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PORTLAND GENERAL ELECTRIC CO /OR/ - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Edgar Glimpses

Forward-Looking Statements

The information in this report includes statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements that relate to expectations, beliefs, plans, assumptions, and objectives concerning future results of operations, business prospects, loads, outcome of litigation and regulatory proceedings, capital expenditures, market conditions, events or performance, and other matters. Words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will likely result," "will continue," "should," or similar expressions are intended to identify such forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed. PGE's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis including, but not limited to, management's examination of historical operating trends and data contained either in internal records or available from third parties, but there can be no assurance that PGE's expectations, beliefs, or projections will be achieved or accomplished.

In addition to any assumptions and other factors and matters referred to specifically in connection with forward-looking statements, factors that could cause actual results or outcomes for PGE to differ materially from those discussed in such forward-looking statements include:

•governmental policies, legislative action, and regulatory audits, investigations, and actions, including those of the FERC and OPUC with respect to allowed rates of return, financings, electricity pricing and price structures, acquisition and disposal of facilities and other assets, construction and operation of plant facilities, transmission of electricity, recovery of power costs and capital investments, and current or prospective wholesale and retail competition; •economic conditions that result in decreased demand for electricity, reduced revenue from sales of excess energy during periods of low wholesale market prices, impaired financial stability of vendors and service providers, and elevated levels of uncollectible customer accounts; •changing customer expectations and choices that may reduce customer demand for its services may impact PGE's ability to make and recover its investments through rates and earn its authorized return on equity, including the impact of growing distributed and renewable generation resources, changing customer demand for enhanced electric services, and an increasing risk that customers procure electricity from registered Electricity Service Suppliers (ESSs) or community choice aggregators; •the outcome of legal and regulatory proceedings and issues including, but not limited to, the matters described in Note 8, Contingencies, in the Notes to the Condensed Consolidated Financial Statements; •unseasonable or extreme weather and other natural phenomena, which could affect customers' demand for power and PGE's ability and cost to procure adequate power and fuel supplies to serve its customers, and could increase the Company's costs to maintain its generating facilities and transmission and distribution systems; •operational factors affecting PGE's power generating facilities, including forced outages, hydro and wind conditions, and disruption of fuel supply, any of which may cause the Company to incur repair costs or purchase replacement power at increased costs; •complications arising from PGE's jointly-owned generating facilities, including changes in ownership, adverse regulatory outcomes or legislative actions, or operational failures that result in legal or environmental liabilities or unanticipated costs related to replacement power or repair costs; 31 -------------------------------------------------------------------------------- Table of Contents •failure to complete capital projects on schedule and within budget or the abandonment of capital projects, either of which could result in the Company's inability to recover project costs; •volatility in wholesale power and natural gas prices that could require PGE to post additional collateral or issue additional letters of credit pursuant to power and natural gas purchase agreements; •changes in the availability and price of wholesale power and fuels, including natural gas and coal, and the impact of such changes on the Company's power costs; •capital market conditions, including availability of capital, volatility of interest rates, reductions in demand for investment-grade commercial paper, as well as changes in PGE's credit ratings, any of which could have an impact on the Company's cost of capital and its ability to access the capital markets to support requirements for working capital, construction of capital projects, and the repayments of maturing debt; •future laws, regulations, and proceedings that could increase the Company's costs of operating its thermal generating plants, or affect the operations of such plants by imposing requirements for additional emissions controls or significant emissions fees or taxes, particularly with respect to coal-fired generating facilities, in order to mitigate carbon dioxide, mercury, and other gas emissions; •changes in, and compliance with, environmental laws and policies, including those related to threatened and endangered species, fish, and wildlife; •the effects of climate change, including changes in the environment that may affect energy costs or consumption, increase the Company's costs, or adversely affect its operations; •changes in residential, commercial, or industrial customer growth, or demographic patterns, in PGE's service territory; •the effectiveness of PGE's risk management policies and procedures; •cybersecurity attacks, data security breaches, or other malicious acts that cause damage to the Company's generation, transmission, or distribution facilities, information technology systems, or result in the release of confidential customer, employee, or Company information; •employee workforce factors, including potential strikes, work stoppages, transitions in senior management, and the ability to recruit and retain appropriate talent; •new federal, state, and local laws that could have adverse effects on operating results; •political and economic conditions; •natural disasters and other risks, such as pandemic, earthquake, flood, drought, lightning, wind, and fire; •the impact of widespread health developments, including the recent global coronavirus (COVID-19) pandemic, and responses to such developments (such as voluntary and mandatory quarantines, including government stay at home orders, as well as shut downs and other restrictions on travel, commercial, social and other activities), which could materially and adversely affect, among other things, demand for electric services, customers' ability to pay, supply chains, personnel, contract counterparties, liquidity and financial markets; •changes in financial or regulatory accounting principles or policies imposed by governing bodies; and •acts of war or terrorism. Any forward-looking statement speaks only as of the date on which such statement is made and, except as required by law, PGE undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all such factors or assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. 32 -------------------------------------------------------------------------------- Table of Contents OVERVIEW Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide an understanding of the business environment, results of operations, and financial condition of PGE. The MD&A should be read in conjunction with the Company's condensed consolidated financial statements contained in this report, and other periodic and current reports filed with the SEC. PGE is a vertically-integrated electric utility engaged in the generation, transmission, distribution, and retail sale of electricity in the state of Oregon. In addition, the Company participates in wholesale markets by purchasing and selling electricity and natural gas in an effort to meet the needs of, and obtain reasonably-priced power for, its retail customers. The Company generates revenues and cash flows primarily from the sale and distribution of electricity to retail customers in its service territory. PGE has been affected by the COVID-19 pandemic, but the Company is confident in its ability to manage through the crisis. PGE remains committed to continuing to achieve steady growth and returns as the Company transforms to meet the challenges of climate change and an ever-evolving energy grid. Customers, policy makers, and other stakeholders expect PGE to reduce greenhouse gas emissions, keep the power grid reliable and secure, and ensure prices are affordable, especially for the most vulnerable customers. The Company's strategy strives to balance these interests. PGE's goals are to: •Reduce greenhouse gas emissions associated with serving its retail load by more than 80 percent below 2010 levels by 2050; •Electrify sectors of the economy, including transportation and buildings, that are also transforming to reduce greenhouse gas emissions; and •Perform as a business, driving improvements to work efficiency, safety, and systems and equipment reliability, all while adhering to the Company's earnings per diluted share growth guidance of 4-6% on average. COVID-19 Impacts-The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide, including workforces, liquidity, capital markets, consumer behavior, supply chains, and macroeconomic conditions. In the State of Oregon, the Governor issued an executive order on March 23, 2020 directing Oregon residents to stay at home except for essential activity and mandating closure of businesses for which close personal contact is difficult or impossible to avoid. This order was rescinded May 14, 2020 in a new executive order announcing a phased approach for reopening Oregon's economy. The updated order contains baseline requirements that include similar provisions to the original March 23, 2020 order. The current reopening approach for Oregon includes three phases, with each phase loosening restrictions and allowing more sectors to open. Oregon's three most populous counties, in which the majority of PGE's customers are located, remain in the first phase with the most restrictive requirements, including, among other things, limiting local gatherings to ten individuals and requiring six feet of social distancing at restaurants and bars, with a 10 pm closure requirement. Further reopening is currently on hold as Oregon has experienced an increase in COVID-19 cases in recent weeks. Retail loads-The economic impacts of the COVID-19 pandemic and the Governor's initial stay-at-home order and subsequent phased reopening approach has not allowed all businesses to reopen, or has allowed reopening only at reduced capacity to meet requirements for social distancing. The slowdown in certain sectors of the economy has resulted in changes in retail load patterns. After adjusting for the effects of weather, retail energy deliveries for the three months ended June 30, 2020 decreased 3% compared to the same period of 2019. The change was driven by an increase of 7% in residential deliveries as a larger percent of the population is spending more time at home, a 16% decrease in commercial deliveries as many business have faced temporary or permanent closures, and a 3% increase in industrial energy deliveries. Based on these trends in retail load patterns the Company currently projects that retail energy deliveries will remain flat compared to 2019 weather-adjusted levels, however changes in deliveries across customer classes may impact retail revenues. See "Customers and Demand" in this Overview 33 -------------------------------------------------------------------------------- Table of Contents section and "Revenues" of the Results of Operations section for more information related to COVID-19 impacts on retail loads. Bad debt expense-The Company has responded to the hardships many customers are facing and has taken steps to support its customers and communities, including temporarily suspending disconnections and late fees during the crisis, developing time payment arrangements, and partnering with local non-profits to stabilize the impacts on small businesses and low-income residential customers. PGE believes that it is reasonably possible that the combination of these actions and observed trends of increased unemployment and late customer payments will have a material impact on the results of operations. PGE's bad debt expense is projected to be $15 million for the full-year, compared to an original $6 million forecast for 2020. See "Administrative and other" of the Results of Operations section for more information related to COVID-19 impacts on bad debt expense. Financial condition and liquidity-Global capital markets have experienced significant volatility in response to COVID-19 and PGE continues to assess the impact of this volatility on its liquidity position and capital investment plans. The Company believes the combination of its revolver capacity, proceeds of a $150 million, 364-day term loan, issued in April 2020, and proceeds of a $200 million First Mortgage Bond (FMB) issuance, also completed in April 2020, will provide adequate liquidity for the Company's operational needs. The Company continues to evaluate its five-year capital plan. A detailed discussion of capital market and capital investment responses is included in the "Liquidity and Capital Resources" section. Capital market disruptions due to COVID-19 are resulting in significant changes to the inputs used to determine pension funding levels and funding requirements. In 2019, the Company contributed $62 million to its pension plan and does not anticipate any additional contributions until 2022. The Company continues to monitor the impact of COVID-19 on capital markets and the potential consequences to pension funding levels and corresponding mandatory funding.

