PORTLAND GENERAL ELECTRIC CO /OR/ [POR] Filings

10-Q 1 por-20230930.htm 10-Q por-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 001-5532-99

PORTLAND GENERAL ELECTRIC COMPANY

(Exact name of registrant as specified in its charter)


Oregon			93-0256820
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

121 SW Salmon Street

Portland, Oregon 97204

(503) 464-8000

(Address of principal executive offices, including zip code,

and registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


(Title of class)	(Trading Symbol)	(Name of exchange on which registered)
Common Stock, no par value	POR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[x] Yes x [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes [x] No

Number of shares of common stock outstanding as of October 20, 2023 is 101,123,903 shares.

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PORTLAND GENERAL ELECTRIC COMPANY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS


Definitions		3

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

	Condensed Consolidated Statements of Income and Comprehensive Income	4

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65

Item 4.	Controls and Procedures	65

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	66





Item 6.	Exhibits	66

SIGNATURE		67

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DEFINITIONS

The following abbreviations and acronyms are used throughout this document:


Abbreviation or Acronym						Definition
AFUDC						Allowance for funds used during construction
AUT						Annual Power Cost Update Tariff



Colstrip						Colstrip Units 3 and 4 coal-fired generating plant

EFSA						Equity Forward Sale Agreement
EPA						United States Environmental Protection Agency

FERC						Federal Energy Regulatory Commission
FMBs						First Mortgage Bonds
GAAP						Accounting principles generally accepted in the United States of America
GRC						General Rate Case
IRP						Integrated Resource Plan
Moody’s						Moody’s Investors Service
MW						Megawatts
MWa						Average megawatts
MWh						Megawatt hour
Nasdaq						National Association of Securities Dealers Automated Quotations
NVPC						Net Variable Power Costs
NYSE						New York Stock Exchange

OPUC						Public Utility Commission of Oregon
PCAM						Power Cost Adjustment Mechanism


RPS						Renewable Portfolio Standard
S&P						S&P Global Ratings
SEC						United States Securities and Exchange Commission

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PART I — FINANCIAL INFORMATION


Item 1.			Financial Statements.

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Dollars in millions, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Revenues, net	$	801	$	742	$	2,192	$	1,955
Alternative revenue programs, net of amortization	1		1		6		5
Total revenues	802		743		2,198		1,960
Operating expenses:
Purchased power and fuel	386		337		910		707
Generation, transmission and distribution	85		83		279		258
Administrative and other	89		84		262		257
Depreciation and amortization	116		108		340		310
Taxes other than income taxes	41		39		124		118
Total operating expenses	717		651		1,915		1,650
Income from operations	85		92		283		310
Interest expense, net	42		39		127		115
Other income:
Allowance for equity funds used during construction	5		4		12		10
Miscellaneous income, net	5		13		22		13
Other income, net	10		17		34		23
Income before income tax expense	53		70		190		218
Income tax expense	6		12		30		36
Net income	47		58		160		182
Other comprehensive income	—		—		1		1
Net income and Comprehensive income	$	47	$	58	$	161	$	183

Weighted-average common shares outstanding (in thousands):
Basic	100,849		89,263		96,625		89,294
Diluted	101,103		89,447		96,830		89,448

Earnings per share:
Basic	$	0.47	$	0.65	$	1.65	$	2.04
Diluted	$	0.46	$	0.65	$	1.65	$	2.04

See accompanying notes to condensed consolidated financial statements.

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	47	$	165
Accounts receivable, net	364		398

Inventories	109		95

Regulatory assets—current	55		54
Other current assets	149		498
Total current assets	724		1,210
Electric utility plant, net	9,078		8,465
Regulatory assets—noncurrent	546		473
Nuclear decommissioning trust	34		39
Non-qualified benefit plan trust	33		38
Other noncurrent assets	188		234
Total assets	$	10,603	$	10,459

See accompanying notes to condensed consolidated financial statements.

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(Dollars in millions)

(Unaudited)


	September 30, 2023		December 31, 2022
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	187	$	457
Liabilities from price risk management activities—current	73		118

Current portion of long-term debt	—		260

Current portion of finance lease obligation	20		20
Accrued expenses and other current liabilities	356		641
Total current liabilities	636		1,496
Long-term debt, net of current portion	3,786		3,386
Regulatory liabilities—noncurrent	1,418		1,389
Deferred income taxes	445		439
Unfunded status of pension and postretirement plans	172		170
Liabilities from price risk management activities—noncurrent	120		75
Asset retirement obligations	261		257
Non-qualified benefit plan liabilities	78		83
Finance lease obligations, net of current portion	291		294
Other noncurrent liabilities	101		91
Total liabilities	7,308		7,680
Commitments and contingencies (see notes)
Shareholders’ Equity:
Preferred stock, no par value, 30,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022	—		—
Common stock, no par value, 160,000,000 shares authorized; 101,123,903 and 89,283,353 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	1,744		1,249
Accumulated other comprehensive loss	(3)		(4)
Retained earnings	1,554		1,534


Total shareholders’ equity	3,295		2,779
Total liabilities and shareholders’ equity	$	10,603	$	10,459

See accompanying notes to condensed consolidated financial statements.

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	160	$	182
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	340		310



Deferred income taxes	(3)		9
Pension and other postretirement benefits	4		7
Other post retirement benefits settlement gain	—		(11)
Allowance for equity funds used during construction	(12)		(10)

Decoupling mechanism deferrals, net of amortization	(6)		(5)


Regulatory assets	10		(44)
Regulatory liabilities	17		8


2020 Labor Day wildfire earnings test reserve	—		15
Other non-cash income and expenses, net	46		41
Changes in working capital:
Accounts receivable, net	23		(21)
Inventories	(14)		(14)
Margin deposits	87		(8)
Accounts payable and accrued liabilities	(181)		80
Margin deposits from wholesale counterparties	(133)		44
Other working capital items, net	20		24



Other, net	(27)		(33)
Net cash provided by operating activities	331		574

See accompanying notes to condensed consolidated financial statements.

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from investing activities:
Capital expenditures	(931)		(541)


Sales of Nuclear decommissioning trust securities	1		3
Purchases of Nuclear decommissioning trust securities	(1)		(3)



Proceeds from sale of properties	2		13
Other, net	(3)		—
Net cash used in investing activities	(932)		(528)




Cash flows from financing activities:
Proceeds from issuance of common stock	$	485	$	—
Proceeds from issuance of long-term debt	400		—
Payments on long-term debt	(260)		—


Issuance of commercial paper, net	—		40
Proceeds from Pelton/Round Butte financing arrangement	—		25
Dividends paid	(131)		(117)


Repurchase of common stock	—		(18)
Other	(11)		(10)
Net cash provided by (used in) financing activities	483		(80)
Change in cash and cash equivalents	(118)		(34)
Cash and cash equivalents, beginning of period	165		52
Cash and cash equivalents, end of period	$	47	$	18

Supplemental cash flow information is as follows:
Cash paid for interest, net of amounts capitalized	$	91	$	81
Cash paid for income taxes	25		18
Non-cash investing and financing activities:



Assets obtained under leasing arrangements	—		29


See accompanying notes to condensed consolidated financial statements.

