Business Context and Reporting Period
This Form 8-K is filed by Northwest Natural Holding Company and Northwest Natural Gas Company (NW Natural) on March 10, 2020. The filing reports on two significant regulatory events: a partial settlement regarding a general rate case with the Public Utility Commission of Oregon (OPUC) and the issuance of a new Oregon executive order concerning greenhouse gas (GHG) emissions.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, or debt figures. However, it discloses the following financial parameters agreed upon in the rate case settlement:
- Overall Cost of Capital: 6.965%
- Capital Structure: 50% equity and 50% long-term debt
- Return on Equity (ROE): 9.4%
The settlement does not address the average rate base or the overall annual revenue requirement increase.
Material Changes and Events
Partial Rate Case Settlement
On March 12, 2020, NW Natural and all parties to the general rate case filed a settlement with the OPUC addressing cost of capital issues. The settlement is subject to OPUC review and approval. New rates based on this settlement are expected to take effect on November 1, 2020, pending an OPUC order.
Executive Order on GHG Emissions
On March 10, 2020, the Governor of Oregon issued an executive order directing state agencies to reduce GHG emissions by at least 45% below 1990 levels by 2035 and 80% by 2050. The order directs the OPUC to prioritize decarbonization in the utility sector and directs other agencies to cap and reduce emissions from fuels, including natural gas.
Outlook, Risks, and Management Commentary
Regulatory Uncertainty: Management states it is unable to predict the impact of the new executive order on NW Natural at this time. Implementation relies on state agency rule-making, the scope and timing of which are undetermined.
Legal Challenges: The executive order and any resulting rules are likely to be subject to legal challenges from various stakeholders.
Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to uncertainties regarding regulatory proceedings, legal challenges, and changes in laws.
Investor Verification Checklist
- Verify the final OPUC order approving the cost of capital settlement and the specific effective date of new rates.
- Monitor the OPUC and other state agencies for proposed rules implementing the GHG reduction executive order.
- Track any legal challenges filed against the executive order or the resulting regulatory rules.
- Review future filings for the resolution of the remaining rate case elements (rate base and revenue requirement) not covered in the partial settlement.