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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Summary of Significant Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash Equivalents Highly liquid investments with maturities of three months or less at the date of acquisition are classified as cash equivalents, of which PGE had none as of December 31, 2023 and $150 million as of December 31, 2022 included within Cash and cash equivalents in the consolidated balance sheets. Accounts Receivable Accounts receivable are recorded at invoiced amounts based on prices that are subject to federal (FERC) and State (OPUC) regulations. Balances do not bear interest; however, late fees are assessed beginning 8 business days after the invoice due date. Accounts that are inactivated due to nonpayment are charged-off in the period in which the receivable is deemed uncollectible, but no sooner than 45 business days after the due date of the final invoice. During 2020, 2021, and much of 2022, the Company took steps to support customers during the COVID-19 pandemic, including suspending late fees and developing time payment arrangements. COVID-19 protections ended in September 2022. Provisions for uncollectible accounts receivable and unbilled revenues related to retail sales are charged to Administrative and other expense and are recorded in the same period as the related revenues, with an offsetting credit to the allowance for uncollectible accounts. Such estimates for credit losses are based on management’s assessment of the current and forecasted probability of collection, aging of accounts receivable, bad debt write-offs experience, actual customer billings, economic conditions, and other factors that help determine credit loss estimates for accounts receivable and unbilled revenues. For more information on PGE’s provision for uncollectible accounts receivable and unbilled revenues see “Accounts Receivable, Net” in Note 4, Balance Sheet Components. Provisions for uncollectible accounts receivable related to wholesale sales are charged to Purchased power and fuel expense and are recorded periodically based on a review of counterparty non-performance risk and contractual right of offset when applicable. There have been no material write-offs of accounts receivable related to wholesale sales in 2023, 2022, or 2021. Price Risk Management PGE engages in price risk management activities, utilizing financial instruments such as forward, future, swap, and option contracts for electricity, natural gas, and foreign currency. These instruments are measured at fair value and recorded on the consolidated balance sheets as assets or liabilities from price risk management activities. Changes in fair value are recognized in the consolidated statements of income, offset by the effects of regulatory accounting when it is expected that the gain or loss upon settlement will be reflected in future retail rates. Certain electricity forward contracts that were entered into in anticipation of serving the Company’s regulated retail load may meet the requirements for treatment under the normal purchases and normal sales scope exception. Such contracts are not recorded at fair value and are recognized under accrual accounting. Price risk management activities are utilized as economic hedges to protect against variability in expected future cash flows due to associated price risk and to manage exposure to volatility in net variable power costs (NVPC). In accordance with ratemaking and cost recovery processes authorized by the OPUC, PGE recognizes a regulatory asset or liability to defer unrealized losses or gains, respectively, on derivative instruments until settlement. At the time of settlement, the Company recognizes a realized gain or loss on the derivative instrument. Physically settled electricity and natural gas sale and purchase transactions are recorded in Revenues, net and Purchased power and fuel expense, respectively, upon settlement, while transactions that are not physically settled (financial transactions) are recorded on a net basis in Purchased power and fuel expense upon financial settlement. Pursuant to transactions entered into in connection with PGE’s price risk management activities, the Company may be required to provide collateral to certain counterparties. The collateral requirements are based on the contract terms and commodity prices and can vary period to period. Cash deposits provided as collateral are included within Other current assets in the consolidated balance sheets and were $92 million as of December 31, 2023 and $116 million as of December 31, 2022. Letters of credit provided as collateral are not recorded on the Company’s consolidated balance sheets and were $40 million and $33 million as of December 31, 2023 and 2022, respectively. 