I'll describe these two factors in more detail. First, our gas utility has continued to make necessary investments in safety, reliability and technology at record levels. The regulatory lag, recovery lag associated with these investments is exacerbated in 2024 due to the increased level of investment and the shorter lived nature or, if you will, higher depreciation expense associated with our cybersecurity and technology assets. Frankly, this is relatively new to us at these levels, due to this level of technology investment, and we had -- that we had to make to replace aging systems so quickly. Second, like many other companies, our gas utility is contending with inflationary pressure on operating expenses, primarily due to the renewal of several multi-year O&M contracts, higher personnel cost, the amortization of cloud computing technology investments, and higher pension expenses.

These are all reasons, frankly, why we decided to file a rate case in Oregon late last year. Our other operations are experiencing inflationary pressure also, but the magnitude of the items listed above in our gas company has resulted in 2024 earnings guidance being about $0.30 per share lower than our 2023 earnings. Our team has done all they can to reduce cost and operate as efficiently as possible while maintaining a safe and reliable system. For example, to help mitigate the near-term effects, we've extensively reviewed our entire organization and instituted aggressive cost saving measures. All these regulatory lag items will be addressed in the Oregon general rate case that will conclude later this year. And as you may recall, Oregon rate cases are adjudicated over a ten month period, with our filing at year-end.

We expect new rates to be in effect, November 1st. The gas utility request includes a revenue requirement increase of $154.9 million, based on a 50-50 cap structure, a ROE of 10.1%, and a cost of capital of 7.406%. This request includes an increase in average rate base of $381 million since the last rate case. The components of the revenue requirement increase are fairly straightforward, roughly 45% related to investments in the system, higher property taxes, and an updated depreciation study resulting in new depreciation rates, 35% due to operations and maintenance expenses, with the remainder related to cost of capital and income taxes. We carefully considered this rate filing and the effect on our customer bills and the good news is that on average, Oregon residential customers saw a 9% drop in their rates last November.

And today, customers are paying 7% less for their total natural gas bill than they did 15 years ago. Although, we're laser-focused on our gas utility rate case, we're also working hard to refresh rates at multiple water utilities in 2024, including our largest one in Arizona that we filed late -- were filed last year. These cases are largely related to capital investments. We continue to find these systems need substantial investments to meet current drinking water standards, treated effluent standards, and to support our growing communities. These rate cases are a critical step in building a strong foundation of earnings for that business. We believe over the longer term, our business and investments will drive earnings and cash flow growth and solid returns.

2024 is a building year, and reflects the magnified effect of the normal recovery lag in our highly regulated gas and water utility business model. Turning to Northwest Natural Renewables. Construction was completed in 2023 on two facilities that we're investing in with EDL that are designed to convert landfill waste gases to renewable natural gas, while raw gas volumes are flowing for both projects at the expected levels, which is good, full commissioning has not occurred due to a technical issue with the conditioning equipment. After troubleshooting the issues last year, our partners and their technical teams report that they have identified the solutions to resolve the remaining issues, and they expect both facilities to be online later this year.

Our investment of $25 million per facility will only be made upon achieving full commercial operations. And importantly, the revenue and cash flows are expected to begin promptly thereafter from long-term, primarily fixed price off-take agreements that we have contracted with investment grade counterparties. We remain committed to this business and see strong long-term growth opportunities here. However, I'm very disappointed with where we are on this project. We had planned for some earnings and cash flows from this business in 2023 and for a full year in 2024. The long-term financial returns of these projects remain largely intact, but are unfortunately delayed. And despite this disappointment, I am very excited with new leadership at our renewables company.

Anna Chittum was recently announced as the new President and already has hit the ground running. We are anxious to get through these start-up issues this year on those assets and are confident that Anna and her team can find other growth opportunities for us soon. Moving to a few comments on 2023. Last year was a tremendous, yet challenging year for us. Northwest Natural was once again recognized for customer satisfaction and scored second for large utilities in the Western United States according to J.D. Power's Gas Utility Residential Customer Satisfaction Study. At the same time, we grew our gas and water utilities, began operation of our second renewable natural gas facility under Oregon's landmark Senate Bill 98 Legislation, integrated our largest water and wastewater acquisition to date, and launched a water services business.

