The El Nino weather pattern, said NW Natural, which affected the western United States in December 2002, continued in early 2003, “such that January weather in NW Natural’s service area was 15% warmer than average.” Overall, first quarter temperatures were 8% warmer than average and 12% warmer than in the first quarter of 2002.

Because of the first quarter revisions, NW Natural also lowered its guidance for the full year 2003 to $1.60-$1.75 a share, down from $1.70-$1.85.

“Pre-closing estimates of gas sales in the weather-sensitive residential and commercial classes in the first quarter were down about 25-30 million therms, or 10-12%, from NW Natural’s forecasted sales based on average weather,” the company said in a statement. It was able to offset a portion of the margin loss caused by the warm weather by selling a portion of its unused gas supplies in the first quarter to off-system customers at a gain.

Last summer, when NW Natural arranged this year’s gas supply portfolio, the company locked in the prices on more than 90% of its gas supplies at levels lower than the prevailing market prices during the first quarter of this year using a combination of fixed-price contracts, commodity swaps and the use of gas from its underground gas storage facility. Under a regulatory mechanism in Oregon where it is headquartered, NW Natural retains one-third of the gain from these sales and distributes the other two-thirds of the gain to its customers.

The company noted that it filed a general rate case in Oregon in November 2002 and expects new rates to be in effect by the fourth quarter of 2003. The filing with the Oregon Public Utility Commission (OPUC) includes a proposal for a weather normalization mechanism that would reduce the company’s financial exposure if weather is significantly warmer than average, as well as its customers’ exposure to high gas bills if weather is significantly colder than average. Weather normalization rate treatment, if approved by the OPUC for NW Natural, would be applied on a prospective basis.

Also Wednesday, the company declared a quarterly dividend of 31.5 cents a share on the common stock as well as regular quarterly dividends on its preferred stock. The dividends will be paid on May 15, 2003, to shareholders of record on April 30, 2003.

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