Northwest Gas (NWN) Risk Analysis

Our Renewables business is subject to risks, in addition to those described above, including: - unpredictable production levels or performance or gas quality below expected levels, which may impact our ability to accept or deliver RNG under our contractual agreements;- construction risks or delays, including due to inclement weather, supply chain or labor disruptions or otherwise;- cost overruns and the need to commit more capital than initially budgeted as a result of environmental, construction, technological or other complications;- changes in energy commodity prices, including pricing of, and volatility in markets for, RNG and its associated attributes;- equipment failure, difficulties or delays in repairing or replacing equipment, technical difficulties or otherwise higher than expected operating costs;- regulatory, policy, and legal requirements, including environmental, health and safety laws and regulations or regulations that may impact the value of RNG and its associated attributes or our ability to deliver RNG in the manner contemplated under our contractual arrangements;- changes to laws or policies that may reduce demand for, or desirability of, RNG or its associated attributes;- reliance on third parties, including for pipeline interconnection or for a sufficient supply of waste for conversion to RNG;- catastrophic events such as fires, explosions, earthquakes, freezes, droughts, hurricanes, acts of terrorism and other events that may impact the Renewables business, its customers, suppliers, or other business partners; and - failures or delays in obtaining necessary land rights, permits, approvals or other consents required to construct and operate projects or supporting infrastructure, such as pipeline interconnections. Significant losses, liabilities or impairments arising from these businesses may adversely affect NW Holdings' financial position or results of operations.

Although NW Holdings expects its water and wastewater utility operations and water services businesses will provide various benefits, including expanding customer bases, providing investment opportunities through infrastructure development and enhancing regulatory relationships in communities served, NW Holdings may not be able to realize these or other anticipated benefits. Achievement of such benefits is subject to a number of uncertainties, including our ability to operate acquired businesses in the manner intended and whether costs to finance the acquisitions and investments will be consistent with expectations, as well as whether we can successfully scale our investments in a reasonable period of time. Events outside of our control, including but not limited to regulatory changes or developments, could adversely affect our ability to realize the anticipated benefits from building NW Holdings' water platform. The integration of newly acquired water, wastewater or water services businesses, particularly over noncontiguous geographic regions, may be unpredictable, subject to delays or changed circumstances, and such businesses may not perform as expected. In addition, our costs, level of management's attention and internal resources to achieve the integration of or operate the acquired businesses may differ significantly from expectations resulting in failures or delays in achieving expected performance. We have previously acquired, and may make further investments in unregulated businesses on the water platform, including wastewater and water services businesses, which may result in additional uncertainty or volatility of earnings from these businesses. If NW Holdings' expectations regarding the financial results of its investments in water, wastewater or water services operations prove to be inaccurate, it may adversely affect NW Holdings' financial position or results of operations.

We are exposed to weather risk in our natural gas businesses. A majority of NW Natural's gas volume is driven by gas sales to space heating residential and small commercial customers during the winter heating season. Current NW Natural rates are based on an assumption of average weather. Warmer than average weather typically results in lower gas sales. Colder weather typically results in higher gas sales. Although the effects of warmer or colder weather on utility margin in Oregon are expected to be mitigated through the operation of NW Natural's weather normalization mechanism, weather variations from normal, or extreme weather events, could adversely affect utility margin because NW Natural may be required to purchase more or less gas at spot rates, which may be higher or lower than the rates assumed in its PGA. Also, a portion of NW Natural's Oregon residential and commercial customers (usually less than 10%) have opted out of the weather normalization mechanism, and approximately 12% of its customers are located in Washington where it does not have a weather normalization mechanism. SiEnergy, our gas utility in Texas similarly maintains a weather normalization mechanism, however, this mechanism may not fully mitigate the impact of unexpected or extreme weather in Texas. These effects could have an adverse effect on NW Holdings' and NW Natural's financial condition, results of operations and cash flows.

