Good day and welcome to the Northwest Natural Gas Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Nikki Sparley. Please go ahead.

Thank you, Kasia. Good morning, everyone, and welcome to our third quarter 2015 earnings call. As a reminder some of the things that will be said this morning contains forward-looking statements. They are based on management's assumptions, which may or may not come true. You should refer to the language at the end of our press release for the appropriate cautionary statements and also our SEC filings for additional information. 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 conference calls are designed for the financial community. If you are an investor and have questions, please contact me directly at (503) 721-2530. Media may contact, Melissa Moore, at (503) 220-2436. Speaking this morning are Gregg Kantor, Chief Executive Officer and Greg Hazelton, Senior Vice President and Chief Financial Officer. Mr. Kantor and Mr. Hazelton have some opening remarks and then will be available to answer your questions. Also joining us today are other members of our executive team, who are available to help answer any questions you may have. With that, I will turn it over to Mr. Kantor for his opening remarks.

Thanks, Nikki. Good morning, everyone and welcome to our third quarter earnings call. I'll start today with highlights from the period and then turn it over to Greg Hazelton to cover the financial details. Finally, I will wrap up the call with a brief update on our regulatory proceedings and our priorities for the remainder of the year. Let me begin with the quarterly financial results. We had a solid performance with higher utility margin and lower expenses in the period. Margin gains were largely from customer growth which increased to 1.5% from 1.3% last year. This growth rate translated into an additional 10,500 new customers on a rolling 12-month basis. On the expense front, we reduced O&M levels by almost $1 million on a quarter-over-quarter basis and I'm proud of the work we have done this year to control costs after the negative financial impacts of a record warm winter and a significant regulatory disallowance. As we look forward, there are several factors that suggest our local economy continues to experience solid growth. For example, in Portland Metro area about 40,000 new jobs have been added year-over-year which equates to over a 3% increase. And Oregon's average wage today is the highest it has been relative to the national average in at least a generation according to the Oregon Office of Economic Analysis. Another metric of economic growth obviously is the unemployment rate which in September fell to 5.2% in the Portland Metro area from 5.9% last year. Also in the period home sales were up about 25% in Portland and average home prices increased by almost 6% compared to the third quarter of 2014. In Vancouver, Washington, home sales were up about 13% in the quarter compared to last year and average home prices were up just over…

Thank you, Gregg, and good morning everyone. Turning to our results for the third quarter we reported improved performance with a consolidated net loss of $6.7 million or $0.24 per share versus a loss of $8.7 million or $0.32 per share for the same period last year. As a reminder, a majority of our business was seasonal in nature. And the third quarter typically realized the loss due to decreased heating requirements impacting customer usage. Year-to-date earnings through September were $0.88 per share on net income of $24 million compared to $1.11 per share in net income of $30.2 million for the same period last year. As previously discussed in the first quarter, the company recorded a $15 million pretax or $9.1 million after tax environmental disallowance related to the February OPUC Order. This charge is included in O&M expense. Excluding the charge, year-to-date consolidated earnings were $1.21 per share or $33.1 million. This reflects a $2.9 million increase in net income from last year primarily driven by higher utility margins and an increase in other income. At our utility, we reported a net loss of $7.5 million for the quarter, an improvement of $1.3 million from the prior year. Results were driven by higher utility margin, lower O&M expense, and decreased interest expense. For the nine months period, utility net income was $23.1 million or a decrease of $6.4 million from last year, mainly due to the environmental charge. Excluding the disallowance, utility net income increased $2.7 million year-over-year. Positive year-to-date drivers included higher utility margins and increase in other income, lower interest expense; these were partially offset by an increase in O&M expense. Utility margin for the quarter increased $1.5 million driven by customer growth and gains from gas cost incentive sharing. And as you may recall, utility…

