~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

Electric Operations

We generate, transmit and distribute electricity through our subsidiary NIPSCO to approximately 479,000 customers in 20 counties in the northern part of Indiana and also engage in wholesale electric and transmission transactions. NIPSCO owns and operates two coal-fired electric generating stations: four units at R.M. Schahfer located in Wheatfield, IN and one unit at Michigan City located in Michigan City, IN. The two operating facilities have a generating capacity of 2,080 MW. NIPSCO also owns and operates (i) Sugar Creek, a CCGT plant located in West Terre Haute, IN with generating capacity of 571 MW; (ii) two gas-fired generating units located at R.M. Schahfer with a generating capacity of 155 MW; and (iii) two hydroelectric generating plants with a generating capacity of 10 MW (Oakdale located at Lake Freeman in Carroll County, IN and Norway located at Lake Schahfer in White County, IN). These facilities provide for a total system operating generating capacity of 2,816 MW. NIPSCO is the managing partner in Rosewater Wind Generation LLC, a joint venture that owns and operates 102 MW of nameplate generating capacity in White County, IN. Refer to Note 4 "Variable Interest Entities" in the Notes to Consolidated Financial Statements for more information.

In May 2018, NIPSCO completed the retirement of two coal-burning units at Bailly Generating Station, located in Chesterton, IN. These units had a generating capacity of approximately 460 MW, which was replaced through various electric purchase agreements.

~~For~~

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NIPSCO’s transmission system, with voltages from 69,000 to 765,000 volts, consists of 3,009 circuit miles. NIPSCO is interconnected with eight neighboring electric utilities. During the ~~years~~year ended December 31, ~~2017, 2016~~2020, NIPSCO generated 68.8% and ~~2015,~~purchased 31.2% of its electric requirements.

NIPSCO participates in the MISO transmission service and wholesale energy market. MISO is a nonprofit organization created in compliance with FERC regulations to improve the flow of electricity in the regional marketplace and to enhance electric reliability. Additionally, MISO is responsible for managing energy markets, transmission constraints and the day-ahead, real-time, Financial Transmission Rights and ancillary markets. NIPSCO transferred functional control of its electric transmission assets to MISO, and transmission service for NIPSCO occurs under the MISO Open Access Transmission Tariff.

Business Strategy

We focus our business strategy on providing safe and reliable service through our core, rate-regulated asset-based utilities, which generate substantially all of our operating ~~income~~income. Our utilities continue to move forward on core safety, infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all six states in which we operate. Our goal is to develop strategies that benefit all stakeholders as we (i) address changing customer conservation patterns, (ii) align our price structures with our cost structure, and (iii) embark on long-term investment programs. These strategies focus on improving safety and reliability, enhancing customer service, lowering customer bills and reducing emissions while generating sustainable returns.

The safety of our customers, communities and employees remains our top priority. The SMS transitioned in 2020 from an accelerated project launch to an established operating model within NiSource. With the continued support and advice from the Quality Review Board, a ~~reconciliation~~panel of ~~net revenues~~third parties with safety operations expertise engaged by management to advise on safety matters, we are continuing to mature our SMS processes, capabilities and talent as we collaborate within and across industries to enhance safety and reduce operational risk.

In its 2018 Integrated Resource Plan submission to the ~~most directly comparable GAAP measure, operating income,~~IURC, NIPSCO laid out a plan to retire the R.M. Schahfer Generating Station by 2023 and Michigan City Generating Station by 2028. These units represent 72% of NIPSCO’s remaining generation capacity. The current replacement plan includes renewable sources of energy, including wind, solar, and battery storage, to be obtained through a combination of NIPSCO investment and PPAs. Refer to Note 20-E, "Other Matters," in the Notes to Consolidated Financial Statements for further discussion of these plans.

Rate Case Actions

The following table describes current rate case actions as applicable in each of our jurisdictions net of tracker impacts. See "Cost Recovery and Trackers" below for further detail on trackers.


(in millions)
Company	Proposed ROE		Approved ROE		Requested Incremental Revenue		Approved Incremental Revenue		Filed	Status	Rates Effective


NIPSCO - Electric(1)	10.80	%	9.75	%	$	21.4	$	(53.5)	October 31, 2018	Approved December 4, 2019	January 2020
Columbia of Pennsylvania(2)	9.86	%	N/A		$	76.8	In process		April 24, 2020	Order Expected Q1 2021	January 2021

Columbia of Maryland	10.95	%	None specified(3)		$	5.0	$	2.0	May 15, 2020	Approved November 7, 2020	December 2020

(1)Rates were implemented in two steps, with implementation of step 1 rates effective on January 2, 2020 and step 2 rates effective on March 2, 2020.

(2)On December 4, 2020, a Recommended Decision was issued by the Administrative Law Judge (ALJ) for the PUC to "deny the Company's request in its entirety because it has not met its burden of providing, by substantial evidence, that the proposed base rate revenue increase will result in just and reasonable rates, as ~~follows:~~required by 66 Pa.C.S.A. § 1301 during the current Coronavirus-2019 pandemic." Columbia of Pennsylvania filed Exceptions to the ALJ’s Recommended Decision on December 22, 2020 in which the Company proposed an increase of $76.8 million to be implemented in two steps: (1) an increase of $38.4 million to be effective January 23, 2021 through June 30, 2021, and defer revenue related to the remaining increase to regulatory assets during this phase, and (2) the remaining increase of $38.4 million to be implemented on July 1, 2021. Columbia of Pennsylvania proposed to recover the revenue deferred to a Regulatory Asset during the initial phase over a one-year period beginning January 1, 2022 and ending December 31, 2022. A Final Order from the PUC is expected during the first quarter of 2021 for rates effective retroactively on January 23, 2021.

(3)Columbia of Maryland's rate case resulted in a black box settlement, representing a settlement to a specific revenue increase but not a specified ROE. The settlement provides use of a 9.60% ROE for future Make Whole and Infrastructure Tracker filings.

Year Ended December 31, (in millions
2017 2016 2015 2017 vs. 2016 2016 vs. 2015
Operating Income $ 364.8
$ 291.4
$ 264.4
$ 73.4
$ 27.0

Year Ended December 31, (dollars in millions)
2017 2016 2015 2017 vs. 2016 2016 vs. 2015
Net Revenues
Operating revenues $ 1,786.5
$ 1,661.6
$ 1,574.4
$ 124.9
$ 87.2
Less: Cost of sales (excluding depreciation and amortization) 513.9
495.0
488.4
18.9
6.6
Net Revenues 1,272.6
1,166.6
1,086.0
106.0
80.6
Operating Expenses
Operation and maintenance 568.2
538.8
490.1
29.4
48.7
Depreciation and amortization 277.8
274.5
267.7
3.3
6.8
Loss on sale of assets and impairments, net 1.9
—
—
1.9
—
Other taxes 59.9
61.9
63.8
(2.0 ) (1.9 )
Total Operating Expenses 907.8
875.2
821.6
32.6
53.6
Operating Income $ 364.8
$ 291.4
$ 264.4
$ 73.4
$ 27.0
Revenues
Residential $ 476.9
$ 457.4
$ 427.1
$ 19.5
$ 30.3
Commercial 501.2
456.6
445.4
44.6
11.2
Industrial 698.1
631.6
646.3
66.5
(14.7 )
Wholesale 11.6
11.6
16.4
—
(4.8 )
Other 98.7
104.4
39.2
(5.7 ) 65.2
Total $ 1,786.5
$ 1,661.6
$ 1,574.4
$ 124.9
$ 87.2
Sales (Gigawatt Hours)
Residential 3,301.7
3,514.8
3,309.9
(213.1 ) 204.9
Commercial 3,793.5
3,878.7
3,866.8
(85.2 ) 11.9
Industrial 9,469.7
9,281.8
9,249.1
187.9
32.7
Wholesale 32.5
19.0
194.8
13.5
(175.8 )
Other 128.2
136.9
137.7
(8.7 ) (0.8 )
Total 16,725.6
16,831.2
16,758.3
(105.6 ) 72.9
Cooling Degree Days 837
988
762
(151 ) 226
Normal Cooling Degree Days 806
806
806
—
—
% Warmer (Cooler) than Normal 4 % 23 % (5 )%

Electric Customers
Residential 409,401
407,268
404,889
2,133
2,379
Commercial 56,134
55,605
55,053
529
552
Industrial 2,305
2,313
2,343
(8 ) (30 )
Wholesale 739
744
743
(5 ) 1
Other 2
2
6
—
(4 )
Total 468,581
465,932
463,034
2,649
2,898

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Competition and Changes in the Regulatory Environment

The regulatory frameworks applicable to our operations, including environmental regulations, at both the state and federal levels, continue to evolve. These changes have had and will continue to have an impact on our operations, structure and profitability. Management continually seeks new ways to be more competitive and profitable in this environment. We believe we are, in all material respects, in compliance with such laws and regulations and do not expect continued compliance to have a material impact on our capital expenditures, earnings, or competitive position. We continue to monitor existing and pending laws and regulations, and the impact of regulatory changes cannot be predicted with certainty. Refer to Note 20-D, "Environmental Matters" in the Notes to Consolidated Financial Statements for more information regarding environmental regulations that are applicable to our operations.

The Gas Distribution Operations utilities have pursued non-traditional revenue sources within the evolving natural gas marketplace. These efforts include (i) the sale of products and services upstream of the companies’ service territory, (ii) the sale of products and services in the companies’ service territories, and (iii) gas supply cost incentive mechanisms for service to their core markets. The upstream products are made up of transactions that occur between an individual Gas Distribution Operations utility and a buyer for the sales of unbundled or rebundled gas supply and capacity. The on-system services are offered by us to customers and include products such as the transportation and balancing of gas on the Gas Distribution Operations utility's system. The incentive mechanisms give the Gas Distribution Operations utilities an opportunity to share in the savings created from such situations as gas purchase prices paid below an agreed upon benchmark and their ability to reduce pipeline capacity charges with their customers.

