While it is experiencing financial fallout in its gas storage operations, Portland, OR-based NW Natural continues to push forward with its long-standing plans to expand its Mist Storage project in Oregon to service a new gas-fired generation plant in the area.

A green light to proceed with the storage expansion will be forthcoming by the end of this year, CEO Gregg Kantor said.

The company reported a 3Q2014 net loss of $8.7 million (minus 32 cents/share), compared to a loss of $8.2 million (minus 31 cents/share) for the same period in 2013. Operating revenues from its gas storage operations in Oregon and California declined by $2.7 million in 3Q2014.

“We feel we’re still on schedule for a 2017 in-service date for the Mist expansion,” Kantor said during an earnings conference call. “That’s what [power plant operator] Portland General Electric [PGE] has asked for, and that is what we are all shooting for, and now with PGE’s authority to begin the permitting process we can stay on that schedule.”

Last month, NW Natural received approval from the Oregon Public Utility Commission (PUC) for two new rate schedules for the 16 Bcf Mist facility. “These schedules are intended to allow [us] to provide no-notice gas storage service from Mist and are specifically designed to support services associated with the proposed PGE plant expansion,” Kantor said.

The storage expansion would be supported by a contract with PGE that has been tough to consummate, according to Kantor, because of tight cost considerations. During the negotiations he has conceded the costs have risen on the storage expansion. PGE expects completion of its second Port Westward generation plant — a $300 million project — before the end of the year with commercial startup early next year (see Daily GPI, July 30).

“This expansion project is subject to final approval of project costs, as well as a notice to proceed from PGE, along with the receipt of other permits, PUC approvals and conditions,” Kantor said.

In response to an analyst’s question, Kantor said he was not sure of the timetable for buying pipe and other materials and the eventual construction schedule for the Mist expansion, but over time that will be made public as approvals come for the project.

When pressed on the projected costs for the storage expansion, Kantor said it was still “under $100 million,” but he had no further specifics other than costs are going up. “I will tell you the reason it is taking as long as it is to get a notice to proceed [from PGE] is costs have gone up, and costs are important to PGE; the company wants to make sure they are doing this as cost-effectively as possible. That’s really the reason for the delay we have seen this year.”

For the first nine months of this year, NW Natural reported that net income from gas storage (Mist and the Gill Ranch project in California) decreased by $4 million to $500,000 so far in 2014. The drop was mainly attributable to $2.7 million in contracts for services that expired and were not renewed given low wholesale gas prices and continuing abundant supplies nationally that combined to discourage the need for customers to contract for storage.