For the second year in a row, Ethisphere recognized us as one of the world's most ethical companies, which I greatly value. And, we also increased the dividends for the 68th year, an outstanding legacy. For 2023, we reported net income of $93.9 million, or $2.59 per share. That's an increase of $7.6 million compared to net income of $86.3 million, or $2.54 a share in 2022. Higher revenues from new rates in Oregon drove results of the natural gas utility along with customer growth, lower pension expense, offset by financing costs. A couple of quick notes on customer growth. Despite interest rates putting a damper on the national and local housing market, Northwest Natural Gas added approximately 4,800 new customers during the last 12 months for a growth rate of 0.6%.

In January 2024, we reached a milestone and served 800,000 gas utility customers. Our water and wastewater utilities also continued to growing both organically and through four acquisitions that we closed. Northwest Natural Water added 10,400 customers in 2023 for an average overall growth rate of 12.7% and an organic growth rate of 2%. We also launched a water services business with two acquisitions, and today that business supports nearly 20,000 connections. This is a strong platform that we believe can be scaled in the coming years. I'm very pleased to serve over 892,000 customer connections across five states through our three businesses. In summary, while 2024 reflects a convergence of challenges, these are primarily related to lag intrinsic in a regulated utility.

I believe we've taken the right actions to minimize the lag going forward, and that we're making the right investments today to set the stage for long-term growth. Our objective is to grow earnings while continuing to maintain our strong credit ratings and solid balance sheet. And I'm confident in the value and future of this 165-year old company. That's why today we are reaffirming our 4% to 6% long-term earnings per share growth rate, and the base year for that calculation on the five year window is 2022 with earnings per share that were $2.54. With that, I'll turn it over to Brody for remarks on the financials.

Brody Wilson: Thank you, David and good morning everyone. I'll begin by discussing the highlights for the fourth quarter and full year 2023 results and conclude with guidance for 2024. As a reminder, Northwest Natural's earnings are seasonal with a majority of revenues and earnings generated in the first and fourth quarters during the winter heating months. Also, our segment reporting includes Natural Gas Distribution or NGD segment and other which includes our interstate storage services and asset management services, Northwest Natural Water, Northwest Natural Renewables, and Holding company expenses. Beginning with fourth quarter results, we reported net income of $44.6 million, or a $1.21 per share, compared to net income of $47.9 million, or a $1.36 per share for the same period in 2022.

On a quarter basis, our gas utility net income declined $600,000, mainly from increases in operating costs, including depreciation. Other posted a decline of $2.7 million in the fourth quarter of 2023 compared to last year's results. That decline was primarily due to higher interest expense. Now, a few more details on the gas distribution segment's quarterly results. Margin increased $6.5 million, mainly from new rates, a gain on gas cost sharing and customer growth. Utility O&M increased $9.2 million, reflecting higher payroll costs from additional employees that were part of the previous rate case, information and technology costs, including cloud amortization, as well as increased contract labor costs and the amortization of deferrals. Utility depreciation and general taxes increased $1.5 million due to higher property, plant, and equipment.

Other income increased $4.8 million, primarily from lower pension expense, and higher equity AFUDC interest. Interest expense at the gas utility increased $1.6 million due to higher debt balances. Turning now to full year results. For 2023, we reported net income of $93.9 million, or $2.59 per share, compared to net income of $86.3 million, or $2.54 per share, for the same period in 2022. The $7.6 million increase in net income was largely the result of a $14.4 million increase in our gas utility, related to new rates in both Oregon and Washington, partially offset by higher depreciation and O&M in our gas distribution business and interest expense in our other businesses. Earnings per share was also affected by the issuance of common stock in 2023.

Now, a bit more detail on the gas utility's annual results. Utility margin increased $69.1 million related to new rates in Oregon and Washington, which contributed $56.7 million. The utility also benefited from gains on gas cost sharing, which increased $9.4 million, and customer growth provided $4.6 million. Gas utility O&M increased $40 million. This larger than normal increase reflected many costs which were planned in the rate case for which revenues were collected beginning November 2022. First, we had an increase in payroll costs driven by a higher average number of employees. Second, we incurred higher information technology costs, including cloud amortization, as well as increased costs associated with cybersecurity efforts. Finally, we had an increase in -- from the amortization of deferral balances totaling $7.7 million.