PGE believes the COVID-19 pandemic will not have a material impact on its financial condition and cash flows for 2020 and that it has sufficient liquidity to meet the Company's anticipated capital and operating requirements. It is reasonably possible, however, that disruption and volatility in the global capital markets may materially increase the cost of capital.

Supply chain-The global nature of the COVID-19 pandemic has resulted in supply chain disruptions and in some instances construction interruptions. While PGE has not experienced significant supply chain disruptions or construction interruptions to date, its business continuity plans have included an assessment of critical operational supply chain linkages and an assessment of potential interruptions to our capital project execution. The Company will continue to monitor supply chain issues, including possible force majeure notices, for any material impacts to its operations. Business continuity plans-In February 2020, as more information about the potential impacts of COVID-19 became available, the Company activated its formal business continuity plans. These plans are designed to ensure the safety of the public and employees while the Company continues to provide critical service to its customers. In addition to directing employees to work from home when appropriate, the Company has implemented safeguards for employees who play critical roles to ensure operational reliability and established protocols for employees who interact directly with the public. The Company has enacted extra physical security and cybersecurity measures to safeguard systems to serve operational needs, including those of its remote workforce, and to ensure uninterrupted service to customers. The Company will continue to evolve its business continuity plans to follow guidance from the Centers for Disease Control and the Oregon Health Authority. Although PGE has plans in place to address workforce availability, including sequestration of key employees if necessary, the Company has not experienced workforce availability issues to date. Implementation of PGE's business continuity plans may have a material impact on PGE's results of operation.

Legislative and regulatory developments-The Company has analyzed available relief for the economic effects of COVID-19 under the following:

34 -------------------------------------------------------------------------------- Table of Contents •FERC Waiver-On June 30, 2020 the FERC issued a waiver that provides that, for the 12-month period starting March 2020, jurisdictional utilities may apply an alternative AFDC calculation formula that excludes the actual outstanding short-term debt balance and replaces it with the simple average of the actual 2019 short-term debt balance. The purpose of the waiver is to allow relief from the detrimental impacts of issuing short-term debt on the allowance for equity funds used during construction. PGE has adopted the waiver and retrospectively applied its provisions as of March 2020, resulting in a $1 million increase to AFDC for the three and six months ended June 30, 2020. •Coronavirus Aid, Relief, and Economic Security (CARES) Act-On March 27, 2020, the U.S. Government enacted the CARES Act, which provides approximately $2 trillion of economic relief and stimulus to support the national economy during the COVID-19 pandemic. This package included support for individuals, large corporations, small business, and health care entities, among other affected groups. The Company does not expect direct material benefits from the CARES Act. •COVID-19 Deferral-PGE filed an application for deferral of certain incremental costs and lost revenue related to COVID-19 on March 20, 2020 with the OPUC. This application seeks to recover costs and lost revenue (including customer receivable write-offs and other incremental costs or lost revenue arising from the COVID-19 pandemic) incurred from the date of the application through at least the end of 2020. PGE will defer such costs if they are deemed probable of recovery. Until such determination is made, any incremental expenses will be recognized in the results of operations. Amortization of any deferred costs will remain subject to OPUC review prior to amortization in customer prices and would be subject to an earnings test. Reduce greenhouse gas emissions-PGE partners with customers and local and state governments to advance a clean energy future. PGE continues to leverage these partnerships to pursue emission reductions using a diverse portfolio of clean and renewable energy resources, and promote economy-wide emission reductions through electrification and smart energy use to help the state meet its greenhouse gas reduction goals. PGE's framework for achieving a clean energy future is informed and enabled by: i) customer renewable energy programs; ii) carbon legislation and administrative actions; iii) the resource planning process; and iv) the ability to recover renewable energy costs. Customer Renewable Energy Programs-PGE's customers continue to express a commitment to purchasing clean energy, as over 228,000 customers voluntarily participate in PGE's Green Future Program, the largest renewable power program by participation in the nation. There has been a growing trend of business customers with goals to be served by 100 percent clean electricity. In addition, at least four municipalities in PGE's service territory have climate action plans and resolutions with 100 percent clean or net-zero carbon electricity goals between 2030 and 2035 and 100 percent clean or net-zero carbon economy-wide energy goals by 2050. In response, the Company implemented a new customer product option, the Green Future Impact program as a tool to help customers reach their goals. The first phase allowed for up to 160 MW of PGE-provided power purchase agreements for renewable resources and up to 140 MW of customer-provided renewable resources. PGE has proposed a second phase to increase the cap from 300 MW to 500 MW to allow more customers to participate in the program. The Company is currently working through the regulatory review process for the second phase, which is expected to conclude by the end of 2020. The program provides business and municipal customers access to bundled renewable attributes from those resources while remaining cost-of-service customers. Both the cost-of-service tariff and the price under the renewable energy option tariff apply, a structure intended to avoid stranded costs and cost shifting. Through this voluntary program, the Company seeks to align sustainability goals, cost and risk management, reliable integrated power, and a cleaner energy system.

Carbon Legislation and Administrative Actions-In 2016, Oregon Senate Bill (SB) 1547 set a benchmark for percentages of electricity that must come from renewable sources and requires the elimination of coal from Oregon

35 -------------------------------------------------------------------------------- Table of Contents utility customers' energy supply no later than 2030 (subject to an exception that allowed extension of this date until 2035 for PGE's output from Colstrip). Provisions of the law include: •An increase in RPS thresholds to 27% by 2025, 35% by 2030, 45% by 2035, and 50% by 2040; •A limitation on the life of renewable energy credits (RECs) generated from facilities that become operational after 2022 to five years, but continued unlimited lifespan for all existing RECs and allowance for the generation of additional unlimited RECs for a period of five years for projects online before December 31, 2022; and •An allowance for energy storage costs related to renewable energy in an electric company's Renewable Adjustment Clause (RAC) filings. In response to SB 1547, the Company filed a tariff request in 2016 to accelerate recovery of PGE's investment in the Colstrip facility from 2042 to 2030, which the OPUC approved. In January 2020, the owners of Colstrip Units 1 and 2 permanently retired those two units. Although PGE has no direct ownership interest in those two units, the Company does have a 20% ownership share in Colstrip Units 3 and 4, which utilize certain common facilities with Units 1 and 2. PGE is currently scheduled to recover the costs of its investment in Colstrip Units 3 and 4 by 2030, although some co-owners have sought approval to recover their costs sooner in their respective jurisdictions. The Company continues to evaluate its ongoing investment in Colstrip. Any reduction in generation from Colstrip has the potential to provide capacity on the Colstrip Transmission facilities, which stretch from eastern Montana to near the western end of the state, to serve markets in the Pacific Northwest and beyond. PGE has a 15% ownership interest in, and capacity on, the Colstrip Transmission facilities. Renewable energy development in the state of Montana could benefit from any excess transmission capacity that may become available.

The Company continues with plans to cease coal-fired operation at its Boardman generating plant by the end of 2020.