Increased efficiency of natural gas appliances and improvements in home building codes and standards has contributed to a long-term trend of declining average use per customer. While historical rate design at the distribution level has been structured such that a large portion of cost recovery is based upon throughput rather than in a fixed charge, operating costs are largely incurred on a fixed basis and do not fluctuate due to changes in customer usage. As a result, Gas Distribution Operations have pursued changes in rate design to more effectively match recoveries with costs incurred. Each of the states in which Gas Distribution Operations operate has different requirements regarding the procedure for establishing changes to rate design. Columbia of Ohio has adopted a decoupled rate design that closely links the recovery of fixed costs with fixed charges. Columbia of Maryland and Columbia of Virginia have regulatory approval for weather and revenue normalization adjustments for certain customer classes, which adjust monthly revenues that exceed or fall short of approved levels. Columbia of Pennsylvania continues to operate its pilot residential weather normalization adjustment. Columbia of Kentucky incorporates a weather normalization adjustment. In a prior gas base rate proceeding, NIPSCO implemented a higher fixed customer charge for residential and small customer classes moving toward recovering more of its fixed costs through a fixed recovery charge, but has no weather or usage protection mechanism.

Cost Recovery and Trackers. Comparability of our line item operating results are impacted by regulatory trackers that allow for the future recovery in rates of certain costs as described below. Increases in expenses that are the subject to approved regulatory tracker mechanisms generally lead to increased regulatory assets, which ultimately result in a corresponding increase in operating revenues and, therefore, have essentially no impact on total operating income results. Certain approved regulatory tracker mechanisms allow for abbreviated regulatory proceedings in order for the operating companies to quickly implement revised rates and recover associated costs.

A portion of the Gas Distribution revenue is related to the recovery of gas costs, the review and recovery of which occurs through standard regulatory proceedings. All states in our operating area require periodic review of actual gas procurement activity to determine prudence and confirm the recovery of prudently incurred energy commodity costs supplied to customers.

A portion of the Electric Operations revenue is related to the recovery of fuel costs to generate power and the fuel costs related to purchased power. These costs are recovered through a FAC, which is updated quarterly to reflect actual costs incurred to supply electricity to customers.

Natural Gas Competition. Open access to natural gas supplies over interstate pipelines and the deregulation of the gas supply has led to tremendous change in the energy markets. LDC customers can purchase gas directly from producers and marketers in an open, competitive market. This separation or “unbundling” of the transportation and other services offered by LDCs allows customers to purchase the commodity independent of services provided by LDCs. LDCs continue to purchase gas and recover the associated costs from their customers. Our Gas Distribution Operations’ subsidiaries are involved in programs that provide customers the opportunity to purchase their natural gas requirements from third parties and use our Gas Distribution Operations’ subsidiaries for transportation services.

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Gas Distribution Operations competes with (i) investor-owned, municipal, and cooperative electric utilities throughout its service areas, (ii) other regulated and unregulated natural gas intra and interstate pipelines and (iii) other alternate fuels, such as propane and fuel oil. Gas Distribution Operations continues to be a strong competitor in the energy market as a result of strong customer preference for natural gas. Competition with providers of electricity has traditionally been the strongest in the residential and commercial markets of Kentucky, southern Ohio, central Pennsylvania and western Virginia due to comparatively low electric rates.

Electric Competition. Indiana electric utilities generally have exclusive service areas under Indiana regulations, and retail electric customers in Indiana do not have the ability to choose their electric supplier. NIPSCO faces non-utility competition from other energy sources, such as self-generation by large industrial customers and other distributed energy sources.

Seasonality

A significant portion of our operations are subject to seasonal fluctuations in sales. During the heating and cooling seasons, revenues from gas and electric sales, respectively, are more significant than in other months. The heating season is primarily from November through March, and the cooling season is primarily from June through September.

Human Capital

Human Capital Goals and Objectives.We have aligned our human capital goals to achieve the overall company objectives by driving an enhanced talent strategy, elevating support for front-line leaders, fostering a culture of rigor and accountability and strengthening our Human Resources function as a whole.

Workforce Composition.As of December 31, 2020, we had 7,301 full-time and 88 part-time employees. 2,728 employees were subject to collective bargaining agreements with various labor unions. Six of these agreements covering 527 employees are set to expire within one year.

Diversity.Our talent acquisition teams hired 612 external candidates in 2020 across all business segments. 35% of external hires were female and 18% were racially or ethnically diverse. In 2020, we engaged with community-based organizations, conducted career interest workshops in local schools, and focused our employee mentorship program on females. We also led a separate targeted development program for select employees to support the growth and development of female and ethnically diverse talent. We offered several employee resource groups (“ERGs”) and hosted mostly virtual activities throughout 2020. We have ERGs set up to support African-American, LatinX, veterans, LGBTQ+, female and Asian employees, among others, and held several sponsored conversations between senior executives and the ERGs.

The following provides the diversity breakdown of NiSource as of December 31, 2020:

Talent Development.We offer leadership development programs to enhance the behaviors and skills of our existing and future leaders. In 2020, we had participation from employees of all levels. We also offer extensive technical and non-technical

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employee training programs. Additionally, we strive to provide promotion and advancement opportunities for employees. In 2020, 84% of all leadership positions at the supervisor and above level were filled internally. Succession planning is regularly conducted to ensure bench strength for leadership positions. We utilize retention bonuses and conduct stay conversations in order to retain talent. Retention at NiSource in 2020 was over 93%. Retention is calculated using the total number of terminations divided by the average headcount for the annual period, not including the impacts from the sale of the Massachusetts Business and voluntary separation programs.

Employee Safety and Wellness. We have a number of programs to support employees and their families’ physical, mental, and financial well-being. These programs include a paid wellness day, telemedicine services, an Employee Assistance Program, Integrated Health Management navigation services, employee paid sick/disability leave and paid illness in family days, competitive medical, dental, vision, life and long term disability programs including employee health savings account company contributions and no cost registered financial planner counseling.

In response to COVID-19, we have implemented procedures designed to protect our employees who work in the field and who continue to work in operational and corporate facilities, including social distancing, wearing face coverings, temperature checks and more frequent cleaning of equipment and facilities. We have also implemented work-from-home policies and practices. We have minimized non-essential work that requires an employee to enter a customer premise and limited company vehicle occupancy to one person, where possible. We continue to employ physical and cybersecurity measures to ensure that our operational and support systems remain functional. Our actions to date have mitigated the spread of COVID-19 amongst our employees. We will continue to follow the Centers for Disease Control and Prevention ("CDC") guidance and implement safety measures intended to ensure employee and customer safety during the pandemic.

Other Relevant Business Information

Our customer base is broadly diversified, with no single customer accounting for a significant portion of revenues.

For a listing of certain subsidiaries of NiSource refer to Exhibit 21.

We electronically file various reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, as well as our proxy statements for the Company's annual meetings of stockholders at http://www.sec.gov. Additionally, we make all SEC filings available without charge to the public on our web site at http://www.nisource.com. The information contained on our website is not included in, nor incorporated by reference into, this Annual Report on Form 10-K.

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Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.

OPERATIONAL RISKS

We may not be able to execute our business plan or growth strategy, including utility infrastructure investments.

Business or regulatory conditions may result in us not being able to execute our business plan or growth strategy, including identified, planned and other utility infrastructure investments, which includes investments related to natural gas pipeline modernization and investments related to our renewable energy projects and the build-transfer execution goals within our business plan. Our “NiSource Next” initiative, a comprehensive program designed to identify long-term sustainable capability enhancements and cost optimization improvements, may not be effective. Our customer and regulatory initiatives may not achieve planned results. Utility infrastructure investments may not materialize, may cease to be achievable or economically viable and may not be successfully completed. Natural gas may cease to be viewed as an economically and environmentally attractive fuel. Environmental activist groups, investors and governmental entities may continue to oppose natural gas delivery and infrastructure investments in the jurisdictions where we operate because of perceived environmental impacts associated with the natural gas supply chain and end use. Energy conservation, energy efficiency, distributed generation, energy storage, policies favoring electric heat over gas heat and other factors may reduce demand for natural gas and energy. In addition, we consider acquisitions or dispositions of assets or businesses, joint ventures and mergers from time to time as we execute on our business plan and growth strategy. Any of these circumstances could adversely affect our results of operations and growth prospects. Even if our business plan and growth strategy are executed, there is still risk of, among other things, human error in maintenance, installation or operations, shortages or delays in obtaining equipment, and performance below expected levels (in addition to the other risks discussed in this section).

Our gas distribution and transmission activities, as well as generation, transmission and distribution of electricity, involve a variety of inherent hazards and operating risks, including potential public safety risks.

Our gas distribution and transmission activities, as well as generation, transmission, and distribution of electricity, involve a variety of inherent hazards and operating risks, including, but not limited to, gas leaks and over-pressurization, downed power lines, excavation or vehicular damage to our infrastructure, outages, environmental spills, mechanical problems and other incidents, which could cause substantial financial losses, as demonstrated in part by the Greater Lawrence Incident. In addition, these hazards and risks have resulted and may in the future result in serious injury or loss of life to employees and/or the general public, significant damage to property, environmental pollution, impairment of our operations, adverse regulatory rulings and reputational harm, which in turn could lead to substantial losses for us. The location of pipeline facilities, including regulator stations, liquefied natural gas and underground storage, or generation, transmission, substation and distribution facilities near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from such incidents. As with the Greater Lawrence Incident, certain incidents have subjected and may in the future subject us to litigation or administrative or other legal proceedings from time to time, both civil and criminal, which could result in substantial monetary judgments, fines, or penalties against us, be resolved on unfavorable terms, and require us to incur significant operational expenses. The occurrence of incidents has in certain instances adversely affected and could in the future adversely affect our reputation, cash flows, financial position and/or results of operations. We maintain insurance against some, but not all, of these risks and losses.

Failure to adapt to advances in technology and manage the related costs could make us less competitive and negatively impact our results of operations and financial condition.

A key element of our business model includes generating power at central station power plants to achieve economies of scale and produce power at a competitive cost. We continue to research, plan for, and implement new technologies that produce reliable, cost-efficient power or reduce power consumption. These technologies include renewable energy, distributed generation, energy storage, and energy efficiency. Advances in technology, changes in laws or regulations (including subsidization) and other alternative methods of producing power are reducing the cost of electric generation from these sources to a level that is competitive with most central station power electric production. This could cause power sales to decline and the value of our generating facilities to decline. New technologies may require us to make significant expenditures to remain competitive and may result in the obsolescence of certain operating assets.