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 inventory for purposes of determining that inventories are recorded at the lower of average cost or net realizable value. Electric Utility Plant Capitalization Policy Electric utility plant is capitalized at original cost, which includes direct labor, materials and supplies, and contractor costs, as well as indirect costs such as engineering, supervision, employee benefits, and an allowance for funds used during construction (AFUDC). Plant replacements are capitalized, with minor items charged to expense as incurred. Periodic major maintenance inspections and overhauls performed under long-term service agreements at PGE’s generating plants are charged to expense as incurred, subject to regulatory accounting as applicable. Costs to purchase or develop software applications for internal use only are capitalized and amortized over the estimated useful life of the software. Costs of obtaining FERC licenses for the Company’s hydroelectric projects are capitalized and amortized over the related license period. During the period of construction, costs expected to be included in the final value of the constructed asset, and depreciated once the asset is complete and placed in service, are classified as Construction work-in-progress in Electric utility plant on the consolidated balance sheets. If the project becomes probable of being abandoned, such costs are expensed in the period such determination is made. If any costs are expensed, PGE may seek recovery of such costs in customer prices, although there can be no guarantee such recovery would be granted. Costs disallowed for recovery in customer prices, if any, are charged to expense at the time such disallowance becomes probable. PGE records AFUDC, which is intended to represent the Company’s cost of funds used for construction purposes, based on the rate granted in the latest general rate case for equity funds and the cost of actual borrowings for debt funds. In 2020, the FERC issued a waiver that allowed jurisdictional utilities to apply an alternative AFUDC calculation formula that excluded the actual outstanding short-term debt balance and replaced it with the simple average of the actual 2019 short-term debt balance. PGE adopted the waiver in the second quarter of 2020. The purpose of the waiver, which ultimately expired March 31, 2022, was to allow relief from the detrimental impacts of issuing short-term debt on the allowance for equity funds used during construction in response to COVID-19. AFUDC is capitalized as part of the cost of plant and credited to the consolidated statements of income. The average rate used by PGE was 6.5% in 2023 and in 2022, and 6.7% in 2021. AFUDC from borrowed funds, reflected as a reduction to Interest expense, net, was $13 million in 2023, $7 million in 2022, and $8 million in 2021. AFUDC from equity funds, included in Other income, net, was $19 million in 2023, $14 million in 2022, and $17 million in 2021. Depreciation and Amortization Depreciation is computed using the straight-line method, based upon original cost, and includes an estimate for cost of removal and expected salvage. Depreciation expense as a percent of the related average depreciable plant in service was 3.4% in 2023, 2022, and 2021. A component of depreciation expense includes estimated asset retirement removal costs allowed in customer prices. Periodic studies are conducted to update depreciation parameters (i.e. retirement dispersion patterns, average service lives, and net salvage rates), including estimates of asset retirement obligations (AROs) and asset retirement removal costs. The studies are conducted at a minimum of every five years and are filed with the OPUC for approval and inclusion in a future rate proceeding. In 2021, PGE completed a depreciation study based on 2019 data, with an order received from the OPUC in December 2021 authorizing new depreciation rates effective May 9, 2022. Thermal generation plants are depreciated using a life-span methodology, which ensures that plant investment is recovered by the estimated retirement dates, which range from 2025 to 2061. Depreciation is provided on PGE’s other classes of plant in service over their estimated average service lives, which are as follows (in years):
Generation, excluding thermal: |
Hydro | 95
Wind | 30
Transmission | 61
Distribution | 51
General | 16
When property is retired and removed from service, the original cost of the depreciable property units, net of any related salvage value, is charged to accumulated depreciation. Cost of removal expenditures are recorded against AROs or to accumulated asset retirement removal costs, if applicable, and included in Regulatory liabilities. Intangible plant consists primarily of computer software development costs, which are amortized over either five or ten years, and hydro licensing costs, which are amortized over the applicable license term, which range from 30 to 50 years. Accumulated amortization was $558 million and $499 million as of December 31, 2023 and 2022, respectively, with amortization expense of $61 million in 2023 and $58 million in both 2022 and 2021. Future estimated amortization expense as of December 31, 2023 is as follows: $70 million in 2024; $58 million in 2025; $50 million in 2026; $45 million in 2027; and $24 million in 2028. Marketable Securities Nuclear decommissioning trust Reflects assets held in trust to cover general decommissioning costs and operation of the Independent Spent Fuel Storage Installation (ISFSI) at the decommissioned Trojan nuclear power plant (Trojan), which was closed in 1993. The Nuclear decommissioning trust (NDT) includes contributions made by the Company, less qualified expenditures, plus any realized and unrealized gains and losses on the investments held therein. Non-qualified benefit plan trust Reflects assets held in trust to cover the obligations of PGE’s non-qualified