benefits were recorded during 2025, 2024, or 2023. See Note 11.
Tax Legislation
When significant proposed or enacted changes in income tax rules occur, we consider whether there may be a material impact to our financial position, results of operations, cash flows, or whether the changes could materially affect existing assumptions used in making estimates of tax related balances.
The final tangible property regulations applicable to all taxpayers were issued on September 13, 2013 and were generally effective for taxable years beginning on or after January 1, 2014. In April 2023, the IRS published Revenue Procedure 2023-15 that provides a safe harbor method of income tax accounting for determining when expenditures for natural gas transmission and distribution property must be capitalized or are allowable as repair deductions. We have evaluated this new safe harbor and do not believe that the safe harbor method is materially different from NW Natural’s current repairs methodology or that this additional guidance would have a material effect on our financial condition and results of operations.
Regulatory Matters
Regulatory tax assets and liabilities are recorded to the extent it is probable they will be recoverable from, or refunded to, customers in the future. At December 31, 2025 and 2024, NW Natural had net regulatory income tax assets of $3.6 million and $5.8 million, respectively, representing future rate recovery of deferred tax liabilities resulting from differences in NWN Gas Utility plant financial statement and tax bases and NWN Gas Utility plant removal costs. These regulatory assets are currently being recovered through customer rates. At December 31, 2025 and 2024, regulatory income tax assets of $7.8 million and $6.0 million, respectively, were recorded by NW Natural, representing future rate recovery of deferred tax liabilities resulting from the equity portion of AFUDC. These regulatory assets are currently being recovered through customer rates.
At December 31, 2025 and 2024, regulatory liability balances, representing the estimated net benefit to NWN Gas Utility customers resulting from the change in deferred taxes as a result of the Tax Cut and Jobs Act (TCJA), of $164.6 million and $169.5 million, respectively, were recorded by NW Natural. These balances include a gross up for income taxes of $43.6 million and $44.9 million, respectively. These regulatory liabilities are currently being amortized as a reduction in customer rates.
Environmental Contingencies
Environmental liabilities are accounted for in accordance with accounting standards under the loss contingency guidance when it is probable that a liability has been incurred and the amount of the loss is reaso nably estimable. Amounts recorded for environmental contingencies take numerous factors into consideration, including, among other variables, changes in enacted laws, regulatory orders, estimated remediation costs, interest rates, insurance proceeds, participation by other parties, timing of
payments, and the input of legal counsel and third-party experts. Accordingly, changes in any of these variables or other factual circumstances could have a material impact on the amounts recorded for our environmental liabilities. For a complete discussion of environmental accounting policies refer to Note 2. For a discussion of current environmental sites and liabilities refer to Note 17. In addition, for information regarding the regulatory treatment of these costs and NW Natural's regulatory recovery mechanism, see "Results of Operations—Regulatory Matters—Rate Mechanisms— Environmental Cost Deferral and Recovery " above.
Impairment of Long-Lived Assets and Goodwill
Long-Lived Assets
We review the carrying value of long-lived assets whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment of long-lived assets include a significant adverse change in the extent or manner in which the asset is used, a significant adverse change in legal factors or business climate that could affect the value of the asset, or a significant decline in the observable market value or expected future cash flows of the asset, among others.
When such factors are present, we assess the recoverability by determining whether the carrying value of the asset will be recovered through expected future cash flows. An asset is determined to be impaired when the carrying value of the asset exceeds the expected undiscounted future cash flows from the use and eventual disposition of the asset. If an impairment is indicated, we record an impairment loss for the difference between the carrying value and the fair value of the long-lived assets. Fair value is estimated using appropriate valuation methodologies, which may include an estimate of discounted cash flows.
Goodwill and Business Combinations
In a business combination, goodwill is initially measured as any excess of the acquisition-date fair value of the consideration transferred over the acquisition-date fair value of the net identifiable assets acquired.
The carrying value of goodwill is reviewed annually during the fourth quarter, or whenever events or changes in circumstance indicate that such carrying values may not be recoverable.
NW Holdings' policy for goodwill assessments begins with a qualitative analysis in which events and circumstances are evaluated, including macroeconomic conditions, industry and market conditions, regulatory environments, and the overall financial performance of the reporting unit. If the qualitative assessment indicates that the carrying value may be at risk of recoverability, a quantitative evaluation is performed to measure the carrying value against the fair value of the reporting unit. This evaluation may involve the assessment of future cash flows and other subjective factors for which uncertainty exists and could impact the estimation of future cash flows. These factors include, but are not limited to, the amount and timing of future cash flows, future growth rates, and the discount rate. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge. A qualitative assessment was performed during the fourth quarter of 2025 which indicated a quantitative assessment was not required; thus, no goodwill impairment was recorded. See Note 2 and Note 14 for additional information.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at the acquisition date, and the fair value of any non-controlling interest in the acquiree. Acquisition-related costs are expensed as incurred. When NW Holdings acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as of the acquisition date. When there is substantial judgment or uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities.
