EQUITY

The activity in equity during the three months ended March 31, 2015 and 2014 is as follows (dollars in millions):



	Common Stock				Accumulated Other Comprehensive Loss			Retained Earnings
	Common Stock
	Shares	Amount
Balances as of December 31, 2014	78,228,339	$	918		$	(7	)	$	1,000
Issuances of shares pursuant to equity-based plans	116,352	1			—			—
Stock-based compensation	—	(1		)	—			—
Dividends declared	—	—			—			(22		)
Net income	—	—			—			50
Balances as of March 31, 2015	78,344,691	$	918		$	(7	)	$	1,028

Balances as of December 31, 2013	78,085,559	$	911		$	(5	)	$	913
Issuances of shares pursuant to equity-based plans	96,497	—			—			—
Stock-based compensation	—	1			—			—
Dividends declared	—	—			—			(22		)
Net income	—	—			—			58
Balances as of March 31, 2014	78,182,056	$	912		$	(5	)	$	949

Under the terms of the EFSA, the Company may elect to settle the equity forward transactions by means of: i) physical; ii) cash; or iii) net share settlement, in whole or in part, at any time on or prior to June 11, 2015, except in specified circumstances or events that would require physical settlement. To the extent that the transactions are physically settled, PGE is required to issue and deliver shares of PGE common stock to the forward counterparty at the then applicable forward sale price. The forward sale price was initially determined to be $29.50 per share at the time the EFSA was entered into (June 2013), and the amount of cash to be received by PGE upon physical settlement of the EFSA is subject to certain adjustments in accordance with the terms of the EFSA.

The EFSA had no initial fair value since it was entered into at the then market price of the common stock. PGE concluded that the EFSA was an equity instrument and that it does not qualify as a derivative because the EFSA was indexed to the Company’s stock. PGE anticipates settling the EFSA through physical settlement on or before June 11, 2015.

At March 31, 2015, the Company could have physically settled the EFSA by delivering 10,400,000 shares to the forward counterparty in exchange for cash of $272 million. In addition, at March 31, 2015, the Company could have elected to make a cash settlement by paying approximately $114 million, or a net share settlement by delivering approximately 3,074,000 shares of common stock. To the extent that PGE elects a cash or net share settlement, the Company would receive no additional proceeds.

Prior to settlement, the potentially issuable shares pursuant to the EFSA are reflected in PGE’s diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of PGE’s common stock used in calculating diluted earnings per share for a reporting period are increased by the number of shares, if any, that would be issued upon physical settlement of the EFSA less the number of shares that could be purchased by PGE in the market with the proceeds received from issuance (based on the average market price during that reporting period).