SEC Filing | Portland General Electric Company

View:

por-20220331

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 March 31, 2022


☐			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 April 21, 2022 is 89,224,488 shares.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

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	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62

Item 4.	Controls and Procedures	62

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	62

Item 1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 5.	Other Information	61

Item 6.	Exhibits	64

SIGNATURE		65

Table of Contents

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
CWIP						Construction work-in-progress
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



Wheatridge						Wheatridge Renewable Energy Facility

Table of Contents

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 March 31,
		2022		2021
Revenues:
Revenues, net		$	625	$	612
Alternative revenue programs, net of amortization		1		(3)
Total revenues		626		609
Operating expenses:
Purchased power and fuel		202		169
Generation, transmission and distribution		90		80
Administrative and other		89		86
Depreciation and amortization		99		103
Taxes other than income taxes		40		38
Total operating expenses		520		476
Income from operations		106		133
Interest expense, net		38		34
Other income:
Allowance for equity funds used during construction		3		4
Miscellaneous income, net		—		2
Other income, net		3		6
Income before income tax expense		71		105
Income tax expense		11		9


Net income and Comprehensive income		$	60	$	96

Weighted-average common shares outstanding (in thousands):
Basic		89,396		89,556
Diluted		89,527		89,703


Earnings per share—Basic and diluted		$	0.67	$	1.07


See accompanying notes to condensed consolidated financial statements.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	110	$	52
Accounts receivable, net	303		329

Inventories	72		78

Regulatory assets—current	20		24
Other current assets	371		205
Total current assets	876		688
Electric utility plant, net	8,062		8,005
Regulatory assets—noncurrent	491		533
Nuclear decommissioning trust	44		47
Non-qualified benefit plan trust	42		45
Other noncurrent assets	208		176
Total assets	$	9,723	$	9,494

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(Dollars in millions)

(Unaudited)


	March 31, 2022		December 31, 2021
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	169	$	244
Liabilities from price risk management activities—current	60		47



Current portion of finance lease obligation	22		20
Accrued expenses and other current liabilities	680		457
Total current liabilities	931		768
Long-term debt, net of current portion	3,286		3,285
Regulatory liabilities—noncurrent	1,379		1,360
Deferred income taxes	422		413
Unfunded status of pension and postretirement plans	206		206
Liabilities from price risk management activities—noncurrent	72		90
Asset retirement obligations	243		238
Non-qualified benefit plan liabilities	93		95
Finance lease obligations, net of current portion	299		273
Other noncurrent liabilities	83		59
Total liabilities	7,014		6,787
Commitments and contingencies (see notes)
Shareholders’ Equity:
Preferred stock, no par value, 30,000,000 shares authorized; none issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, no par value, 160,000,000 shares authorized; 89,223,903 and 89,410,612 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	1,236		1,241
Accumulated other comprehensive loss	(10)		(10)
Retained earnings	1,483		1,476


Total shareholders’ equity	2,709		2,707
Total liabilities and shareholders’ equity	$	9,723	$	9,494

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	60	$	96
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	99		103



Deferred income taxes	4		(1)
Pension and other postretirement benefits	3		6
Allowance for equity funds used during construction	(3)		(4)

Decoupling mechanism deferrals, net of amortization	(1)		3


Deferral of incremental storm costs	(2)		(41)
Deferral of incremental wildfire costs	(7)		(7)
Other non-cash income and expenses, net	39		20
Changes in working capital:
(Increase)/decrease in accounts receivable, net	21		(2)
Decrease in inventories	6		4
(Increase)/decrease in margin deposits	23		(1)
Increase/(decrease) in accounts payable and accrued liabilities	(44)		26
Increase in margin deposits from wholesale counterparties	99		—
Other working capital items, net	(27)		(14)



Other, net	(21)		(20)
Net cash provided by operating activities	249		168

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2022		2021

Cash flows from investing activities:
Capital expenditures	(167)		(153)


