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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, 2021

or
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)

Oregon93-0256820
(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 valuePORNew York Stock Exchange
9.31% Medium-Term Notes due 2021POR 21New 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 filerSmaller 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 26, 2021 is 89,605,758 shares.
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PORTLAND GENERAL ELECTRIC COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

TABLE OF CONTENTS

Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 5.
Item 6.
2

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DEFINITIONS

The following abbreviations and acronyms are used throughout this document:

Abbreviation or AcronymDefinition
AFDCAllowance for funds used during construction
AUTAnnual Power Cost Update Tariff
ColstripColstrip Units 3 and 4 coal-fired generating plant
EPAUnited States Environmental Protection Agency
FERCFederal Energy Regulatory Commission
FMBsFirst Mortgage Bonds
GAAPAccounting principles generally accepted in the United States of America
GRCGeneral Rate Case
IRPIntegrated Resource Plan
Moody’sMoody’s Investors Service
MWMegawatts
MWaAverage megawatts
MWhMegawatt hour
NasdaqNational Association of Securities Dealers Automated Quotations
NVPCNet Variable Power Costs
NYSENew York Stock Exchange
OPUCPublic Utility Commission of Oregon
PCAMPower Cost Adjustment Mechanism
RPSRenewable Portfolio Standard
S&PS&P Global Ratings
SECUnited States Securities and Exchange Commission
TrojanTrojan nuclear power plant
WheatridgeWheatridge Renewable Energy Facility
3

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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 March 31,
20212020
Revenues:
Revenues, net$612 $564 
Alternative revenue programs, net of amortization(3)9 
Total revenues609 573 
Operating expenses:
Purchased power and fuel169 153 
Generation, transmission and distribution80 73 
Administrative and other86 71 
Depreciation and amortization103 108 
Taxes other than income taxes38 35 
Total operating expenses476 440 
Income from operations133 133 
Interest expense, net34 33 
Other income (expense):
Allowance for equity funds used during construction4 3 
Miscellaneous income (expense), net2 (4)
Other income (expense), net6 (1)
Income before income tax expense105 99 
Income tax expense9 18 
Net income96 81 
Other comprehensive income 1 
Comprehensive income$96 $82 
Weighted-average common shares outstanding (in thousands):
Basic89,556 89,429 
Diluted89,703 89,579 
Earnings per share—Basic and diluted$1.07 $0.91 
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)



March 31, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$135 $257 
Accounts receivable, net268 271 
Inventories67 72 
Regulatory assets—current25 23 
Other current assets127 98 
Total current assets622 721 
Electric utility plant, net7,616 7,539 
Regulatory assets—noncurrent591 569 
Nuclear decommissioning trust44 45 
Non-qualified benefit plan trust43 42 
Other noncurrent assets153 153 
Total assets$9,069 $9,069 
See accompanying notes to condensed consolidated financial statements.


5

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
(Dollars in millions)
(Unaudited)


March 31, 2021December 31, 2020
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$199 $153 
Liabilities from price risk management activities—current20 14 
Short-term debt200 150 
Current portion of long-term debt20 160 
Current portion of finance lease obligation16 16 
Accrued expenses and other current liabilities319 322 
Total current liabilities774 815 
Long-term debt, net of current portion2,886 2,886 
Regulatory liabilities—noncurrent1,353 1,369 
Deferred income taxes391 374 
Unfunded status of pension and postretirement plans299 299 
Liabilities from price risk management activities—noncurrent118 136 
Asset retirement obligations270 270 
Non-qualified benefit plan liabilities101 101 
Finance lease obligations, net of current portion128 129 
Other noncurrent liabilities74 77 
Total liabilities6,394 6,456 
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, 2021 and December 31, 2020
  
Common stock, no par value, 160,000,000 shares authorized; 89,576,748 and 89,537,331 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
1,233 1,231 
Accumulated other comprehensive loss(11)(11)
Retained earnings1,453 1,393 
Total shareholders’ equity2,675 2,613 
Total liabilities and shareholders’ equity$9,069 $9,069 
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)        
                                        