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

Nature of Business

Portland General Electric Company (PGE or the Company) is a vertically-integrated electric utility engaged in the generation, purchase, transmission, distribution, and retail sale of electricity in the State of Oregon (State). The Company operates as a cost-based, regulated electric utility with revenue requirements and customer prices determined based on the forecasted cost to serve retail customers and a reasonable rate of return as determined by the Public Utility Commission of Oregon (OPUC). The Company participates in the wholesale market under the regulation and authority of the Federal Energy Regulatory Commission (FERC) by purchasing and selling electricity and natural gas, as well as buying and selling transmission products and services, in an effort to provide reasonably-priced power for its retail customers. PGE also performs portfolio management and wholesale market sales services for third parties in the region. In addition, PGE offers wholesale electricity transmission service pursuant to its Open Access Transmission Tariff, which contains rates, terms, and conditions of service, as filed with, and approved by, the FERC. PGE operates as a single segment, with revenues and costs related to its business activities recorded and analyzed on a total electric operations basis. The Company’s corporate headquarters is located in Portland, Oregon and its approximately 4,000 square mile, State-approved service area, entirely within the State, encompasses 51 incorporated cities. As of September 30, 2023, PGE served 929,000 retail customers within a service area of 1.9 million residents.

Condensed Consolidated Financial Statements

These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such regulations, although PGE believes that the disclosures provided are adequate to make the interim information presented not misleading.

The financial information included herein as of and for the three and nine months ended September 30, 2023 and 2022 is unaudited; however, in the opinion of management, such information reflects all adjustments necessary to fairly present the condensed consolidated financial position, condensed consolidated income and comprehensive income, and condensed consolidated cash flows of the Company for these interim periods. All such adjustments are of a normal recurring nature, unless otherwise noted. The financial information as of December 31, 2022 is derived from the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022, included in Item 8 of PGE’s Annual Report on Form 10-K, filed with the SEC on February 16, 2023, which should be read in conjunction with the interim unaudited Financial Statements.

Comprehensive Income

No material change occurred in Other comprehensive income in the three and nine months ended September 30, 2023 and 2022.

Miscellaneous Income, Net

Miscellaneous income, net was comprised of $15 million and $6 million in interest income from regulatory assets for the nine months ended September 30, 2023 and 2022, respectively, $4 million realized and unrealized gains and $6 million losses on the non-qualified benefit plan trust assets, and $3 million and $13 million in other miscellaneous income, which included an $11 million settlement gain related to the buyout of the Non-represented Retiree Medical Plan in 2022. See Note 3, Balance Sheet Components, for further discussion of the settlement gain.

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of gain or loss contingencies, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results experienced by the Company could differ materially from those estimates.

Certain costs are estimated for the full year and allocated to interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period; accordingly, such costs may not be reflective of amounts to be recognized for a full year. Due to seasonal fluctuations in electricity sales, as well as the price of wholesale electricity and natural gas, interim financial results do not necessarily represent those to be expected for the year.

NOTE 2: REVENUE RECOGNITION

Disaggregated Revenue

The following table presents PGE’s revenue, disaggregated by customer type (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Retail:
Residential	$	301	$	283	$	942	$	841
Commercial	213		194		606		540
Industrial	89		74		258		216
Direct access customers	7		9		20		26
Subtotal	610		560		1,826		1,623
Alternative revenue programs, net of amortization	1		1		6		5
Other accrued revenues, net	1		6		(2)		6
Total retail revenues	612		567		1,830		1,634
Wholesale revenues*	173		160		323		281
Other operating revenues	17		16		45		45
Total revenues	$	802	$	743	$	2,198	$	1,960

* Wholesale revenues include $96 million and $67 million related to electricity commodity contract derivative settlements for the three months ended September 30, 2023 and 2022, respectively, and $152 million and $100 million for the nine months ended September 30, 2023 and 2022, respectively. Price risk management derivative activities are included within total revenues but do not represent revenues from contracts with customers as defined by GAAP. For further information, see Note 5, Risk Management.

Retail Revenues

The Company’s primary revenue source is the sale of electricity to customers at regulated, tariff-based prices. Retail customers are classified as residential, commercial, or industrial. Residential customers include single-family housing, multiple-family housing (such as apartments, duplexes, and town homes), manufactured homes, and small farms. Residential demand is sensitive to the effects of weather, with demand highest during the winter heating and

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

summer cooling seasons. Commercial customers accept energy deliveries at voltages equivalent to those delivered to residential customers and are also sensitive to the effects of weather, although to a lesser extent than residential customers. Commercial customers include most businesses, small industrial companies, and public street and highway lighting accounts. Industrial customers consist of non-residential customers who accept delivery at higher voltages than commercial customers. Demand from industrial customers is primarily driven by economic conditions, with weather having little impact on energy use by this customer class.

In accordance with state regulations, PGE’s retail customer prices are based on the Company’s cost of service and determined through general rate case (GRC) proceedings and various tariff filings with the OPUC. Additionally, the Company offers pricing options that include a daily market price option, various time-of-use options, and several renewable energy options.

Retail revenue is billed based on monthly meter readings taken at various cycle dates throughout the month. At the end of each month, PGE estimates and records the revenue earned from energy deliveries that have not yet been billed to customers. This amount, which is classified as unbilled revenues and included in Accounts receivable, net in the Company’s condensed consolidated balance sheets, is calculated based on actual net retail system load each month, the number of days from the last meter read date through the last day of the month, and current customer prices.

PGE’s obligation to sell electricity to retail customers generally represents a single performance obligation representing a series of distinct services that are substantially the same and have the same pattern of transfer to the customer that is satisfied over time as customers simultaneously receive and consume the benefits provided. The Company applies the invoice method to measure its progress towards satisfactorily completing its performance obligations.

Pursuant to regulation by the OPUC, PGE is mandated to maintain several tariff schedules to collect funds from customers for programs that benefit the general public, such as conservation, low-income housing, energy efficiency, renewable energy programs, and privilege taxes. For such programs, the Company generally collects the funds and remits the amounts to third party agencies that administer the programs. In these arrangements, PGE is considered to be an agent, as the Company’s performance obligation is to facilitate a transaction between customers and the administrators of these programs. Therefore, such amounts are presented on a net basis within Revenues, net on the condensed consolidated statements of income.

Wholesale Revenues

PGE participates in the wholesale electricity marketplace in order to balance its supply of power to meet the needs of its retail customers. Interconnected transmission systems in the western United States serve utilities with diverse load requirements and allow the Company to purchase and sell electricity within the region depending upon, among other things, the relative price and availability of power; hydro, solar and wind conditions; and daily and seasonal retail demand.

PGE’s Wholesale revenues are primarily short-term electricity sales to utilities and power marketers that consist of single performance obligations that are satisfied as energy is transferred to the counterparty. The Company may choose to net certain purchase and sale transactions in which it would simultaneously receive and deliver physical power with the same counterparty; in such cases, only the net amount of those purchases or sales required to meet retail and wholesale obligations will be physically settled and recorded in Wholesale revenues.