Our natural gas business model leverages widespread utilization of natural gas for space heating as a core driver of revenues. Alternative energy sources, new technologies or alternatives to natural gas space heating, including cold climate heat pumps and/or efficiency of other products, could reduce demand and increase customer attrition, which would impact our ability to recover on our investments in our gas distribution assets.

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In addition, customers are increasingly expecting additional communications, increased access to information, and expanded electronic capabilities regarding their electric and natural gas services, which, in some cases, involves additional investments in technology. We also rely on technology to adequately maintain key business records.

Our future success will depend, in part, on our ability to anticipate and successfully adapt to technological changes, to offer services that meet customer demands and evolving industry standards, and to recover all, or a significant portion of, any unrecovered investment in obsolete assets. A failure by us to effectively adapt to changes in technology and manage the related costs could harm our ability to remain competitive in the marketplace for our products, services and processes and could have a material adverse impact on our results of operations and financial condition.

Aging infrastructure may lead to disruptions in operations and increased capital expenditures and maintenance costs, all of which could negatively impact our financial results.

We have risks associated with aging infrastructure, including our electric and gas infrastructure assets. These risks can be driven by threats such as, but not limited to, electrical faults, mechanical failure, internal corrosion, external corrosion, ground movement and stress corrosion and/or cracking. The age of these assets may result in a need for replacement, a higher level of maintenance costs, or unscheduled outages, despite efforts by us to properly maintain or upgrade these assets through inspection, scheduled maintenance and capital investment. In addition, the nature of the information available on aging infrastructure assets, which in some cases is incomplete, may make inspections, maintenance, upgrading and replacement of the assets particularly challenging. Missing or incorrect infrastructure data may lead to (1) difficulty properly locating facilities, which can result in excavator damage and operational or emergency response issues, and (2) configuration and control risks associated with the modification of system operating pressures in connection with turning off or turning on service to customers, which can result in unintended outages or operating pressures. Also, additional maintenance and inspections are required in some instances in order to improve infrastructure information and records and address emerging regulatory or risk management requirements, which increases our costs. The failure to operate these assets as desired could result in interruption of electric service, major component failure at generating facilities and electric substations, gas leaks and other incidents and in our inability to meet firm service obligations, which could adversely impact revenues, and could also result in increased capital expenditures and maintenance costs, which, if not fully recovered from customers, could negatively impact our financial results.

We may be unable to obtain insurance on acceptable terms or at all, and the insurance coverage we do obtain may not provide protection against all significant losses.

Our ability to obtain insurance, as well as the cost and coverage of such insurance, are affected by developments affecting our business; international, national, state, or local events; and the financial condition and underwriting considerations of insurers. For example, some insurers are moving away from underwriting certain energy related businesses such as those in the coal industry or those exposed to certain perils such as wildfires as well as gas explosion events or other infrastructure-related risks. The utility insurance market is experiencing a hardening environment due to reductions in commercial suppliers and the capacity they are willing to issue, increases in overall demand for capacity, and a prevalence of severe losses. We have not been able to obtain liability insurance coverage at previously procured limits at rates that are acceptable to us. Insurance coverage may not continue to be available at limits, rates or terms acceptable to us. The premiums we pay for our insurance coverage have significantly increased as a result of market conditions and the accumulated loss ratio over the history of our operations, and we expect that they will continue to increase as a result of hardening in market conditions. In addition, our insurance is not sufficient or effective under all circumstances and against all hazards or liabilities to which we are subject. For example, total expenses related to the Greater Lawrence Incident exceeded the total amount of liability coverage available under our policies. Certain types of damages, expenses or claimed costs, such as fines and penalties, have been and in the future may be excluded under the policies. In addition, insurers providing insurance to us may raise defenses to coverage under the terms and conditions of the respective insurance policies that could result in a denial of coverage or limit the amount of insurance proceeds available to us. Any losses for which we are not fully insured or that are not covered by insurance at all could materially adversely affect our results of operations, cash flows, and financial position.

The implementation of NIPSCO’s electric generation strategy, including the retirement of its coal generation units, may not achieve intended results.

Our plan to replace 80% of our coal generation capacity by mid-2023 and all of our coal generation by the end of 2028 with primarily renewable resources may not progress as anticipated. On October 31, 2018, NIPSCO submitted its 2018 Integrated Resource Plan with the IURC setting forth its short- and long-term electric generation plans in an effort to maintain affordability while providing reliable, flexible and cleaner sources of power. The Integrated Resource Plan evaluated demand-side and supply-side resource alternatives to meet NIPSCO customers' future energy requirements over the ensuing 20 years.

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The preferred option within the Integrated Resource Plan retires the R.M. Schahfer Generating Station by mid-2023 and the Michigan City Generating Station by the end of 2028. These stations represent 2,080 MW of generating capacity, equal to 72% of NIPSCO’s remaining generating capacity and 100% of NIPSCO's remaining coal-fired generating capacity. The current replacement plan includes renewable sources of energy, including wind, solar, and battery storage. In the second quarter of 2020, the MISO approved NIPSCO's plan to retire the R.M. Schahfer Generating Station in 2023. In February 2021, NIPSCO decided to submit modified Attachment Y Notices to MISO requesting accelerated retirement of two of the four units at R.M. Schahfer Generating Station. The two units are now expected to be retired by the end of 2021, with the remaining two units still scheduled to be retired in 2023. Refer to Note 20- E. "Other Matters - NIPSCO 2018 Integrated Resource Plan," in the Notes to Consolidated Financial Statements for additional information.

There are inherent risks and uncertainties in executing the Integrated Resource Plan, including changes in market conditions, regulatory approvals, environmental regulations, commodity costs and customer expectations, which may impede NIPSCO’s ability to achieve the intended results. NIPSCO’s future success will depend, in part, on its ability to successfully implement its long-term electric generation plans, to offer services that meet customer demands and evolving industry standards, and to recover all, or a significant portion of, any unrecovered investment in obsolete assets. NIPSCO’s electric generation strategy could require significant future capital expenditures, operating costs and charges to earnings that may negatively impact our financial position, financial results and cash flows. As required by statute, NIPSCO plans to submit a new Integrated Resource Plan to the IURC by November 1, 2021. This submission will again outline NIPSCO's short and long term plans for meeting the energy supply needs of its customers, taking into account current perspectives on a range of factors including, but not limited to, new state and federal policy, wholesale market rules, forecasted customer demand, and available resource alternatives.The analysis, conclusions and Preferred Plan in the 2021 Integrated Resource Plan may be different from the analysis, conclusions and Preferred Plan in the 2018 Integrated Resource Plan.

Our capital projects and programs subject us to construction risks and natural gas costs and supply risks, and are subject to regulatory oversight, including requirements for permits, approvals and certificates from various governmental agencies.

Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric generating facilities, electric and natural gas distribution infrastructure, natural gas storage, and other projects, including projects for environmental compliance. We are engaged in intrastate natural gas pipeline modernization programs to maintain system integrity and enhance service reliability and flexibility. NIPSCO also is currently engaged in a number of capital projects, including environmental improvements to its electric generating stations, the construction of new transmission facilities, and new projects related to renewable energy. As we undertake these projects and programs, we may be unable to complete them on schedule or at the anticipated costs. Additionally, we may construct or purchase some of these projects and programs to capture anticipated future growth in natural gas production, which may not materialize, and may cause the construction to occur over an extended period of time.

Our existing and planned capital projects require numerous permits, approvals and certificates from federal, state, and local governmental agencies. If there is a delay in obtaining any required regulatory approvals or if we fail to obtain or maintain any required approvals or to comply with any applicable laws or regulations, we may not be able to construct or operate our facilities, we may be forced to incur additional costs, or we may be unable to recover any or all amounts invested in a project. We also may not receive the anticipated increases in revenue and cash flows resulting from such projects and programs until after their completion. Other construction risks include changes in costs of materials, equipment, commodities or labor (including changes to tariffs on materials), delays caused by construction incidents or injuries, work stoppages, shortages in qualified labor, poor initial cost estimates, unforeseen engineering issues, the ability to obtain necessary rights-of-way, easements and transmissions connections and general contractors and subcontractors not performing as required under their contracts.

On May 1, 2020, former President Donald Trump issued an executive order (the “EO”) prohibiting any transaction initiated after that day that (i) involves bulk-power system (“BPS”) equipment designed, developed, manufactured or supplied by persons owned by, controlled by or subject to the jurisdiction or direction of a foreign adversary and (ii) poses an unacceptable risk to national security. Implementing regulations from the U.S. Secretary of Energy are still pending. The EO also requires the U.S. Secretary of Energy to review the risk of existing bulk-power system equipment sourced from foreign adversaries and to establish a task force to review and recommend federal procurement policies and procedures consistent with the considerations identified in the EO. On July 8, 2020, the U.S. Department of Energy issued a Request for Information (“RFI”), seeking input from industry stakeholders to “understand the energy industry’s current practices to identify and mitigate vulnerabilities in the supply chain” for components of bulk-power system equipment. The RFI identifies the following governments as “foreign adversaries”: China, Cuba, Iran, North Korea, Russia and Venezuela. The RFI notes that the U.S. Secretary of Energy retains

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authority to amend this list at any time and such countries have been identified only for the purposes of the EO. Pursuant to the EO, on December 17, 2020, the U.S. Department of Energy issued a Prohibition Order (the “Prohibition Order”) prohibiting the acquisition, importation, transfer, or installment of specified BPS equipment from China that directly serves critical defense facilities. While the implications of the Prohibition Order are still being assessed, it could impact our procurement processes for BPS equipment. In the future, certain bulk-power system equipment owned or operated by NiSource could possibly be considered to be sourced from a foreign adversary within the meaning of the EO. These regulations, if implemented, may impact our procurement processes for bulk-power system equipment.

To the extent that delays occur, costs become unrecoverable, or we otherwise become unable to effectively manage and complete our capital projects, our results of operations, cash flows, and financial condition may be adversely affected.

A significant portion of the gas and electricity we sell is used by residential and commercial customers for heating and air conditioning. Accordingly, fluctuations in weather, gas and electricity commodity costs and economic conditions impact demand of our customers and our operating results.

