Portland, OR-based NW Natural is focusing on reducing its carbon footprint with the use of renewable natural gas (RNG), or biomethane, and expansion in the water utility sector, CEO David Anderson said on Tuesday during a 3Q2019 earnings conference call.

"The key for us is to get RNG flowing into our system," Anderson said in response to investment opportunities stimulated by the state's new law encouraging more RNG use, Senate Bill (SB) 98, which became effective in September. 

RNG can come from various sources, such as landfills, dairies, and wastewater treatment plants, as well as from new power-to-gas technologies, such as power-to-gas using excess renewable-produced power and producing hydrogen.

Anderson said Oregon has abundant excess renewable power at certain times of the year, and NW Natural, like other natural gas utilities, can put hydrogen in its system. "It is really not new technology; they've been doing it in Europe for a period of time." NW Natural is currently pursuing a project with a local municipality.

"Strategically, the most important thing for us is to get more de-carbonized gas on our system," Anderson said. "Long-term, we'll see where the best opportunities play out."

Emissions in the residential sector are not a major issue for NW Natural, since that portion of its customers only account for 5% of the utility's greenhouse gas (GHG) emissions overall. Nevertheless, Anderson said it makes sense to work at lowering that. SB 98 allows for the gas-only utility to invest up to $30 million annually in RNG and other clean energy programs.

In the water sector, NW Natural is continuing to acquire small private and public sector water utility systems in the three Pacific Northwest states  (Idaho, Oregon and Washington), completing three more purchases in the last quarter. To date, the gas utility holding company has invested $12 million in acquisitions collectively representing 25,000 connections, expanding from the Northwest to Texas, starting with a 3,500 customer water operation in Conroe, TX, north of Houston.

As one of the fastest growing areas in the nation, Texas is going to be one of the key areas to promote rapid growth of the NW Natural water business, Anderson said.

In the merchant gas storage area, as announced last year, NW Natural is exiting the nonutility underground gas storage business with the sale of its 75% interest in 15 Bcf capacity Gill Ranch storage in Northern California.

Anderson reported that a California Public Utilities Commission (CPUC) administrative law judge has approved the sale. Approval by the five-member CPUC is the last major step in completing the sale. "I would hope it can be addressed before year-end this year, which would allow us to close late this year or early next year," Andereson said.

In 3Q2019, NW Natural recorded a $19.7 million loss (minus 64 cents/share), compared to a loss of $11.9 million (minus 42 cents) for the same period in 2018.