Northwest Natural Holding Company

Hello and welcome to today's NW Natural Holding Company Q3 2022 earnings call. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to our host, Nikki Sparling with NW Natural Holding. The floor is yours. Please go ahead.

Thank you, Elliot. Good morning and welcome to our third quarter 2022 earnings call. As a reminder, some things that will be said this morning contain forward-looking statements. They're based on management's assumptions, which may or may not occur. For a complete list of our cautionary statements, refer to the language at the end of our press release. We expect to file our 10-Q later today. As mentioned, this teleconference is being recorded and will be available on our website following the call. Please note these calls are designed for the financial community. If you are an investor and have additional questions after the call, please contact me directly at 503-721-2530. News media may contact David Roy at 503-610-7157. Speaking this morning are David Anderson, President and Chief Executive Officer, and Frank Burkhartsmeyer, Senior Vice President and Chief Financial Officer. David and Frank have prepared remarks, and then we'll be available along with other members of our executive team to answer your questions. With that, I will turn it over to David.

Thanks, Nikki, and good morning, everybody, and welcome. We continue to see strong financial results and expect the year to be in line with the guidance that we previously provided. Frank will go through more of the detailed financial results here in a moment. This morning I'll walk through some economic indicators and provide a summary of Northwest Natural's Oregon general rate case order. I'll wrap up with an update on hydrogen projects at the gas utility and recent news from our water and competitive renewables business. Turning to a few comments on the economy. In our gas utility service territory in Oregon and Washington, we continue to see strength in employment numbers, while the housing market moderates from its highs in 2021. Overall, Oregon is trending similar to national averages, but we continue to carefully monitor economic conditions. The labor market remains stable. In Oregon, for example, unemployment was 3.8% in September 2022. As expected, single-family housing activity is cooling as interest rates rise. Single-family permitting has moderated off the elevated levels in 2021. The median sales price of a home was down about 4.7% for the third quarter this year. The inventory of homes for sale in the Portland metro area remains very tight at only 2.2 months of supply. Overall growth is roughly in line with our expectations. So far, we've seen the decline in mixed-use multifamily projects, but expect several developments to come online in the fourth quarter. In addition, supply chain issues have put customers' conversion projects on a longer runway. Despite these factors, we added nearly 8,800 new customers during the last 12 months, which equates to a growth rate of about 1.1%. Our water and wastewater utilities continue to operate in areas that have very solid economic footing. Unemployment rates in our largest water service territories range from 2.8% in Idaho to 4% in Texas. We experienced growth across our water utilities with several pockets of outperformance. Texas remains an extraordinary market with our water and wastewater utilities posting nearly 11% organic growth. The housing market in Idaho is strong with our falls water utility providing 5% growth. On a consolidated basis, our water and wastewater utilities grew over 3% over the last 12 months. In addition to this organic growth, our recent acquisition of Far West in Arizona increased our water customer base by 70% to 61,000 customers. On a consolidated basis, our collective gas and water utility customer base grew 5.3%, including our recent acquisitions. Moving to a summary of our Oregon general rate case for the gas utility. In October, the Oregon Public Utility Commission issued an order approving several multi-party settlements. Under the order, Northwest Natural's revenue requirement increased $59.4 million beginning November 1st. This was based on a 50-50 capital structure, an ROE of 9.4%, and an overall cost of capital of 6.8%. Rate base increased $320 million and now stands at $1.7 billion. A number of other items were approved as part of the rate case, including full recovery of our COVID deferral, enhancements to our low-income energy efficiency program, the recovery of our Lexington RNG facility, and a new automatic adjustment clause for new RNG investments. During the quarter, we filed for our annual purchase gas adjustment also in both states, which updates rates for the projected gas cost in the coming year. In October, we received approval from both Oregon and Washington for those increases. New rates for those also went into effect November 1st. Despite these recent increases, it's important to note that customers are paying less today for their total natural gas service in our area than they did 15 years ago. With that, let me turn it over to Frank to go a little bit deeper into the financials. Frank?