benefit plans (NQBP) and represents contributions made by the Company, less qualified expenditures, plus any realized and unrealized gains and losses on the investments held therein. All of PGE’s investments in marketable securities included in NDT and NQBP trust assets on the consolidated balance sheets, are classified as equity or trading debt securities. These securities are classified as noncurrent because they are not available for use in operations. Such securities are stated at fair value based on quoted market prices. Realized and unrealized gains and losses on the NQBP trust assets are included in Other income, net. Realized and unrealized gains and losses on the NDT fund assets are recorded as regulatory liabilities or assets, respectively, for future ratemaking treatment. The cost of securities sold in the NDT and the NQBP are based on the first in first out method. Regulatory Accounting Regulatory Assets and Liabilities As a rate-regulated enterprise, PGE applies regulatory accounting, which results in the creation of regulatory assets and regulatory liabilities. Regulatory assets represent: i) probable future revenue associated with certain actual or estimated costs that are expected to be recovered from customers through the ratemaking process; or ii) probable future collections from customers resulting from revenue accrued for completed alternative revenue programs, provided certain criteria are met. Regulatory liabilities represent probable future reductions in revenue associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory accounting is appropriate as long as: i) prices are established by, or subject to, approval by independent third-party regulators; ii) prices are designed to recover the specific enterprise’s cost-of-service; and iii) in view of demand for service, it is reasonable to assume that prices set at levels that will recover costs can be charged to and collected from customers. Once the regulatory asset or liability is reflected in prices, the respective regulatory asset or liability is amortized to the appropriate line item in the consolidated statement of income over the period in which it is included in prices. Circumstances that could result in the discontinuance of regulatory accounting include: i) increased competition that restricts PGE’s ability to establish prices to recover specific costs; and ii) a significant change in the manner in which prices are set by regulators from cost-based regulation to another form of regulation. The Company periodically reviews the criteria of regulatory accounting to ensure that its continued application is appropriate. Based on a current evaluation of the various factors and conditions, management believes that recovery of PGE’s regulatory assets is probable. For additional information concerning the Company’s regulatory assets and liabilities, see Note 7, Regulatory Assets and Liabilities. 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 consolidated statements of income, and is net of wholesale sales, which are classified as Revenues, net in the 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. PGE’s authorized ROE was 9.5% for 2023 and 2022. Any estimated refund to customers pursuant to the PCAM is recorded as a reduction in Revenues, net in PGE’s 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, 2023, PGE’s actual NVPC was $5 million above baseline NVPC, which is within the established deadband range, therefore no estimated collection from customers was recorded as of December 31, 2023. A final determination regarding the 2023 PCAM results will be made by the OPUC through a public filing and review in 2024. For the year ended December 31, 2022, actual NVPC was above baseline NVPC by $23 million, which was within the established deadband range, therefore no estimated collection from customers was recorded as of December 31, 2022. Asset Retirement Obligations Legal obligations related to the future retirement of tangible long-lived assets are classified as AROs on PGE’s consolidated balance sheets. An ARO is recognized in the period in which the legal obligation is incurred, and when the fair value of the liability can be reasonably estimated. Due to the long lead time involved until decommissioning activities occur, the Company uses present value techniques. The present value of estimated future decommissioning costs is capitalized and included in Electric utility plant, net on the consolidated balance sheets with a corresponding offset to ARO. For revisions to AROs in which the related asset is no longer in service, the corresponding offset is recorded as a Regulatory asset on the consolidated balance sheets, except for those AROs related to non-utility assets which is charged to Depreciation and amortization on the consolidated statements of income. Such estimates are revised periodically, with actual settlements charged to the ARO as incurred. The estimated capitalized costs of AROs are depreciated over the estimated life of the related asset, with such depreciation included in Depreciation and amortization in the consolidated statements of income. Changes in the ARO resulting from the passage of time (accretion) is based on the original discount rate and recognized as an increase in the carrying amount of the liability and as a charge to accretion expense, which is included in Depreciation