Other Operating Revenues

Other operating revenues consist primarily of gains and losses on the sale of natural gas volumes purchased that exceeded what was needed to fuel the Company’s generating facilities, as well as revenues from transmission

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

services, excess transmission capacity resales, excess fuel sales, utility pole attachment revenues, and other electric services provided to customers.

Arrangements with Multiple Performance Obligations

Certain contracts with customers, primarily wholesale, may include multiple performance obligations. For such arrangements, PGE allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.

NOTE 3: BALANCE SHEET COMPONENTS

Inventories

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

Accounts Receivable, Net

Accounts receivable, net includes $110 million and $131 million of unbilled revenues as of September 30, 2023 and December 31, 2022, respectively. Accounts receivable, net includes an allowance for credit losses of $12 million as of both September 30, 2023 and December 31, 2022. The following summarizes activity in the allowance for credit losses (in millions):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023		2023
Balance as of beginning of period	$	13	$	12
Increase in provision	2		6
Amounts written off	(4)		(10)
Recoveries	1		4
Balance as of end of period	$	12	$	12

Other Current Assets

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


	September 30, 2023		December 31, 2022
Prepaid expenses	$	45	$	69

Assets from price risk management activities	74		313
Margin deposits	30		116


Other current assets	$	149	$	498

Assets from price risk management activities and related unrealized gains as well as Margin deposits decreased during the nine months ended September 30, 2023 due to decreases in wholesale natural gas and electricity prices. For further information, see Note 5, Risk Management.

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Electric Utility Plant, Net

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


	September 30, 2023		December 31, 2022
Electric utility plant in-service	$	13,045	$	12,421
Construction work-in-progress	709		467
Total cost	13,754		12,888
Less: accumulated depreciation and amortization	(4,676)		(4,423)
Electric utility plant, net	$	9,078	$	8,465

Accumulated depreciation and amortization in the table above includes accumulated amortization related to intangible assets of $541 million and $499 million as of September 30, 2023 and December 31, 2022, respectively. Amortization expense related to intangible assets was $16 million and $15 million for the three months ended September 30, 2023 and 2022, respectively, and $45 million and $44 million for the nine months ended September 30, 2023 and 2022, respectively. The Company’s intangible assets primarily consist of computer software development and hydro licensing costs.

Battery storage agreement—On April 26, 2023, PGE entered into a battery storage purchased power agreement (PPA) that will be accounted for as a lease upon commencement. The lease is expected to commence in December 2024 and has a term of 20 years. The total fixed contract consideration is expected to be $737 million over the lease term.

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Regulatory Assets and Liabilities

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


	September 30, 2023					December 31, 2022
	Current			Noncurrent		Current			Noncurrent
Regulatory assets:
Price risk management	$	—		$	96	$	—		$	1
Pension and other postretirement plans	—			95		—			95

Debt issuance costs	—			20		—			21
Trojan decommissioning activities	—			137		—			133
February 2021 ice storm and damage	12			57		10			64
Power cost adjustment mechanism	16			3		14			14
2020 Labor Day wildfire	5			24		4			27
COVID-19	12			4		—			22
Wildfire mitigation	—			31		—			28
Other	10			79		26			68
Total regulatory assets	$	55		$	546	$	54		$	473
Regulatory liabilities:
Asset retirement removal costs	$	—		$	1,164	$	—		$	1,136
Deferred income taxes	—			183		—			194

Asset retirement obligations	—			10		—			7

Price risk management	1			—		195			—
Boardman Refund	3			3		—			—
Other	29			58		39			52
Total regulatory liabilities	$	33	*	$	1,418	$	234	*	$	1,389

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

Wildfire Mitigation represents incremental costs and investments made by PGE under Oregon Senate Bill (SB) 762, which was passed in the 2021 legislative session with an effective date of July 19, 2021. SB 762 instructs public utilities to develop, implement, and execute a wildfire protection plan, in which reasonable costs can be recovered through prices to all customers. The outcome of PGE’s 2022 GRC provided an annual amount of $24 million to be collected in base rates for recovery of operating expenses related to wildfire mitigation efforts beginning May 9, 2022. As of September 30, 2023 and December 31, 2022, PGE’s deferred balance related to incremental wildfire mitigation operating expenses was $31 million and $28 million, respectively.

On July 1, 2022, PGE filed an application for reauthorization of OPUC Docket UM 2019 to defer incremental wildfire mitigation costs that exceed the amount granted in base rates. On May 10, 2023, in Order No. 23-173, the OPUC approved an automatic adjustment clause mechanism to recover wildfire mitigation costs (capital and expense). PGE and certain parties agreed to a stipulation, which was adopted by the OPUC on October 18, 2023, that allows PGE to begin amortizing $27 million comprised of $23 million related to the September 30, 2023 deferred operating expense balance of $31 million and $4 million for capital related revenue requirement. The $27 million will be amortized over a one-year period beginning October 20, 2023. PGE will recover the remaining deferred expense balance in future periods to be determined in a later proceeding.

Beginning January 1, 2024, and in conjunction with the Company’s current GRC proceeding, PGE will remove collections related to wildfire mitigation costs (for both capital and operating expense) from base prices and include

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PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

the forecasted costs within the automatic adjustment clause. Differences between actual and forecasted costs will be recorded as regulatory assets or liabilities within the automatic adjustment clause balancing account, which will not be subject to an earnings test.

COVID-19—The COVID-19 pandemic led Oregon’s Governor to declare a state of emergency on March 8, 2020. Due to the adverse impacts of COVID-19 on economic activity, PGE experienced an increase in bad debt expense, lost revenue, and other incremental costs. In March 2020, PGE filed an application with the OPUC for deferral of lost revenue and certain incremental costs, such as bad debt expense, related to COVID-19. PGE’s deferral application was approved by the OPUC in October 2020 with final stipulations approved in November 2020.

As of September 30, 2023 and December 31, 2022, PGE’s deferred balance, net of amortization, was $16 million and $22 million, respectively, comprised primarily of bad debt expense in excess of what is currently considered and collected in customer prices. PGE filed a request for amortization of deferred amounts in December 2022, which reflected a $12 million adjustment primarily related to bad debt write-offs being lower than estimated. During a March 14, 2023 public meeting, Staff recommended the OPUC approve PGE's filing of Advice No. 22-45 associated with the recovery of the COVID-19 deferral. On March 21, 2023, Advice No. 22-45 was approved by the OPUC, allowing for amortization of deferred amounts over a two-year period, which began April 1, 2023.

Deferral of Boardman revenue requirement—In 2020, intervenors filed a deferral application with the OPUC that would have required PGE to defer and refund the revenue requirement associated with the Company’s Boardman coal-fired generating plant (Boardman) then included in customer prices as established in the Company’s 2019 GRC. The OPUC found that the deferral was warranted with amortization subject to an earnings test.