During the 2019 Oregon legislative session, House Bill (HB) 2020 was introduced, which would have authorized a comprehensive cap and trade package in Oregon and would have granted the OPUC direct authority to address climate change. Although HB 2020 was not enacted in 2019, an amended version was reintroduced in the 35-day legislative session, which began in February 2020. This new proposal, SB 1530, was also a cap and trade package that included changes made to address concerns raised by various parties. Prior to the legislative session, the OPUC stated that it would continue to collaborate with the legislature and stakeholders to make progress on climate change, noting that their authority is limited to that of an economic regulator. The short 2020 legislative session adjourned without action on SB 1530 due to a lack of quorum and, as a result, in March 2020, the Governor of Oregon issued an Executive Order directing state agencies to seek to reduce and regulate greenhouse gas (GHG) emissions. Many of the direct agency actions are on an aggressive timeline with due dates in 2020 and 2021. As the Governor is limited by current statutory authority, the Executive Order does not include a market-based mechanism as envisioned by the cap and trade legislation introduced in the 2019 and 2020 legislative sessions. Among other things, the Executive Order: •Modifies the statewide GHG emissions reduction goals to at least 45% below 1990 emission levels by 2035 and at least 80% below 1990 emission levels by 2050. 36 -------------------------------------------------------------------------------- Table of Contents •Directs state agencies to integrate climate change and the State's GHG reduction goals into their planning, budgets, investments, and decisions to the extent allowed by law. •Directs the OPUC to- •determine whether utility portfolios and customer programs reduce risks and costs to utility customers by making rapid progress towards reducing GHG emissions consistent with Oregon's reduction goals; •encourage electric companies to support transportation electrification infrastructure that supports GHG reductions and the SB 1044 zero emission vehicle goals; and •prioritize proceedings and activities that advance decarbonization in the utility sector and exercise its broad statutory authority to reduce GHG emissions, mitigate energy burden on utility customers, and ensure reliability and resource adequacy. •Directs the Oregon Department of Environmental Quality (DEQ) to adopt a program to cap and reduce GHG emissions from large stationary sources, transportation fuels, and other liquid or gaseous fuels including natural gas. •More than doubles the reduction goals of the state's Clean Fuels Program and extends the program, from the current rule that requires a 10 percent reduction in average carbon intensity of fuels from 2015 levels by 2025, to a 25 percent reduction below 2015 levels by 2035. Regional Haze-In early 2020, PGE received a letter from the DEQ indicating that, under Phase 2 of the Regional Haze rules, the Beaver generating plant, based on its allowable emissions, which are considerably higher than actual emissions and the DEQ's screening threshold, has been identified as a potential contributor to visibility impacts to the Mt. Hood National Forest. The Company has responded to the DEQ committing to voluntarily reduce emissions to a level below the threshold in an upcoming air permit renewal application for the facility. Such approach would be sufficient to meet the Company's Regional Haze obligations for Beaver. Taking such a reduction on allowable emissions has the potential to constrain operations, although a review of actual emissions from 2014 to 2019 showed that Beaver would not have been limited during those operating years. PGE does not expect future limitations on operations based on the anticipated reduction in allowable emissions. The Resource Planning Process-PGE's resource planning process includes working with customers, stakeholders, and regulators to chart the course toward a clean, affordable, and reliable energy future. This process includes consideration of customer expectations and legislative mandates to move away from fossil fuel generation and toward renewable sources of energy. In May 2018, the Company issued a request for proposals seeking to procure approximately 100 average megawatts (MWa) of qualifying renewable resources. The prevailing bid, Wheatridge Renewable Energy Facility (Wheatridge), will be located in eastern Oregon and combine 300 MW of wind generation and 50 MW of solar generation with 30 MW of battery storage. PGE will own 100 MW of the wind resource with an investment of approximately $160 million. Subsidiaries of NextEra Energy Resources, LLC will own the balance of the 300 MW wind resource, along with the solar and battery components, and sell their portion of the output to PGE under 30-year power purchase agreements. PGE has the option to purchase the underlying assets of the power purchase agreements on the twelfth anniversary of the commercial operation date of the wind facility. As of June 30, 2020, the Company has recorded $56 million, including the allowance for funds used during construction (AFDC), in construction work-in-progress (CWIP) related to Wheatridge. The wind component of the facility is expected to be operational and placed in-service by December 2020 and qualify for production tax credits (PTCs) at the 100 percent level. Construction of the solar and battery components is planned for 2021 and is expected to qualify for federal investment tax credits. To date, PGE has not experienced any supply chain disruptions due to the COVID-19 pandemic related to the construction of Wheatridge, and the 37 -------------------------------------------------------------------------------- Table of Contents project is proceeding as planned. PGE is working closely with the contractor to actively monitor for supply chain issues. See "COVID-19 Impacts" within this "Overview" section for further information on COVID-19. In July 2019, PGE submitted its 2019 Integrated Resource Plan (2019 IRP) to the OPUC. The initial plan and modifications proposed by PGE within the docket (LC 73) set forth actions the Company proposed to undertake over the next four years to acquire the resources identified. The OPUC issued an order on May 6, 2020 that acknowledged the following Action Plan for PGE to undertake: •Customer actions- •Seek to acquire all cost-effective energy efficiency; and •Seek to acquire all cost-effective and reasonable distributed flexibility. •Renewable actions-Conduct a Renewables Request for Proposals (RFP) seeking up to approximately 150 MWa of new RPS-eligible resources that contribute to meeting PGE's capacity needs by the end of 2024, with the following conditions, among others: •Resources must qualify for the federal Production Tax Credit (PTC) or the federal Investment Tax Credit; •Resources must pass the cost-containment screen; and •The value of RECs generated prior to 2030 must be returned to customers. •Capacity actions-Pursue dispatchable capacity through the following concurrent processes: •Pursue cost-competitive, bilateral contract agreements for existing capacity in the region; and •Conduct an RFP for non-emitting dispatchable resources that contribute to meeting PGE's capacity needs. The order also requires that PGE consider resources in the Renewable and Capacity RFPs in a co-optimized manner. PGE had requested authorization to pursue up to approximately 700 MW of capacity contribution by 2025 from a combination of renewables, existing resources, and new non-emitting dispatchable capacity resources, such as energy storage. As PGE implements the Action Plan, the Company will continue to evaluate present and ongoing resource needs in light of the economic disruption related to COVID-19.

PGE expects to file an IRP Update in 2020.

PGE and Douglas County Public Utility District have signed an agreement to supply the Company additional capacity from facilities including the Wells Hydroelectric Project, located on the Columbia River in central Washington. The agreement also provides Douglas County PUD with PGE load management and wholesale market sales services.