and amortization expense in the Company’s consolidated statements of income. For additional information concerning the Company’s AROs, see Note 8, Asset Retirement Obligations. The difference between the timing of the recognition of ARO depreciation and accretion expenses and the amount included in customers’ prices is recorded as a regulatory asset or liability in the Company’s consolidated balance sheets. As of December 31, 2023, PGE had a net regulatory liability related to Utility plant AROs in the amount of $4 million and a net regulatory asset related to Trojan decommissioning ARO activities of $139 million. As of December 31, 2022, PGE had a net regulatory liability related to Utility plant AROs in the amount of $7 million and a net regulatory asset related to Trojan decommissioning ARO activities of $131 million. For additional information concerning the Company’s regulatory assets and liabilities related to AROs, see Note 7, Regulatory Assets and Liabilities. Contingencies Contingencies are evaluated using the best information available at the time the consolidated financial statements are prepared. Legal costs incurred in connection with loss contingencies are expensed as incurred. Loss contingencies, including environmental contingencies, are accrued, and disclosed if material, when it is probable that an asset has been impaired, or a liability incurred, as of the financial statement date and the amount of the loss can be reasonably estimated. If a reasonable estimate of probable loss cannot be determined, a range of loss may be established, in which case the minimum amount in the range is accrued, unless some other amount within the range appears to be a better estimate. A loss contingency will also be disclosed when it is reasonably possible that a liability has been incurred if the estimate or range of potential loss is material. If a probable or reasonably possible loss cannot be determined, then the Company: i) discloses an estimate of such loss or the range of such loss, if the Company is able to determine such an estimate; or ii) discloses that an estimate cannot be made and the reasons why the estimate cannot be made. If an asset has been impaired or a liability incurred after the financial statement date, but prior to the issuance of the financial statements, the loss contingency is disclosed, if material, and the amount of any estimated loss is recorded in either the current or the subsequent reporting period, depending on the nature of the underlying event. Gain contingencies are recognized when realized and are disclosed when material. For additional information concerning the Company’s contingencies, see Note 19, Contingencies. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss (AOCL) presented on the consolidated balance sheets is comprised of the difference between the obligations of the non-qualified benefit plans recognized in net income and the unfunded position. Revenue Recognition Revenue is recognized when obligations under the terms of a contract with customers are satisfied. Generally, this satisfaction of performance obligations and transfer of control occurs and revenues are recognized as electricity is delivered to customers, including any services provided. The prices charged, and amount of consideration PGE receives in exchange for its services provided, are regulated by the OPUC or the FERC. PGE recognizes revenue through the following steps: i) identifying the contract with the customer; ii) identifying the performance obligations in the contract; iii) determining the transaction price; iv) allocating the transaction price to the performance obligations; and v) recognizing revenue when or as each performance obligation is satisfied. Franchise taxes, which are collected from customers and remitted to taxing authorities, are recorded on a gross basis in PGE’s consolidated statements of income. Amounts collected from customers are included in Revenues, net and amounts due to taxing authorities are included in Taxes other than income taxes and totaled $56 million in 2023, $53 million in 2022, and $48 million in 2021. 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 remained unbilled to customers. The unbilled revenues estimate, which is included in Accounts receivable, net in the Company’s 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. As a rate-regulated utility, PGE, in certain situations, recognizes revenue to be billed to customers in future periods or defers the recognition of certain revenues to the period in which the related costs are incurred or approved by the OPUC for amortization. For additional information, see “Regulatory Assets and Liabilities” in this Note 2. Alternative Revenue Programs Revenues related to PGE’s decoupling mechanism are considered earned under alternative revenue programs, as this amount represents a contract with the regulator and not with customers. Such revenues are presented separately from revenues from contracts with customers and classified as Alternative revenue programs, net of amortization on the consolidated statements of income. The activity within this line item is comprised of current period deferral adjustments, which can either be a collection from or a refund to customers, and is net of any related amortization. When amounts related to alternative revenue programs are ultimately