DIRECTORS DEFERRED COMPENSATION PLAN

EXHIBIT 10.3

NORTHWEST NATURAL GAS COMPANY

DIRECTORS DEFERRED COMPENSATION PLAN

EFFECTIVE JUNE 1, 1981

RESTATED AS OF DECEMBER 15, 2005

Table of Contents

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NORTHWEST NATURAL GAS COMPANY

DIRECTORS DEFERRED COMPENSATION PLAN

1. Restatement . The Board of Directors (the “Board”) of Northwest Natural Gas Company (hereinafter, the “Company”) adopted a Director’s Deferred Compensation Plan (hereinafter, the “Plan”) effective June 1, 1981, which was previously restated effective as of January 1, 1988, December 1, 1997 and December 1, 2001, amended effective as of July 1, 2002 and then restated again effective as of February 26, 2004. The existing Plan is amended by this Restatement, effective as of December 15, 2005.

2. Election by Directors .

(a) Eligibility . Any director of the Company or any corporation or other entity affiliated with or subsidiary to it (a “Director”) is eligible to elect to defer receipt of all or part of (i) the fees paid to him or her as a Director or as a member of a committee of the Board (“Fees”), or (ii) the shares (“NEDSCP Shares”) of restricted common stock of the Company (“Common Stock”) awarded to the Director under the Company’s Non-Employee Directors Stock Compensation Plan (“NEDSCP”). In addition, a Director may elect under the NEDSCP to receive awards under that plan as deferred cash credits (“NEDSCP Cash Credits”) rather than as NEDSCP Shares.

(b) Deferral of Fees . Any Director may elect, prior to the beginning of any calendar year, to defer receipt of fees for that calendar year, whether or not the fees are actually payable in that calendar year; and any newly elected Director prior to assuming office may elect to defer receipt of fees commencing after the date on which the Director assumes office. Any election under the preceding sentence shall apply only to fees earned subsequent to the date the election is filed. Total deferrals of Fees by a Director in a calendar year must be at least $1,500.

(c) Deferral of NEDSCP Shares . Any Director may elect, prior to the beginning of any calendar year, to defer receipt of unvested NEDSCP Shares that are scheduled to vest in that calendar year; and any newly elected Director prior to assuming office may elect to defer receipt of NEDSCP Shares that will vest in the remainder of the calendar year after the date on which the Director assumes office. Total deferrals of NEDSCP Shares by a Director in a calendar year must be at least 100% of the NEDSCP Shares scheduled to vest in that year. No deferral shall be allowed of NEDSCP Shares as to which a Director has made an election under Section 83(b) of the Internal Revenue Code.

(d) Continuation and Modification . An election to defer Fees or NEDSCP Shares by a Director shall automatically continue from year to year unless the Director terminates or modifies the election by written request. Any such termination or modification shall not become applicable until the calendar year following the year in which such written termination or modification is filed. In the event of a termination of a deferral election, any amounts already deferred by a Director shall not be paid until he or she ceases to serve as a Director, and then only pursuant to the terms, conditions, limitations and restrictions of the Plan.

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3. Accounts .

(a) Accounts . The Company shall establish on its books one, two or three separate accounts (individually, an “Account” and collectively, the “Accounts”) for each Director who participates in the Plan: a Stock Account, a Cash Account, and/or for each person who is a Director as of January 1, 1998, a Retirement Benefit Account. The number of NEDSCP Shares deferred by a Director shall be credited to the Stock Account. Any NEDSCP Cash Credits shall be credited to the Cash Account. Fees deferred by a Director shall be credited to the Stock Account or the Cash Account as elected by the Director at the time the Director elects to defer Fees. Such election may be divided between the two Accounts in increments of 25 percent of the deferred Fees covered by the election. An election between the Stock Account and the Cash Account shall be irrevocable as to the deferred Fees covered by the election and no transfers between the Stock Account and the Cash Account shall be permitted except as otherwise provided in Paragraph 3(f)(iv). The credit for deferred Fees shall be entered on the Company’s books of account each month at the time that Fees are paid to other Directors who do not elect to defer the payment of such Fees. The credit for deferred NEDSCP Shares shall be entered on the Company’s books of account as soon as practicable after January 1 of the year subject to the deferral. The credit for an NEDSCP Cash Credit shall be entered on the Company’s books of account effective as of the award date for such credit under the NEDSCP. No special fund shall be established nor shall any notes or securities be issued by the Company with respect to a Director’s Accounts.

