Northwest Natural Gas Q1 2026 Earnings Report

Northwest Natural Gas EPS Results

• Actual EPS: $2.33
• Consensus EPS: $2.40
• Beat/Miss: Missed by -$0.07
• One Year Ago EPS: $2.28

Northwest Natural Gas Revenue Results

• Actual Revenue: $490.40 million
• Expected Revenue: $538.57 million
• Beat/Miss: Missed by -$48.17 million
• YoY Revenue Growth: -0.80%

Northwest Natural Gas Announcement Details

• Quarter: Q1 2026
• Date: 5/6/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 6, 2026
• Conference Call Time: 11:00AM ET

Northwest Natural Gas (NYSE:NWN) (NYSE: NWN), commonly known as NW Natural, is a publicly traded energy utility primarily engaged in the distribution of natural gas to residential, commercial and industrial customers. Headquartered in Portland, Oregon, the company operates an extensive pipeline network spanning thousands of miles across Oregon and southwest Washington. Its core business activities include gas procurement, system operation and maintenance, safety inspections and customer service support.

Dating back to the mid-19th century, Northwest Natural traces its origins to the Portland Gas Light Company, which first illuminated Portland streets with manufactured gas in 1859. Over the decades, NW Natural expanded through mergers and system upgrades, transitioning from coal-produced gas to cleaner natural gas deliveries beginning in the mid-20th century. The company has continually reinvested in its infrastructure, upgrading pipelines and metering systems to improve reliability and safety for customers across urban and rural service territories.

Today, NW Natural serves more than three-quarters of a million customers throughout the greater Portland metropolitan area, the Willamette Valley, the Rogue Valley and parts of southwest Washington. In addition to its core gas distribution services, the company offers conservation programs, energy efficiency incentives and natural gas vehicle fuel services. Its network is monitored around the clock to detect and respond promptly to any operational issues, ensuring a high level of service continuity for both residential neighborhoods and large-scale industrial users.

Under the leadership of President and Chief Executive Officer Mary Kipp, NW Natural has pursued strategic initiatives focused on sustainability and decarbonization. The company is actively exploring renewable natural gas (RNG) projects, hydrogen blending trials and infrastructure modernization aimed at reducing greenhouse gas emissions. Governed by a board of directors with expertise in utilities, finance and environmental policy, NW Natural continues to balance customer affordability with investments in long-term system resilience and cleaner energy solutions.

Northwest Natural Gas Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reaffirmed guidance: Q1 adjusted EPS was $2.33 (vs. $2.28 prior year) and the company reaffirmed full-year 2026 EPS guidance of $2.95–$3.15 and its 4%–6% long‑term EPS growth target (which would rise to 5%–7% if MX‑3 receives notice to proceed).
• Neutral Sentiment: Regulatory progress is active but outcomes remain pending: a constructive multi‑party settlement was filed in Washington (first‑year revenue increase of $20.1M, ROE 9.5%, 50/50 capital structure), C Energy filed a Texas rate case seeking ~$12M of additional revenue and GRIP factors, and Oregon’s multi‑year framework may not be resolved until 2027 while an alternative 1.5% rate mechanism was filed for Oct. 2026.
• Positive Sentiment: MX‑3 storage project: A $300M FERC‑regulated expansion to add 4–5 BCF of capacity under 25‑year contracts (NTP targeted by end of 2027, in‑service 2029) is expected to materially boost long‑term earnings once NTP is achieved.
• Positive Sentiment: Strong growth in regulated platforms: C Energy delivered 16% organic customer growth with a backlog >250,000 meters and expects 15%–20% annual growth through 2030, while NW Natural Water grew customers 4.1% (organic 2.2%) and has ~10,000+ water connection backlog in Texas.
• Neutral Sentiment: Capital and funding plan: 2026 capex is expected at $500M–$550M funded by operating cash flow plus ~ $150M net long‑term debt and $40M–$50M equity via ATM, with ~$590M liquidity on hand and a dividend policy targeting a 55%–65% payout ratio over time.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to Northwest Natural Holding Company's Q1 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Nikki Sparley, Director of Investor Relations. Nikki, please go ahead.

[Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company]

Thank you. Good morning, welcome to our first quarter 2026 earnings call. In addition to the press release, a supplemental presentation is available on our investor relations website at ir.nwnaturalholdings.com. Following this call, a recording will also be available on our website.

[Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company]

As a reminder, some things that will be said this morning contain forward-looking statements. They are based on management's assumptions, which may or may not occur. For a complete list of cautionary statements, refer to the language at the end of our press release.

[Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company]

Additionally, our risk factors are provided in our 10-Q and 10-K filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany today's call, which are available on the investor relations page of our website.

[Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company]

Please note our guidance assumes continued customer growth, average weather conditions, and no significant changes in prevailing regulatory policies, mechanisms, or assumed outcomes, or significant changes in local, state, or federal laws, legislation, or regulations.

[Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company]

We expect to file our 10-Q later today. With us today are Justin Palfreyman, President and Chief Executive Officer, and Ray Kaszuba, Senior Vice President and Chief Financial Officer. Justin will provide highlights from the first quarter of 2026, a regulatory update, and a look forward. Ray will walk through our financial results and guidance. After Justin and Ray's prepared remarks, we will host a question and answer session. With that, I will turn the call over to Justin.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Thanks, Nikki. Good morning and welcome, everyone. Overall, the first quarter results were strong and in line with our expectations, reflecting another quarter of solid execution and putting us on solid footing for the year. As a result, we also reaffirmed our 2026 and long-term guidance. Our gas utility systems performed very well over the heating season.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Our team delivered strong operational performance across all our utilities, and we produced healthy customer growth. Importantly, the quarter underscored the strength of the Northwest Natural Holdings platform and the stability of having 3 distinct regulated utility businesses, making our results more predictable.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

We are well-positioned to drive durable long-term growth while maintaining our core commitment to providing safe, reliable, and affordable service to our customers. Our focus remains on disciplined execution, steady earnings growth, and attractive overall shareholder returns. Related to that, we made meaningful progress on our regulatory initiatives this year.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Let me highlight a few of our recent filings. In March, Northwest Natural filed a multi-party settlement with the Washington Utilities and Transportation Commission, resolving all the revenue requirement aspects of our multi-year general rate case. While it remains subject to commission approval, the outcome is constructive for both customers and shareholders.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

The settlement provides for annual revenue requirement increases over three years, including $20.1 million in the first year beginning August 1, 2026, $7.7 million in the second year, and $8.7 million in the third year.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

The settlement includes a capital structure of 50% equity and 50% long-term debt and a return on equity of 9.5%. In Oregon, we remain constructively engaged with staff and parties on multi-year rate case rulemaking. As we've seen in other jurisdictions, we believe multi-year rate cases could provide greater clarity and predictability for both customers and utilities.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

While we await the outcome of the multi-year framework in Oregon, which could extend into 2027, we filed an alternative rate mechanism to help recover certain safety, IT, and large public works investments. The proposal contemplates a modest 1.5% rate increase beginning October 31, 2026.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

We've had productive conversations with staff and continue working closely with parties to reach agreement on the docket. Until the multi-year rulemaking process concludes, we have the ability to recover on our investments through additional mechanisms or general rate cases.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In addition, we have made progress on regulatory initiatives in our other key businesses. On May 4, SiEnergy filed a general rate case with the Texas Railroad Commission. The filing consolidates SiEnergy and the recently acquired Pines Gas entities, simplifying both our regulatory structure and operations in Texas. We are requesting a $12 million revenue requirement increase over current rates.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

This increase is based on a 10.75% return on equity, a cost of capital of 8.73%, and a capital structure of 60% equity and 40% long-term debt, which is consistent with other Texas gas utilities. This request includes an increase in average rate base of $176.9 million since the last rate case for a total rate base of $343.1 million.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In addition to the existing beneficial mechanisms from Texas House Bill 4384 and weather normalization. We are requesting the factors necessary to file for the Gas Reliability Infrastructure Program, or GRIP.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