There are a number of international, federal, state, and local legislative, legal, regulatory and other initiatives being proposed and adopted in an attempt to measure, control or limit the effects of global warming and climate change, including greenhouse gas (GHG) emissions such as carbon dioxide, nitrous oxide, and methane. These initiatives have and could continue to take a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, appliance taxes and fees, additional charges to fund energy efficiency activities or other regulatory actions, and incentives or mandates to conserve energy, or use renewable energy sources. Federal, state, or local governments may provide tax advantages and other subsidies to support alternative energy sources, withdraw funding from fossil fuel sources, mandate or restrict the use of specific fuels or technologies (including natural gas), or promote research into new technologies to reduce the cost and increase the scalability of alternative energy sources. Moreover, federal policy shifts under the current presidential administration, including actions that could restrict, discourage or impose penalties on sustainability or decarbonization initiatives, could increase our costs or penalize or limit our ability to pursue renewable energy projects. At the state level, effective beginning in 2023, the State of Washington enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that provides an overall limit for GHG emissions from major sources in the state and declines yearly to 95% below 1990 levels by 2050. NW Natural is currently subject to the CCA. Similarly, in Oregon, in November 2024, the ODEQ issued final cap and reduce rules for its Climate Protection Program (CPP), which became effective January 1, 2025. The CPP establishes a program to limit GHG emissions from covered entities, including natural gas utilities, by 50% by 2035 and 90% by 2050 from a 2017-2019 baseline. In addition, the State of Washington has implemented, and the State of Oregon and some local jurisdictions have considered or are considering, building codes that could have the effect of disfavoring or disallowing natural gas in residential or commercial new construction or conversions, including locations within our service territory. Certain local jurisdictions in our service territories have also considered or developed plans address GHG emissions, and engaged in a number of actions, including identifying potential revenue sources, like a gas supplier tax. Similarly, some jurisdictions and advocates are evaluating restricting the use of natural gas and certain natural gas appliances inside homes contending that there are detrimental indoor health effects associated with the use of natural gas. Some jurisdictions are also considering whether to impose carbon impact fees on buildings that use natural gas. Such current or future legislation, regulation or other initiatives (including executive orders, ballot initiatives or ordinances) could impose on our natural gas businesses operational requirements or restrictions, additional charges to fund energy efficiency initiatives, or levy a tax based on carbon content. In addition, certain jurisdictions, including San Francisco, Seattle, Colorado, the District of Columbia, Maryland, and New York have enacted measures to ban or discourage the use of new natural gas hookups in various building types. Other jurisdictions, including several in our service territory, have considered or are currently considering similar restrictions or other measures discouraging the use of natural gas, such as limitations or bans on the use of natural gas in new construction, requiring the conversion of buildings to electric heat, or adopting policies or incentives to encourage the use of electricity in lieu of natural gas. Such restrictions could adversely impact customer growth or usage and could adversely impact our ability to recover costs and maintain reasonable customer rates. In addition, certain states, cities, local jurisdictions and private parties have initiated lawsuits against companies related to alleged climate change impacts, GHG emissions or climate-related disclosures. We have been named as a defendant in two such legal proceedings, each as described in more detail in Note 17 to the Consolidated Financial Statements. While we intend to diligently defend against such claims, we cannot predict the outcome of such litigation. Such climate-related claims or actions could be costly to defend and could negatively impact our business, reputation, financial condition, and results of operations. NW Natural believes natural gas has an important role in moving the Pacific Northwest to a lower carbon future and is developing programs and measures to reduce carbon emissions. However, NW Natural's efforts may not happen quickly enough to keep pace with legislation or other regulation, legal changes or public sentiment, or may be more costly or not be as effective as expected. Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed policies, regulations, restrictions or programs, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our customer growth, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, increase the likelihood of litigation, reduce our access to capital, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements which may or may not be recoverable in customer rates, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings' or NW Natural's business operations, financial condition and results of operations.