Energy sales are sensitive to variations in weather. Forecasts of energy sales are based on “normal” weather, which represents a long-term historical average. Significant variations from normal weather, could have, and have had, a material impact on energy sales. Additionally, residential usage, and to some degree commercial usage, is sensitive to fluctuations in commodity costs for gas and electricity, whereby usage declines with increased costs, thus affecting our financial results. Lastly, residential and commercial customers’ usage is sensitive to economic conditions and factors such as unemployment, consumption and consumer confidence. Therefore, prevailing economic conditions affecting the demand of our customers may in turn affect our financial results.

Fluctuations in the price of energy commodities or their related transportation costs or an inability to obtain an adequate, reliable and cost-effective fuel supply to meet customer demands may have a negative impact on our financial results.

Our current electric generating fleet is dependent on coal and natural gas for fuel, and our gas distribution operations purchase and resell a portion of the natural gas we deliver to our customers. These energy commodities are subject to price fluctuations and fluctuations in associated transportation costs. When appropriate, we use hedging in order to offset fluctuations in commodity supply prices. We rely on regulatory recovery mechanisms in the various jurisdictions in order to fully recover the commodity costs incurred in selling energy to our customers. However, while we have historically been successful in the recovery of costs related to such commodity prices, there can be no assurance that such costs will be fully recovered through rates in a timely manner.

In addition, we depend on electric transmission lines, natural gas pipelines, and other transportation facilities owned and operated by third parties to deliver the electricity and natural gas we sell to wholesale markets, supply natural gas to our gas storage and electric generation facilities, and provide retail energy services to customers. If transportation is disrupted, or if capacity is inadequate, we may be unable to sell and deliver our gas and electricservices to some or all of our customers. As a result, we may be required to procure additional or alternative electricity and/or natural gas supplies at then-current market rates, which, if recovery of related costs is disallowed, could have a material adverse effect on our businesses, financial condition, cash flows, results of operations and/or prospects.

Failure to attract and retain an appropriately qualified workforce, and maintain good labor relations, could harm our results of operations.

We operate in an industry that requires many of our employees to possess unique technical skill sets. Events such as an aging workforce without appropriate replacements, the mismatch of skill sets to future needs, or the unavailability of contract resources may lead to operating challenges or increased costs. These operating challenges include lack of resources, loss of knowledge, and a lengthy time period associated with skill development. In addition, current and prospective employees may determine that they do not wish to work for us due to market, economic, employment and other conditions. Failure to hire and retain qualified employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, may adversely affect our ability to manage and operate our business. If we are unable to successfully attract and retain an appropriately qualified workforce, safety, service reliability, customer satisfaction and our results of operations could be adversely affected.

Some of our employees are subject to collective bargaining agreements. Our collective bargaining agreements are generally negotiated on an operating company basis. Any failure to reach an agreement on new labor contracts or to negotiate these labor contracts might result in strikes, boycotts or other labor disruptions. Labor disruptions, strikes or significant negotiated wage

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and benefit increases, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our businesses, results of operations and/or cash flows.

If we cannot effectively manage new initiatives and organizational changes, we will be unable to address the opportunities and challenges presented by our strategy and the business and regulatory environment.

In order to execute on our sustainable growth strategy and enhance our culture of ongoing continuous improvement, we must effectively manage the complexity and frequency of new initiatives and organizational changes. If we are unable to make decisions quickly, assess our opportunities and risks, and implement new governance, managerial and organizational processes as needed to execute our strategy in this increasingly dynamic and competitive business and regulatory environment, our financial condition, results of operations and relationships with our business partners, regulators, customers and stockholders may be negatively impacted.

We outsource certain business functions to third-party suppliers and service providers, and substandard performance by those third parties could harm our business, reputation and results of operations.

Utilities rely on extensive networks of business partners and suppliers to support critical enterprise capabilities across their organizations. Global metrics indicate that deliveries from suppliers are slowing and that labor shortages are occurring in the energy sector. We outsource certain services to third parties in areas including construction services, information technology, materials, fleet, environmental, operational services and other areas. Outsourcing of services to third parties could expose us to inferior service quality or substandard deliverables, which may result in non-compliance (including with applicable legal requirements and industry standards), interruption of service or accidents, or reputational harm, which could negatively impact our results of operations. If any difficulties in the operations of these third-party suppliers and service providers, including their systems, were to occur, they could adversely affect our results of operations, or adversely affect our ability to work with regulators, unions, customers or employees.

A cyber-attack on any of our or certain third-party computer systems upon which we rely may adversely affect our ability to operate and could lead to a loss or misuse of confidential and proprietary information or potential liability.

We are reliant on technology to run our business, which is dependent upon financial and operational computer systems to process critical information necessary to conduct various elements of our business, including the generation, transmission and distribution of electricity; operation of our gas pipeline facilities; and the recording and reporting of commercial and financial transactions to regulators, investors and other stakeholders. In addition to general information and cyber risks that all large corporations face (e.g., malware, unauthorized access attempts, phishing attacks, malicious intent by insiders, third-party software vulnerabilities and inadvertent disclosure of sensitive information), the utility industry faces evolving and increasingly complex cybersecurity risks associated with protecting sensitive and confidential customer and employee information, electric grid infrastructure, and natural gas infrastructure. Deployment of new business technologies, along with maintaining legacy technology, represents a large-scale opportunity for attacks on our information systems and confidential customer and employee information, as well as on the integrity of the energy grid and the natural gas infrastructure. Increasing large-scale corporate attacks in conjunction with more sophisticated threats continue to challenge power and utility companies. Any failure of our computer systems, or those of our customers, suppliers or others with whom we do business, could materially disrupt our ability to operate our business and could result in a financial loss and possibly do harm to our reputation.

Additionally, our information systems experience ongoing, often sophisticated, cyber-attacks by a variety of sources, including foreign sources, with the apparent aim to breach our cyber-defenses. Although we attempt to maintain adequate defenses to these attacks and work through industry groups and trade associations to identify common threats and assess our countermeasures, a security breach of our information systems, or a security breach of the information systems of our customers, suppliers or others with whom we do business, could (i) impact the reliability of our generation, transmission and distribution systems and potentially negatively impact our compliance with certain mandatory reliability standards, (ii) subject us to reputational and other harm or liabilities associated with theft or inappropriate release of certain types of information such as system operating information or information, personal or otherwise, relating to our customers or employees, (iii) impact our ability to manage our businesses, and/or (iv) subject us to legal and regulatory proceedings and claims from third parties, in addition to remediation costs, any of which, in turn, could have a material adverse effect on our businesses, cash flows, financial condition, results of operations and/or prospects. Although we do maintain cyber insurance, it is possible that such insurance will not adequately cover any losses or liabilities we may incur as a result of a cybersecurity incident.

We are exposed to significant reputational risks, which make us vulnerable to a loss of cost recovery, increased litigation and negative public perception.

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As a utility company, we are subject to adverse publicity focused on the reliability of our services, the speed with which we are able to respond effectively to electric outages, natural gas leaks or events and related accidents and similar interruptions caused by storm damage or other unanticipated events, as well as our own or third parties' actions or failure to act. We are also subject to adverse publicity related to actual or perceived environmental impacts. If customers, legislators, or regulators have or develop a negative opinion of us, this could result in less favorable legislative and regulatory outcomes or increased regulatory oversight, increased litigation and negative public perception. The adverse publicity and investigations we experienced as a result of the Greater Lawrence Incident may have an ongoing negative impact on the public’s perception of us. It is difficult to predict the ultimate impact of this adverse publicity. The foregoing may have continuing adverse effects on our business, results of operations, cash flow and financial condition.

The sale of the Massachusetts Business poses risks and challenges that could negatively impact our business, and we may not realize the expected benefits of the sale of the Massachusetts Business.

On October 9, 2020, we completed the sale of the Massachusetts Business to Eversource. The sale of the Massachusetts Business involves separation or carve-out activities and costs and possible disputes with Eversource. We have continued financial liabilities with respect to the business conducted by Columbia of Massachusetts, as we retain responsibility for, and have agreed to indemnify Eversource against, certain liabilities. This responsibility includes liabilities for any fines arising out of the Greater Lawrence Incident and liabilities of Columbia of Massachusetts or its affiliates pursuant to civil claims for injury of persons or damage to property to the extent such injury or damage occurred prior to the closing in connection with the Massachusetts Business. It may also be difficult to determine whether a claim from a third party is our responsibility, and we may expend substantial resources trying to determine whether we or Eversource has responsibility for the claim.

Further, the sale of the Massachusetts Business may result in a dilutive impact to our future earnings if we are unable to offset the loss of revenue associated with the sale, which could have a material adverse effect on our results of operations and financial condition.

The impacts of natural disasters, acts of terrorism, acts of war, civil unrest, cyber-attacks, accidents, public health emergencies or other catastrophic events may disrupt operations and reduce the ability to service customers.

A disruption or failure of natural gas distribution systems, or within electric generation, transmission or distribution systems, in the event of a major hurricane, tornado, terrorist attack, acts of war, civil unrest, cyber-attack (as further detailed above), accident, public health emergency, pandemic, or other catastrophic event could cause delays in completing sales, providing services, or performing other critical functions. We have experienced disruptions in the past from hurricanes and tornadoes and other events of this nature. Also, companies in our industry face a heightened risk of exposure to acts of terrorism and vandalism. The occurrence of such events could adversely affect our financial position and results of operations. In accordance with customary industry practice, we maintain insurance against some, but not all, of these risks and losses.

Climate change has the potential to affect our business.

Our strategy may be impacted by policy and legal, technology, market, and reputational risks and opportunities that are associated with the transition to a lower-carbon economy, as disclosed in other risk factors in this section. In addition, climate change may exacerbate the risks to our physical infrastructure, including heat stresses to power lines, storms that damage infrastructure, lake and sea level changes that affect the manner in which services are currently provided, droughts or other stresses on water used to supply services, and other extreme weather conditions. Climate change and the transition to a lower carbon economy have the potential to affect our business by reducing our ability to serve customers, increasing the costs we incur in providing our products and services, impacting the demand for and consumption of our products and services (due to changes in costs, technology, reputation and weather patterns), and affecting the economic health of the regions in which we operate. Changes in policy to combat climate change, and technology advancement, each of which can also accelerate the implications of a transition to a lower carbon economy, may materially adversely impact our business, financial position, results of operations, and cash flows.