This mechanism would further align capital investment with timely cost recovery. Even after the increase, SiEnergy's rates are projected to be competitive with peers in the state. Turning to our water and wastewater business. As it scales, we are beginning to see a more consistent regulatory cadence.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In 2025, we completed seven rate cases. We currently have four open rate cases in Oregon, Texas, and Arizona. Foothills, our largest water and wastewater utility, has made substantial investments over the past several years. That trend continues in 2026 as we invest in water storage and treatment to support growth in the region.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In Q1, we received approval for our second Certificate of Convenience and Necessity expansion, adding to our service territory in Arizona. We are excited to serve these growing communities and are committed to making the necessary investments to provide safe, reliable water and wastewater. We filed a rate case for Foothills last month that includes a request to use formula rates in the future. Formula rates are designed to support annual recovery of O&M and investments without going through a general rate case process.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Blue Topaz, our Texas water utility, recently filed its first rate case in approximately 20 years. The filing consolidates several of our Texas entities, recovers capital investments made since our ownership of these assets, and incorporates fair market value rate based adjustments.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

As our first quarter actions demonstrate, we are taking a more proactive and coordinated approach to our regulatory strategy across the enterprise. Multi-year rate cases in Washington and Oregon, as well as the mechanisms we plan to use at SiEnergy and Northwest Natural Water, are all designed to reduce regulatory lag and produce a more balanced and linear consolidated earnings profile.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

These mechanisms also maintain affordability and predictability for customers. Moving to a quick review of our key business segments. Starting with SiEnergy, our Texas gas utility delivered another strong quarter and performed well during the heating season.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Results were driven by healthy 16% organic customer growth. Our backlog exceeded 250,000 future meters at quarter end, highlighting the long-term growth potential of this business. Looking ahead, we are continuing to see solid growth in the Texas housing market and expect 15%-20% annual customer growth through 2030, with SiEnergy contributing approximately 10%-15% of consolidated EPS in 2026.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Moving to Northwest Natural Water, this business posted healthy overall customer growth of 4.1% in the quarter and organic customer growth of 2.2%. As a reminder, the seasonality of water complements our gas business, with the highest demand in the third quarter and lower demand in the first quarter. Even though results were consistent year-over-year, we continued to make progress on customer growth and regulatory execution.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

We also remain active in greenfield opportunities for water and wastewater in Texas. We now have signed agreements with developers that represent a backlog of over 10,000 connections. Approximately 25% of these are in communities that have started development.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

This platform is driven primarily by organic customer growth, and we expect it to achieve 2%-3% growth through 2030. Water is expected to contribute approximately 10%-15% of consolidated EPS in 2026.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Finally, turning to Northwest Natural Gas, our largest segment. This business continues to play a critical role in ensuring affordable and reliable energy for customers in Oregon and Washington. I'm pleased to report that our system performed well this winter, reliably serving our customers during the heating season. We remain incredibly excited about our MX3 storage project that we announced last quarter.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

As a reminder, MX-3 is a $300 million FERC-regulated gas storage expansion that will add 4 to 5 BCF of capacity and is fully contracted with 25-year agreements. Since our last call, the project has continued to progress as we expected. Our timeline still contemplates receiving notice to proceed by the end of 2027, with an in-service date in 2029.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

E3, a highly regarded energy consulting firm, recently updated a study reinforcing earlier conclusions that natural gas remains essential to system reliability in the Pacific Northwest, particularly as the region continues to add significant electric load. The latest study now points to an approximately 14 gigawatt shortfall in generation capacity by 2035.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

That's why our storage capabilities are so important. They are uniquely positioned, expandable even beyond MX-3, and offer a cost-effective solution to our region's growing energy constraints.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

MX3 is not contemplated in our current 4%-6% long-term EPS growth guidance. However, we do expect the project to have a sustained positive impact on earnings growth and plan to include the project in our guidance when we achieve notice to proceed, which would raise our long-term EPS outlook to 5%-7%. Overall, we remain confident in our strategy, our execution, and the growth platform that we've built.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

The businesses are performing well. We are making progress on our regulatory initiatives, and the outlook across our company is strong. We are progressing through 2026 with solid momentum and remain focused on disciplined utility growth and long-term shareholder value. With that, I'll turn it over to Ray to walk through the financials.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

