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Five years ago we began to address the challenges of a carbon-constrained world by introducing the Conservation Tariff. Its immediate purpose was to break the link between our earnings and gas usage. It effectively put shareholders on the same side of the table as customers, paving the way for us to aggressively promote conservation. It worked. Customers have used less natural gas without harming the company financially. A recognized success, it was renewed by Oregon regulators and has been emulated by utilities in at least 11 other states.
 Last year we took another important step in our efforts to address growing environmental concerns by creating an office of environmental policy and sustainability, a rarity among gas utilities. The new director, Bill Edmonds, will help focus and guide our efforts to reduce our company's environmental footprint and meet the expectations of our environmentally conscious customer base. In the future, you will see NW Natural bring a sustainability focus to its own operations, promote direct use of natural gas and combined heat and power, and continue to help our customers use our product with greater efficiency.
Looking to the Future
Making fundamental shifts in the operating model of a 148-year-old company is a complex task, one that requires extensive knowledge of the company, its operations and its people.
Fortunately, we were able to take advantage of the experience of our Executive Vice President, Mike McCoy, before he retired at the end of 2006. Mike devoted 37 years of his professional life to NW Natural, helped to mentor a new generation of company leaders, and in his final assignment, played a central role in redesigning our operations.
With the implementation of our new operating model, the board approved several executive promotions. In December, Gregg Kantor, Senior Vice President for Public and Regulatory Affairs, was named Executive Vice President. Gregg will now help coordinate the work of the officer team in addition to his other assignments.
The board also made three other appointments. Grant Yoshihara was promoted to Vice President of Utility Operations, Dave Williams became our Vice President of Utility Services, and Keith White will serve as Vice President of Business Development and Energy Supply. These four executives represent more than 70 years of combined operations and leadership experience at NW Natural and are well qualified, along with the other members of the executive team, to lead our company into the future.
While the passing of 2006 added depth to our executive team, the year also, sadly, marked the passage of two respected leaders and friends. Dick Woolworth, our Chairman of the Board, passed away in August. Wayne Kuni, who retired from the board in 2003 after 23 years of service, passed away in February. Both were outstanding directors who contributed much to the company's success. We will miss their wisdom and experience.
Finally, I would be remiss if I didn't finish this letter by underscoring that last year's outstanding performance was without question the product of great employees. During a year of tough changes, they remained focused on the job at hand, displaying the discipline and dedication of a world-class work force. Month after month they executed on our business plan and, at the same time, helped implement changes to make NW Natural a stronger company for the long haul. They deserve enormous credit.
Going forward, we realize that becoming stronger by design is a process, not an event - a journey, not a destination. We will continue to adapt our operations to meet the challenges ahead and to fulfill our commitment to delivering the greatest possible value to our customers, and to you, our shareholders.
Thank you for your continuing investment in NW Natural.
Sincerely,
Mark S. Dodson
President & Chief Executive Officer
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