Extreme weather conditions may negatively impact our operations.

We conduct our operations across a wide geographic area subject to varied and potentially extreme weather conditions, which may from time to time persist for sustained periods of time. Despite preventative maintenance efforts, persistent weather related stress on our infrastructure may reveal weaknesses in our systems not previously known to us or otherwise present various operational challenges across all business segments. Further, adverse weather may affect our ability to conduct operations in a manner that satisfies customer expectations or contractual obligations, including by causing service disruptions.

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FINANCIAL, ECONOMIC AND MARKET RISKS

We have substantial indebtedness which could adversely affect our financial condition.

Our business is capital intensive and we rely significantly on long-term debt to fund a portion of our capital expenditures and repay outstanding debt, and on short-term borrowings to fund a portion of day-to-day business operations. We had total consolidated indebtedness of $9,746.1 million outstanding as of December 31, 2020. Our substantial indebtedness could have important consequences. For example, it could:

•limit our ability to borrow additional funds or increase the cost of borrowing additional funds;

•reduce the availability of cash flow from operations to fund working capital, capital expenditures and other general corporate purposes;

•limit our flexibility in planning for, or reacting to, changes in the business and the industries in which we operate;

•lead parties with whom we do business to require additional credit support, such as letters of credit, in order for us to transact such business;

•place us at a competitive disadvantage compared to competitors that are less leveraged;

•increase vulnerability to general adverse economic and industry conditions; and

•limit our ability to execute on our growth strategy, which is dependent upon access to capital to fund our substantial infrastructure investment program.

Some of our debt obligations contain financial covenants related to debt-to-capital ratios and cross-default provisions. Our failure to comply with any of these covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of outstanding debt obligations.

A drop in our credit ratings could adversely impact our cash flows, results of operation, financial condition and liquidity.

The availability and cost of credit for our businesses may be greatly affected by credit ratings. The credit rating agencies periodically review our ratings, taking into account factors such as our capital structure, earnings profile, and, in 2020 and 2021, the impacts of the COVID-19 pandemic. We are committed to maintaining investment grade credit ratings; however, there is no assurance we will be able to do so in the future. Our credit ratings could be lowered or withdrawn entirely by a rating agency if, in its judgment, the circumstances warrant. Any negative rating action could adversely affect our ability to access capital at rates and on terms that are attractive. A negative rating action could also adversely impact our business relationships with suppliers and operating partners, who may be less willing to extend credit or offer us similarly favorable terms as secured in the past under such circumstances.

Certain of our subsidiaries have agreements that contain “ratings triggers” that require increased collateral in the form of cash, a letter of credit or other forms of security for new and existing transactions if our credit ratings (including the standalone credit ratings of certain of our subsidiaries) are dropped below investment grade. These agreements are primarily for insurance purposes and for the physical purchase or sale of gas or power. As of December 31, 2020, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately $53.9 million. In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business.

If our or certain of our subsidiaries' credit ratings were downgraded, especially below investment grade, financing costs and the principal amount of borrowings would likely increase due to the additional risk of our debt and because certain counterparties may require additional credit support as described above. Such amounts may be material and could adversely affect our cash flows, results of operations and financial condition. Losing investment grade credit ratings may also result in more restrictive covenants and reduced flexibility on repayment terms in debt issuances, lower share price and greater stockholder dilution from common equity issuances, in addition to reputational damage within the investment community.

The novel coronavirus (COVID-19) pandemic adversely impacts our business, results of operations, financial condition, liquidity and cash flows.

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The continued spread of COVID-19 has resulted in widespread impacts on the global economy and financial markets and could lead to a prolonged reduction in economic activity, extended disruptions to supply chains and capital markets, and reduced labor availability and productivity. We have experienced lower revenues, higher expenses for personal protective equipment and supplies, and higher bad debt expense as a consequence of the pandemic, which has negatively impacted our results of operations as of December 31, 2020. Our future operating results and liquidity may continue to be impacted by the pandemic, but the extent of the impact remains uncertain. Such ongoing impact of the pandemic includes, but is not limited to:

•Lower revenue and cash flow, resulting from the decrease in commercial and industrial gas and electric demand as businesses comply with operating restrictions and re-opening plans in each state and as businesses experience negative economic impact from the pandemic, potentially offset by higher residential demand;

•Lower revenue and cash flow due to the continuing suspension of late payment and reconnection fees in some jurisdictions;

•A decline in revenue due to an increase in customer attrition rates, as well as lower revenue growth if customer additions slow due to a prolonged economic downturn;

•A continued increase in bad debt and a decrease in cash flows resulting from the suspension of shut-offs and the inability of our customers to pay for their gas and electric service due to job loss or other factors, partially offset by regulatory deferral;

•Lower revenues on a prolonged basis resulting from higher customer bankruptcies, predominately focused on commercial and industrial customers not able to sustain operations through the broader economic downturn;

•A continued delay in cash flows as customers utilize the more flexible payment plans we offer; and

•An increase in internal labor costs from higher overtime.

We also face the risk of not achieving operational compliance and/or customer requirements because of work restrictions or unavailable employees due to the pandemic. For more information regarding the items above and additional items related to the pandemic that we are evaluating and monitoring, please see our discussion of these topics in Part II., Item 7. "Management Discussion and Analysis of Financial Condition and Results of Operations - Executive Summary - Introduction - COVID-19" in this report and in our future filings with the Securities and Exchange Commission. To the extent the pandemic adversely affects our business, results of operations, financial condition, liquidity or cash flows, it may also have the effect of heightening many of the other Risk Factors described herein. The degree to which the pandemic will impact us will depend in part on future developments, including the continued severity and duration of the outbreak, actions that may be taken by governmental authorities, and to what extent and when normal economic and operating conditions can resume.

Adverse economic and market conditions, including as a result of the COVID-19 pandemic, or increases in interest rates could materially and adversely affect our business, results of operations, cash flows, financial condition and liquidity.

Deteriorating, sluggish or volatile economic conditions in our operating jurisdictions could adversely impact our ability to maintain or grow our customer base and collect revenues from customers, which could reduce our revenue or growth rate and increase operating costs. The continued spread of COVID-19 has resulted in widespread impacts on the global economy and financial markets and could lead to a prolonged reduction in economic activity, disruptions to supply chains and capital markets, and reduced labor availability and productivity.

In connection with the pandemic, certain state regulatory commissions instituted disconnection moratoriums and the suspension of collection of late payment fees, deposits and reconnection fees, which impacted our ability to pursue our standard credit risk mitigation practices. Following the issuance of these moratoriums, certain of our regulated operations have been authorized to record a regulatory asset for bad debt expense above levels currently in rates. While several of these moratoriums remain in place, we have reinstated our common credit mitigation practices where moratoriums have expired. It is possible that such moratoriums will be extended or reinstated as the pandemic continues.

In addition, the pandemic has impacted our physical business operations, resulting in delays in conducting certain residential work and additional costs required to comply with pandemic-related health and safety protocols.

Further, we rely on access to the capital markets to finance our liquidity and long-term capital requirements, including expenditures for our utility infrastructure and to comply with future regulatory requirements, to the extent not satisfied by the cash flow generated by our operations. We have historically relied on long-term debt and on the issuance of equity securities to

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fund a portion of our capital expenditures and repay outstanding debt, and on short-term borrowings to fund a portion of day-to-day business operations. Successful implementation of our long-term business strategies, including capital investment, is dependent upon our ability to access the capital and credit markets, including the banking and commercial paper markets, on competitive terms and rates. An economic downturn or uncertainty, market turmoil, changes in tax policy, challenges faced by financial institutions, changes in our credit ratings, or a change in investor sentiment toward us or the utilities industry generally could adversely affect our ability to raise additional capital or refinance debt. Reduced access to capital markets, increased borrowing costs, and/or lower equity valuation levels could reduce future earnings per share and cash flows. Refer to Note 15, “Long-Term Debt,” in the Notes to Consolidated Financial Statements for information related to outstanding long-term debt and maturities of that debt. In addition, any rise in interest rates may lead to higher borrowing costs, which may adversely impact reported earnings, cost of capital and capital holdings.

If, in the future, we face limits to the credit and capital markets or experience significant increases in the cost of capital or are unable to access the capital markets, it could limit our ability to implement, or increase the costs of implementing, our business plan, which, in turn, could materially and adversely affect our results of operations, cash flows, financial condition and liquidity.

Most of our revenues are subject to economic regulation and are exposed to the impact of regulatory rate reviews and proceedings.

Most of our revenues are subject to economic regulation at either the federal or state level. As such, the revenues generated by us are subject to regulatory review by the applicable federal or state authority. These rate reviews determine the rates charged to customers and directly impact revenues. Our financial results are dependent on frequent regulatory proceedings in order to ensure timely recovery of costs and investments.

The outcomes of these proceedings are uncertain, potentially lengthy and could be influenced by many factors, some of which may be outside of our control, including the cost of providing service, the necessity of expenditures, the quality of service, regulatory interpretations, customer intervention, economic conditions and the political environment. Further, the rate orders are subject to appeal, which creates additional uncertainty as to the rates that will ultimately be allowed to be charged for services. The COVID-19 pandemic is another factor that will continue to influence the regulatory process, such as the implementation of disconnection moratoriums as discussed above and the risk of not being able to recover costs and/or returns on invested capital through raising rates during a pandemic, which has disproportionately impacted vulnerable customers and communities.

Additionally, the costs of complying with current and future changes in environmental and federal pipeline safety laws and regulations are expected to be significant, and their recovery through rates will also be contingent on regulatory approval.

Our business operations are subject to economic conditions in certain industries.

Business operations throughout our service territories have been and may continue to be adversely affected by economic events at the national and local level where our businesses operate. In particular, sales to large industrial customers, such as those in the steel, oil refining, industrial gas and related industries, are impacted by economic downturns, including the downturn resulting from the COVID-19 pandemic; geographic or technological shifts in production or production methods; and consumer demand for environmentally friendly products and practices. The U.S. manufacturing industry continues to adjust to changing market conditions including international competition, increasing costs, and fluctuating demand for its products. In addition, our results of operations are negatively impacted by lower revenues resulting from higher bankruptcies, predominately focused on commercial and industrial customers not able to sustain operations through the economic disruptions related to the pandemic.