Subsequently, PGE and parties submitted stipulations to the OPUC reflecting agreements that resolved all matters related to this deferral and stated that PGE would refund $6.5 million to customers. On June 5, 2023, the OPUC issued Order 23-195, which approved the stipulations. The refund amount, plus interest, is being amortized into customer prices over a two-year period that began July 1, 2023.

Establishing the Boardman refund deferral resulted in an increase to regulatory liabilities with an offsetting charge to the condensed consolidated statements of income during 2023. As of September 30, 2023, the liability balance was $6 million.

Accrued Expenses and Other Current Liabilities

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


	September 30, 2023		December 31, 2022
Accrued employee compensation and benefits	$	74	$	66
Accrued taxes payable	50		29
Accrued interest payable	47		31
Accrued dividends payable	50		42
Regulatory liabilities—current	33		234
Margin deposits from wholesale counterparties	7		140
Other	95		99
Total accrued expenses and other current liabilities	$	356	$	641

The current portion of Regulatory liabilities and Margin deposits from wholesale counterparties decreased during the nine months ended September 30, 2023 due to decreases in wholesale natural gas and electricity prices. For further information, see Note 5, Risk Management.

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Credit Facilities

On August 18, 2023, PGE entered into an amendment of its existing revolving credit facility. As of September 30, 2023, PGE had a $750 million revolving credit facility scheduled to expire in September 2028. The Company has the ability to expand the revolving credit facility to $850 million, if needed, subject to the requirements of the agreement. Pursuant to the terms of the agreement, the revolving credit facility may be used for general corporate purposes, including as backup for commercial paper borrowings and to permit the issuance of standby letters of credit. PGE may borrow for one, three, or six months at a fixed interest rate established at the time of the borrowing, or at a variable interest rate for any period up to the then remaining term of the applicable credit facility. The revolving credit facility contains a provision that requires annual fees based on the Company’s unsecured credit ratings, and contains customary covenants and default provisions, including a requirement that limits consolidated indebtedness, as defined in the agreement, to 65% of total capitalization. As of September 30, 2023, PGE was in compliance with this covenant with a 54.3% debt-to-total capital ratio and had no outstanding balance on the revolving credit facility. As a result of the policy to backup commercial paper borrowings, the aggregate unused available credit capacity under the credit facility was $750 million. In addition, the credit facility offers the potential for adjustments to interest rate margins and fees based on PGE’s achievement of certain annual sustainability-linked metrics related to its non-emitting generation capacity and the percentage of management comprised of women and employees who identify as black, indigenous, and people of color. The Company believes these potential adjustments will have an immaterial impact on PGE’s results of operations.

The Company has a commercial paper program under which it may issue commercial paper for terms of up to 270 days. The Company has elected to limit its borrowings under the revolving credit facility in order to allow for coverage of any potential need to repay commercial paper that may be outstanding at the time. As of September 30, 2023, PGE had no commercial paper outstanding.

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

In addition, PGE has three letter of credit facilities that provide a total capacity of $220 million under which the Company can request letters of credit for original terms not to exceed one year. The issuance of such letters of credit is subject to the approval of the issuing institution. Under these facilities, letters of credit for a total of $92 million were outstanding as of September 30, 2023. Letters of credit issued are not reflected on the Company’s condensed consolidated balance sheets.

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

Long-term Debt

On August 29, 2023, PGE entered into a Bond Purchase Agreement related to the sale of $500 million in First Mortgage Bonds (FMBs), the bonds consist of:

•a series, due in 2030, in the amount of $50 million that bear interest at an annual rate of 5.44%;

•a series, due in 2033, in the amount of $150 million that bear interest at an annual rate of 5.48%;

•a series, due in 2038, in the amount of $100 million that bear interest at an annual rate of 5.68%;

•a series due in 2053, in the amount of $100 million that bear interest at an annual rate of 5.78%; and

•a series due in 2059, in the amount of $100 million that bear interest at an annual rate of 5.83%.

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As of September 30, 2023, the 2030, 2033, and 2038 series, totaling $300 million, were issued and funded in full. The 2053 and 2059 series, totaling $200 million, are expected to be funded in November 2023.

On October 21, 2022, PGE obtained a 366-day term loan from lenders in the aggregate principal of $260 million under a 366-Day Bridge Credit Agreement. The term loan bore interest for the relevant interest period at the Term Secured Overnight Financing Rate (SOFR) plus Term SOFR Adjustment Rate of 10 basis points and applicable margin of 87.5 basis points. The interest rate was subject to adjustment pursuant to the terms of the loan. On March 1, 2023, this term loan was repaid in full with proceeds from the Equity Forward Sale Agreement described in Note 7, Shareholders’ Equity.

On November 30, 2022, PGE entered into a Bond Purchase Agreement related to the sale of $200 million in First Mortgage Bonds (FMBs), the first half of which funded in 2022 and the remaining $100 million funded in full on January 13, 2023.

Defined Benefit Retirement Plan Costs

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Service cost	$	3	$	4	$	9	$	12
Interest cost*	9		7		27		21
Expected return on plan assets*	(11)		(12)		(33)		(36)
Amortization of net actuarial loss*	—		4		—		12
Net periodic benefit cost	$	1	$	3	$	3	$	9

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

PGE sponsors a health and welfare plan, under which it offers medical and life insurance benefits, as well as health reimbursement arrangements. Retirees who participate in the Company’s postretirement health insurance plans are eligible for a Defined Dollar Medical Benefit, which limits PGE’s obligation pursuant to the postretirement health plan by establishing a maximum benefit per employee with employees responsible for the additional cost. In the third quarter of 2022, PGE executed a buyout of the Non-represented Retiree Medical Plan, resulting in an $11 million settlement gain, which has been recorded in Miscellaneous income, net on the condensed consolidated statement of income and comprehensive income.

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NOTE 4: FAIR VALUE OF FINANCIAL INSTRUMENTS

PGE estimated the fair value of financial asset and liability instruments as of September 30, 2023 and December 31, 2022, and classified these financial instruments based on a fair value hierarchy that is applied to prioritize the inputs to the valuation techniques used to measure fair value. The three levels of the fair value hierarchy and application to the Company are:


Level 1			Quoted prices are available in active markets for identical assets or liabilities as of the measurement date;
Level 2			Pricing inputs include those that are directly or indirectly observable in the marketplace as of the measurement date; and
Level 3			Pricing inputs include significant inputs that are unobservable for the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. Assets measured at fair value using net asset value (NAV) as a practical expedient are not categorized in the fair value hierarchy. These assets are listed in the totals of the fair value hierarchy to permit the reconciliation to amounts presented in the financial statements.

Changes to market liquidity conditions, the availability of observable inputs, or changes in the economic structure of a security marketplace may require transfer of the securities between levels.