Thank you, Justin. Good morning, everyone. Our first quarter performance was strong and in line with our expectations. Adjusted earnings per share was $2.33, compared to $2.28 in the prior year period. To simplify our financial reporting and clarify the underlying drivers of the business, we have updated our segments to better reflect our current business mix.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

NW Natural Gas Company is now reported as a single segment, consolidating the gas utility and storage operations. This change does not affect our SiEnergy or Water segment reporting.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

Adjusted net income was up $5.7 million. EPS increased $0.05 in the quarter, driven by new rates, particularly at Northwest Natural and customer growth. This was partially offset by investments in our systems, leading to higher depreciation expense and financing needs.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

Northwest Natural reported an increase in net income of $2.7 million, reflecting new rates in Oregon with EPS down $0.02 due to equity financing. SiEnergy's EPS was up $0.08, driven by a full quarter of operations from SiEnergy and Pines Gas and strong organic customer growth of 16%.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

NW Natural Water's EPS was essentially flat for the quarter, primarily reflecting higher O&M and depreciation expenses. This was largely offset by higher operating revenues, driven by continued customer growth and acquisitions. Please keep in mind that the first quarter is Water's lowest demand quarter. We are investing in the underlying business, and as Justin mentioned, we are executing on our regulatory strategy to recover these investments and earn a return in a timely manner.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

Overall, we are pleased with first quarter results, are on track for the year, and reaffirmed our full year 2026 earnings guidance of $2.95 to $3.15 per share. SiEnergy and Water combined are still expected to contribute approximately 25% of consolidated EPS this year. Our long-term EPS growth target of 4%-6% remains intact.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

As Justin noted, our expected long-term EPS growth rate is projected to increase to 5%-7% with the inclusion of MX3 once we receive notice to proceed. We still expect capital expenditures of $500 million-$550 million in 2026. Our funding plan remains disciplined and balanced, supported by strong operating cash flow, approximately $150 million of net long-term debt, and $40 million-$50 million of equity issued through our ATM.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

We currently have approximately $590 million of available liquidity. Over the 5-year planning horizon, capital expenditures will be funded largely through operating cash flows, along with a balanced mix of long-term debt and equity. Through 2030, we expect to meet our equity needs through our ATM program.

[Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company]

Finally, on shareholder returns, as our dividend payout ratio comes in line with our 55%-65% target, we continue to expect to increase our dividend over time, consistent with earnings growth and cash flow generation. In summary, 2026 is off to a solid start, and we have a strong momentum heading into the balance of 2026 and beyond. With that, we'll open the call to questions.

[Operator]

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Christopher Ellinghaus from Siebert Williams. Chris, please go ahead.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Hey, good morning, everybody. Justin, I think you quoted 16% organic growth at SiEnergy. What, I assume that means there was some acquisition in the quarter because the meters were up considerably more than that?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Thanks for the question, Chris. You're referring to SiEnergy, I assume?

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Yeah.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Yeah, on the SiEnergy growth, there are no real acquisitions reflected in that because it's comparing Q1 of last year to Q1 of this year. The 16% reflects the energy.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Okay. I'm sort of detecting some weakness in the Oregon economy that's maybe even accelerating a little bit across some industries, you kind of see it maybe in your meter number for the quarter. Can you just sort of talk about what you're seeing for economic conditions in Oregon?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Yeah. Economic conditions in Oregon, they've been challenged a bit for I would say a few years now. We have seen a slowdown here over that timeframe, both in housing starts and other sort of macro indicators in the region.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

However, the customer growth that we are seeing is largely in line with what we expected for the year here. A lot of the growth opportunities that we are seeing in Oregon relate to our gas storage facility as an expansion opportunities, as well as, just investing in, the safety and reliability of our system here.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Okay. By the way, thanks for the segment update. That's helpful. Your guidance for utility net income growth, I presume part of that is a result of the CUB or the FAIR Act, which is pretty restrictive.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

