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 June 30, 2020

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)

Oregon	93-0256820
(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 value	POR	New York Stock Exchange
9.31% Medium-Term Notes due 2021	POR 21	New 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 filer	☐	Smaller 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 July 27, 2020 is 89,508,545 shares.

PORTLAND GENERAL ELECTRIC COMPANY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

TABLE OF CONTENTS

Definitions		3
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Income and Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 6.	Exhibits	57
SIGNATURE		58

2

DEFINITIONS

The following abbreviations and acronyms are used throughout this document:

Abbreviation or Acronym	Definition
AFDC	Allowance for funds used during construction
AUT	Annual Power Cost Update Tariff
Colstrip	Colstrip Units 3 and 4 coal-fired generating plant
EPA	United States Environmental Protection Agency
FERC	Federal Energy Regulatory Commission
FMBs	First Mortgage Bonds
GAAP	Accounting principles generally accepted in the United States of America
GRC	General Rate Case
IRP	Integrated Resource Plan
Moody’s	Moody’s Investors Service
MW	Megawatts
MWa	Average megawatts
MWh	Megawatt hour
Nasdaq	National Association of Securities Dealers Automated Quotations
NVPC	Net Variable Power Costs
NYSE	New York Stock Exchange
OPUC	Public Utility Commission of Oregon
PCAM	Power Cost Adjustment Mechanism
RPS	Renewable Portfolio Standard
S&P	S&P Global Ratings
SEC	United States Securities and Exchange Commission
Trojan	Trojan nuclear power plant
Wheatridge	Wheatridge Renewable Energy Facility

3

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Revenues, net	$	469	$	462	$	1,033	$	1,032
Alternative revenue programs, net of amortization	—		(2)		9		1
Total revenues	469		460		1,042		1,033
Operating expenses:
Purchased power and fuel	109		105		262		284
Generation, transmission and distribution	77		86		150		163
Administrative and other	74		78		145		149
Depreciation and amortization	104		101		212		202
Taxes other than income taxes	34		33		69		67
Total operating expenses	398		403		838		865
Income from operations	71		57		204		168
Interest expense, net	34		31		67		63
Other income:
Allowance for equity funds used during construction	4		2		7		5
Miscellaneous income (loss), net	3		—		(1)		2
Other income, net	7		2		6		7
Income before income tax expense	44		28		143		112
Income tax expense	5		3		23		14
Net income	39		25		120		98
Other comprehensive income	—		1		1		2
Comprehensive income	$	39	$	26	$	121	$	100
Weighted-average common shares outstanding (in thousands):
Basic	89,489		89,357		89,459		89,333
Diluted	89,625		89,561		89,602		89,537
Earnings per share:
Basic	$	0.44	$	0.28	$	1.34	$	1.10
Diluted	$	0.43	$	0.28	$	1.34	$	1.09
See accompanying notes to condensed consolidated financial statements.

4

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	303	$	30
Accounts receivable, net	204		253
Inventories	109		96
Regulatory assets—current	12		17
Other current assets	108		104
Total current assets	736		500
Electric utility plant, net	7,301		7,161
Regulatory assets—noncurrent	526		483
Nuclear decommissioning trust	47		46
Non-qualified benefit plan trust	37		38
Other noncurrent assets	158		166
Total assets	$	8,805	$	8,394
See accompanying notes to condensed consolidated financial statements.

5

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(Dollars in millions)

(Unaudited)