We are exposed to risk that customers will not remit payment for delivered energy or services, and that suppliers or counterparties will not perform under various financial or operating agreements.

Our extension of credit is governed by a Corporate Credit Risk Policy, involves considerable judgment by our employees and is based on an evaluation of a customer or counterparty’s financial condition, credit history and other factors. We monitor our credit risk exposureby obtaining credit reports and updated financial information for customers and suppliers, and by evaluating the financial status of our banking partners and other counterparties by reference to market-based metrics such as credit default swap pricing levels, and to traditional credit ratings provided by the major credit rating agencies. Adverse economic conditions result in an increase in defaults by customers, suppliers and counterparties. As stated above, in connection with the COVID-19 pandemic, certain state regulatory commissions instituted regulatory moratoriums that have impacted our ability to pursue our standard credit risk mitigation practices.

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We are a holding company and are dependent on cash generated by our subsidiaries to meet our debt obligations and pay dividends on our stock.

We are a holding company and conduct our operations primarily through our subsidiaries, which are separate and distinct legal entities. Substantially all of our consolidated assets are held by our subsidiaries. Accordingly, our ability to meet our debt obligations or pay dividends on our common stock and preferred stock is largely dependent upon cash generated by these subsidiaries. In the event a major subsidiary is not able to pay dividends or transfer cash flows to us, our ability to service our debt obligations or pay dividends could be negatively affected.

Capital market performance and other factors may decrease the value of benefit plan assets, which then could require significant additional funding and impact earnings.

The performance of the capital markets affects the value of the assets that are held in trust to satisfy future obligations under defined benefit pension and other postretirement benefit plans. We have significant obligations in these areas and hold significant assets in these trusts as noted in Note 12, "Pension and Other Postretirement Benefits," in the Notes to Consolidated Financial Statements. These assets are subject to market fluctuations and may yield uncertain returns, which fall below our projected rates of return. A decline in the market value of assets may increase the funding requirements of the obligations under the defined benefit pension plan. Additionally, changes in interest rates affect the liabilities under these benefit plans; as interest rates decrease, the liabilities increase, which could potentially increase funding requirements. Further, the funding requirements of the obligations related to these benefits plans may increase due to changes in governmental regulations and participant demographics, including increased numbers of retirements or longer life expectancy assumptions, as well as voluntary early retirements. In addition, lower asset returns result in increased expenses. Ultimately, significant funding requirements and increased pension or other postretirement benefit plan expense could negatively impact our results of operations and financial position.

We have significant goodwill. Any future impairments of goodwill could result in a significant charge to earnings in a future period and negatively impact our compliance with certain covenants under financing agreements.

In accordance with GAAP, we test goodwill for impairment at least annually and review our definite-lived intangible assets for impairment when events or changes in circumstances indicate its fair value might be below its carrying value. Goodwill is also tested for impairment when factors, examples of which include reduced cash flow estimates, a sustained decline in stock price or market capitalization below book value, indicate that the carrying value may not be recoverable.

A significant charge in the future could impact the capitalization ratio covenant under certain financing agreements. We are subject to a financial covenant under our revolving credit facility, which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2020, the ratio was 62.5%.

Changes in the method for determining LIBOR and the potential replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, results of operations and cash flows.

Some of our indebtedness, including borrowings under our revolving credit agreement, bears interest at a variable rate based on LIBOR. From time to time, we also enter into hedging instruments to manage our exposure to fluctuations in the LIBOR benchmark interest rate. In addition, these hedging instruments, as well as hedging instruments that our subsidiaries use for hedging natural gas price and basis risk, rely on LIBOR-based rates to calculate interest accrued on certain payments that may be required to be made under these agreements, such as late payments or interest accrued if any cash collateral should be held by a counterparty. Any changes announced by regulators in the method pursuant to which the LIBOR rates are determined may result in a sudden or prolonged increase or decrease in the reported LIBOR rates. If that were to occur, the level of interest payments we incur may change.

In July 2017, the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In November 2020, the Board of Governors of the U.S. Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the U.S. Comptroller of the Currency collectively issued a statement encouraging banks to stop entering into financial contracts that use LIBOR as a reference rate as soon as possible, and no later than December 31, 2021. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom or elsewhere. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in April 2018. SOFR is intended to be a

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broad measure of the cost of borrowing cash overnight that is collateralized by U.S. Treasury securities. However, because SOFR is a broad U.S. Treasury repurchase agreement financing rate that represents overnight secured funding transactions, it differs fundamentally from LIBOR. For example, SOFR is a secured overnight rate, while LIBOR is an unsecured rate that represents interbank funding over different maturities. In addition, because SOFR is a transaction-based rate, it is backward-looking, whereas LIBOR is forward-looking. Because of these and other differences, there is no assurance that SOFR will perform in the same way as LIBOR would have performed at any time, and there is no guarantee that it is a comparable substitute for LIBOR.

In addition, although certain of our LIBOR based obligations provide for alternative methods of calculating the interest rate payable on certain of our obligations if LIBOR is not reported, which include, without limitation, requesting certain rates from major reference banks in London or New York, uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than, lower than or that do not otherwise correlate over time with, the interest rates or payments that would have been made on our obligations if a LIBOR-based rate was available in its current form.

LITIGATION, REGULATORY AND LEGISLATIVE RISKS

The outcome of legal and regulatory proceedings, investigations, inquiries, claims and litigation related to our business operations may have a material adverse effect on our results of operations, financial position or liquidity.

We areinvolved in legal and regulatory proceedings, investigations, inquiries, claims and litigation in connection with our business operations, including those related to the Greater Lawrence Incident, the most significant of which are summarized in Note 20, “Other Commitments and Contingencies” in the Notes to Consolidated Financial Statements. Our insurance does not cover all costs and expenses that we have incurred or that we may incur in the future relating to the Greater Lawrence Incident, and may not fully cover incidents that could occur in the future. Due to the inherent uncertainty of the outcomes of such matters, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity.

The Greater Lawrence Incident has materially adversely affected and may continue to materially adversely affect our financial condition, results of operations and cash flows.

In connection with the Greater Lawrence Incident, we have incurred and will incur various costs and expenses. We have been subject to inquiries and investigations by government authorities and regulatory agencies regarding the Greater Lawrence Incident, including the Massachusetts DPU and the Massachusetts Attorney General's Office, as further described in Note 7, "Goodwill and Other Intangible Assets," Note 20-C. "Legal Proceedings," and Note 20-E. "Other Matters" in the Notes to Consolidated Financial Statements.

While we have recovered the full amount of our liability insurance coverage available under our policies, total expenses related to the incident have exceeded such amount. Expenses in excess of our liability insurance coverage have materially adversely affected and may continue to materially adversely affect our results of operations, cash flows and financial position.

We may also incur additional costs associated with the Greater Lawrence Incident, beyond the amount currently anticipated, including in connection with the U.S. Attorney’s Office investigation as well as civil litigation. Further, state or federal legislation may be enacted that would require us to incur additional costs by mandating various changes, including changes to our operating practice standards for natural gas distribution operations and safety. If we are unable to recover the capital cost of the gas pipeline replacement through the pending property insurance litigation related to this matter, or we incur a material amount of other costs, our financial condition, results of operations, and cash flows could be materially and adversely affected.

Further, if it is determined in other matters that we did not comply with applicable statutes, regulations or rules in connection with the operations or maintenance of our natural gas system, and we are ordered to pay additional amounts in penalties, or other amounts, our financial condition, results of operations, and cash flows could be materially and adversely affected.

Our settlement with the U.S. Attorney’s Office in respect of federal charges in connection with the Greater Lawrence Incident may expose us to further penalties, liabilities and private litigation, and may impact our operations.

On February 26, 2020, the Company entered into a DPA and Columbia of Massachusetts entered into a plea agreement with the U.S. Attorney’s Office to resolve the U.S. Attorney’s Office’s investigation relating to the Greater Lawrence Incident, which was subsequently approved by the United States District Court for the District of Massachusetts (the "Court"). See Note 20-C. "Legal Proceedings” in the Notes to Consolidated Financial Statements. The agreements impose various compliance and remedial obligations on the Company and Columbia of Massachusetts. Failure to comply with the terms of these agreements could result in further enforcement action by the U.S. Attorney’s Office, expose the Company and Columbia of Massachusetts

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to penalties, financial or otherwise, and subjects the Company to further private litigation, each of which could impact our operations and have a material adverse effect on our business.

Our businesses are subject to various laws, regulations and tariffs. We could be materially adversely affected if we fail to comply with such laws, regulations and tariffs or with any changes in or new interpretations of such laws, regulations and tariffs.

Our businesses are subject to various laws, regulations and tariffs, including, but not limited to, those relating to natural gas pipeline safety, employee safety, the environment and our energy infrastructure. Existing laws, regulations and tariffs may be revised or become subject to new interpretations, and new laws, regulations and tariffs may be adopted or become applicable to us and our operations. In some cases, compliance with new laws, regulations and tariffs increases our costs. If we fail to comply with laws, regulations and tariffs applicable to us or with any changes in or new interpretations of such laws, regulations or tariffs, our financial condition, results of operations, regulatory outcomes and cash flows may be materially adversely affected.

Our businesses are regulated under numerous environmental laws. The cost of compliance with these laws, and changes to or additions to, or reinterpretations of the laws, could be significant. Liability from the failure to comply with existing or changed laws could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Our businesses are subject to extensive federal, state and local environmental laws and rules that regulate, among other things, air emissions, water usage and discharges, GHG and waste products such as coal combustion residuals. Compliance with these legal obligations require us to make expenditures for installation of pollution control equipment, remediation, environmental monitoring, emissions fees, and permits at many of our facilities. These expenditures are significant, and we expect that they will continue to be significant in the future. Furthermore, if we fail to comply with environmental laws and regulations or are found to have caused damage to the environment or persons, that failure or harm may result in the assessment of civil or criminal penalties and damages against us, injunctions to remedy the failure or harm, and the inability to operate facilities as designed.