With a start date of January 1, 2021, the five-year agreement is expected to contribute between 100 and 160 MWs toward a roughly 250 MW power capacity need that PGE identified in its 2019 IRP. The agreement is a further step toward the Company's stated goal of providing customers with a clean energy future. Recovery of Renewable Energy Costs-As previously authorized by the OPUC, a primary method available to recover costs associated with renewable resources is the RAC. This mechanism allows PGE to recover prudently incurred costs of renewable resources through filings made annually to the OPUC. In the 2019 General Rate Case (2019 GRC) Order, the OPUC also authorized the inclusion of prudent costs of energy storage projects associated with renewables in future RAC filings, under certain conditions. In the fourth quarter of 2019, the Company submitted a RAC filing requesting recovery of the net revenue requirement of Wheatridge. If approved as requested, the Company would begin collection in customer prices upon the project's in-service date, which is expected to occur prior to the inclusion of the project cost in base rates. 38 -------------------------------------------------------------------------------- Table of Contents Regulatory review of the request continues through a public process being conducted by the OPUC with a decision anticipated in the third quarter of this year. The wind facility is expected to be in-service in the fourth quarter of this year. Electrify other sectors of the economy-PGE is working toward an equitable, safe, and clean energy future. Recent and future enhancements to the grid to enable a seamless platform include: •The use of electricity in more applications such as electric vehicles and heat pumps; •The integration of new, geographically-diverse energy markets; •The deployment of new technologies like energy storage, communications networks, automation and control systems for flexible loads, and distributed generation; •The development of connected neighborhood microgrids and smart communities; and •The use of data and analytics to better predict demand and support energy-saving customer programs. In July 2019, PGE's Board approved plans to construct an Integrated Operations Center (IOC) to support and enhance the reliability and resiliency of the grid and as a key step to support efforts to electrify the economy. The IOC, at an estimated total cost of $200 million, excluding AFDC, will centralize mission-critical operations, including those that are planned as part of the integrated grid strategy. This secure, resilient facility will include infrastructure to support and enhance grid operations and co-locate primary support functions. As of June 30, 2020, the Company has recorded $55 million, including AFDC, in CWIP related to the IOC. The project is on track for an in-service completion date in the fourth quarter of 2021. The Company continues to actively monitor any potential supply chain or labor issues as a result of the COVID-19 pandemic. The Company is also working to advance transportation electrification, with projects aimed at improving accessibility to electric vehicle charging stations and partnering with local mass transit agencies to transition to a greater use of electric vehicles. In June 2019, the Oregon Legislature enacted SB 1044 that established zero emissions goals, which include having 250,000 registered electric vehicles by 2025 and 90% of all new vehicle sales be electric by 2035. In September 2019, PGE filed with the OPUC its first Transportation Electrification plan, which considers current and planned activities, along with both existing and potential system impacts, in relation to the State's carbon reduction goals. Perform as a business-PGE focuses on providing reliable, clean power to customers at affordable prices while providing a fair return to investors. To achieve this goal the Company must execute effectively within its regulatory framework and maintain prudent management of key financial, regulatory, and environmental matters that may affect customer prices and investor returns. Power Costs-Pursuant to the Annual Update Tariff (AUT) process, PGE annually files an estimate of power costs for the following year. As approved by the OPUC, the 2020 AUT included a final increase in power costs for 2020, and a corresponding increase in annual revenue requirement, of $27 million from 2019 levels, which were reflected in customer prices effective January 1, 2020. Under the power cost adjustment mechanism (PCAM) for 2019, NVPC was within the limits of the deadband, thus no potential refund or collection was recorded. The OPUC will review the results of the PCAM for 2019 during the second half of 2020 with a decision expected in the fourth quarter 2020. Portland Harbor Environmental Remediation Account (PHERA) Mechanism-The EPA has listed PGE as one of over one hundred PRPs related to the remediation of the Portland Harbor site. As of June 30, 2020, significant uncertainties still remain concerning the precise boundaries for clean-up, the assignment of responsibility for clean-up costs, and whether the final selection of a proposed remedy by the EPA will be implemented as issued. PGE continues to participate in a voluntary process to determine an appropriate allocation of costs amongst the PRPs and expects the next major phase of the allocation process to begin in January 2021, contemporaneously with the remedial design process that is just beginning. In a Record of Decision issued in 2017, the EPA outlined its selected 39 -------------------------------------------------------------------------------- Table of Contents remediation plan for clean-up of the Portland Harbor site, which had an estimated total cost of $1.7 billion. It is probable that PGE will share in a portion of the costs related to Portland Harbor, however the Company does not currently have sufficient information to reasonably estimate the amount, or range, of its potential costs for investigation or remediation, although such costs could be material to PGE's financial position. The impact of such costs to the Company's results of operations is mitigated by the PHERA mechanism. As approved by the OPUC, the Company's recovery mechanism allows the Company to defer and recover incurred environmental expenditures related to Portland Harbor through a combination of third-party proceeds, such as insurance recoveries, and customer prices, as necessary. The mechanism established annual prudency reviews of environmental expenditures and third-party proceeds, and annual expenditures in excess of $6 million, excluding contingent liabilities, are subject to an annual earnings test. PGE's results of operations may be impacted to the extent such expenditures are deemed imprudent by the OPUC or disallowed per the prescribed earnings test. For further information regarding the PHERA mechanism, see "EPA Investigation of Portland Harbor" in Note 8, Contingencies in the Notes to Condensed Consolidated Financial Statements in Item 1.-"Financial Statements." City of Portland Audit-In 2019, the city of Portland (the "City"), which is the largest city within PGE's service territory, completed its audit of PGE's and the City's mutual License Fees agreement for the 2012 through 2015 periods. The preliminary claim by the City was that PGE improperly excluded certain items from the calculation of gross revenues, which resulted in underpayment of franchise taxes of $7 million, including interest and penalties. PGE believes the City's preliminary findings are not consistent with previous audit conclusions, which found that the Company appropriately calculated gross revenues in determining franchise fees. PGE believes it has a sound basis for maintaining the historical approach to determining License Fees and has not recorded a liability for the City's assertion. The City has not provided its Final Letter of Determination, which is an initial step in an ongoing resolution process. Discussions with the City over this matter continue. Capital Project Deferral-In the second quarter of 2018, PGE placed into service a new customer information system at a total cost of $152 million. In accordance with agreements reached with stakeholders in the Company's 2019 GRC, the Company's capital cost of the asset was included in rate base and customer prices as of January 1, 2019. Consistent with past regulatory precedent, in May 2018, the Company submitted an application to the OPUC to defer the revenue requirement associated with this new customer information system from the time the system went into service through the end of 2018. As a result, PGE began deferring its incurred expenses, primarily related to depreciation and amortization, of the new customer information system once it was placed in service. In 2017, the OPUC opened docket UM 1909 to conduct an investigation of the scope of its authority under Oregon law to allow the deferral of costs related to capital investments for later inclusion in customer prices. In October 2018, the OPUC issued Order 18-423 (Order) concluding that the OPUC lacked authority under Oregon law to allow deferrals of any costs related to capital investments. In the Order, the OPUC acknowledged that this decision was contrary to its past limited practice of allowing deferrals related to capital investments and would require adjustments to its regulatory practices. The OPUC directed its Staff to meet with the utilities and stakeholders to address the full implications of this decision, and to propose recommendations needed to implement this decision consistent with the OPUC's legal authority and the public interest. During 2018, PGE deferred a total of $12 million of expenses related to the customer information system. However, the Order impacted the probability of recovery of deferred expenses and, as such, the Company recorded a reserve for the full amount of the costs related to the customer information system. The reserve was established with an offsetting charge to the results of operations in 2018. In response to the Order, PGE and other utilities filed a motion for reconsideration and clarification, which was denied. On April 19, 2019, PGE and the other utilities filed a petition for judicial review of the Order with the Oregon Court of Appeals, although the Court has indicated that the case would be dismissed given the lack of recent action in the case. 40 -------------------------------------------------------------------------------- Table of Contents On April 30, 2020, the OPUC issued a final order affirming its authority to defer all cost components related to a utility's capital projects, including both depreciation expense and the cost of financing capital projects. PGE believes that the costs incurred to date associated with the customer information system were prudently incurred and has not withdrawn its deferral application to recover the revenue requirement of this capital project. Any amounts that may ultimately be approved by the OPUC in subsequent proceedings would be recognized in earnings in the period of such approval; however, there is no assurance that such recovery would be granted by the OPUC. Decoupling-The decoupling mechanism, authorized by the OPUC through 2022, is intended to provide for recovery of margin lost as a result of a reduction in electricity sales attributable to energy efficiency, customer-owned generation, and conservation efforts by residential and certain commercial customers. The mechanism provides for collection from (or refund to) customers if weather-adjusted use per customer is less (or more) than that projected in the Company's most recent general rate case. The Company recorded an estimated collection of $8 million from commercial customers for the six months ended June 30, 2020, which resulted from variances between actual weather-adjusted use per customer and that projected in the 2019 GRC. Estimated collections of $6 million recorded in the first quarter of 2020 from residential customers substantially reversed in the second quarter bringing the year-to-date total to nearly zero. In the near term the Company expects to see, and has seen in the second quarter, higher weather-adjusted use per customer from residential customers that are spending more time at home and lower use per customer from commercial customers that are adversely affected by COVID-19. Collections under the decoupling mechanism are subject to an annual limitation of 2% of revenues for each eligible customer class, based on the net prices in effect for the applicable tariff schedule at the time of collection. For collections recorded in 2020, the 2% limit will be applied to the net prices for the applicable tariff schedules that will be in effect on January 1, 2022. The Company has $1 million remaining under the 2020 annual cap for commercial customers and expects to reach the cap during the third quarter of 2020. No cap exists for any potential refunds under the decoupling mechanism. At December 31, 2019, PGE recorded a total collection of $14 million, which if approved, will be collected over a one-year period beginning January 1, 2021. Corporate Activity Tax-In 2019, the State of Oregon enacted HB 3427, which imposes a new gross receipts tax on companies with annual revenues in excess of $1 million and will apply to tax years beginning on or after January 1, 2020. The tax applies to commercial activities sourced in Oregon, less a deduction for 35% of the greater of "cost inputs" or "labor costs." The resulting amount will be taxed at 0.57%. In January 2020, at PGE's request, the OPUC issued an order approving a tariff and related deferral and balancing account to provide for an estimated recovery of $7 million in customer prices in 2020. The Company will revisit the expected tax consequences annually and revise the annual tariff accordingly. Pursuant to the order, PGE started collections in customer prices February 1, 2020.