	June 30, 2020		December 31, 2019
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	134	$	165
Liabilities from price risk management activities—current	40		23
Short-term debt	150		—
Current portion of long-term debt	140		—
Current portion of finance lease obligation	16		16
Accrued expenses and other current liabilities	289		315
Total current liabilities	769		519
Long-term debt, net of current portion	2,676		2,597
Regulatory liabilities—noncurrent	1,362		1,377
Deferred income taxes	385		378
Unfunded status of pension and postretirement plans	249		247
Liabilities from price risk management activities—noncurrent	145		108
Asset retirement obligations	265		263
Non-qualified benefit plan liabilities	101		103
Finance lease obligations, net of current portion	132		135
Other noncurrent liabilities	75		76
Total liabilities	6,159		5,803
Commitments and contingencies (see notes)
Shareholders’ Equity:
Preferred stock, no par value, 30,000,000 shares authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019	—		—
Common stock, no par value, 160,000,000 shares authorized; 89,506,951 and 89,387,124 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	1,224		1,220
Accumulated other comprehensive loss	(9)		(10)
Retained earnings	1,431		1,381
Total shareholders’ equity	2,646		2,591
Total liabilities and shareholders’ equity	$	8,805	$	8,394
See accompanying notes to condensed consolidated financial statements.

6

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	120	$	98
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	212		202
Deferred income taxes	4		6
Pension and other postretirement benefits	12		12
Allowance for equity funds used during construction	(7)		(5)
Decoupling mechanism deferrals, net of amortization	(8)		(1)
(Amortization) of net benefits due to Tax Reform	(11)		(11)
Other non-cash income and expenses, net	46		21
Changes in working capital:
Decrease in accounts receivable, net	40		63
(Increase) in inventories	(13)		(17)
(Increase)/decrease in margin deposits	(9)		11
(Decrease) in accounts payable and accrued liabilities	(27)		(65)
Other working capital items, net	18		16
Other, net	(21)		(16)
Net cash provided by operating activities	356		314
Cash flows from investing activities:
Capital expenditures	(370)		(271)
Sales of Nuclear decommissioning trust securities	4		7
Purchases of Nuclear decommissioning trust securities	(3)		(5)
Other, net	(1)		(2)
Net cash used in investing activities	(370)		(271)

7

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(In millions)

(Unaudited)

	Six Months Ended June 30,
	2020		2019
Cash flows from financing activities:
Proceeds from issuance of long-term debt	319		200
Payments on long-term debt	(98)		(300)
Borrowings on short-term debt	200		—
Repayments of short-term debt	(50)		—
Issuance of commercial paper, net	—		17
Dividends paid	(69)		(65)
Other	(15)		(3)
Net cash provided by (used in) financing activities	287		(151)
Increase (Decrease) in cash and cash equivalents	273		(108)
Cash and cash equivalents, beginning of period	30		119
Cash and cash equivalents, end of period	$	303	$	11
Supplemental cash flow information is as follows:
Cash paid for interest, net of amounts capitalized	$	56	$	60
Cash paid for income taxes	5		20
See accompanying notes to condensed consolidated financial statements.

8

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 June 30, 2020, PGE served 901,000 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 and six months ended June 30, 2020 and 2019 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, 2019 is derived from the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019, included in Item 8 of PGE’s Annual Report on Form 10-K, filed with the SEC on February 14, 2020, 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 and six months ended June 30, 2020 and 2019.

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

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2018-14 Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 amends Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This update will be effective for fiscal years ending after December 15, 2020. Because the standard relates only to disclosures, PGE does not expect the adoption to have a material impact on the condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

On January 1, 2020, PGE adopted ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 amends Topic 820 to add, remove, and clarify requirements related to fair value measurement disclosures. Because the standard relates only to disclosures, the implementation did not result in an impact to the results of operation, financial position, or cash flows.

On January 1, 2020, PGE adopted ASU 2018-15 Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 provides guidance on implementation costs incurred in a cloud computing arrangement that is a service contract and aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. PGE applied the amendments of this ASU prospectively, and the implementation did not have a material impact on PGE’s results of operation, financial position, or cash flows.

On January 1, 2020, PGE adopted ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology in previous GAAP with a methodology that reflects expected credit losses, and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. PGE applied this ASU using a modified-retrospective approach, and as a result, amounts recorded prior to January 1, 2020 have not been retrospectively restated. Under the new standard, PGE estimates current expected credit losses for retail sales based on an 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 significant events that may impact the collectability of accounts receivable and unbilled revenues. Provisions for current expected credit losses related to retail sales, and changes to the amount of expected credit losses for existing receivables, 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 credit losses. The implementation did not have a material impact on PGE’s results of operation, financial position, or cash flows. To conform with 2020 presentation, PGE reclassified $86 million of Unbilled revenues to Accounts receivable, net on the condensed consolidated balance sheets as of December 31, 2019.