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The Company’s financial assets and liabilities whose values were recognized at fair value in the Company’s condensed consolidated balance sheets are as follows by level within the fair value hierarchy (in millions):


	As of September 30, 2023
	Level 1		Level 2		Level 3		Other (2)		Total
Assets:
Cash equivalents	$	—	$	—	$	—	$	—	$	—
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government	8		9		—		—		17
Corporate credit	—		8		—		—		8
Money market funds	—		—		—		9		9
Non-qualified benefit plan trust: (3)
Debt securities—domestic government	3		—		—		—		3
Money market funds	1		—		—		—		1
Equity securities	—		—		—		—		—




Price risk management activities: (1) (4)
Electricity	—		18		13		—		31
Natural gas	—		64		3		—		67
	$	12	$	99	$	16	$	9	$	136
Liabilities:

Price risk management activities: (1) (4)
Electricity	$	—	$	10	$	112	$	—	$	122
Natural gas	—		50		21		—		71
	$	—	$	60	$	133	$	—	$	193

(1)Activities are subject to regulation, with certain gains and losses deferred pursuant to regulatory accounting and included in Regulatory assets or Regulatory liabilities as appropriate.

(2)Assets are measured at NAV as a practical expedient and not subject to hierarchy level classification disclosure.

(3)Excludes insurance policies of $29 million, which are recorded at cash surrender value.

(4)For further information, see Note 5, Risk Management.

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	As of December 31, 2022
	Level 1		Level 2		Level 3		Other (2)		Total
Assets:
Cash equivalents	$	150	$	—	$	—	$	—	$	150
Nuclear decommissioning trust: (1)

Debt securities:
Domestic government	9		10		—		—		19
Corporate credit	—		9		—		—		9
Money market funds	—		—		—		11		11
Non-qualified benefit plan trust: (3)
Debt securities—domestic government	3		—		—		—		3
Money market funds	1		—		—		—		1
Equity securities	3		—		—		—		3



Price risk management activities: (1) (4)
Electricity	—		93		63		—		156
Natural gas	—		225		6		—		231
	$	166	$	337	$	69	$	11	$	583
Liabilities:

Price risk management activities: (1) (4)
Electricity	$	—	$	53	$	93	$	—	$	146
Natural gas	—		39		8		—		47
	$	—	$	92	$	101	$	—	$	193

(1)Activities are subject to regulation, with certain gains and losses deferred pursuant to regulatory accounting and included in Regulatory assets or Regulatory liabilities as appropriate.

(2)Assets are measured at NAV as a practical expedient and not subject to hierarchy level classification disclosure.

(3)Excludes insurance policies of $31 million, which are recorded at cash surrender value.

(4)For further information, see Note 5, Risk Management.

Cash equivalents are highly liquid investments with maturities of three months or less at the date of acquisition and primarily consist of money market funds. Such funds seek to maintain a stable net asset value and are comprised of short-term, government funds. Policies of such funds require that the weighted average maturity of securities holdings of such funds not exceed 90 days and provide investors with the ability to redeem shares of the funds daily at their respective net asset value. Cash equivalents are classified as Level 1 in the fair value hierarchy due to the availability of quoted prices for identical assets in an active market as of the measurement date. Principal markets for money market fund prices include published exchanges such as the National Association of Securities Dealers Automated Quotations (Nasdaq) and the New York Stock Exchange (NYSE).

Assets held in the Nuclear decommissioning trust (NDT) and Non-qualified benefit plan (NQBP) trusts are recorded at fair value in PGE’s condensed consolidated balance sheets and invested in securities that are exposed to interest rate, credit, and market volatility risks. These assets are classified within Level 1, 2, or 3 based on the following factors:

Debt securities—PGE invests in highly-liquid United States Treasury securities to support the investment objectives of the trusts. These domestic government securities are classified as Level 1 in the fair value hierarchy due to the availability of quoted prices for identical assets in an active market as of the measurement date.

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Assets classified as Level 2 in the fair value hierarchy include domestic government debt securities, such as municipal debt, and corporate credit securities. Prices are determined by evaluating pricing data such as broker quotes for similar securities and adjusted for observable differences. Significant inputs used in valuation models generally include benchmark yields and issuer spreads. The external credit rating, coupon rate, and maturity of each security are considered in the valuation, as applicable.

Equity securities—Equity mutual fund and common stock securities are classified as Level 1 in the fair value hierarchy due to the availability of quoted prices for identical assets in an active market as of the measurement date. Principal markets for equity prices include published exchanges such as Nasdaq and the NYSE.

Money market funds—PGE invests in money market funds that seek to maintain a stable net asset value. These funds invest in high-quality, short-term, diversified money market instruments, short-term treasury bills, federal agency securities, certificates of deposits, and commercial paper. The Company believes the redemption value of these funds is likely to be the fair value, which is represented by the net asset value. Redemption is permitted daily without written notice.

The NQBP trust is invested in exchange-traded government money market funds and is classified as Level 1 in the fair value hierarchy due to the availability of quoted prices in published exchanges such as Nasdaq and the NYSE. The money market fund in the NDT is valued at NAV as a practical expedient and is not included in the fair value hierarchy.

Assets and liabilities from price risk management activities, recorded at fair value in PGE’s condensed consolidated balance sheets, consist of derivative instruments entered into by the Company to manage its risk exposure to commodity price and foreign currency exchange rates and reduce volatility in net variable power costs (NVPC) for the Company’s retail customers. For additional information regarding these assets and liabilities, see Note 5, Risk Management.

For those assets and liabilities from price risk management activities classified as Level 2, fair value is derived using present value formulas that utilize inputs such as forward commodity prices and interest rates. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include commodity forwards, futures, and swaps.

Assets and liabilities from price risk management activities classified as Level 3 consist of longer-term commodity forwards, futures, swaps, and options for which fair value is derived using one or more significant inputs that are not observable for the entire term of the instrument.

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Quantitative information regarding the significant, unobservable inputs used in the measurement of Level 3 assets and liabilities from price risk management activities is presented below:


	Fair Value				Valuation Technique	Significant Unobservable Input	Price per Unit
Commodity Contracts	Assets		Liabilities				Low		High		Weighted Average
	(in millions)
As of September 30, 2023
Electricity physical forwards	$	12	$	111	Discounted cash flow	Electricity forward price (per MWh)	$	33.00	$	149.00	$	83.49
Natural gas financial swaps	3		21		Discounted cash flow	Natural gas forward price (per Decatherm)	2.37		11.43		3.60
Electricity financial futures	1		1		Discounted cash flow	Electricity forward price (per MWh)	52.00		120.00		91.88
	$	16	$	133
As of December 31, 2022
Electricity physical forwards	$	52	$	93	Discounted cash flow	Electricity forward price (per MWh)	$	35.00	$	270.00	$	101.27
Natural gas financial swaps	6		8		Discounted cash flow	Natural gas forward price (per Decatherm)	2.71		24.71		4.42
Electricity financial futures	11		—		Discounted cash flow	Electricity forward price (per MWh)	54.17		143.70		104.21
	$	69	$	101

The significant unobservable inputs used in the Company’s fair value measurement of price risk management assets and liabilities are long-term forward prices for commodity derivatives. For certain long-term contracts, observable, liquid market transactions are not available for the duration of the delivery period. In such instances, the Company uses internally-developed long-term price curves that utilize observable data when available. When not available, regression techniques are used to estimate unobservable future prices.