You know, your rate base growth considerably more than that 1%-3% and customer growth is on the lower side. It sort of suggests that you end up with a bit of a bubble at the end of the period in terms of a catch-up, presuming you don't get some kind of great multi-year rate plan that like sort of keeps you on track.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

What are your thoughts about, you know, potentially ending up with sort of an end of 5-year period, you know, sort of excess catch-up to make? That's sort of counterintuitive to what the FAIR Act was all about. You know, what are your thoughts there?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Chris, I think you are picking up on what could be driving that delta from the rate base growth to the net income growth. Part of it is our current view of what the rate case cadence is between now and 2030 and you could be growing rate base, net income hasn't quite caught up to it yet.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

All that's gonna depend on where things end up with the FAIR Act and where we eventually end up with our rate case cadence in Oregon. Of course, there's always a little bit of lag that we have, regulatory lag that we have as well that would come into play. Between those two dynamics, that's driving that difference. It is timing in terms of the specific 5-year guidance range through 2030. I think you're picking up on that correctly.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Okay. I'll just ask you two more because I've got 1 million questions. One, the rate base increase that you guys quoted for C, if I'm not mistaken, the rate base number in the last rate case, and I might just be confusing what the request was versus what was approved, but I thought the last rate case was something like $152 million. Do you know what that discrepancy is versus the $170 whatever that you quoted?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Chris, we'll have to get back on, back to that question, for you, and we'll revert after the call.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

Okay.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Don't know off the top of my head.

[Christopher Ellinghaus, Analyst at Siebert Williams Shank]

All right. I'll just stop there. I appreciate it. Thanks for the color.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Thanks, Chris.

[Operator]

Your next question comes from the line of Alex Kania from BTIG. Alex, please go ahead.

[Alex Kania, Analyst at BTIG]

Hi, good morning. I've got 2 quick questions for you. I think the first one is just, Justin, if you could kind of maybe dive a little bit more in detail just on kind of the evolution of the framing of the multi-year rate structure in Oregon. Maybe when do you think you might have a little bit more clarity on that, just as a, you know, as a precursor to kind of finalizing, I guess, what the rate case plan might be in that jurisdiction. The second question is just from the perspective of obviously, lots of growth in SiEnergy and the like, and that's good to see.

[Alex Kania, Analyst at BTIG]

Just also wondering if, you know, do you have a sense of any potential opportunities for additional tuck-ins there? Do you feel like you need any there? I'm just kind of curious maybe what the environment down there looks like.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Great. Thanks for the questions, Alex. On the Oregon multi-year plan, we have obviously been engaged there for fairly actively throughout the process. From a timing perspective, we anticipate it could slip into next year before we have clarity around what the multi-year planning framework is.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

This is obviously new to Oregon, they're taking a lot of information in from other states that have successfully implemented this, whether that's Washington or California or others. There's a lot of parties involved and engaged in that process. Our expectation at this point is that we see some resolution on that next year.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In the meantime, just a reminder, we have filed for this alternative rate mechanism here in 2026, and we are in the middle of that process, which is moving along as expected. We also have, if you're familiar with the FAIR Energy Act, we do have the ability to file for a general rate case in that interim period as well, before the multi-year plans are established.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In general, I'd say it's all moving along as expected, and we look forward to driving that to resolution. On your second question, in Texas, there are other, you know, acquisition opportunities on both the gas and the water side, and you've seen us make a fair number of acquisitions in water there.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Obviously SiEnergy, we did this bolt-on with Pines Gas. We continue to look at that, but I will say the organic growth opportunity is so strong that we are very focused on that, investing in our systems.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

If you look at the SiEnergy rate case as well as the Blue Topaz rate case, which is our water utility in Texas, you'll see there's a fair amount of growth embedded in that, as well as mechanisms that we believe are going to drive or reduce regulatory lag going forward. For the SiEnergy filing, we're actually filing for the factors that will allow us to file for GRIP in the future, which is a nice mechanism for reducing lag.

[Alex Kania, Analyst at BTIG]

Great. Thanks very much.

[Operator]

Your next question comes from Selman Akyol from Stifel. Selman, please go ahead.