On April 1, 2020, PGE adopted ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. PGE applied the amendments of this ASU prospectively, and the implementation did not have a material impact on PGE’s results of operation, financial position, or cash flows.

10

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Retail:
Residential	$	223	$	205	$	502	$	495
Commercial	140		158		299		312
Industrial	53		50		104		94
Direct access customers	12		10		23		21
Subtotal	428		423		928		922
Alternative revenue programs, net of amortization	—		(2)		9		1
Other accrued revenues, net	1		6		6		13
Total retail revenues	429		427		943		936
Wholesale revenues*	27		16		74		53
Other operating revenues	13		17		25		44
Total revenues	$	469	$	460	$	1,042	$	1,033

* Wholesale revenues include $8 million and $2 million related to electricity commodity contract derivative settlements for the three months ended June 30, 2020 and 2019, respectively, and $24 million and $13 million for the six months ended June 30, 2020 and 2019, 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.

11

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.

12

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 $74 million and $86 million of unbilled revenues as of June 30, 2020 and December 31, 2019, respectively. Accounts receivable, net is net of an allowance for credit losses of $12 million as of June 30, 2020. The following summarizes activity in the allowance for credit losses (in millions):

	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Balance as of beginning of period	$	6	$	5
Increase in provision	7		9
Amounts written off	(3)		(6)
Recoveries	2		4
Balance as of end of period	$	12	$	12

In connection with the adoption of ASU 2016-13 and to conform with 2020 presentation, PGE reclassified $86 million of Unbilled revenues to Accounts receivable, net on the condensed consolidated balance sheets as of December 31, 2019.

Other Current Assets

Other current assets consist of the following (in millions):

	June 30, 2020		December 31, 2019
Prepaid expenses	$	37	$	63
Assets from price risk management activities	46		25
Margin deposits	25		16
Other current assets	$	108	$	104

Electric Utility Plant, Net

Electric utility plant, net consists of the following (in millions):

	June 30, 2020		December 31, 2019
Electric utility plant	$	11,163	$	10,928
Construction work-in-progress	376		328
Total cost	11,539		11,256
Less: accumulated depreciation and amortization	(4,238)		(4,095)
Electric utility plant, net	$	7,301	$	7,161

13

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 $397 million and $366 million as of June 30, 2020 and December 31, 2019, respectively. Amortization expense related to intangible assets was $31 million and $33 million for the six months ended June 30, 2020 and 2019, respectively, and $16 million and $17 million for the three months ended June 30, 2020 and 2019, respectively. 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):

	June 30, 2020					December 31, 2019
	Current			Noncurrent		Current			Noncurrent
Regulatory assets:
Price risk management	$	—		$	135	$	—		$	95
Pension and other postretirement plans	—			204		—			213
Debt issuance costs	—			27		—			26
Trojan decommissioning activities	—			94		—			94
Other	12			66		17			55
Total regulatory assets	$	12		$	526	$	17		$	483
Regulatory liabilities:
Asset retirement removal costs	$	—		$	996	$	—		$	1,021
Deferred income taxes	—			256		—			260
Asset retirement obligations	—			55		—			54
Tax Reform deferral	12			—		23			—
Other	28			55		21			42
Total regulatory liabilities	$	40	*	$	1,362	$	44	*	$	1,377

* Included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in millions):

	June 30, 2020		December 31, 2019
Accrued employee compensation and benefits	$	63	$	74
Accrued taxes payable	31		33
Accrued interest payable	27		25
Accrued dividends payable	36		36
Regulatory liabilities—current	40		44
Other	92		103
Total accrued expenses and other current liabilities	$	289	$	315

Credit Facilities

As of June 30, 2020, 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

14

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 PGE’s 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 June 30, 2020, PGE was in compliance with this covenant with a 54.4% debt-to-total capital ratio.