Operating Activities

In combination with electricity provided by its own generation portfolio, to meet its retail load requirements and balance its energy supply with customer demand, PGE purchases and sells electricity in the wholesale market. PGE also participates in the California Independent System Operator's Energy Imbalance Market, which allows the Company to integrate more renewable energy into the grid by better matching the variable output of renewable resources. PGE also purchases natural gas in the United States and Canada to fuel its generation portfolio and sells excess gas back into the wholesale market. The Company generates revenues and cash flows primarily from the sale and distribution of electricity to its retail customers. The impact of seasonal weather conditions on demand for electricity can cause the Company's revenues, cash flows, and income from operations to fluctuate from period to period. Historically, PGE has experienced its highest MWa deliveries and retail energy sales during the winter heating season, although peak deliveries have increased during the summer months, generally resulting from air conditioning demand. Retail customer price 41 -------------------------------------------------------------------------------- Table of Contents changes and customer usage patterns, which can be affected by the economy, also have an effect on revenues. Wholesale power availability and price, hydro and wind generation, and fuel costs for thermal and gas plants can also affect income from operations. Customers and Demand-The following tables presents energy deliveries as well as the average number of customers in the various customer classes for the periods indicated. Three Months Ended June % Increase % Increase 30, (Decrease) in Six Months Ended June 30, (Decrease) in 2020 2019 Energy 2020 2019 Energy Deliveries Deliveries Energy deliveries (MWhs in thousands): Retail: Residential 1,658 1,526 9 % 3,789 3,782 - % Commercial 1,374 1,630 (16) % 3,000 3,261 (8) % Industrial 828 802 3 % 1,638 1,510 8 % Subtotal 3,860 3,958 (2) % 8,427 8,553 (1) % Direct access: Commercial 141 177 (20) % 311 341 (9) % Industrial 370 360 3 % 725 720 1 % Subtotal 511 537 (5) % 1,036 1,061 (2) % Total retail energy deliveries 4,371 4,495 (3) % 9,463 9,614 (2) % Wholesale energy deliveries 1,287 785 64 % 2,980 1,459 104 % Total energy deliveries 5,658 5,280 7 % 12,443 11,073 12 % Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Average number of retail customers: Residential 789,927 88 % 777,564 88 % 788,511 88 % 776,816 88 % Commercial 110,158 12 109,190 12 110,116 12 109,470 12 Industrial 195 - 192 - 194 - 195 - Direct access 633 - 634 - 631 - 633 - Total 900,913 100 % 887,580 100 % 899,452 100 % 887,114 100 %

The following table indicates the number of heating and cooling degree-days for the three and six months ended June 30, 2020 and 2019, along with 15-year averages based on weather data provided by the National Weather Service, as measured at Portland International Airport:

Heating Degree-days Cooling Degree-days 2020 2019 Avg. 2020 2019 Avg. First Quarter 1,761 1,992 1,849 - - - April 305 312 375 - - 3 May 174 109 185 39 28 24 June 75 46 76 60 74 62 Second Quarter 554 467 636 99 102 89 Year-to-date 2,315 2,459 2,485 99 102 89 (Decrease)/increase from the 15-year average (7) % (1) % 11 % 15 % 42

-------------------------------------------------------------------------------- Table of Contents During the second quarter, total heating degree days, while 13% below average, were 19% greater than 2019, thus indicating a higher demand for electricity during 2020. On a year-to-date basis, total heating degree-days were 6% below prior year totals, indicating that milder temperatures in the first quarter had served to dampen demand. The impact of cooling degree-days, which have a greater impact on demand in the upcoming third quarter of the year in PGE's service territory, was on par with 2019. Retail energy deliveries for the six months ended June 30, 2020 decreased 2% compared with the six months ended June 30, 2019, which was attributed to an 8% decrease in commercial deliveries. Partially offsetting the decrease was a 6.0% increase in industrial deliveries, while residential deliveries were flat on the year-to-date basis. In the second quarter, retail energy deliveries decreased 3% compared to the second quarter of 2019. Commercial deliveries decreased 16% while energy deliveries to industrial customers increased 3%. Residential deliveries, which had been down 6% in the first quarter, were up 9% in the second quarter, bringing the six months year-to-date total to nearly the same level as the first six months of 2019. The large swing from the first to the second quarter of 2020 was due largely to the impact of the COVID-19 pandemic. The results for the first quarter largely reflected conditions prior to the COVID-19 pandemic. On March 23, 2020, the Governor of Oregon issued an order directing residents to stay at home except for essential activity and mandating closure of businesses for which close personal contact would be difficult or impossible to avoid. The Company has seen a shift in retail demand in response, during the second quarter. In particular, residential loads have increased as a result of a larger percentage of the population spends more time at home, whether working from home, providing child-care due to school closures, or lacking employment as commercial activity slows. Conversely, commercial energy deliveries have declined as many businesses were either directed to temporarily close to maintain social distancing or have since done so as a result of the lack of business as residents follow directives from state and federal authorities. Although the industrial class as a whole experienced an increase in energy deliveries in the second quarter, this is due primarily to continued growth in the high tech and digital services sectors, which saw lesser impacts from noted closures than other sectors. It is expected that some industrial customers will be affected in the coming months as production shifts in response to evolving customer demand for goods and services.

The following table shows the percentage contribution of the Company's 2019 commercial and industrial revenues by category, some of which have seen, or may see, larger impacts from COVID-19 than others:

Percentage of Commercial Category and Industrial Revenues Manufacturing - High tech 15 % Manufacturing - Other 13 Office, Finance, Insurance, and Real Estate 12 Government and Education 11 Other Services 11 Miscellaneous Commercial 8 Other - Trade 8 Transportation, Utilities, and Warehousing 6 Restaurants and Lodging 6 Health Care 6 Food and Merchandise Stores 4 After adjusting for the effects of weather, retail energy deliveries for the six months ended June 30, 2020 increased 0.5% compared to the same period of 2019. The increase was driven by an increase of 4% in residential deliveries and 6% growth in industrial energy deliveries. Commercial energy deliveries were down 7%. Residential average 43 -------------------------------------------------------------------------------- Table of Contents usage per customer saw an increase, which, combined with growth of 1.5% in the average number of residential customers, contributed to increased energy deliveries. PGE now expects that, while retail energy deliveries for 2020 will continue to be impacted by COVID-19 related behavioral changes, retail energy deliveries for the full year 2020 will remain flat compared to 2019 weather-adjusted levels. The Company's cost-of-service opt-out program caps participation by customers in the fixed three-year and minimum five-year opt-out programs, which account for the majority of energy delivered to Direct Access customers who purchase their energy from ESSs. This cap would have limited energy deliveries to these customers to an amount equal to approximately 14% of PGE's total retail energy deliveries for the first six months of 2020. Actual energy deliveries to Direct Access customers represented 11% of PGE's total retail energy deliveries for the first six months of 2020 and 2019. During 2018, the OPUC created a New Large Load Direct Access program for unplanned, large, new loads and large load growth at existing customer sites. In early February 2020, PGE began offering service to customers under this program, which is capped at 119 MWa, based on an order issued by the OPUC in January 2020. Power Operations-PGE utilizes a combination of its own generating resources and wholesale market transactions to meet the energy needs of its retail customers. The Company continuously makes economic dispatch decisions to obtain reasonably-priced power for its retail customers based on numerous factors, including plant availability, customer demand, river flows, wind conditions, and current wholesale prices. As a result, the amount of power generated and purchased in the wholesale market to meet the Company's retail load requirement can vary from period to period. The following table illustrates certain operating statistics related to the performance of PGE's own generating resources for the six month periods ended June 30: Actual energy provided as a Actual energy provided percentage of compared to projected total retail Plant availability (1) levels (2) load 2020 2019 2020 2019 2020 2019

Generation: Thermal: Natural gas 91 % 92 % 77 % 79 % 39 % 36 % Coal (3) 100 84 104 98 17 19 Wind 96 96 127 85 13 9 Hydro 90 97 77 85 8 9 (1)Plant availability represents the percentage of the period the plant was available for operations, which is impacted by planned maintenance and forced, or unplanned, outages. (2)Projected levels of energy are included as part of PGE's AUT. Such projections establish the power cost component of retail prices for the following calendar year. Any shortfall is generally replaced with power from higher cost sources, while any excess generally displaces power from higher cost sources. (3)Plant availability excludes Colstrip, which PGE does not operate. Colstrip availability was 78% during the six months ended June 30, 2020, compared with 88% in 2019. Energy received from PGE-owned and jointly-owned thermal plants decreased 1% during the six months ended June 30, 2020 compared to 2019, primarily as a result of strong performance for hydro and wind assets. Energy expected to be received from thermal resources is projected annually in the AUT based on forecast market prices, variable costs to run the plant, and the constraints of the plant. PGE's thermal generating plants require varying levels of annual maintenance, which is generally performed during the second quarter of the year. Energy received from PGE-owned hydroelectric plants and under contracts from mid-Columbia hydroelectric projects increased 6% during the six months ended June 30, 2020 compared to 2019, due to more favorable hydro conditions in 2020. Energy expected to be received from hydroelectric resources is projected annually in the AUT based on a modified hydro study, which utilizes 80 years of historical stream flow data. 44