[Selman Akyol, Analyst at Stifel]

Okay. Just following up on that last comment you made about putting the pieces in place for filing for a GRIP. Can you just talk about what the timeframe is for that?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

The timeframe for the rate case itself is approximately 6 months. We expect that we'll have the rate case resolved and new rates in effect by later this year, sometime in Q4. The way the GRIP process works, Selman, is in this rate case, we get the factors defined in terms of, you know, our ROE cap structure, et cetera.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

We can then in future years, file for a rate adjustment under the GRIP mechanism. We can do that for up to 5 years before we would be required to come in for a new general rate case. You've seen that many other gas utilities in Texas have executed on that and it's been fairly successful.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In SiEnergy's previous, rate case a few years ago before our ownership, they did a black box settlement that did not allow them to have those factors that you would need to file for GRIP. We're taking a slightly different tact and, wanna make sure that we do everything we can to minimize the regulatory lag going forward for that business.

[Selman Akyol, Analyst at Stifel]

Got it. Thank you for that. Just thinking about or just staying with SiEnergy. You previously talked about sort of seeing opportunities for water there, as you can grow in conjunction with SiEnergy. I'm wondering are you actually executing on that and then, you know, seeing where you're actually installing both water and gas as you go into these new communities?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Yeah, that's a great question. One of the reasons that I highlighted the 10,000 connections we now have in backlog for water in Texas in my remarks. About six months ago, we combined our business development forces down in Texas really to leverage the SiEnergy platform who, you know, has a really strong relationship with developers and home builders.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

For the first time, we are starting to see communities where we could install both gas, water, and potentially wastewater systems. Specifically on the water side, our utility down there is relatively small, but has the potential to grow significantly because of how we're approaching this.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

With of the 10,000 in backlog, about 25% of those are already beginning development or construction on the water and wastewater portion of the project. It's exciting to see that momentum in this short period of time and we're highly confident that that's the right strategy to pursue. Just with the overall, you know, amount of growth that we see down in Texas, on the residential side, but also on the commercial and industrial side, we're excited about the opportunity.

[Selman Akyol, Analyst at Stifel]

Got it. Just the last one with me. Just thinking about water, are you guys continuing to see a lot of acquisition opportunities in 2026?

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Yeah. We continue to look for acquisitions, but we've seen the market slow down a bit, and I think there's some data out there that reflects that. Where we are at with our water strategy is we're in a really good position because we don't need acquisitions to grow. The organic growth of 2% to 3% on customer growth is, you know, excludes any potential future acquisitions, and we are not relying on that for growth. We now have opportunities to invest in the platform that we've built. There's a long runway of investments there.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Really optimizing the platform both operationally and from a regulatory standpoint to try to, you know, minimize that gap between earned and allowed ROEs across our platform, which is why you're seeing, you know, multiple rate cases being filed each year in the water space.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

In addition, we're very focused on organic growth. I mentioned the greenfield in Texas. On my prepared remarks, I mentioned the CCN expansion in Arizona. We have other opportunities like that to really just expand our existing footprint without going out and paying a premium for acquisitions.

[Selman Akyol, Analyst at Stifel]

Got it. Thank you so much.

[Operator]

We have reached the end of the Q&A session. I'll now turn the call to Justin Palfreyman for closing remarks. Justin, go ahead.

[Justin Palfreyman, President and CEO at Northwest Natural Holding Company]

Thank you, Lucas, and thanks everyone for joining this morning. We appreciate the questions and your interest in Northwest Natural Holdings. Just to recap, 2026 is off to a promising start, and we are continuing to execute on our growth strategy. We look forward to seeing many of you at AGA later this month. As always, don't hesitate to reach out to Nikki with any further questions. Thanks, everyone.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Analysts

• Alex Kania, Analyst at BTIG
• Christopher Ellinghaus, Analyst at Siebert Williams Shank
• Justin Palfreyman, President and CEO at Northwest Natural Holding Company
• Nikki Sparley, Director of Investor Relations at Northwest Natural Holding Company
• Ray Kaszuba, SVP and CFO at Northwest Natural Holding Company
• Selman Akyol, Analyst at Stifel