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net income$96 $81 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization103 108 
Deferred income taxes(1)7 
Pension and other postretirement benefits6 6 
Allowance for equity funds used during construction(4)(3)
Decoupling mechanism deferrals, net of amortization3 (9)
Amortization of net benefits due to Tax Reform (6)
Deferral of incremental storm costs(41) 
Other non-cash income and expenses, net13 19 
Changes in working capital:
(Increase)/decrease in accounts receivable, net(2)19 
Decrease/(increase) in inventories4 (1)
(Increase)/decrease in margin deposits(1)(19)
Increase/(decrease) in accounts payable and accrued liabilities26 (22)
Other working capital items, net(14)(9)
Other, net(20)(16)
Net cash provided by operating activities168 155 
Cash flows from investing activities:
Capital expenditures(153)(162)
Sales of Nuclear decommissioning trust securities3 3 
Purchases of Nuclear decommissioning trust securities(3)(2)
Other, net(9)4 
Net cash used in investing activities(162)(157)
7

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PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In millions)
(Unaudited)
Three Months Ended March 31,
20212020
Cash flows from financing activities:
Proceeds from issuance of long-term debt 119 
Payments on long-term debt(140)(98)
Borrowings on short-term debt200 20 
Repayments of short-term debt(150)(20)
Issuance of commercial paper, net 20 
Dividends paid(36)(34)
Other(2)(5)
Net cash provided by (used in) financing activities(128)2 
Increase (Decrease) in cash and cash equivalents(122) 
Cash and cash equivalents, beginning of period257 30 
Cash and cash equivalents, end of period$135 $30 
Supplemental cash flow information is as follows:
Cash paid for interest, net of amounts capitalized$16 $12 
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. The Company participates in the wholesale market by purchasing and selling electricity and natural gas in an effort to provide reasonably-priced power for its retail customers. 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, 2021, PGE served 909,000 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, 2021 and 2020 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 normal recurring nature, unless otherwise noted. The financial information as of December 31, 2020 is derived from the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in Item 8 of PGE’s Annual Report on Form 10-K, filed with the SEC on February 19, 2021, 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, 2021 and 2020.

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 energy and natural gas, interim financial results do not necessarily represent those to be expected for the year.

9

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PORTLAND GENERAL ELECTRIC COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
NOTE 2: REVENUE RECOGNITION

Disaggregated Revenue

The following table presents PGE’s revenue, disaggregated by customer type (in millions):
Three Months Ended March 31,
20212020
Retail:
Residential$310 $279 
Commercial162 159 
Industrial60 51 
Direct access customers11 11 
Subtotal543 500 
Alternative revenue programs, net of amortization(3)9 
Other accrued revenues, net13 5 
Total retail revenues553 514 
Wholesale revenues*
33 47 
Other operating revenues23 12 
Total revenues$609 $573 
* Wholesale revenues include $5 million and $16 million related to electricity commodity contract derivative settlements for the three months ended March 31, 2021 and 2020, 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.
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.
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PORTLAND GENERAL ELECTRIC COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
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. PGE 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, PGE 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 PGE’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.

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. PGE generally determines standalone selling prices based on the prices charged to customers.

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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, the Company assesses whether inventories are recorded at the lower of average cost or net realizable value.

Accounts Receivable, Net

Accounts receivable, net includes $86 million and $97 million of unbilled revenues as of March 31, 2021 and December 31, 2020, respectively. Accounts receivable, net is net of an allowance for credit losses of $20 million as of March 31, 2021. The following summarizes activity in the allowance for credit losses (in millions):

 Three Months Ended March 31,
 2021
Balance as of beginning of period$16 
Increase in provision7 
Amounts written off(4)
Recoveries1 
Balance as of end of period$20 

Other Current Assets

Other current assets consist of the following (in millions):
March 31, 2021December 31, 2020
Prepaid expenses$68 $57 
Assets from price risk management activities50 33 
Margin deposits9 8 
Other current assets$127 $98 