Table of Contents

Energy received from PGE-owned and contracted wind resources increased 45% during the six months ended June 30, 2020 compared to 2019, due to more favorable wind conditions in 2020. Energy expected to be received from wind generating resources (Biglow Canyon and Tucannon River) is projected annually in the AUT based on historical generation. Wind generation forecasts are developed using a 5-year rolling average of historical wind levels or forecast studies when historical data is not available. Under the PCAM, PGE may share with customers a portion of cost variances associated with NVPC. Subject to a regulated earnings test, customer prices can be adjusted annually to absorb a portion of the difference between the forecasted NVPC included in customer prices (baseline NVPC) and actual NVPC for the year, if such differences exceed a prescribed "deadband" limit, which ranges from $15 million below to $30 million above baseline NVPC. •For the six months ended June 30, 2020, actual NVPC was $38 million below baseline NVPC. Based on forecast data, NVPC for the year ending December 31, 2020 is currently estimated to be below the baseline, but within the established deadband range. Accordingly, no estimated refund to customers is expected under the PCAM for 2020. •For the six months ended June 30, 2019, actual NVPC was $6 million above baseline NVPC. For the year ended December 31, 2019, actual NVPC was $5 million above baseline NVPC, which was within the established deadband range. Accordingly, no estimated collection to customers was recorded pursuant to the PCAM for 2019. Critical Accounting Policies

The Company's critical accounting policies are outlined in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020.

Results of Operations

The following tables provide financial information to be considered in conjunction with management's discussion and analysis of results of operations.

PGE defines Gross margin as Total revenues less Purchased power and fuel. Gross margin is considered a non-GAAP measure as it excludes depreciation, amortization, and other operation and maintenance expenses. The presentation of Gross margin is intended to supplement an understanding of PGE's operating performance in relation to changes in customer prices, fuel costs, impacts of weather, customer counts and usage patterns, and impact from regulatory mechanisms such as decoupling. The Company's definition of Gross margin may be different from similar terms used by other companies and may not be comparable to their measures. 45 -------------------------------------------------------------------------------- Table of Contents The results of operations are as follows for the periods presented (dollars in millions): Three Months Ended Six Months Ended June 30, June 30, 2020 2019 % Increase (Decrease) 2020 2019 % Increase (Decrease)

Total revenues $ 469 $ 460 2 % $ 1,042 $ 1,033 1 % Purchased power and fuel 109 105 4 % 262 284 (8) % Gross margin(1) 360 355 1 % 780 749 4 % Other operating expenses: Generation, transmission and distribution 77 86 (10) % 150 163 (8) % Administrative and other 74 78 (5) % 145 149 (3) % Depreciation and amortization 104 101 3 % 212 202 5 % Taxes other than income taxes 34 33 3 % 69 67 3 % Total other operating expenses 289 298 (3) % 576 581 (1) % Income from operations 71 57 25 % 204 168 21 % Interest expense(2) 34 31 10 % 67 63 6 % Other income: Allowance for equity funds used during construction 4 2 100 % 7 5 40 % Miscellaneous income (expense), net 3 - - % (1) 2 (150) % Other income, net 7 2 250 % 6 7 (14) % Income before income tax expense 44 28 57 % 143 112 28 % Income tax expense 5 3 67 % 23 14 64 % Net income $ 39 $ 25 56 % $ 120 $ 98 22 % (1) Gross margin agrees to Total revenues less Purchased power and fuel as reported on PGE's Condensed Consolidated Statements of Income and Comprehensive Income. (2) Net of an allowance for borrowed funds used during construction of $1 million for three months ended June 30, 2020 and 2019, and $3 million and $2 million for the six months ended June 30, 2020 and 2019, respectively. 46 -------------------------------------------------------------------------------- Table of Contents Net income - The following items contributed to the increase (decrease) in Net income for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions): Three Months Ended Six Months Ended June 30, 2019 $ 25 $ 98 Items increasing (decreasing) Net income: Decrease in Purchased power and fuel expense due to lower 13 78 average variable power cost per MWh Increase in Purchased power and fuel expense due to higher (17) (56) total system loads Decrease in other operating revenues primarily from the (4) (16)

resale of excess natural gas used for fuel in 2019 that did not recur in 2020 Change in average retail price

10 12 Decline in retail deliveries (11) (15) Increase in Wholesale revenues driven by increased volumes 11 21 Increase in bad debt expense (6) (6) Decrease in operating expenses as a result of decreased plant 8 16 maintenance expense Other 10 (12) June 30, 2020 $ 39 $ 120 Change in Net income $ 14 $ 22 47

-------------------------------------------------------------------------------- Table of Contents Three and six months ended June 30, 2020 compared with the three and six months ended June 30, 2019

Revenues consist of the following for the periods presented (in millions):

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Retail: Residential $ 223 48 % $ 205 45 % $ 502 48 % $ 495 48 % Commercial 140 30 158 34 299 29 312 30 Industrial 53 11 50 11 104 10 94 9 Direct Access 12 3 10 2 23 2 21 2 Subtotal 428 91 423 92 928 89 922 89 Alternative revenue programs, net of amortization - - (2) - 9 1 1 - Other accrued revenues, net 1 - 6 1 6 1 13 1 Total retail revenues 429 91 427 93 943 91 936 90 Wholesale revenues 27 6 16 3 74 7 53 5 Other operating revenues 13 3 17 4 25 2 44 5 Total revenues $ 469 100 % $ 460 100 % $ 1,042 100 % $ 1,033 100 %

Total retail revenues - The following items contributed to the increase (decrease) in Total retail revenues for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions):

Three Months Ended Six Months Ended June 30, 2019 $

427 $ 936 Increase as a result of the change in the average price of kWhs delivered

10 12

Increase attributed to alternative revenue programs related to the decoupling mechanism

2 8

Increase resulting from the combination of various supplemental tariffs and adjustments, the largest of which pertain to the demand response pilot program

1 2

Decrease from lower retail energy deliveries driven by the impact of COVID-19 in the second quarter 2020 and milder temperatures during the winter heating season in 2020

(11) (15) June 30, 2020 $ 429 $ 943 Change in Total retail revenues $ 2 $ 7 Wholesale revenues for the three months ended June 30, 2020 increased $11 million, or 69%, from the three months ended June 30, 2019, as a result of a $10 million increase related to 64% greater wholesale sales volume and a $1 million increase as a result of 4% higher average wholesale sales prices. Wholesale revenues for the six months ended June 30, 2020 increased $21 million, or 40%, from the six months ended June 30, 2019, as sales volumes more than doubled, the effect of which was partially offset by a 32% reduction in the average wholesale sales price. The price decline was due to the relatively high wholesale prices experienced during early 2019 as a result of natural gas availability constraints combined with weaker than average regional hydro production. More normal conditions have returned during 2020 along with a relatively mild winter and strong wind generation during the first quarter. 48 -------------------------------------------------------------------------------- Table of Contents Other operating revenues for the three months ended June 30, 2020 decreased $4 million from the three months ended June 30, 2019, the majority of which was the result of the sales of excess natural gas that occurred during 2019 that was not repeated in 2020. Other operating revenue for the six months ended June 30, 2020 decreased $19 million from the six months ended June 30, 2019 driven primarily by market conditions that provided less revenue from the sale of natural gas, in excess of amounts needed for the Company's generation portfolio, back into the wholesale market. Natural gas prices were considerably higher in the first quarter of 2019 as a result of a supply pipeline disruption in the region and the milder than average winter in North America in 2020, which resulted in an oversupply of natural gas and lower prices. Purchased power and fuel - The following items contributed to the increase (decrease) in Purchased power and fuel for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (dollars in millions, except for average variable power cost per MWh): Three Months Ended Six Months Ended June 30, 2019 $ 105 $ 284 Decrease related to average variable power cost per MWh (13) (78) Increase related to total system load 17 56 June 30, 2020 $ 109 $ 262 Change in Purchased power and fuel $