Existing environmental laws and regulations may be revised and new laws and regulations seeking to change environmental regulation of the energy industry may be adopted or become applicable to us, with an increasing focus on both coal and natural gas. Revised or additional laws and regulations may result in significant additional expense and operating restrictions on our facilities or increased compliance costs, which may not be fully recoverable from customers through regulated rates and could, therefore, impact our financial position, financial results and cash flow. Moreover, such costs could materially affect the continued economic viability of one or more of our facilities.

An area of significant uncertainty and risk are the laws concerning emission of GHG. While we continue to reduce GHG emissions through the retirement of coal-fired electric generation, increased sourcing of renewable energy, and priority pipeline replacement, energy efficiency programs, leak detection and repair, GHG emissions are currently an expected aspect of the electric and natural gas business. Revised or additional future GHG legislation and/or regulation related to the generation of electricity or the extraction, production, distribution, transmission, storage and end use of natural gas could materially impact our gas supply, financial position, financial results and cash flows.

Even in instances where legal and regulatory requirements are already known or anticipated, the original cost estimates for environmental improvements, remediation of past environmental impact, or pollution reduction strategies and equipment can differ materially from the amount ultimately expended. The actual future expenditures depend on many factors, including the nature and extent of impact, the method of improvement, the cost of raw materials, contractor costs, and requirements established by environmental authorities. Changes in costs and the ability to recover under regulatory mechanisms could affect our financial position, financial results and cash flows.

Changes in taxation and the ability to quantify such changes as well as challenges to tax positions could adversely affect our financial results.

We are subject to taxation by the various taxing authorities at the federal, state and local levels where we do business. Legislation or regulation which could affect our tax burden could be enacted by any of these governmental authorities. For example, the TCJA includes numerous provisions that affect businesses, including changes to U.S. corporate tax rates, business-related exclusions, deductions and credits. The outcome of regulatory proceedings regarding the extent to which the effect of a change in corporate tax rate will impact customers and the time period over which the impact will occur could significantly impact future earnings and cash flows. Separately, a challenge by a taxing authority, changes in taxing authorities’

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ITEM 1A. RISK FACTORS

NISOURCE INC.

administrative interpretations, decisions, policies and positions, our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions may cause actual financial results to deviate from previous estimates.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

NISOURCE INC.

None.

ITEM 2. PROPERTIES

Discussed below are the principal properties held by us and our subsidiaries as of December 31, 2020.

Gas Distribution Operations

Refer to Item 1, "Business - Gas Distribution Operations" of this report for further information on Gas Distribution Operations properties.

Electric Operations

Refer to Item 1, "Business - Electric Operations" of this report for further information on Electric Operations properties.

Corporate and Other Operations

We own the Southlake Complex, our 325,000 square foot headquarters building located in Merrillville, Indiana.

Character of Ownership

Our principal properties and our subsidiaries' principal properties are owned free from encumbrances, subject to minor exceptions, none of which are of such a nature as to impair substantially the usefulness of such properties. Many of our subsidiary offices in various communities served are occupied under leases. All properties are subject to routine liens for taxes, assessments and undetermined charges (if any) incidental to construction. It is our practice to regularly pay such amounts, as and when due, unless contested in good faith. In general, the electric lines, gas pipelines and related facilities are located on land not owned by us or our subsidiaries, but are covered by necessary consents of various governmental authorities or by appropriate rights obtained from owners of private property. We do not, however, generally have specific easements from the owners of the property adjacent to public highways over, upon or under which our electric lines and gas distribution pipelines are located. At the time each of the principal properties were purchased, a title search was made. In general, no examination of titles as to rights-of-way for electric lines, gas pipelines or related facilities was made, other than examination, in certain cases, to verify the grantors’ ownership and the lien status thereof.

ITEM 3. LEGAL PROCEEDINGS

For a description of our legal proceedings, see Note 20-C "Legal Proceedings" in the Notes to Consolidated Financial Statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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SUPPLEMENTAL ITEM. INFORMATION ABOUT OUR EXECUTIVE OFFICERS

NISOURCE INC.

The following is a list of our executive officers, including their names, ages, offices held and other recent business experience.

Name

Age

Office(s) Held in Past 5 Years

Joseph Hamrock

President and Chief Executive Officer of NiSource since July 2015.

Donald E. Brown

Executive Vice President, Chief Financial Officer and President, NiSource Corporate Services.

Executive Vice President of NiSource since May 2015.

Chief Financial Officer of NiSource since July 2015.

President, NiSource Corporate Services since June 2020.

Treasurer of NiSource from July 2015 to June 2016.

Anne-Marie W. D'Angelo

Executive Vice President, General Counsel and Corporate Secretary.

Executive Vice President of NiSource since January 2021.

Corporate Secretary and General Counsel of NiSource since September 2019.

Senior Vice President of NiSource from September 2019 to January 2021.

General Counsel of Global Brass & Copper Inc. from May 2017 to August 2019.

Assistant General Counsel of McDonald’s USA from January 2015 to May 2017.

Shawn Anderson

Senior Vice President and Chief Strategy and Risk Officer of NiSource since June 2020.

Vice President, Strategy of NiSource from January 2019 to May 2020.

Vice President of NiSource from May 2018 to December 2018.

Treasurer and Chief Risk Officer of NiSource from June 2016 to May 2020.

Vice President, Regulatory Affairs and Financial of Columbia of Ohio from July 2015 to June 2016.

Charles E. Shafer, II

Senior Vice President and Chief Safety Officer of NiSource since October 2019.

Senior Vice President, Gas Engineering and Gas Support Services of NiSource Corporate Services Company from January 2019 to September 2019.

Senior Vice President, Customer Services and New Business of NiSource Corporate Services Company from May 2016 through December 2018.

Vice President, Engineering and Construction of NiSource Corporate Services Company from June 2012 to May 2016.

Violet G. Sistovaris

Executive Vice President and Chief Experience Officer.

Executive Vice President of NiSource since July 2015.

Chief Experience Officer of NiSource since June 2020.

President, NIPSCO of NiSource from July 2015 to May 2020.

Pablo A. Vegas

Executive Vice President, Chief Operating Officer and President, NiSource Utilities.

Executive Vice President of NiSource since May 2016.

Chief Operating Officer and President, NiSource Utilities of NiSource since June 2020.

President, Gas Utilities of NiSource from January 2019 to May 2020.

Chief Restoration Officer of NiSource from September 2018 to December 2018.

Executive Vice President, Gas Business Segment and Chief Customer Officer of NiSource from May 2017 to September 2018.

President, Columbia Gas Group, of NiSource from May 2016 to May 2017.

President and Chief Operating Officer of American Electric Power Company of Ohio from May 2012 to May 2016.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

NISOURCE INC.

NiSource’s common stock is listed and traded on the New York Stock Exchange under the symbol “NI.”

Holders of shares of NiSource’s common stock are entitled to receive dividends if and when declared by NiSource’s Board out of funds legally available, subject to the prior dividend rights of holders of our preferred stock or the depositary shares representing such preferred stock outstanding, and if full dividends have not been declared and paid on all outstanding shares of preferred stock in any dividend period, no dividend may be declared or paid or set aside for payment on our common stock. The policy of the Board has been to declare cash dividends on a quarterly basis payable on or about the 20th day of February, May, August, and November. At its January 27, 2021 meeting, the Board declared a quarterly common dividend of $0.22 per share, payable on February 19, 2021 to holders of record on February 9, 2021.

Although the Board currently intends to continue the payment of regular quarterly cash dividends on common shares, the timing and amount of future dividends will depend on the earnings of NiSource’s subsidiaries, their financial condition, cash requirements, regulatory restrictions, any restrictions in financing agreements and other factors deemed relevant by the Board. There can be no assurance that NiSource will continue to pay such dividends or the amount of such dividends.

As of February 9, 2021, NiSource had 18,211 common stockholders of record and 391,859,711 shares outstanding.

The graph below compares the cumulative total shareholder return of NiSource’s common stock for the last five years with the cumulative total return for the same period of the S&P 500 and the Dow Jones Utility indices.

The foregoing performance graph is being furnished as part of this annual report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by NiSource under the Securities Act or the Exchange Act.

The total shareholder return for NiSource common stock and the two indices is calculated from an assumed initial investment of $100 and assumes dividend reinvestment.

Purchases of Equity Securities by Issuer and Affiliated Purchasers. For the three months ended December 31, 2020, no equity securities that are registered by NiSource Inc. pursuant to Section 12 of the Securities Exchange Act of 1934 were purchased by or on behalf of us or any of our affiliated purchasers.

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ITEM 6. SELECTED FINANCIAL DATA

NISOURCE INC.

None.

On November 19, 2020, the SEC issued amendments to streamline and enhance certain financial disclosure requirements in Regulation S-K. These changes are effective for annual filings for the first fiscal year ending on or after August 9, 2021. Early adoption is permitted for companies after February 10, 2021, and companies are permitted to selectively early adopt the provisions of the final rules, provided an amended item is adopted in its entirety. We early adopted the amendments to Item 301 in their entirety, which removed the requirement to furnish selected financial data for each of the last five fiscal years.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NISOURCE INC.


Index			Page
Executive Summary			28
Summary of Consolidated Financial Results			30
Results and Discussion of Segment Operations			31
Gas Distribution Operations			32
Electric Operations			36
Liquidity and Capital Resources			40
Off Balance Sheet Arrangements			45
Market Risk Disclosures			45
Other Information			46

EXECUTIVE SUMMARY

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion) analyzes our financial condition, results of operations and cash flows and those of our subsidiaries. It also includes management’s analysis of past financial results and certain potential factors that may affect future results, potential future risks and approaches that may be used to manage those risks. See "Note regarding forward-looking statements" at the beginning of this report for a list of factors that may cause results to differ materially.

Management’s Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with our Consolidated Financial Statements and related Notes to Consolidated Financial Statements in this annual report.

We are an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states. We generate substantially all of our operating income through these rate-regulated businesses, which are summarized for financial reporting purposes into two primary reportable segments: Gas Distribution Operations and Electric Operations.

Refer to the “Business” section under Item 1 of this annual report and Note 24, "Segments of Business," in the Notes to Consolidated Financial Statements for further discussion of our regulated utility business segments.