Thanks, Greg. At this point in the year, our focus is two-fold. First, we will be moving toward a decision on our open environmental compliance proceedings. And at the same time, we will continue to work necessary to advance our growth initiatives. As you know, in the first quarter, we received the Commission's decision on our environmental cost recovery mechanism and the application of an earnings test to environmental expenditures. As part of the decision, the OPUC required a compliance filing that describes how we would implement their order. We submitted a revised compliance filing at the end of September and we're currently working through the review process with OPUC staff and other parties. We believe the two main issues in question are whether the company is required to forego recovery of interest on the original regulatory disallowance and on how certain costs are allocated between Oregon and Washington. The filing will be subject to final commission approval which we expect early in 2016. On our growth initiatives, we've been working with the Oregon Commission and parties on a Carbon Solutions Program under Oregon's greenhouse gas reduction legislation. As we've discussed before, Senate Bill 844 allows the OPUC to incent natural gas utilities to undertake projects that will reduce greenhouse gas emissions. Our first proposal was submitted in June and is designed to further the use of combined heat and power in Oregon, a goal that the state has had for a number of years. Under our CHP proposal, industrial and commercial customers in the market could submit CHP projects for consideration. In our view, this is an important effort that could provide a significant carbon reduction benefit for our customers and for Oregon. The OPUC has set a schedule for review of our CHP filing that calls for a…

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Spencer Joyce of Hilliard Lyons. Please go ahead.

Hi good morning guys. Great quarter here.

Thank you. Thank you, good morning Spencer.

Just a couple of real quick ones from me. First want to go back and talk about the $13 million of environmental cost that we're going to be able to start recovering in Oregon, I guess beginning just a couple of days ago on November 1. I guess first question is this going to be strictly a cash flow statement item or will we see this flow also through the income statement part one there. And then part two, I guess this recovery subject to a final review. Are we pretty comfortable with the $13 million or can you kind of put odds on the likelihood we see some change to that number?

Spencer, this is Greg Hazelton. I will take those questions in order. First of all the recovery of the $13 million, we will see an increase in revenue for that amount and you'll see an offsetting increase in expense or amortization. As we have reported as an operating expense as we amortize the deferred balance. So the net-net would be it will be a positive cash flow perspective but net zero from an income or net income perspective.

Okay, perfect. That's what somewhat what I assume there.

Sure. Now we're collecting the $13 million which has been authorized this is not something that's subject to refund, this is something that we're collecting amortizing those balances any adjustments to collections on a -- of deferred balances would be done on a perspective basis as we go through each calendar year.

And once it gets put into the PGA, we're collecting it has -- those are dollars that have been approved for collection by the commission and there is no second look at it, right.

Okay, perfect. I guess totally separately jumping up to the O&M lines, a real nice quarter here sounds like you've got a couple of cost tailwinds there. I would expect some of those to perhaps show up in Q4 and may be into early next year as well any color there, I know it’s somewhat baked into guidance. But I know previous quarters, we have talked a little bit about some increased cost or maintenance cost or some of the storage facilities, it seems like that may be unwinding a bit, but just any additional color to help us model that O&M over the next few quarters?

Yes I think may be a couple of things would be helpful here. Gill Ranch, we had about $1.8 million recorded last year on the storage segment which increased Gill Ranch's O&M which we wouldn't expect to be repeated this year or something that would be recurring. As we think about O&M or generally, we have implemented cost controls to try to offset some of the impact for weather and the write-off, frankly coming off '14, which was actually a pretty, we had a pretty low level of O&M expense that year based on FTEs and so forth. So we're coming off a pretty low base. From a budgeting perspective, we actually expect it to be up fairly significantly year-over-year in the 7% area. In fact that we've held it to relatively close to flat year-over-year is acknowledgement of the effort that we've taken this year which are probably not sustainable next year. At some point, we have to have -- we have to adjust staffing, we have to reflect increases in cost that are baked into third-party expenditures and other things. So I would say if you look at our -- if you look year-over-year, if you think our O&M of $121 million which is reported year-to-date and we adjust out of that the about $16 million in write-off, environmental write-off and other adjustments. And then, if we look at some of the baked in increases that we had to offset which included bargaining unit labor increases and compensation increases. Again we've kept that flat relative to last year. So that in total that gets you somewhere in the $4 million plus area in terms of savings that we've been able to achieve which are baked into our forecast numbers.

Okay, perfect, great color there. That's all I had. Thanks guys.

[Operator Instructions].

Okay, doesn't seem to be any additional questions. I want to end by thanking you all again for joining us this morning and for your interest in our company. We appreciate it. Take care.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.