The Company’s Level 3 assets and liabilities from price risk management activities are sensitive to market price changes in the respective underlying commodities. The significance of the impact is dependent upon the magnitude of the price change and PGE’s position as either the buyer or seller under the contract. Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:

Significant Unobservable Input

Position

Change to Input

Impact on Fair Value

Market price

Buy

Increase (decrease)

Gain (loss)

Market price

Sell

Increase (decrease)

Loss (gain)

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Changes in the fair value of net liabilities from price risk management activities (net of assets from price risk management activities) classified as Level 3 in the fair value hierarchy were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance as of the beginning of the period	$	138	$	35	$	32	$	85
Net realized and unrealized losses/(gains)*	(21)		—		78		(56)



Transfers from Level 3 to Level 2	—		(5)		7		1
Balance as of the end of the period	$	117	$	30	$	117	$	30

* Both realized and unrealized losses/(gains), of which the unrealized portions are offset by the effects of regulatory accounting until settlement of the underlying transactions, are recorded in Revenues, net or Purchased power and fuel expense in the condensed consolidated statements of income and comprehensive income. Includes $5 million and $2 million in net realized losses for the three months ended September 30, 2023 and 2022, respectively. For the nine-month periods ended September 30, 2023 and 2022, includes $8 million in net realized losses and $1 million in net realized gains, respectively.

Transfers out of Level 3 occur when the significant inputs become more observable, such as when the time between the valuation date and the delivery term of a transaction becomes shorter.

Long-term debt is recorded at amortized cost in PGE’s condensed consolidated balance sheets. The value of the Company’s FMBs and Pollution Control Revenue Bonds is classified as a Level 2 fair value measurement.

As of September 30, 2023, the carrying amount of PGE’s long-term debt was $3,786 million, net of $13 million of unamortized debt expense, and its estimated aggregate fair value was $3,212 million. As of December 31, 2022, the carrying amount of PGE’s long-term debt was $3,646 million, net of $13 million of unamortized debt expense, and its estimated aggregate fair value was $2,984 million.

NOTE 5: RISK MANAGEMENT

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

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

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PGE’s Assets and Liabilities from price risk management activities consist of the following (in millions):


	September 30, 2023		December 31, 2022
Current assets:
Commodity contracts:
Electricity	$	22	$	112
Natural gas	52		201
Total current derivative assets (1)	74		313
Noncurrent assets:
Commodity contracts:
Electricity	9		44
Natural gas	15		30
Total noncurrent derivative assets (1)	24		74

Total derivative assets (2)	$	98	$	387
Current liabilities:
Commodity contracts:
Electricity	$	31	$	93
Natural gas	42		25
Total current derivative liabilities	73		118
Noncurrent liabilities:
Commodity contracts:
Electricity	91		53
Natural gas	29		22
Total noncurrent derivative liabilities	120		75

Total derivative liabilities (2)	$	193	$	193

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

(2) As of September 30, 2023 and December 31, 2022, no derivative assets or liabilities were designated as hedging instruments.

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


	September 30, 2023			December 31, 2022
Commodity contracts:
Electricity	4		MWhs	6		MWhs
Natural gas	209		Decatherms	211		Decatherms

Foreign currency	$	11	Canadian	$	10	Canadian

PGE has elected to report positive and negative exposures resulting from derivative instruments pursuant to agreements that meet the definition of a master netting arrangement gross on the condensed consolidated balance sheets. In the case of default on, or termination of, any contract under the master netting arrangements, such agreements provide for the net settlement of all related contractual obligations with a given counterparty through a single payment. These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, receivables and payables arising from settled positions, and other forms of non-cash collateral, such as letters of credit. As of September 30, 2023, gross amounts included as Price risk management liabilities subject to master netting agreements were $9 million, comprised of $7 million for natural gas and $2 million for

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electricity, for which PGE has posted no collateral. As of December 31, 2022, gross amounts included as Price risk management liabilities subject to master netting agreements were $5 million, entirely for natural gas, for which PGE has posted no collateral.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Commodity contracts:
Electricity	$	(85)	$	(12)	$	(32)	$	(66)
Natural Gas	(33)		(42)		164		(280)
Foreign currency exchange	—		—		—		1

Net unrealized and certain net realized losses/(gains) presented in the table above are offset within the condensed consolidated statements of income and comprehensive income by the effects of regulatory accounting. Of the net amounts recognized in Net income for the three-month periods ended September 30, 2023 and 2022, net gains of $74 million and net losses of $45 million, respectively, have been offset. Net losses of $289 million and net gains of $138 million have been offset for the nine-month periods ended September 30, 2023 and 2022, respectively.

Assuming no changes in market prices and interest rates, the following table indicates the year in which the net unrealized loss/(gain) recorded as of September 30, 2023 related to PGE’s derivative activities would become realized as a result of the settlement of the underlying derivative instrument (in millions):


	2023		2024		2025		2026		2027		Thereafter		Total
Commodity contracts:
Electricity	$	(2)	$	15	$	16	$	(2)	$	(1)	$	65	$	91
Natural gas	(21)		9		5		11		—		—		4
Net unrealized loss/(gain)	$	(23)	$	24	$	21	$	9	$	(1)	$	65	$	95

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

The aggregate fair value of derivative instruments with credit-risk-related contingent features that were in a liability position as of September 30, 2023 was $183 million, for which PGE has posted $42 million in collateral, consisting of $24 million of letters of credit and $18 million of cash. If the credit-risk-related contingent features underlying these agreements were triggered at September 30, 2023, the cash requirement to either post as collateral or settle the instruments immediately would have been $113 million. As of September 30, 2023, PGE had $8 million cash collateral posted for derivative instruments with no credit-risk-related contingent features. Cash collateral for derivative instruments is classified as Margin deposits included in Other current assets on the Company’s condensed consolidated balance sheets.

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As of September 30, 2023, PGE held from counterparties $20 million in collateral, consisting of $13 million of letters of credit and $7 million of cash. Decreases in margin deposits received from wholesale counterparties is primarily due to the decrease in PGE’s natural gas derivative asset positions from December 31, 2022. The obligation to return cash collateral held for derivative instruments is included in Accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets.

PGE is exposed to credit risk in its commodity price risk management activities related to potential nonperformance by counterparties. Credit risk may be concentrated to the extent the Company’s counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. PGE manages the risk of counterparty default according to its credit policies by performing financial credit reviews, setting limits and monitoring exposures, and requiring collateral (in the form of cash, letters of credit, and guarantees) when needed. The Company also uses standardized enabling agreements and, in certain cases, master netting agreements, which allow for the netting of positive and negative exposures under multiple agreements with counterparties.

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

NOTE 6: EARNINGS PER SHARE

Basic earnings per share are computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of common shares outstanding and the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares consist of: i) employee stock purchase plan shares; ii) contingently issuable time-based and performance-based restricted stock units, along with associated dividend equivalent rights; and iii) shares issuable pursuant to the Equity Forward Sale Agreement (EFSA) and at the market offering program. See Note 7, Shareholders’ Equity, for additional information on the EFSA and at the market offering program and the resulting impact on earnings per share. Unvested performance-based restricted stock units and associated dividend equivalent rights are included in dilutive potential common shares only after the performance criteria have been met.