Electric Utility Plant, Net

Electric utility plant, net consists of the following (in millions):
March 31, 2021December 31, 2020
Electric utility plant$11,073 $10,974 
Construction work-in-progress472 429 
Total cost11,545 11,403 
Less: accumulated depreciation and amortization(3,929)(3,864)
Electric utility plant, net$7,616 $7,539 
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PORTLAND GENERAL ELECTRIC COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
Accumulated depreciation and amortization in the table above includes accumulated amortization related to intangible assets of $403 million and $388 million as of March 31, 2021 and December 31, 2020, respectively. Amortization expense related to intangible assets was $15 million for the three months ended March 31, 2021 and 2020. The Company’s intangible assets primarily consist of computer software development and hydro licensing costs.

Regulatory Assets and Liabilities

Regulatory assets and liabilities consist of the following (in millions):
March 31, 2021December 31, 2020
CurrentNoncurrentCurrentNoncurrent
Regulatory assets:
Price risk management$ $103 $ $124 
Pension and other postretirement plans 234  240 
Debt issuance costs 25  25 
Trojan decommissioning activities 97  95 
Incremental storm costs— 41 — — 
Other25 91 23 85 
Total regulatory assets$25 $591 $23 $569 
Regulatory liabilities:
Asset retirement removal costs$ $1,020 $ $1,016 
Deferred income taxes 222  239 
Asset retirement obligations 38  37 
Price risk management30  18  
Other12 73 5 77 
Total regulatory liabilities$42 
(1)
$1,353 $23 
(1)
$1,369 

(1)Included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Incremental storm costs represents the incremental costs incurred during the three months ended March 31, 2021 to repair damage to PGE’s transmission and distribution systems and restore power to customers. As a result of the historic February winter storms, Oregon’s Governor declared a state of emergency on February 13, 2021. On February 15, 2021, PGE filed an application for authorization to defer emergency restoration costs for the February storms (Docket UM 2156) . PGE does not expect an OPUC decision on the February storm deferral until later in 2021 or 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 which could result in a portion or all of PGE’s deferral being disallowed for recovery.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in millions):
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PORTLAND GENERAL ELECTRIC COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
March 31, 2021December 31, 2020
Accrued employee compensation and benefits$48 $67 
Accrued taxes payable45 36 
Accrued interest payable43 29 
Accrued dividends payable37 38 
Regulatory liabilities—current42 23 
Other104 129 
Total accrued expenses and other current liabilities$319 $322 

Credit Facilities

As of March 31, 2021, PGE had a $500 million revolving credit facility scheduled to expire in November 2023. The Company has the ability to expand the revolving credit facility to $600 million, if needed. 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, two, 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 PGEs 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, 2021, PGE was in compliance with this covenant with a 55.2% debt-to-total capital ratio. The aggregate unused available credit capacity under the revolving credit facility was $500 million.

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, 2021, 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 four 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, 2021. Letters of credit issued are not reflected on the Company’s condensed consolidated balance sheets.

On April 9, 2020, PGE obtained a 364-day term loan from lenders in the aggregate principal of $150 million. The term loan bore interest for the relevant interest period at LIBOR plus 1.25%. The interest rate was subject to adjustment pursuant to the terms of the loan. On March 31, 2021, this term loan was repaid in full with proceeds from the term loan described below.

On March 31, 2021, PGE obtained an unsecured 364-day term loan in the aggregate principal amount of $200 million. The term loan will bear interest for the relevant interest period at LIBOR plus 0.70%, with the interest rate subject to adjustment pursuant to terms of the loan. The credit agreement expires on March 30, 2022, with any outstanding balance due and payable on such date. The Company used a portion of the proceeds to repay the prior 364-day term loan, with the remainder of the proceeds used for general corporate purposes.

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(Unaudited)
Pursuant to an order issued by the Federal Energy Regulatory Commission (FERC), the Company is authorized to issue short-term debt in an aggregate amount of up to $900 million through February 6, 2022.

Long-term Debt

On January 6, 2021, the Company made a $140 million scheduled repayment on a 2.51% Series of First Mortgage Bonds with available cash.

