Good morning and welcome to the Northwest Natural Gas Third Quarter Teleconference. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I’d now like to turn the conference over to Bob Hess. Please go ahead.

Thank you, Ashley. Good morning, everybody, and welcome to our third quarter earnings call. As a reminder, some of the things that will be said this morning contain forward-looking statements. They are based on management’s assumptions, which may or may not come true, and 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 conference call is being recorded and will be available on our website following the call. Please note that these conference calls are designed for financial community. If you’re an individual investor and have questions, please contact me directly at 503-220-2388, media should contact Kim Heiting at 503-220-2366. Speaking this morning first are Gregg Kantor, President and Chief Executive Officer, and David Anderson, Senior Vice President and Chief Financial Officer. Gregg and David have some opening remarks and then we’ll be available to answer your questions, as well as other members of our executive team. With that, let me turn you over to Gregg.

Good morning, everyone. Thank you for joining us for our third quarter earnings call and happy Election Day. Obviously the big news for the quarter is the recent decision on our Oregon general rate case, so this morning I’m going to start with an overview of the case and then turn it over to David to going to more depth on the financial implications as well as our third quarter results. I’ll end the call with a brief look forward and then open it up for questions. On the rate case, there is some good news, some disappointing news and some news yet to be decided. First, the disappointing news, in the order the commission determined that Northwest Natural’s annual revenue requirement should be increased $8.7 million or about 1% with an allowed rate base return at 7.78% and a loud return on equity of 9.5%. However, this increase includes recovery of amounts that had previously been differed to the companies decoupling mechanism which are managed about $15 million. David will describe this impact in more detail, but overall it means a net decrease of about $6 million in utility margin annually. Also in the case, the OPUC role that the company cannot recover increases and differed tax amounts caused by 2009 Oregon tax rate change. As a result, we have taken a one time after-tax charge of $2.7 million in the third quarter. Clearly those revenue impacts are disappointing and while the timing of this case wasn’t idle there were two issues that made it unavoidable, the first was the Encana transaction, after approving the $250 million gas reserves investment regulators wanted a chance to review our books, since the last general rate case and Oregon was back in 2003. The second reason was a push on our end.…

Thank you, Gregg, and good morning everybody. I will first quickly review results for the quarter and the year-to-date periods and then provide some additional detail on our Oregon general rate case outcome and its expected impact on financial results for the reminder of the year. First to the quarter results, we’ve recorded a third quarter net loss of $10.6 million or $0.39 per share. This compares to a loss of $8.3 million or $0.31 per share last year. Results include a one time after-tax charge of $2.7 million for the right off at differed stayed taxes as Gregg mentioned earlier. Excluding this one time charge, operating results for the quarter would have produced a net loss of $7.9 million or $0.29 per share. Utility Operations in the quarter generated a loss of $11.9 million, which compares to a loss of $9.5 million last year. Gas storage contributed net income of $1.3 million in the quarter compared to $1.2 million last year. Total gas deliveries in the third quarter were essentially flat compared to the prior year, the 158 million therms. Sales of gas to residential and commercial customers in the quarter were also essentially flat at 53 million therms. Gas deliveries to industrial customers in the quarter were 105 million therms up slightly from a 104 million therms last year. Total utility margin in the quarter increased 3% to $42 million compared to $41 million last year. The margin increase in 2012 largely due to customer growth and an increase in revenues from our gas costs incentive sharing mechanism in Oregon. The company’s weather and decoupling mechanisms in Oregon adjusted margins up by about $300,000 compared to a margin decrease last year of a $100,000. Operations and maintenance costs for the third quarter were $600,000 higher or 2%. The…

Thanks, David. Clearly our focus will be on achieving a positive outcome on the remaining issues from the rate case this year, issues that really are important to resolve in 2013. On the growth front, the fourth consecutive year of lower natural gas prices is fueling some new momentum in the market. You heard from David that our customer growth rate has picked up to 1%. We’re still far from where we were before the recession, but after such a prolong gift in the housing sector, we’re pleased to report some positive movement. Housing prices and sales are up and like the nation overall, housing starts in Oregon have increased significantly from their recessionary lows. As you know, the improvement in the single family sector has been two steps forward and one step back. The good news is, as we move into the fourth quarter, this year is shaping up to be the strongest for new construction start since the end of the recession. While things are slowly improving in the housing sector, where we’re really seeing the impact of lower gas prices is in our large customer segments. In the past 18 months, a total of 30 new large commercial and industrial customers have signed up for natural gas service. The typical rate is closer to five or six a year. And these new customers are a mix of conversions and new businesses, which is a good economic sign. We’re working hard to capitalize on this surgeon business activity and will be aggressively marketing our price advantage over oil and electricity in the months ahead. We also remain hopeful that we will be able to begin working on another expansion of our Mist storage facility next year. As I mentioned on our last call, we have signed an agreement…

(Operator Instructions) Our first question comes from Winfred (indiscernible).

Hi, good morning. Thank you. I’ve been looking at the – your company’s growth rate for the past years and again in the third quarter. And I’m wondering over the next five years, what will drive your earnings growth because even though our residential customer growth increases it’s by no means sufficient to provide meaningful earnings growth, if you agree with me if you wish.