For the three and nine months ended September 30, 2023, unvested performance-based restricted stock units and related dividend equivalent rights of 427 thousand shares were excluded from the dilutive calculation because the performance goals had not been met, with 315 thousand shares excluded for the three and nine months ended September 30, 2022.

Net income is the same for both the basic and diluted earnings per share computations. The denominators of the basic and diluted earnings per share computations are as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted-average common shares outstanding—basic	100,849	89,263	96,625	89,294
Dilutive effect of potential common shares	254	184	205	154
Weighted-average common shares outstanding—diluted	101,103	89,447	96,830	89,448

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NOTE 7: SHAREHOLDERS’ EQUITY

The activity in equity during the three- and nine-month periods ended September 30, 2023 and 2022 was as follows (dollars in millions, except per share amounts):


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings

	Shares	Amount						Total
Balances as of December 31, 2022	89,283,353	$	1,249	$	(4)	$	1,534	$	2,779
Issuances of shares pursuant to equity-based plans	159,603	—		—		—		—
Issuances of shares pursuant to equity forward sales agreement	7,178,016	300		—		—		300
Stock-based compensation		(1)		—		—		(1)


Dividends declared ($0.4525 per share)	—	—		—		(40)		(40)
Net income	—	—		—		74		74
Balances as of March 31, 2023	96,620,972	$	1,548	$	(4)	$	1,568	$	3,112
Issuances of shares pursuant to equity-based plans	30,245	1		—		—		1
Issuances of shares pursuant to equity forward sales agreement	2,212,610	92		—		—		92
Stock-based compensation	—	6		—		—		6
Other comprehensive income	—	—		1		—		1

Dividends declared ($0.4750 per share)	—	—		—		(51)		(51)
Net income	—	—		—		39		39
Balances as of June 30, 2023	98,863,827	$	1,647	$	(3)	$	1,556	$	3,200
Issuances of shares pursuant to equity-based plans	35,702	—		—		—		—
Issuances of shares pursuant to equity forward sales agreement	2,224,374	93		—		—		93
Stock-based compensation	—	4		—		—		4

Dividends declared ($0.4750 per share)	—	—		—		(49)		(49)
Net income	—	—		—		47		47
Balances as of September 30, 2023	101,123,903	$	1,744	$	(3)	$	1,554	$	3,295

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	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings

	Shares	Amount						Total
Balances as of December 31, 2021	89,410,612	$	1,241	$	(10)	$	1,476	$	2,707
Issuances of shares pursuant to equity-based plans	163,291	—		—		—		—


Repurchase of common stock	(350,000)	(5)		—		(13)		(18)
Dividends declared ($0.4300 per share)	—	—		—		(40)		(40)
Net income	—	—		—		60		60
Balances as of March 31, 2022	89,223,903	$	1,236	$	(10)	$	1,483	$	2,709
Issuances of shares pursuant to equity-based plans	18,769	1		—		—		1
Stock-based compensation	—	4		—		—		4
Other comprehensive income	—	—		1		—		1

Dividends declared ($0.4525 per share)	—	—		—		(41)		(41)
Net income	—	—		—		64		64
Balances as of June 30, 2022	89,242,672	$	1,241	$	(9)	$	1,506	$	2,738
Issuances of shares pursuant to equity-based plans	27,989	—		—		—		—
Stock-based compensation	—	4		—		—		4

Dividends declared ($0.4525 per share)	—	—		—		(40)		(40)
Net income	—	—		—		58		58
Balances as of September 30, 2022	89,270,661	$	1,245	$	(9)	$	1,524	$	2,760

At the Market Offering Program—On April 28, 2023, PGE entered into an equity distribution agreement under which it could sell up to $300 million of its common stock through at the market offering programs. As of September 30, 2023, pursuant to the terms of the equity distribution agreement, PGE entered into separate forward sale agreements with forward counterparties and under such agreements, the Company could have physically settled by delivering 1,237,033 shares to the counterparties in exchange for cash of $58 million. Any proceeds from the issuances of common stock will be used for general corporate purposes and investments in renewables and non-emitting dispatchable capacity.

Equity Forward Sale Agreement—In 2022, PGE entered into an EFSA in connection with a public offering of 10,100,000 shares of its common stock. In March 2023, the Company issued 7,178,016 shares pursuant to the EFSA and received net proceeds of $300 million. In June 2023, the Company issued 2,212,610 shares pursuant to the EFSA and received net proceeds of $92 million. On July 12, 2023, the Company issued 2,224,374 shares pursuant to the EFSA, settling the equity forward transaction, and received net proceeds of $92 million.

Pursuant to the terms of the EFSA, the forward counterparties borrowed 11,615,000 shares of PGE’s common stock, including 1,515,000 shares in connection with the underwriters’ exercise of their option to purchase additional shares, from third parties in the open market and sold the shares to a group of underwriters for $43.00 per share, less an underwriting discount equal to $1.23625 per share. PGE receives proceeds from the sale of common stock when the EFSA is settled (described above), and at that time PGE records the proceeds, if any, in equity.

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PGE concluded that the EFSA was an equity instrument and that it qualified for an exception from derivative accounting because the EFSA was indexed to its own stock.

Prior to settlement, the potentially issuable shares pursuant to the EFSA were reflected in PGE’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of PGE’s common stock used in calculating diluted earnings per share for a reporting period would be increased by the number of shares, if any, that would be issued upon physical settlement of the EFSA less the number of shares that could be purchased by PGE in the market with the proceeds received from issuance (based on the average market price during that reporting period). Share dilution occurs when the average market price of PGE’s stock during the reporting period is higher than the average forward sale price during the reporting period. No such dilution occurred for the three and nine months ended September 30, 2023. For additional information concerning the Company’s diluted earnings per share, see Note 6, Earnings Per Share.

NOTE 8: CONTINGENCIES

PGE is subject to legal, regulatory, and environmental proceedings, investigations, and claims that arise from time to time in the ordinary course of its business. Contingencies are evaluated using the best information available at the time the condensed consolidated financial statements are prepared. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company may seek regulatory recovery of certain costs that are incurred in connection with such matters, although there can be no assurance that such recovery would be granted.

Loss contingencies are accrued, and disclosed if material, when it is probable that an asset has been impaired or a liability incurred as of the financial statement date and the amount of the loss can be reasonably estimated. If a reasonable estimate of probable loss cannot be determined, a range of loss may be established, in which case the minimum amount in the range is accrued, unless some other amount within the range appears to be a better estimate.

A loss contingency will also be disclosed when it is reasonably possible that an asset has been impaired, or a liability incurred, if the estimate or range of potential loss is material. If a probable or reasonably possible loss cannot be reasonably estimated, then PGE: i) discloses an estimate of such loss or the range of such loss, if the Company is able to determine such an estimate; or ii) discloses that an estimate cannot be made and the reasons why the estimate cannot be made.