Sales of Nuclear decommissioning trust securities	2		3
Purchases of Nuclear decommissioning trust securities	(2)		(3)



Proceeds from sale of properties	12		—
Other, net	1		(9)
Net cash used in investing activities	(154)		(162)




Cash flows from financing activities:


Payments on long-term debt	—		(140)
Borrowings on short-term debt	—		200
Repayments of short-term debt	—		(150)

Proceeds from failed sale-leaseback transactions	25		—
Dividends paid	(38)		(36)


Repurchase of common stock	(18)		—
Other	(6)		(2)
Net cash used in financing activities	(37)		(128)
Increase (Decrease) in cash and cash equivalents	58		(122)
Cash and cash equivalents, beginning of period	52		257
Cash and cash equivalents, end of period	$	110	$	135

Supplemental cash flow information is as follows:
Cash paid for interest, net of amounts capitalized	$	18	$	16
Cash paid for income taxes	2		—
Non-cash investing and financing activities:



Assets obtained under leasing arrangements	29		—


See accompanying notes to condensed consolidated financial statements.

Table of Contents

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. The Company participates in the wholesale market 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. In addition, PGE offers wholesale electricity transmission service pursuant to its Open Access Transmission Tariff (OATT), which contains rates, terms, and conditions of service, as filed with, and approved by, the Federal Energy Regulatory Commission (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 4,000 square mile, state-approved service area encompasses 51 incorporated cities entirely within the State of Oregon. As of March 31, 2022, PGE served 921,000 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 months ended March 31, 2022 and 2021 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, 2021 is derived from the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021, included in Item 8 of PGE’s Annual Report on Form 10-K, filed with the SEC on February 17, 2022, 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 months ended March 31, 2022 and 2021.

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

price of wholesale electricity and natural gas, interim financial results do not necessarily represent those to be expected for the year.

Reclassifications

To conform with current year presentation, the Company has reclassified Deferral of incremental wildfire costs of $7 million from Other non-cash income and expenses, net in the operating activities section of the consolidated statements of cash flows for the three months ended March 31, 2021.

NOTE 2: REVENUE RECOGNITION

Disaggregated Revenue

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


	Three Months Ended March 31,
		2022		2021
Retail:
Residential		$	308	$	310
Commercial		178		162
Industrial		69		60
Direct access customers		8		11
Subtotal		563		543
Alternative revenue programs, net of amortization		1		(3)
Other accrued revenues, net		—		13
Total retail revenues		564		553
Wholesale revenues*		56		33
Other operating revenues		6		23
Total revenues		$	626	$	609

* Wholesale revenues include $19 million and $5 million related to electricity commodity contract derivative settlements for the three months ended March 31, 2022 and 2021, 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 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.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 proceedings and various tariff filings with the Public Utility Commission of Oregon (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 the revenue earned from energy deliveries that have not yet been billed to customers. This amount, classified as Unbilled revenues, which is 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 and are not reflected in Revenues, net within the condensed consolidated statements of income and comprehensive 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 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 services, excess transmission capacity resales, utility pole attachment revenues, and other services provided to customers and other energy providers.

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.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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


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

Other Current Assets

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


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

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


Other current assets	$	371	$	205

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

Electric Utility Plant, Net

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)


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

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

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

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

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

Table of Contents

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):


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

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

Asset retirement obligations	—			44		—			43

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

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

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

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

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

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

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

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

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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

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

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Accrued Expenses and Other Current Liabilities

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


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

Credit Facilities

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

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

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

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

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Defined Benefit Retirement Plan Costs

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


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

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

NOTE 4: FAIR VALUE OF FINANCIAL INSTRUMENTS

PGE estimated the fair value of financial asset and liability instruments as of March 31, 2022 and December 31, 2021, 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.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 March 31, 2022
	Level 1		Level 2		Level 3		Other(2)		Total
Assets:
Cash equivalents	$	92	$	—	$	—	$	—	$	92
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government	9		8		—		—		17
Corporate credit	—		13		—		—		13
Money market funds measured at NAV (2)	—		—		—		14		14
Non-qualified benefit plan trust: (3)
Debt securities—domestic government	4		—		—		—		4
Money market funds	1		—		—		—		1
Equity securities	3		—		—		—		3