Hi, Winfred, it’s good to see you again. This is David. Obviously the utility about 90% of our overall earnings comes from the core utility, so we’re tied closely to the economic vitality of the regions, so customer growth going forward would be one-time and as I think you recall we have a good conversion opportunity in this part of the country. So as customer growth as you would expect the economy to improve that will provide additional earnings growth going forward, but by the largest leverage item for us in the near-term is with our storage properties and specifically our California property. So as storage, depending on your views, the storage pricing improves going forward or not then that has the biggest overall impact on the near-term basis in terms of earnings and the earnings growth for the company.

I could also say, Winfred that, this is Gregg. We remain highly focused on residential is very important key segment for us. But I think for us and probably for gas utilities elsewhere in the country, the industrial segment is becoming even more important. We’re talking to businesses, as I said, we have 30 new gas industrial customers some of which are new which are getting a lot of folks converting their processes to natural and I expect that to be a growing segment for us and I suspect around the country as well.

Okay, that’s helpful. Thank you very much.

And our next question comes from John Hanson of Praesidis.

Good morning, John. John, you there?

Actually it looks like he dropped off.

Okay. And then our next question will be from Michael Bates of DA Davidson. Michael Bates – DA Davidson: Hey good morning.

Good morning, Michael. Michael Bates – DA Davidson: As we talk about these items that have been deferred from the rate case, we know that they should be decided in 2013. Do we have any visibility as to whether it’s early in the year, late in the year?

We don’t, not yet. Again, we’re still operating on a preliminary order, so we expect the final order on the case itself to show up any day now and then they’ll probably a little while before we get scheduled setup for the docket. So those will be proper proceedings and you can track them but right now we haven’t had any discussions about how quickly the dockets are going to be setup. Michael Bates – DA Davidson: You have a sense as to whether there would be a statutory limit as to how long they could take?

No, but it’s clear on some of them that and if it’ll be in everybody’s interest to get them done certainly before the next PGA because the cost either increases or decreases will want to be rolled into the next PGA. So my suspicion is you get them done by the end of August versus September.

Yeah we update rates, Michael, in November 1 with rates referring and I agree I think that would be the time that we would all want to get things in place. Michael Bates – DA Davidson: Sure. And then as we think about 2013, we’re seeing a lot of utilities talk about lower discount rates for their defined benefit plans. Obviously you’re coming right out of a new rate case if you’re in Oregon. So how effectively will this rate case help you in managing potentially higher pension expenses next year?

Well Michael this is David. As you recall, we have a balancing account already approved by the PUC and that’s in place. So during this period of time when we’re working through this from an income statement perspective, you’ll see little change there, any decrease in the discount rate which raises the expenses will be covered in the deferral account. The bigger issue that we’re trying to address is the mechanism is a little bit broken right now with the pension protection act requiring companies to fund quicker than what the old FAS 87 methodology kind of put in place. And so that’s what we will be working with the commission on this year saying that the shareholders funded the money and they need to have a reimbursement of that money or at least a return on that money during this interim period of time. But from an income statement perspective, I want to make sure you understand the balancing account will take into account that increase, any increase from lower discount rates. Michael Bates – DA Davidson: Thank you.

And our next question is from Spencer Joyce of Hilliard Lyons. Spencer Joyce – Hilliard Lyons: Good morning guys. How are you?

Good morning, good. Spencer Joyce – Hilliard Lyons: Okay. Couple of quick questions here. Sort of to somewhat follow-up on Michael’s question there on the timing issues for the outstanding issues, the rate case, I known is the guidance range is still at $0.20 here. And my first inclination is that we may have one or two of those pump into Q4 which it sounds like is probably not going to happen, but what are some of the drivers that could pop up in Q4 that will push us either towards the bottom end or the higher end of that range?

Yes, Spencer, this is David. We did not the change the width of the guidance range. In general, I’m not sure anything from the rate case is going to be a driver in the fourth quarter, unless we see something in the final order frankly that’s different than what we’ve seen in the preliminary order. That’s the only thing that I can personally think of from a rate case perspective that would have an impact on the quarter then you’re back to just normal operating type issues which for us specifically, there is still weather exposure in parts of our rates, storage, pricing and optimization could be a benefit during that period of time. But very few items have a material impact in the fourth quarter. Spencer Joyce – Hilliard Lyons: Okay. Kind of the usual weather in storage suspects there.

Yeah, go ahead. Spencer Joyce – Hilliard Lyons: To switch gears a little bit, talk a little bit more about the customer growth. I know you all mentioned the 30 large new industrial customers over the, I believe was it 18 months, is that right?

Over the last 18 months, yes. Spencer Joyce – Hilliard Lyons: Okay. Is there still a pretty good pipeline there? You may have alluded to that there may have been, you all still see some opportunity there in your territory or do you feel like maybe some of the low hanging fruit there has already been plugged?