4 $ (22)

Average variable power cost per MWh: June 30, 2019 $ 21.55 $ 26.92 June 30, 2020 $ 20.35 $ 21.98 Total system load (MWhs in thousands): June 30, 2019 4,916 10,554 June 30, 2020 5,364 11,950 For the three months ended June 30, 2020, the $13 million decrease related to the change in average variable power cost per MWh (which includes PGE-generated power and market purchases), was driven by a 12% decline on the average cost of purchased power, combined with a 8% decline on the average cost for the Company's own generation. The $17 million increase related to total system load was primarily due to a 33% increase in purchased power, driven by lower gas prices and surplus hydro in the region. For the six months ended June 30, 2020, the $78 million decrease related to the change in average variable power cost per MWh, was primarily driven by a decrease in the cost for purchased power, which declined 31% on a per MWh basis. The $56 million increase related to total system load was primarily due to a 32% increase in purchased power, driven by lower gas prices and surplus hydro in the region. 49 -------------------------------------------------------------------------------- Table of Contents The sources of energy for PGE's total system load, as well as its retail load requirement, were as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Sources of energy (MWhs in thousands): Generation: Thermal: Natural gas 1,044 19 % 1,150 23 % 3,477 29 % 3,318 31 % Coal 318 6 378 8 1,504 13 1,713 16 Total thermal 1,362 25 1,528 31 4,981 42 5,031 47 Hydro 317 6 460 9 686 6 837 8 Wind 608 11 608 13 1,193 10 820 8 Total generation 2,287 42 2,596 53 6,860 58 6,688 63 Purchased power: Term 2,504 47 1,919 39 4,108 34 3,177 30 Hydro 459 9 319 6 804 7 566 6 Wind 114 2 82 2 178 1 123 1 Total purchased power 3,077 58 2,320 47 5,090 42 3,866 37 Total system load 5,364 100 % 4,916 100 % 11,950 100 % 10,554 100 % Less: wholesale sales (1,287) (785) (2,980) (1,459) Retail load requirement 4,077 4,131 8,970 9,095

The following table presents the forecasted April-to-September 2020 and the actual 2019 runoff at particular points of major rivers relevant to PGE's hydro resources:

Runoff as a Percent of Normal*

Location 2020 Forecast 2019 Actual Columbia River at The Dalles, Oregon 106 % 94 % Mid-Columbia River at Grand Coulee, Washington 111 87 Clackamas River at Estacada, Oregon 78 114 Deschutes River at Moody, Oregon 87 111

* Volumetric water supply forecasts and historical averages for the Pacific Northwest region are prepared by the Northwest River Forecast Center, with the Natural Resources Conservation Service and other cooperating agencies.

Actual NVPC - The following items contributed to the increase (decrease) in Actual NVPC for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions):

Three Months Ended Six Months Ended June 30, 2019 $ 89 $ 231 Increase (Decrease) in Purchased power and fuel expense 4 (22) Increase in Wholesale revenues (11) (21) June 30, 2020 $ 82 $ 188 Change in NVPC $ (7) $ (43)

See "Purchased power and fuel expense" and "Revenues" within this "Results of Operations" for more details.

50 -------------------------------------------------------------------------------- Table of Contents For the three months ended June 30, 2020 and 2019, actual NVPC was $18 million below the baseline and $6 million below the baseline NVPC, respectively. For the six months ended June 30, 2020 and 2019, actual NVPC was $38 million below and $6 million above baseline NVPC, respectively. Based on forecast data, NVPC for the year ending December 31, 2020 is currently estimated to be below the baseline, but within the established deadband range. Accordingly, no estimated refund to customers is expected under the PCAM for 2020. Generation, transmission and distribution - The following items contributed to the decrease in Generation, transmission and distribution for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions): Three Months Ended Six Months Ended June 30, 2019 $ 86 $ 163 Lower operating and plant maintenance expenses at the (10) (15) Company's generation facilities Lower distribution expenses for vegetation management and (2) (1) storm restoration Miscellaneous expenses 3 3 June 30, 2020 $ 77 $ 150 Change in Generations, transmission and distribution $

(9) $ (13)

Administrative and other - The following items contributed to the increase (decrease) in Administrative and other for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions):

Three Months Ended Six Months


June 30, 2019 $ 78 $ 149 Increase to bad debt expense 6 6 Lower employee benefits expense (3) (4) Lower outside services (3) (3) Miscellaneous expenses (4) (3) June 30, 2020 $ 74 $ 145 Change in Administrative and other $ (4) $ (4) COVID-19 may prospectively impact Administrative and other expenses, particularly if economic shutdowns increase bad debt expense by driving higher unemployment and impact the revenue of businesses in the Company's service territory. PGE expects that the combination of actions benefiting customers, such as suspending disconnections and late fee penalties, and regional economic factors will likely result in significant increases to bad debt expense, which is currently projected to be $15 million for 2020. 51 -------------------------------------------------------------------------------- Table of Contents Depreciation and amortization - The following items contributed to the increase (decrease) in Depreciation and amortization for the three and six months ended June 30, 2020 compared to the same periods in 2019 as follows (in millions): Three Months Ended Six Months Ended June 30, 2019 $ 101 $ 202 Increased depreciation and amortization expense from capital 1 3


Increased amortization related to regulatory programs (offset 5 10 in revenues) Miscellaneous expenses (3) (3) June 30, 2020 $ 104 $ 212 Change in Depreciation and amortization $ 3 $ 10 Interest expense, net increased $3 million and $4 million, in the three and six months ended June 30, 2020, respectively, primarily due to an increase in the average balance of outstanding debt and interest on additional finance leases.

Other income, net increased $5 million and decreased $1 million for the three and six months ended June 30, 2020, respectively, primarily due to market changes on the non-qualified benefit trust.

Income tax expense increased $2 million and $9 million for three and six months ended June 30, 2020, respectively, compared to the same periods in 2019, with the increases primarily due to higher pre-tax income.



Credit market disruptions caused by the impacts of COVID-19 have increased liquidity concerns. PGE's capacity to respond to liquidity issues and credit market disruptions is supported by: i) a $500 million revolving credit facility; ii) $220 million in letter of credit facilities; iii) strong investment grade credit ratings with multiple agencies; iv) significant capacity to issue additional debt within existing debt covenant restrictions; and v) continued access to capital markets demonstrated by an issuance of a $150 million 364-day term loan and a $200 million FMB issuance in April 2020. The Company has the ability to expand the revolving credit facility to $600 million, if needed. PGE continues to monitor credit market conditions to identify additional actions to support anticipated capital and operating requirements. PGE's access to short-term debt markets, including revolving credit from banks, helps provide necessary liquidity to support the Company's current operating activities, including the purchase of power and fuel. Long-term capital requirements are driven largely by capital expenditures for distribution, transmission, and generation facilities to support both new and existing customers, information technology systems, and debt refinancing activities. PGE's liquidity and capital requirements can also be significantly affected by other working capital needs, including margin deposit requirements related to wholesale market activities, which can vary depending upon the Company's forward positions and the corresponding price curves.

The following summarizes PGE's cash flows for the periods presented (in millions):



Table of Contents Six Months Ended June 30, 2020 2019 Cash and cash equivalents, beginning of period $ 30 $ 119 Net cash provided by (used in): Operating activities 356 314 Investing activities (370) (271) Financing activities 287 (151) (Decrease) increase in cash and cash equivalents 273 (108) Cash and cash equivalents, end of period $ 303 $ 11 Cash Flows from Operating Activities-Cash flows from operating activities are generally determined by the amount and timing of cash received from customers and payments made to vendors, with adjustments for certain non-cash items, such as depreciation and amortization, deferred income taxes, and pension and other postretirement benefit costs included in net income during a given period. The following items contributed to the net change in cash flows from operations for the six months ended June 30, 2020 compared with the six months ended June 30, 2019 (in millions): Increase/ (Decrease) Accounts payable and other accrued liabilities $ 38 Other non-cash income and expenses, net 25 Net income 22

Margin deposits primarily due to additional collateral requirements as the result of market conditions


Accounts receivable, net


Net change in cash flow from operations

$ 42

PGE estimates that non-cash charges for depreciation and amortization in 2020 will range from $410 million to $430 million. Combined with other sources, total cash expected to be provided by operations is estimated to range from $550 million to $600 million. For additional information, see "Contractual Obligations" in this Liquidity and Capital Resources section of Item 2. Cash Flows from Investing Activities-Cash flows used in investing activities consist primarily of capital expenditures related to new construction and improvements to PGE's generation facilities and transmission and distribution systems. Net cash used in investing activities for the six months ended June 30, 2020 increased $99 million when compared with the six months ended June 30, 2019, as capital expenditures increased as a result of construction underway for Wheatridge and the IOC in 2020. Excluding AFDC, the Company plans to make capital expenditures of $740 million in 2020, which it expects to fund with cash to be generated from operations during 2020, as discussed above, and the issuance of debt securities. For additional information, see "Debt and Equity Financings" in this Liquidity and Capital Resources section of Item 2. Cash Flows from Financing Activities-Financing activities provide supplemental cash for both day-to-day operations and capital requirements as needed. During the six months ended June 30, 2020, net cash provided by financing activities was primarily the result of proceeds from the combination of $200 million of FMBs issued, the $150 million term loan, and $21 million from the remarketing of PCRBs previously held by the Company, partially offset by the payment of $69 million of dividends. 53 -------------------------------------------------------------------------------- Table of Contents Capital Requirements

The following table presents PGE's estimated capital expenditures and contractual maturities of long-term debt for 2020 through 2024 (in millions, excluding AFDC).