Most of the O&M increases in 2023 were anticipated in the forward test year of our rate case that went into effect on November 1st, 2022. Utility depreciation and general taxes increased $11.4 million, due to additional capital investments, about half of which relates to capital investments in core infrastructure for safety and reliability, and the remaining relates to an increase in technology investments which have a shorter depreciable life. Other income increased $15.8 million, driven by $5.8 million of lower pension costs, $5.5 million of higher interest income, and $4.1 million of increased equity AFUDC interest. Interest expense for our gas utility increased $14.3 million due primarily to incremental long-term debt financing. For 2023, cash provided by operating activities was a record $280 million.

We invested $327 million in our systems related to safety and reliability and technology. Nearly 90% of those capital expenditures were for our gas utility. We also deployed $8.5 million for water and wastewater acquisitions. Cash provided by financing activities was $64 million. We raised $66.5 million from the issuance of common stock and issued $240 million of incremental long-term debt to support our gas utility. Northwest Natural Holdings also executed a $150 million Note Purchase Agreement in December, which is expected to close in early March. We intend to use the proceeds to refinance $150 million of Holding Company and Water company debt due in March of 2024, taking care of our expected long-term debt needs for this year. Moving to our liquidity position and financing needs, we have ample liquidity and our credit ratings remain strong.

In October 2023, S&P initiated an A-plus rating for our holding company. Our ratings for the gas company have remained unchanged. Looking forward, we expect to continue targeting a capital structure at Northwest Natural of 50% equity and 50% long-term debt in keeping with our regulated capital structure in Oregon. Our objective remains to keep our balance sheet strong with ample liquidity to support working capital needs and growth. Turning to our Capital Expenditure guidance. For 2024, the gas utility capital expenditures are expected to be in the range of $350 million to $400 million, which included significant projects related to meter modernization, safety and reliability, and technology upgrades. For our existing water utilities, we expect 2024 CapEx to be approximately $40 million.

As a result of the increased capital investments at our gas and water utilities, we have increased our five-year consolidated CapEx range midpoint to $1.6 billion from $1.5 billion last year. As David discussed, these capital investments, coupled with higher forecasted expenses drove our decision to file the Oregon rate case this past December. Lag is expected to be alleviated as new rates for Northwest Natural are anticipated on November 1st, 2024. At the water utilities, we're experiencing similar regulatory lag. We filed a rate case at our largest water utility, and expect to file several more this year with new rates expected by the end of 2024. I would like to emphasize while the utility regulatory lag has put near-term earnings pressure on the business, these are important investments that are expected to translate into long-term earnings once rates are updated.

Finally, our Renewables business is poised to provide long-term earnings once the two RNG facilities are operational, but are not expected to make a significant earnings contribution until after 2024. Consistent with these business drivers, the company initiated 2024 earnings guidance today in the range of $2.20 per share to $2.40 per share, or about a $0.30 per share decline from the $2.59 per share of 2023 earnings. The decrease is primarily related to the regulatory lag we have described. Guidance assumes continued customer growth, average weather conditions, and no significant changes in prevailing regulatory policies, mechanisms, or outcomes or significant changes in laws, legislation, or regulations. Long-term, we continue to project solid growth in our natural gas and water utilities, and see value and growth from our renewable natural gas business.

As a result, we continue to target a long-term earnings per share growth rate of 4% to 6%, compounded annually from 2022 to 2027. Our base year for that view is 2022, when earnings per share was $2.54. With that, I'd like to turn it back over to David.

David Anderson: Thanks Brody, and we'll turn now to our strategic pillars and an update on our growth initiatives. Core to our strategy is to drive profitable growth for our investors across our gas, water, and renewable energy business in support of our company's long-term earnings growth target that Brody just discussed. Turning to our gas utility, as Brody outlined, we anticipate continued investments in our gas utility system and storage facilities for safety and reliability over the next five years, and we're finding needed investments on all fronts, including modernizing core infrastructure like meters, upgrading technology, maintaining our valuable storage facilities and a keen focus on safety and reliability spend. I'm encouraged by the opportunities and rate base growth of 5% to 7% over the next five years.