If an asset has been impaired or a liability incurred after the financial statement date, but prior to the issuance of the financial statements, the loss contingency is disclosed, if material, and the amount of any estimated loss is recorded in either the current or the subsequent reporting period, depending on the nature of the underlying event.

PGE evaluates, on a quarterly basis, developments in such matters that could affect the amount of any accrual, as well as the likelihood of developments that would make a loss contingency both probable and reasonably estimable. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves a series of complex judgments about future events. Management is often unable to estimate a reasonably possible loss, or a range of loss, particularly in cases in which: i) the damages sought are indeterminate or the basis for the damages claimed is not clear; ii) the proceedings are in the early stages; iii) discovery is not complete; iv) the matters involve novel or unsettled legal theories; v) significant facts are in dispute; vi) a large number of parties are represented (including circumstances in which it is uncertain how liability, if any, would be shared among multiple defendants); or vii) a wide range of potential outcomes exist. In such cases, there may be considerable uncertainty regarding the timing or ultimate resolution, including any possible loss, fine, penalty, or business impact.

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EPA Investigation of Portland Harbor

An investigation by the United States Environmental Protection Agency (EPA) of a segment of the Willamette River known as Portland Harbor that began in 1997 revealed significant contamination of river sediments. The EPA subsequently included Portland Harbor on the National Priority List pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act as a federal Superfund site. PGE has been included among more than one hundred Potentially Responsible Parties (PRPs), as it historically owned or operated property near the river.

A Portland Harbor site remedial investigation was completed pursuant to an agreement between the EPA and several PRPs known as the Lower Willamette Group (LWG), which did not include PGE. The LWG funded the remedial investigation and feasibility study and stated that it had incurred $115 million in investigation-related costs. The Company anticipates that such costs will ultimately be allocated to PRPs as a part of the allocation process for remediation costs of the EPA’s preferred remedy.

The EPA finalized a feasibility study, along with a remedial investigation, and the results provided the framework for the EPA to determine a clean-up remedy for Portland Harbor that was documented in a Record of Decision (ROD) issued in 2017. The ROD outlined the EPA’s selected remediation plan for clean-up of Portland Harbor that had an undiscounted estimated total cost of $1.7 billion, comprised of $1.2 billion related to remediation construction costs and $0.5 billion related to long-term operation and maintenance costs. Remediation construction costs were estimated to be incurred over a 13-year period, with long-term operation and maintenance costs estimated to be incurred over a 30-year period from the start of construction. Stakeholders have raised concerns that EPA’s cost estimates are understated, and PGE estimates undiscounted total remediation costs for Portland Harbor per the ROD could range from $1.9 billion to $3.5 billion. The EPA acknowledged the estimated costs were based on data that was outdated and that pre-remedial design sampling was necessary to gather updated baseline data to better refine the remedial design and estimated cost.

A small group of PRPs performed pre-remedial design sampling to update baseline data and submitted the data in an updated evaluation report to the EPA for review. The evaluation report concluded that the conditions of Portland Harbor had improved substantially with the passage of time. In response, the EPA indicated that while it would use the data to inform implementation of the ROD, the EPA’s conclusions remained materially unchanged. With the completion of pre-remedial design sampling, Portland Harbor is now in the remedial design phase, which consists of additional technical information and data collection to be used to design the expected remedial actions. Certain PRPs, not including PGE, have entered into consent agreements to perform remedial design and the EPA has indicated it will take the initial lead to perform remedial design on the remaining areas. The Company anticipates that remedial design costs will ultimately be allocated to PRPs as a part of the allocation process for remediation costs of the EPA’s preferred remedy. The entirety of Portland Harbor is under an active engineering design phase.

PGE continues to participate in a voluntary process to determine an appropriate allocation of costs amongst the PRPs. Significant uncertainties remain surrounding facts and circumstances that are integral to the determination of such an allocation percentage, including conclusion of remedial design, a final allocation methodology, and data with regard to property specific activities and history of ownership of sites within Portland Harbor that will inform the precise boundaries for clean-up. It is probable that PGE will share in a portion of the costs related to Portland Harbor. Based on the above facts and remaining uncertainties in the voluntary allocation process, PGE does not currently have sufficient information to reasonably estimate the amount, or range, of its potential liability or determine an allocation percentage that would represent PGE’s portion of the liability to clean-up Portland Harbor. However, the Company may obtain sufficient information, prior to the final determination of allocation percentages among PRPs, to develop a reasonable estimate, or range, of its potential liability that would require recording of the estimate, or low end of the range. The Company’s liability related to the cost of remediating Portland Harbor could be material to PGE’s financial position.

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In cases in which injuries to natural resources have occurred as a result of releases of hazardous substances, federal and state natural resource trustees may seek to recover for damages at such sites, which are referred to as Natural Resource Damages (NRD). The EPA does not manage NRD assessment activities but does provide claims information and coordination support to the NRD trustees. NRD assessment activities are typically conducted by a Council made up of the trustee entities for the site. The Portland Harbor NRD trustees consist of the National Oceanic and Atmospheric Administration, the U.S. Fish and Wildlife Service, the State, the Confederated Tribes of the Grand Ronde Community of Oregon, the Confederated Tribes of Siletz Indians, the Confederated Tribes of the Umatilla Indian Reservation, the Confederated Tribes of the Warm Springs Reservation of Oregon, and the Nez Perce Tribe.

The NRD trustees may seek to negotiate legal settlements or take other legal actions against the parties responsible for the damages. Funds from such settlements must be used to restore injured resources and may also compensate the trustees for costs incurred in assessing the damages. PGE’s portion of NRD liabilities related to Portland Harbor will not have a material impact on its results of operations, financial position, or cash flows.

The impact of costs related to EPA and NRD liabilities on the Company’s results of operations is mitigated by the Portland Harbor Environmental Remediation Account (PHERA) mechanism. As approved by the OPUC in 2017, the PHERA allows the Company to defer estimated liabilities and recover incurred environmental expenditures related to Portland Harbor through a combination of third-party proceeds, including but not limited to insurance recoveries, and, if necessary, through customer prices. The mechanism established annual prudency reviews of environmental expenditures and third-party proceeds. Annual expenditures in excess of $6 million, excluding expenses related to contingent liabilities, are subject to an annual earnings test and would be ineligible for recovery to the extent PGE’s actual regulated return on equity exceeds its return on equity as authorized by the OPUC in PGE’s most recent GRC. PGE’s results of operations may be impacted to the extent such expenditures are deemed imprudent by the OPUC or ineligible per the prescribed earnings test. The Company plans to seek recovery of any costs resulting from EPA’s determination of liability for Portland Harbor through application of the PHERA. At this time, PGE is not collecting any Portland Harbor cost from the PHERA through customer prices.

Governmental Investigations

In March, April, and May 2021, the Division of Enforcement of the Commodity Futures Trading Commission (the "CFTC"), the Division of Enforcement of the SEC, and the Division of Enforcement of the FERC, respectively, informed the Company they are conducting investigations arising out of the energy trading losses the Company previously announced in August 2020. The Company is cooperating with the CFTC, the SEC, and the FERC. Management cannot predict the eventual scope or outcome of these matters.