Price risk management activities: (1) (4)
Electricity	—		35		1		—		36
Natural gas	—		274		18		—		292
	$	109	$	330	$	19	$	14	$	472
Liabilities:

Price risk management activities: (1) (4)
Electricity	$	—	$	51	$	71	$	—	$	122
Natural gas	—		10		—		—		10
	$	—	$	61	$	71	$	—	$	132

(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 $34 million, which are recorded at cash surrender value.

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

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)


	As of December 31, 2021
	Level 1		Level 2		Level 3		Other (2)		Total
Assets:
Cash equivalents	$	44	$	—	$	—	$	—	$	44
Nuclear decommissioning trust: (1)

Debt securities:
Domestic government	9		10		—		—		19
Corporate credit	—		14		—		—		14
Money market funds measured at NAV (2)	—		—		—		14		14
Non-qualified benefit plan trust: (3)
Debt securities—domestic government	4		—		—		—		4
Money market funds	1		—		—		—		1
Equity securities	4		—		—		—		4



Price risk management activities: (1) (4)
Electricity	—		16		1		—		17
Natural gas	—		115		5		—		120
	$	62	$	155	$	6	$	14	$	237
Liabilities:

Price risk management activities: (1) (4)
Electricity	$	—	$	33	$	90	$	—	$	123
Natural gas	—		13		1		—		14
	$	—	$	46	$	91	$	—	$	137

(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 $36 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.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 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 instruments for which fair value is derived using one or more significant inputs that are not observable for the entire term of the instrument. These instruments consist of longer-term commodity forwards, futures, and swaps.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 March 31, 2022
Electricity physical forwards	$	—	$	70	Discounted cash flow	Electricity forward price (per MWh)	$	20.00	$	146.53	$	51.04
Natural gas financial swaps	18		—		Discounted cash flow	Natural gas forward price (per Decatherm)	2.55		5.83		3.08
Electricity financial futures	1		1		Discounted cash flow	Electricity forward price (per MWh)	20.00		146.53		58.40
	$	19	$	71
As of December 31, 2021
Electricity physical forwards	$	—	$	90	Discounted cash flow	Electricity forward price (per MWh)	$	16.66	$	129.75	$	43.73
Natural gas financial swaps	5		1		Discounted cash flow	Natural gas forward price (per Decatherm)	2.02		8.02		2.81
Electricity financial futures	1		—		Discounted cash flow	Electricity forward price (per MWh)	26.76		68.43		52.46
	$	6	$	91

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)

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 March 31,
		2022		2021
Balance as of the beginning of the period		$	85	$	137
Net realized and unrealized losses/(gains)*		(37)		(21)



Transfers from Level 3 to Level 2		4		1
Balance as of the end of the period		$	52	$	117

* Both realized and unrealized losses/(gains), of which unrealized portion 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 $1 million in net realized gains for each of the three-month periods ended March 31, 2022 and March 31, 2021.

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 March 31, 2022, the carrying amount of PGE’s long-term debt was $3,286 million, net of $13 million of unamortized debt expense, and its estimated aggregate fair value was $3,439 million. As of December 31, 2021, the carrying amount of PGE’s long-term debt was $3,285 million, net of $14 million of unamortized debt expense, and its estimated aggregate fair value was $3,831 million.