included in prices and customer bills, the amounts are included within Revenues, net, with an equal and offsetting amount of amortization recorded on the Alternative revenue programs, net of amortization line item. In the 2022 General Rate Case (GRC), parties reached an agreement that has eliminated PGE’s decoupling mechanism upon the effective date of new customer prices pursuant to the case, which began May 9, 2022. Pursuant to the GRC Order, the OPUC adopted the agreement such that deferrals will not occur after 2022, although amortization of then previously recorded deferrals will continue as scheduled until collected or refunded in future customer prices and deferral continued through the end of 2022 on a prorated basis. As stipulated in the 2024 GRC settlement agreement, PGE made a tariff filing, on January 26, 2024, that proposes weather-normalized decoupling, which would begin April 1, 2024 and sunset after December 31, 2025, for residential and small non-residential customers. The proposal seeks a 3% annual limit on collections or refunds and a balancing account to capture any amounts that exceed the limit, which would carry forward to subsequent years for refund or recovery. Stock-Based Compensation The measurement and recognition of compensation expense for all share-based payment awards, including restricted stock units, is based on the estimated fair value of the awards. The fair value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite vesting period. PGE attributes the value of stock-based compensation to expense on a straight-line basis. For additional information concerning the Company’s Stock-Based Compensation, see Note 14, Stock-Based Compensation Expense. Income Taxes Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between financial statement carrying amounts and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in current and future periods that includes the enactment date. Investment Tax Credits (ITC) are deferred and amortized as a reduction of income tax expense over the estimated useful lives of the related properties. Any valuation allowance would be established to reduce deferred tax assets to the “more likely than not” amount expected to be realized upon transfer or in future tax returns. Valuation allowances related to a discount incurred on transfer transactions that are recorded to deferred tax expense are currently recoverable through a regulatory asset. Because PGE is a rate-regulated enterprise, changes in certain deferred tax assets and liabilities are required to be passed on to customers through future prices and are charged or credited directly to a regulatory asset or regulatory liability. Such amounts were recognized as net regulatory liabilities of $177 million and $194 million as of December 31, 2023 and 2022, respectively, and will primarily be reversed using the average rate assumption method to account for the refund to customers as the temporary differences reverse. Unrecognized tax benefits represent management’s expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. Until such positions are no longer considered uncertain, PGE would not recognize the tax benefits resulting from such positions and would report the tax effect as a liability in the Company’s consolidated balance sheets. PGE records any interest and penalties related to income tax deficiencies in Interest expense and Other income, net, respectively, in the consolidated statements of income. The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022. The IRA provides an election to transfer (i.e., sell) certain tax credits to unrelated third parties in exchange for cash consideration. PGE is electing an accounting policy to account for the transfer of Production Tax Credits (PTCs) and ITCs, including discounts, within the scope of Accounting Standards Codification 740 – Income Taxes. On December 12, 2023, PGE received approval from the OPUC to transfer 2023 PTCs and record any difference in the full value and the discounted value as a deferred regulatory asset. Proceeds from the sale of 2023 PTCs are reported in Tax credit sales on PGE’s consolidated statements of cash flows. PGE transferred tax credits of $24 million, net of discount, for cash proceeds in the fourth quarter of 2023. Derecognition of the transferred deferred tax asset occurs when the buyer obtains control of the tax credit Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 amends Topic 280 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. For calendar year-end entities, the update will be effective for annual periods beginning on January 1, 2025. Early adoption is permitted. As the standard relates only to disclosures, PGE does not expect the adoption to have a material impact on the consolidated financial statements and does not plan to early adopt the standard. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 amends Topic 740 to address requests to improve transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. For calendar year-end entities, the update will be effective for annual periods beginning on January 1, 2026. Early adoption is permitted. As the standard relates only to disclosures, PGE does not expect the adoption to have a material impact on the consolidated financial statements and does not plan to early adopt the standard.

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