No, I think there is opportunity for us there. Again you got to remember that the Northwest has been very, very – even on the industrial side very dependent on electricity and oil for a long, long period of time and we are – we have a pretty good size manufacturing segment in our service territory and the cost differential is pretty impressive. And I think you’ll continue to see that particularly as electric prices go up which we expect to see continuing. So I think there is – that is an area rich for us to mine. Spencer Joyce – Hilliard Lyons: Okay. And on the residential side, I would maybe splitting hears here a little bit, but would you attribute more of the growth there to the uptick in housing and construction or maybe to the low cost tailwind and sort of that price advantage that natural gas has compared to…

Well it’s not 50-50. If I have that right?

Yeah, it’s interesting. We’ve actually seen an uptick in our new construction where about 56% of that growth for the year is from new construction and then as you know Spencer, we also have conversion opportunities which represent the other 44%. So the uptick is really tied directly to the economy with the new construction which I think is a positive sign.

That’s right. We’ve had 50-50 conversion new construction. Spencer Joyce – Hilliard Lyons: Yeah, I agree there. New construction is pretty fantastic, I mean, I feel like that I feel little bit more sustainable than the few conversions here and there. So that’s…

Yeah, for us – go ahead. Spencer Joyce – Hilliard Lyons: Yeah. No that’s all I had there. Final point, I just want to talk a little bit about the O&M expense. I know when you’ve talked a time or two that we expected a little bit higher growth for the full year, but this quarter is for you actually came in a little bit better than we were modeling and expecting. Do you all feel that we kind of reached a natural rate of growth here that we’ve seen some of the one-time hiring and promotion and odd cost. Are they coming down a little bit or we getting kind of some of those?

Yeah we’ll have some costs from this rate case like we have – we’re not going to be implementing new service windows for our customers. So there is going to be some increases going forward, but what this company has done for a long time is to try to manage its own end cost below inflation rates and that would be something that we would be targeting again going forward. Spencer Joyce – Hilliard Lyons: Sounds good. It’s all I have. Thanks guys.

(Operator Instructions) And our next question is from John Hanson of Praesidis.

Good morning John.

Yeah, we’re having trouble with John again.

Yeah.

Okay. (Operator Instructions) Are you there Mr. Hanson? John Hanson – Praesidis: All right, let’s try this again. This would work now?

Yes. John Hanson – Praesidis: All right, great. I got too many electronic things here. Winfred’s question on storage. Just want to follow-up what you’re seeing for the storage market, I know we’ve been following this for a couple of years here with the Gill Ranch and the Mist, what do you’re seeing now here as compared to last quarter or two?

Well, the current year intrinsic value IBs are still very week, and as I said in the past, they fluctuate up and down and right now they’re kind of in a very week state but again for us it really doesn’t affect the mist storage facility very much because it is so driven by utility interest in storage. It has more of an impact down in Gill Ranch, we’re working there as well to try and identify utility customers for our storage projects and that really is the focus of our work for this coming and going forward. And we’re having some success we’ve, even from the beginning we’ve got a couple of utilities with contracts and that’s really where we’re going to see the improvement I think in storage values, not in the sort of market or IB, EB range, if that does just continue to remain very week. John Hanson – Praesidis: Okay great, thanks. The next question I had was on the – we’ve had a couple of big pipeline opportunities that have been kind on the drawing board, any update on those?

Yeah little bit, just referring Palma pipeline, we continue to push on that, we are revising – last year we pulled the permit basically to do some rerouting of the pipeline itself and to make some other changes, short net. We’ve actually at this point are working on a new president agreement between Northwest Natural and Palma, we’d be one of the shippers on the pipeline but a big part of the movement on the project will be determined by who wins and what the eventual outcome is of PGE is RFP for both are base load generation and they’re peeking generation but we expect next year to begin working on identifying additional shippers, hopefully by mid-year to be in a position to re-file our permit process. Again though, I would put that if my timeline and if it does proceed in that timeline, I’d tell you, you’re still probably five years out before you get the thing built and in service, couple of year to permit two to three to build something like that, so it’s out there. Again, I’ll tell you though that the – with what we’re seeing the way of increased gas use in the Northwest we continue to believe it’s a question of not, if we need another pipeline but when. John Hanson – Praesidis: Okay, great. Well I might just follow-up one more item on after the rate case here.

Sure. John Hanson – Praesidis: There is a couple of things that you’re saying you’re working on here post rate case, is that really kind of preclude going back in for anything more for a while then right?

Well, I would – if you ask you, if the question is another rate case I don’t think you’ll see us filing in other rate case in Oregon with these proceedings going on at least in the next six to nine months. We are working on lots of other things that required sort of regulatory issues around business development and other things, smaller stuff but I don’t see a new rate case before the end of these dockets. John Hanson – Praesidis: Okay, thanks.

Welcome.

This will conclude our question-and-answer session. I’d like to turn the conference back over to Mr. Gregg Kantor for closing remarks.

Thank you. Again, thanks for joining us and let me just finish by saying for those of you in New York and New Jersey we’re thinking about you and we wish you all the best and the recovery efforts from the storm. The pictures here show a pretty dramatic outcome from Sandy and we wish you the best. With that, we’re done.

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