The Company has a commercial paper program under which it may issue commercial paper for terms of up to 270 days, limited to the unused amount of credit under the revolving credit facility. 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.

PGE typically classifies borrowings under the revolving credit facility and outstanding commercial paper as Short-term debt on the condensed consolidated balance sheets.

Under the revolving credit facility, as of June 30, 2020, PGE had no commercial paper outstanding. As a result, the aggregate unused available credit capacity under the revolving credit facility was $500 million.

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 $46 million were outstanding as of June 30, 2020. 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 bears interest for the relevant interest period at LIBOR plus 1.25%. The interest rate is subject to adjustment pursuant to the terms of the loan. The credit agreement is classified as Short-term debt on the Company’s condensed consolidated balance sheets and expires on April 8, 2021, with any outstanding balance due and payable on such date.

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 7, 2022.

Long-term Debt

On March 11, 2020, PGE completed the remarketing of an aggregate principal amount of $119 million of Pollution Control Revenue Refunding Bonds (PCRBs), which consist of $98 million aggregate principal of PCRBs that will bear an interest rate of 2.125%, and $21 million aggregate principal of PCRBs that will bear an interest rate of 2.375%, both due in 2033.

On April 27, 2020, PGE issued $200 million of 3.15% Series First Mortgage Bonds (FMBs) due in 2030.

15

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Service cost	$	4	$	4	$	8	$	8
Interest cost*	8		9		16		17
Expected return on plan assets*	(11)		(10)		(22)		(20)
Amortization of net actuarial loss*	4		2		8		5
Net periodic benefit cost	$	5	$	5	$	10	$	10

* 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 determines the fair value of financial instruments, both assets and liabilities recognized and not recognized in the Company’s condensed consolidated balance sheets, for which it is practicable to estimate fair value as of June 30, 2020 and December 31, 2019. PGE then classifies these financial assets and liabilities 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.

16

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

The Company’s financial assets and liabilities whose values were recognized at fair value are as follows by level within the fair value hierarchy (in millions):

	As of June 30, 2020
	Level 1		Level 2		Level 3		Other(2)		Total
Assets:
Cash equivalents	$	293	$	—	$	—	$	—	$	293
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government	7		12		—		—		19
Corporate credit	—		15		—		—		15
Money market funds measured at NAV (2)	—		—		—		13		13
Non-qualified benefit plan trust: (3)
Money market funds	1		—		—		—		1
Equity securities	6		—		—		—		6
Debt securities—domestic government	1		—		—		—		1
Price risk management activities: (1) (4)
Electricity	—		28		—		—		28
Natural gas	—		25		3		—		28
	$	308	$	80	$	3	$	13	$	404
Liabilities:
Price risk management activities: (1) (4)
Electricity	$	—	$	19	$	154	$	—	$	173
Natural gas	—		12		—		—		12
	$	—	$	31	$	154	$	—	$	185

(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 $29 million, which are recorded at cash surrender value.

(4)For further information, see Note 5, Risk Management.

17

PORTLAND GENERAL ELECTRIC COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

(Unaudited)

	As of December 31, 2019
	Level 1		Level 2		Level 3		Other (2)		Total
Assets:
Cash equivalents	$	26	$	—	$	—	$	—	$	26
Nuclear decommissioning trust: (1)
Debt securities:
Domestic government	8		16		—		—		24
Corporate credit	—		9		—		—		9
Money market funds measured at NAV (2)	—		—		—		13		13
Non-qualified benefit plan trust: (3)
Debt securities—domestic government	1		—		—		—		1
Money market funds	1		—		—		—		1
Equity securities	7		—		—		—		7
Price risk management activities: (1) (4)
Electricity	—		9		7		—		16
Natural gas	—		21		1		—		22
	$	43	$	55	$	8	$