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,
20212020
Service cost$5 $4 
Interest cost*7 8 
Expected return on plan assets*(11)(11)
Amortization of net actuarial loss*5 4 
Net periodic benefit cost$6 $5 
* The expense portion of non-service cost components are included in Miscellaneous income (loss), 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, 2021 and December 31, 2020, 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.

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):
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(Unaudited)
As of March 31, 2021
Level 1Level 2Level 3
Other(2)
Total
Assets:
Cash equivalents$72 $ $ $— $72 
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government12 7  — 19 
Corporate credit 12  — 12 
Money market funds measured at NAV (2)
— — — 13 13 
Non-qualified benefit plan trust: (3)
Money market funds1   — 1 
Equity securities1   — 1 
Debt securities—domestic government8   — 8 
Price risk management activities: (1) (4)
Electricity 14 5 — 19 
Natural gas 44 2 — 46 
$94 $77 $7 $13 $191 
Liabilities:
Price risk management activities: (1) (4)
Electricity$ $11 $123 $— $134 
Natural gas 3 1 — 4 
$ $14 $124 $— $138 
 
(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 $33 million, which are recorded at cash surrender value.
(4)For further information, see Note 5, Risk Management.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
As of December 31, 2020
Level 1Level 2Level 3
Other (2)
Total
Assets:
Cash equivalents$255 $ $ $— $255 
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government9 11  — 20 
Corporate credit 13  — 13 
Money market funds measured at NAV (2)
— — — 12 12 
Non-qualified benefit plan trust: (3)
Debt securities—domestic government1   — 1 
Money market funds1   — 1 
Equity securities7   — 7 
Price risk management activities: (1) (4)
Electricity 4 4 — 8 
Natural gas 36 1 — 37 
$273 $64 $5 $12 $354 
Liabilities:
Price risk management activities: (1) (4)
Electricity 5 141 — 146 
Natural gas 4 1 — 5 
$ $9 $142 $— $151 
 
(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 $33 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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(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 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 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.

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(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 ValueValuation TechniqueSignificant Unobservable InputPrice per Unit
Commodity ContractsAssetsLiabilitiesLowHighWeighted Average
(in millions)
As of March 31, 2021
Electricity physical forwards$ $123 Discounted cash flowElectricity forward price (per MWh)$5.75 $73.58 $33.39 
Natural gas financial swaps2 1 Discounted cash flowNatural gas forward price (per Decatherm)1.60 4.32 2.22 
Electricity financial futures5  Discounted cash flowElectricity forward price (per MWh)5.75 73.58 37.97 
$7 $124 
As of December 31, 2020
Electricity physical forwards$ $141 Discounted cash flowElectricity forward price (per MWh)$11.17 $51.18 $29.74 
Natural gas financial swaps1 1 Discounted cash flowNatural gas forward price (per Decatherm)1.52 4.33 2.29 
Electricity financial futures4  Discounted cash flowElectricity forward price (per MWh)8.78 58.42 43.71 
$5 $142 

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 InputPositionChange to InputImpact on Fair Value
Market priceBuyIncrease (decrease)Gain (loss)
Market priceSellIncrease (decrease)Loss (gain)
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):
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(Unaudited)
Three Months Ended March 31,
20212020
Balance as of the beginning of the period$137 $97 
Net realized and unrealized losses/(gains)*
(21)39 
Transfers from Level 3 to Level 21 (2)
Balance as of the end of the period$117 $134 
* 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.

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 PCRBs is classified as a Level 2 fair value measurement.

As of March 31, 2021, the carrying amount of PGE’s long-term debt was $2,906 million, net of $12 million of unamortized debt expense, and its estimated aggregate fair value was $3,359 million. As of December 31, 2020, the carrying amount of PGE’s long-term debt was $3,046 million, net of $13 million of unamortized debt expense, and its estimated aggregate fair value was $3,808 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 its existing long-term wholesale contracts. Wholesale market transactions include purchases and sales of both power and fuel resulting from economic dispatch decisions for Company-owned generation resources. 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 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 the 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.