(b) Stock Account . A Director’s Stock Account shall be denominated in shares of Common Stock, including fractional shares. With respect to each amount of Fees deferred to a Director’s Stock Account, the Stock Account shall be credited with a number of shares equal to the deferred Fees divided by the purchase price for shares of Common Stock under the Company’s Dividend Reinvestment and Direct Stock Purchase Plan (the “DRSPP”) on the Investment Date (as defined in the DRSPP) next succeeding the day the deferred Fees would have been paid if not for the deferral. As of each date for payment of dividends on the Common Stock, the Stock Accounts shall be credited with an additional number of shares (including fractional shares) equal to the amount of dividends that would be paid on the number of shares recorded as the balance of the Stock Account as of the record date for such dividend divided by the purchase price for shares of Common Stock under the DRSPP for dividends reinvested on such payment date.

(c) Forfeiture of NEDSCP Shares or NEDSCP Cash Credits . If any NEDSCP Shares deferred by a Director under this Plan are forfeited under the terms of the NEDSCP, the Director’s Stock Account shall be reduced by the number of shares so forfeited. If any NEDSCP Cash Credits of a Director are forfeited under the terms of the NEDSCP, the Director’s Cash Account shall be reduced by the amount of NEDSCP Cash Credits so forfeited.

(d) Retirement Benefit Account . A Director’s Retirement Benefit Account shall be denominated in shares of Common Stock, including fractional shares. Effective as of January 1, 1998, Section 5 of Article III of the Company’s Bylaws has been amended to eliminate with respect to all persons who are Directors as of January 1, 1998 a provision for a retirement benefit payable to Directors who retire from the Board at age 72 with at least 10 years of service. Effective as of January 1, 1998, the Retirement Benefit Account of each person who

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is a Director on that date shall be credited with a number a shares of Common Stock determined by the Company as a replacement for the prior retirement benefit. As of each date for payment of dividends on the Common Stock, the Retirement Benefit Accounts shall be credited with an additional number of shares (including fractional shares) equal to the amount of dividends that would be paid on the number of shares recorded as the balance of the Retirement Benefit Account as of the record date for such dividend divided by the purchase price for shares of Common Stock under the DRSPP for dividends reinvested on such payment date. The Retirement Benefit Account of a Director shall be canceled, and all amounts credited to such account shall be forfeited, if the Director ceases to be a Director before reaching age 70 or before serving as a Director for 10 years; provided, however, that each Director’s Retirement Benefit Account will be fully vested and noncancellable upon the death of the Director, the disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code) of the Director, or a Change in Control as defined in Paragraph 8.

(e) Statement of Account . At the end of each calendar quarter, a report shall be issued by the Company to each participating Director setting forth the balances of the Director’s Accounts under the Plan. The credit entries made to a Director’s Accounts constitute merely a general obligation of the Company to pay such Accounts to the Director, or to his or her beneficiary or estate when due under the Plan.

(f) Effect of Corporate Transaction on Stock Accounts and Retirement Benefit Accounts . At the time of consummation of a Corporate Transaction, if any, the amount credited to a Director’s Stock Account and Retirement Benefit Account shall be converted into a credit for cash or common stock of the acquiring company (“Acquiror Stock”) based on the consideration received by shareholders of the Company in the Corporate Transaction, as follows:

(i) Stock Transaction . If holders of Common Stock receive Acquiror Stock in the Corporate Transaction, then (1) the amount credited to each Director’s Stock Account and/or Retirement Benefit Account shall be converted into a credit for the number of shares of Acquiror Stock that the Director would have received as a result of the Corporate Transaction if the Director had actually held the Common Stock credited to his or her Stock Account and/or Retirement Benefit Account immediately prior to the consummation of the Corporate Transaction, and (2) Stock Accounts and Retirement Benefit Accounts will thereafter be denominated in shares of Acquiror Stock and ongoing deferrals of Fees and NEDSCP Shares, if any, shall continue to be made in accordance with outstanding deferral elections into the Stock Accounts as so denominated.

(ii) Cash or Other Property Transaction . If holders of Common Stock receive cash or other property in the Corporate Transaction, then (1) the amount credited to a Director’s Stock Account and/or Retirement Benefit Account shall be transferred to the Director’s Cash Account and converted into a cash credit for the amount of cash or the value of the property that the Director would have received as a result of the Corporate Transaction if the Director had actually held the Common Stock credited to his or her Stock Account and/or Retirement Benefit Account immediately prior to the consummation of the Corporate Transaction, and (2) Stock Accounts shall no longer exist under the Plan and all ongoing deferrals, if any, shall thereafter be made into Cash Accounts.

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(iii) Combination Transaction . If holders of Common Stock receive Acquiror Stock and cash or other property in the Corporate Transaction, then (1) the amount credited to each Director’s Stock Account and/or Retirement Benefit Account shall b