With this level of investment, we're balancing the best approach for customers and the company. That's why in our most recent rate filing in Oregon, we propose multi-year rate cases be considered in the future. This strategy has been successful in Washington State, helping to smooth increases, allowing customers to understand future rates, and providing the company more certainty. We look forward to engaging with the Oregon commission, staff and interveners on this topic. Now an update on the gas utility decarbonization efforts. We believe climate change requires rapid innovation and action. We also need to approach the energy transition in a way that ensures the energy system's reliability and affordability. Just last month, we were reminded once again of the importance of peak planning and the critical life safety and energy reliability benefits that a natural gas system provides.

Starting January 13th, a winter storm brought frigid temperatures, severe wind and snow to the Pacific Northwest and resulted in a record breaking weekend for our gas system. We hit a new peak day record on Saturday, January 13th, delivering 8 million therms of natural gas to sales customers, that's 100,000 therms more than our previous record in 2022 and doubled our average daily winter spend, our daily winter send out levels. If we include our transportation customers, we delivered 9 million therms that day. And for those of you familiar with megawatt hours, that's equivalent to 260,000 megawatt hours. For comparison, the largest local electric utility in our service territory delivered 84,000 megawatt hours on that same day. Our Mist Storage gas storage facility delivered a new record volume that same Saturday, and the facility provided essential support for the entire region's energy system throughout the event.

I'm pleased to report that our employees rose to the occasion, braved dangerous conditions, and ensured that our system performed well, supporting additional demand when our region needed it the most. Providing reliable energy is the result of disciplined investments in the system over many decades, and this consistent investment is why today we operate one of the tightest and most modern systems in the nation, and we use that system to deliver 50% more energy than any other gas or electric utility in Oregon. It's why our system is an energy powerhouse for the communities that we serve. And, we believe that two integrated systems, gas and electric, are better than one. It's a starting point for our climate strategy as we leverage our system that's already in place in new, innovative ways to drive emissions down even further, and to that end, I'm proud to announce that Northwest Natural has signed agreements with waste management doing business with WM that provides us exclusive rights to construct a renewable natural gas facility at WM's landfill in East Wenatchee, Washington.

We expect the facility could begin generating RNG in late 2025, providing a 20-year supply of RNG from the facility once constructed. This would be Northwest Natural's third RNG facility investment and the first facility located in the Pacific Northwest. We'll continue to work on multiple fronts to advance decarbonization efforts for our customers. A few comments of Northwest Natural Water. Since our water strategy began in 2017, we've grown through more than 30 acquisitions. What started with Water Utilities quickly turned to opportunities in Wastewater. We took an additional step in 2023 by launching the water services company and expect that this new business will complement our water acquisition strategy. Today, Northwest Natural ranks among the 20 largest privately owned water utilities in the United States, based on customer account.

And this is an impressive achievement in my opinion. Acquisition-by-acquisition, system-by-system, year-by-year, we built this into a meaningful business. There is no shortcut to consolidating a fragmented sector. Patience, discipline, and ingenuity are the keys to success. And we are committed to this area for the long-term. We've been successful at professionalizing the systems we've acquired, standing up safety programs, enhancing customer service, putting structured capital expenditure planning in place, and executing on those plans. And since 2018, our property, plant, and equipment assets have grown from $3.6 million to almost $150 million at the end of 2023. And we're not done. What we found is a tremendous amount of investment needed to ensure clean and safe water and wastewater services to our customers.

And while that CapEx has created regulatory lag in the near term, we know in the long-term it will benefit customers and investors alike. I continue to believe the diversification in long-term earnings and cash flow power of this business. Our focus is on smart acquisitions and follow on investments, as well as executing rate cases as necessary. In summary, I'm pleased with all the accomplishments our employees and this management team achieved in 2023. We've made substantial progress on all strategic initiatives. 2024 is challenging due to the larger than usual regulatory lag that we are experiencing, but it also will bring additional opportunities. I can assure you that our leadership team and employees are highly engaged to ensure success, not only this year, but in 2025 and years to come.

That's why we're reaffirming our 4% to 6% long-term earnings per share growth rate off the 2022 base year of $2.54. Thanks for joining us this morning and listening to us go through quite a few remarks here. Bailey, with that, I think we're ready to open it up for questions.

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