NOTE 5: RISK MANAGEMENT

Price 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, future, swap, 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. PGE also enters into non-exchange-traded weather contract options, which are accounted for using the intrinsic value method. In accordance with ratemaking and cost recovery processes authorized by the OPUC, the Company recognizes a regulatory asset or liability to defer the gains and losses from derivative activity until settlement of the associated derivative instrument. PGE may designate certain derivative instruments as cash flow hedges or may use derivative instruments as economic hedges. The Company does not intend to engage in trading activities for non-retail purposes.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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


	March 31, 2022		December 31, 2021
Current assets:
Commodity contracts:
Electricity	$	35	$	16
Natural gas	229		86
Total current derivative assets(1)	264		102
Noncurrent assets:
Commodity contracts:
Electricity	1		1
Natural gas	63		34
Total noncurrent derivative assets(1)	64		35

Total derivative assets(2)	$	328	$	137
Current liabilities:
Commodity contracts:
Electricity	$	51	$	36
Natural gas	9		11
Total current derivative liabilities	60		47
Noncurrent liabilities:
Commodity contracts:
Electricity	71		87
Natural gas	1		3
Total noncurrent derivative liabilities	72		90

Total derivative liabilities(2)	$	132	$	137

(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 March 31, 2022 and December 31, 2021, 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):


	March 31, 2022			December 31, 2021
Commodity contracts:
Electricity	4		MWhs	4		MWhs
Natural gas	160		Decatherms	181		Decatherms

Foreign currency	$	20	Canadian	$	19	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 March 31, 2022, gross amounts included as Price risk management liabilities subject

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

to master netting agreements were $4 million, for which PGE has posted no collateral. Of the gross amounts recognized as of March 31, 2022, $1 million was for electricity and $3 million was for natural gas. As of December 31, 2021, gross amounts included as Price risk management liabilities subject to master netting agreements were $3 million, for which PGE posted no collateral. Of the gross amounts recognized as of December 31, 2021, $1 million was for electricity and $2 million was for natural gas.

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 March 31,
		2022		2021
Commodity contracts:
Electricity		$	(40)	$	(23)
Natural Gas		(211)		(25)
Foreign currency exchange		—		—

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 March 31, 2022 and 2021, net gains of $198 million and net gains of $39 million, respectively, have been offset.

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 March 31, 2022 related to PGE’s derivative activities would become realized as a result of the settlement of the underlying derivative instrument (in millions):


	2022		2023		2024		2025		2026		Thereafter		Total
Commodity contracts:
Electricity	$	18	$	(1)	$	3	$	3	$	4	$	59	$	86
Natural gas	(165)		(98)		(15)		(4)		—		—		(282)
Net unrealized loss/(gain)	$	(147)	$	(99)	$	(12)	$	(1)	$	4	$	59	$	(196)

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 March 31, 2022 was $117 million, for which PGE has posted $5 million in collateral, consisting entirely of cash. If the credit-risk-related contingent features underlying these agreements were triggered at March 31, 2022, the cash requirement to either post as collateral or settle the instruments immediately would have been $97 million. As of March 31, 2022, PGE had no 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.

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

As of March 31, 2022, PGE received from counterparties $167 million in collateral, consisting of $10 million of letters of credit and $157 million of cash. Increases in margin deposits received from wholesale counterparties is primarily due to the increase in PGE’s natural gas derivative asset positions. 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 PGE’s counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. The Company 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. PGE 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. Despite such mitigation efforts, defaults by counterparties may periodically occur. Based upon periodic review and evaluation, allowances are recorded as needed to reflect credit risk related to wholesale accounts receivable.

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; and ii) contingently issuable time-based and performance-based restricted stock units, along with associated dividend equivalent rights. 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 months ended March 31, 2022, unvested performance-based restricted stock units and related dividend equivalent rights of 385 thousand shares were excluded from the dilutive calculation because the performance goals had not been met, with 373 thousand shares excluded for the three months ended March 31, 2021.

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 March 31,
		2022	2021
Weighted-average common shares outstanding—basic		89,396	89,556
Dilutive effect of potential common shares		131	147
Weighted-average common shares outstanding—diluted		89,527	89,703

Table of Contents

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

NOTE 7: SHAREHOLDERS’ EQUITY

The activity in equity during the three-month periods ended March 31, 2022 and 2021 was as follows (dollars in millions, except per share amounts):

Common Stock

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Amount