2020 2021 2022 2023 2024 Ongoing capital expenditures* $ 550 $ 450 $ 500 $ 500 $ 500 Wheatridge Renewable Energy Facility 120 15 - - - Integrated Operations Center 70 100 - - - Total capital expenditures $ 740 $ 565 $ 500 $ 500 $ 500 Long-term debt maturities $ - $ 160 $ - $ - $ 80

* Consists primarily of upgrades to, and replacement of, generation, transmission, and distribution infrastructure, as well as new customer connections. Includes preliminary engineering and removal costs.

Debt and Equity Financings

PGE's ability to secure sufficient short- and long-term capital at a reasonable cost is determined by its financial performance and outlook, its credit ratings, its capital expenditure requirements, alternatives available to investors, market conditions, and other factors, such as the significant volatility in the capital markets in response to COVID-19. Management believes that the availability of its revolving credit facility, the expected ability to issue short- and long-term debt and equity securities, and cash expected to be generated from operations provide sufficient cash flow and liquidity to meet the Company's anticipated capital and operating requirements for the foreseeable future. For 2020, PGE expects to fund estimated capital requirements with cash from operations, which is expected to range from $550 million to $600 million, issuances of debt securities of up to $410 million, and the issuance of commercial paper, as needed. The actual timing and amount of any such issuances of debt and commercial paper will be dependent upon the timing and amount of capital expenditures and debt payments. Short-term Debt. PGE has approval from the Federal Energy Regulatory Commission to issue short-term debt up to a total of $900 million through February 7, 2022. The following table shows available liquidity as of June 30, 2020 (in millions): As of June 30, 2020 Capacity Outstanding


Revolving credit facility (1) $ 500 $ - $ 500 Letters of credit (2) 220 46 174 Total credit $ 720 $ 46 $ 674 Cash and cash equivalents 303 Total liquidity $ 977 (1)Scheduled to expire November 2023. (2)PGE has four letter of credit facilities under which the Company can request letters of credit for an original term not to exceed one year. The unsecured revolving credit facility supplements operating cash flows and provides a primary source of liquidity. Pursuant to the terms of the agreement, the revolving credit facility may be used as backup for commercial paper borrowings, to permit the issuance of standby letters of credit, and to provide cash for general corporate purposes. PGE may borrow for one, two, three, or six months at a fixed interest rate established at the time of the borrowing, or at a variable interest rate for any period up to the then remaining term of the credit facility. 54 -------------------------------------------------------------------------------- Table of Contents The Company has a commercial paper program under which it may issue commercial paper for terms of up to 270 days, limited to the unused amount of credit under the revolving credit facility. The Company has elected to limit its borrowings under the revolving credit facility in order to allow coverage for the potential need to repay any commercial paper that may be outstanding at the time. On April 9, 2020, PGE obtained a 364-day, term loan in the aggregate principal of $150 million. The term loan will bear interest for the relevant interest period at the London Inter-Bank Offered Rate plus 1.25%. The interest rate is subject to adjustment pursuant to the terms of the loan. The credit agreement expires on April 8, 2021, with any outstanding balance due and payable on such date.

Long-term Debt. As of June 30, 2020, total long-term debt outstanding, net of $13 million of unamortized debt expense, was $2,816 million.

On March 11, 2020, PGE completed the remarketing of an aggregate principal amount of $119 million of Pollution Control Revenue Refunding Bonds, which consist of the refinancing of $98 million previously outstanding that will now bear an interest rate of 2.125%, and $21 million previously held by PGE for remarketing that will bear an interest rate of 2.375%, both due in 2033.

On April 27, 2020, PGE issued $200 million of 3.15% Series First Mortgage Bonds (FMBs) due in 2030.

Capital Structure. PGE's financial objectives include maintaining a common equity ratio (common equity to total consolidated capitalization, including any current debt maturities) of approximately 50%, over time. Achievement of this objective helps the Company maintain investment grade credit ratings and facilitates access to long-term capital at favorable interest rates. The Company's common equity ratio was 45.6% and 48.1% as of June 30, 2020 and December 31, 2019, respectively.

Credit Ratings and Debt Covenants

PGE's secured and unsecured debt is rated investment grade by Moody's Investors Service (Moody's) and S&P Global Ratings (S&P), with current credit ratings and outlook as follows: Moody's S&P First Mortgage Bonds A1 A Senior unsecured debt A3 BBB+ Commercial paper P-2 A-2 Outlook Stable Positive Should Moody's or S&P reduce their credit rating on PGE's unsecured debt below investment grade, the Company could be subject to requests by certain of its wholesale, commodity, and transmission counterparties to post additional performance assurance collateral in connection with its price risk management activities. The performance assurance collateral can be in the form of cash deposits or letters of credit, depending on the terms of the underlying agreements, are based on the contract terms and commodity prices, and can vary from period to period. Cash deposits that PGE provides as collateral are classified as Margin deposits, which is included in Other current assets on the Company's condensed consolidated balance sheets, while any letters of credit issued are not reflected on the condensed consolidated balance sheets. As of June 30, 2020, PGE had $31 million of collateral posted with these counterparties, consisting of $25 million in cash and $6 million in letters of credit. Based on the Company's energy portfolio, estimates of energy market prices, and the level of collateral outstanding as of June 30, 2020, the amount of additional collateral that could be requested upon a single agency downgrade to below investment grade was $17 million, and decreases to $4 million by December 31, 2020 and none by December 31, 2021. The amount of additional collateral that could be requested 55 -------------------------------------------------------------------------------- Table of Contents upon a dual agency downgrade to below investment grade was $106 million at June 30, 2020 and decreases to $84 million by December 31, 2020 and to $71 million by December 31, 2021. PGE's financing arrangements do not contain ratings triggers that would result in the acceleration of required interest and principal payments in the event of a ratings downgrade. However, the cost of borrowing and issuing letters of credit under the credit facility would increase. The issuance of FMBs requires that PGE meet earnings coverage and security provisions set forth in the Indenture of Mortgage and Deed of Trust (Indenture) securing the bonds. PGE estimates that on June 30, 2020, under the most restrictive issuance test in the Indenture, the Company could have issued up to $955 million of additional FMBs. Any issuances of FMBs would be subject to market conditions and amounts could be further limited by regulatory authorizations or by covenants and tests contained in other financing agreements. PGE has the ability to release property from the lien of the Indenture under certain circumstances, including bond credits, deposits of cash, or certain sales, exchanges, or other dispositions of property. PGE's revolving credit facility contains customary covenants and credit provisions, including a requirement that limits consolidated indebtedness, as defined in the credit agreements, to 65.0% of total capitalization (debt-to-total capital ratio). As of June 30, 2020, the Company's debt-to-total capital ratio, as calculated under the credit agreement, was 54.4%.

Off-Balance Sheet Arrangements

PGE has no off-balance sheet arrangements, other than surety bonds and outstanding letters of credit, that have, or are reasonably likely to have, a material current or future effect on its consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. PGE's surety bond and letter of credit arrangements are described in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, there have been no material changes outside the ordinary course of business as of June 30, 2020, with the exception of an increase of $26 million to the surety bonds PGE has provided on behalf of the operator of Colstrip for a total of $44 million.

Contractual Obligations

PGE's contractual obligations for 2020 and beyond are set forth in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020. For such obligations, there have been no material changes outside the ordinary course of business as of June 30, 2020.


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