PGE’s Assets and Liabilities from price risk management activities consist of the following (in millions):
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
March 31, 2021December 31, 2020
Current assets:
Commodity contracts:
Electricity$14 $4 
Natural gas36 29 
Total current derivative assets(1)
50 33 
Noncurrent assets:
Commodity contracts:
Electricity5 4 
Natural gas10 8 
Total noncurrent derivative assets(1)
15 12 
Total derivative assets(2)
$65 $45 
Current liabilities:
Commodity contracts:
Electricity$17 $13 
Natural gas3 2 
Total current derivative liabilities20 15 
Noncurrent liabilities:
Commodity contracts:
Electricity117 133 
Natural gas1 3 
Total noncurrent derivative liabilities118 136 
Total derivative liabilities(2)
$138 $151 
(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, 2021 and December 31, 2020, 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, 2021December 31, 2020
Commodity contracts:
Electricity5 MWhs6 MWhs
Natural gas154 Decatherms137 Decatherms
Foreign currency$19 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, 2021, gross amounts included as Price risk management liabilities subject to master netting agreements was $1 million, comprised solely of natural gas contracts for which PGE posted no collateral. As of December 31, 2020, PGE had no material master netting arrangements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)

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,
20212020
Commodity contracts:
Electricity$(23)$32 
Natural Gas(25)9 
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 March 31, 2021 and 2020, net gains of $39 million and net losses of $42 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, 2021 related to PGE’s derivative activities would become realized as a result of the settlement of the underlying derivative instrument (in millions):
20212022202320242025ThereafterTotal
Commodity contracts:
Electricity$3 $1 $8 $8 $8 $87 $115 
Natural gas(28)(12)(2)   (42)
Net unrealized loss/(gain)$(25)$(11)$6 $8 $8 $87 $73 
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, 2021 was $128 million, for which PGE has posted $9 million in collateral, consisting entirely of letters of credit. If the credit-risk-related contingent features underlying these agreements were triggered at March 31, 2021, the cash requirement to either post as collateral or settle the instruments immediately would have been $125 million. As of March 31, 2021, 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 sheet.

Counterparties representing 10% or more of assets and liabilities from price risk management activities were as follows:
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(Unaudited)
March 31, 2021December 31, 2020
Assets from price risk management activities:
Counterparty A14 %12 %
Counterparty B13 17 
Counterparty C17 21 
Counterparty D14 16 
58 %66 %
Liabilities from price risk management activities:
Counterparty E89 %93 %
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, 2021, unvested performance-based restricted stock units and related dividend equivalent rights of 373 thousand shares were excluded from the dilutive calculation because the performance goals had not been met, with 301 thousand shares excluded for the three months ended March 31, 2020.

Net income (loss) 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,
20212020
Weighted-average common shares outstanding—basic89,556 89,429 
Dilutive effect of potential common shares147 150 
Weighted-average common shares outstanding—diluted89,703 89,579 

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(Unaudited)
NOTE 7: SHAREHOLDERS’ EQUITY

The activity in equity during the three-month periods ended March 31, 2021 and 2020 was as follows (dollars in millions, except per share amounts):

Common StockAccumulated
Other
Comprehensive
Loss
Retained
Earnings
SharesAmountTotal
Balances as of December 31, 202089,537,331 $1,231 $(11)$1,393 $2,613 
Issuances of shares pursuant to equity-based plans39,417  — —  
Stock-based compensation— 2 — — 2 
Dividends declared ($0.4075 per share)
—   (36)(36)
Net income— — — 96 96 
Balances as of March 31, 202189,576,748 $1,233 $(11)$1,453 $2,675 
Balances as of December 31, 201989,387,124 $1,220 $(10)$1,381 $2,591 
Issuances of shares pursuant to equity-based plans77,397  — —  
Other comprehensive income— — 1 — 1 
Dividends declared ($0.3850 per share)
—   (35)(35)
Net income— — — 81 81 
Balances as of March 31, 202089,464,521 $1,220 $(9)$1,427 $2,638