Our goal is to develop strategies that benefit all stakeholders as we (i) address changing customer conservation patterns, (ii) develop more contemporary pricing structures, and (iii) embark on long-term infrastructure investment and safety programs. These strategies focus on improving reliability and safety, enhancing customer service, lowering customer bills and reducing emissions while generating sustainable returns. Additionally, we continue to pursue regulatory and legislative initiatives that will allow residential customers not currently on our system to obtain gas service in a cost effective manner. Refer also to the Electric Supply section of our Electric Operations Segment discussion for additional information on our long term electric generation strategy.

Columbia of Massachusetts Asset Sale:On February 26, 2020, NiSource and Columbia of Massachusetts entered into an Asset Purchase Agreement with Eversource (the "Asset Purchase Agreement"). Upon the terms and subject to the conditions set forth in the Asset Purchase Agreement, we sold the Massachusetts Business to Eversource for net proceeds of approximately $1,113 million in cash, subject to adjustment for the final working capital amount. The sale was approved by the Massachusetts DPU on October 7, 2020, and closed on October 9, 2020. As a result of the sale, we have transitioned to executing a TSA with Eversource. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements for additional information.

Your Energy, Your Future: Our plan to replace 80% of our coal generation capacity by the end of 2023 and all of our coal generation by the end of 2028 with primarily renewable resources is well underway. In October 2020, we executed three BTAs for 900 MW solar nameplate capacity and 135 MW of storage capacity. In December 2020, the formation of the Rosewater Wind Generation joint venture, one of our previously executed BTAs, was completed, and has begun operation. We executed in December 2020 a PPA for an additional 280 MW of solar nameplate capacity. These projects were selected following a comprehensive review of bids submitted through the RFP process that NIPSCO underwent in late 2019. The projects complement previously executed BTAs and PPAs with a combined nameplate capacity of 400 MW and 1,300 MW, respectively. For additional information, see Note 4 "Variable Interest Entities" and "Results and Discussion of Segment Operation - Electric Operations," in this Management's Discussion.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

NIS~~OURCE~~ INC.

NiSource Next: We have launched a comprehensive, multi-year program designed to deliver long-term safety, sustainable capability enhancements and cost optimization improvements. This program will advance the high priority we place on safety and risk mitigation, further enable our safety management system ("SMS"), and enhance the customer experience. NiSource Next is designed to (i) leverage our current scale, (ii) utilize technology, (iii) define clear roles and accountability with our leaders and employees, and (iv) standardize our processes to focus on operational rigor, quality management and continuous improvement. An initial step in this program was the voluntary separation program announced in August 2020, with an expected total severance expense of approximately $38.0 million. The majority of these separation costs will be expensed in 2020 and approximately $21.2 million has been paid as of December 31, 2020. The NiSource Next initiative, along with the sale of the Massachusetts Business, is projected to achieve a reduction in ongoing operation and maintenance costs by approximately 8% in 2021 compared to 2020. For additional information, see Note 20-E, "Other Matters," in the Notes to Consolidated Financial Statements.

COVID-19: The safety of our employees and customers, while providing essential services during the COVID-19 pandemic, continues to be a key area of focus. Since March 2020, we have taken a proactive, coordinated approach intended to prevent, mitigate and respond to the pandemic, by utilizing our Incident Command System (ICS). The ICS includes members of our executive leadership team, a medical review professional, and members of functional teams from across our company. The ICS monitors state-by-state conditions and determines steps to conduct our operations safely for employees and customers.

We have implemented procedures designed to protect our employees who work in the field and who continue to work in operational and corporate facilities, including social distancing, wearing face coverings, temperature checks and more frequent cleaning of equipment and facilities. We have also implemented work-from-home policies and practices. We have minimized non-essential work that requires an employee to enter a customer premise and limited company vehicle occupancy to one person, where possible. We continue to employ physical and cybersecurity measures to ensure that our operational and support systems remain functional. Our actions to date have mitigated the spread of COVID-19 amongst our employees and principal field contractors. We will continue to follow CDC guidance and implement safety measures intended to ensure employee and customer safety during this pandemic. We are following all federal, state and local guidelines related to the COVID-19 vaccinations and will encourage employees to receive the vaccine when it is available to them.

Since the beginning of the pandemic, we have been helping our customers navigate this challenging time. We suspended disconnections soon after this outbreak began. As of December 2020, suspension of disconnections has been lifted in some, but not all, of our jurisdictions. We plan to continue our payment assistance programs across all of our operating territory to help customers deal with the impact of the pandemic. Additionally, we continue to have dialogue with the state regulatory commissions for each of our operating companies regarding the pandemic. Regulatory deferrals for certain costs have been allowed by all of our state regulatory commissions. Costs approved for deferral vary by state. For information on the state specific suspension of disconnections and COVID-19 regulatory filings, see Note 9, "Regulatory Matters," in the Notes to Consolidated Financial Statements. The CARES Act was enacted on March 27, 2020 and provides monetary-relief and financial aid to individuals, business, nonprofits, states and municipalities. The Coronavirus Relief Act was enacted on December 27, 2020 and extended or supplemented many of the programs from the CARES act. We are continuing to promote multiple resources available to customers including benefits from the CARES Act, such as additional funding for both the Low-Income Home Energy Assistance Program and the Community Services Block Grant to help support income-qualified customers. We are sharing energy efficiency tips to help customers save energy at home and promoting our budget plan program, which allows customers to pay about the same amount each month.

We have experienced lower revenue, higher expenses for personal protective equipment and supplies, and higher bad debt expense as a consequence of the pandemic, which has negatively impacted our results of operations through December 31, 2020. Refer to "Results and Discussion of Segment Operation" in this Management's Discussion for additional segment specific information. We did experience lower cash flows from operations for the year ended December 31, 2020 in comparison to the same period in 2019 due, in part, to slower collections of customer accounts receivable; however, we believe we have sufficient liquidity as a result of the issuance of $1.0 billion notes in April 2020, the remaining cash proceeds received from the sale of the Massachusetts Business in October 2020, the available capacity under our short-term revolving credit facility and accounts receivable securitization facilities, and our anticipated ability to access capital markets. Additionally, in the second quarter of 2020 we reduced our planned 2020 capital investments by $145 million. We did not make any other material changes to our capital construction programs or our renewable generation projects. While we have not experienced any significant issues in our supply chain, we are actively managing the materials, supplies, and contract services for our generation, transmission, distribution, and customer services functions.

Refer to Part I. Item 1A. "Risk Factors" for additional information related to the ongoing impact of the pandemic.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Greater Lawrence Incident: For the year ended December 31, 2020, we have incurred $17 million of third-party claims and other incident-related costs associated with the Greater Lawrence Incident. For additional information, see Note 20-C, "Legal Proceedings" and Note 20-E "Other Matters," in the Notes to Consolidated Financial Statements.

We invested approximately $258 million of capital spend for specific pipeline replacement work that was completed in 2019. We maintain property insurance for gas pipelines and other applicable property. In 2019, Columbia of Massachusetts filed a proof of loss with its property insurer for this pipeline replacement work. In January 2020, we filed a lawsuit against the property insurer, seeking payment of our property claim. We are currently unable to predict the timing or amount of any insurance recovery under the property policy. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements for additional information.

Refer to Note 20-C. "Legal Proceedings" and Note 20-E "Other Matters," in the Notes to Consolidated Financial Statements, "Summary of Consolidated Financial Results," "Results and Discussion of Segment Operation - Gas Distribution Operations," and "Liquidity and Capital Resources" in this Management's Discussion for additional information related to the Greater Lawrence Incident.

Summary of Consolidated Financial Results

A summary of our consolidated financial results for the years ended December 31, 2020, 2019 and 2018, are presented below:


Year Ended December 31, (in millions, except per share amounts)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018
Operating Revenues	$	4,681.7	$	5,208.9	$	5,114.5	$	(527.2)	$	94.4
Operating Expenses
Cost of energy	1,109.3		1,534.8		1,761.3		(425.5)		(226.5)
Other Operating Expenses	3,021.6		2,783.4		3,228.5		238.2		(445.1)
Total Operating Expenses	4,130.9		4,318.2		4,989.8		(187.3)		(671.6)
Operating Income	550.8		890.7		124.7		(339.9)		766.0
Total Other Deductions, Net	(582.1)		(384.1)		(355.3)		(198.0)		(28.8)
Income Taxes	(17.1)		123.5		(180.0)		(140.6)		303.5
Net Income (Loss)	(14.2)		383.1		(50.6)		(397.3)		433.7
Net income attributable to noncontrolling interest	3.4		—		—		3.4		—
Net Income (Loss) attributable to NiSource	(17.6)		383.1		(50.6)		(400.7)		433.7
Preferred dividends	(55.1)		(55.1)		(15.0)		—		(40.1)
Net Income (Loss) Available to Common Shareholders	(72.7)		328.0		(65.6)		(400.7)		393.6
Basic Earnings (Loss) Per Share	$	(0.19)	$	0.88	$	(0.18)	$	(1.07)	$	1.06
Basic Average Common Shares Outstanding	384.3		374.6		356.5		9.7		18.1

The majority of the costs of energy in both segments are tracked costs that are passed through directly to the customer, resulting in an equal and offsetting amount reflected in operating revenues.

On a consolidated basis, we reported a net loss available to common shareholders of $72.7 million or $0.19 per basic share for the twelve months ended December 31, 2020 compared to income to common shareholders of $328.0 million or $0.88 per basic share for the same period in 2019. Additionally, we reported operating income of $550.8 million for the twelve months ended December 31, 2020 compared to $890.7 million for the same period in 2019. The decrease in both net income available to common shareholders and operating income during 2020 was primarily due to lower operating revenue related to the sale of the Massachusetts Business, as well as higher operating expenses due to insurance recoveries recorded in 2019, net of third-party claims and other costs, related to the Greater Lawrence Incident. Additionally, the decrease to net income available to common shareholders was also impacted by the loss on early extinguishment of debt in 2020 as well as partially offset by a change from income tax expense in 2019 to an income tax benefit in 2020.

Other Deductions, Net

Other deductions, net reduced income by $582.1 million in 2020 compared to a reduction in income of $384.1 million in 2019. This change is primarily due to the loss on early extinguishment of debt in 2020.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Income Taxes

The decrease in income tax expense from 2019 to 2020 is primarily attributable to lower pre-tax income, resulting from the items discussed above in "Operating Income" and "Other Deductions, Net," state jurisdictional mix of pre-tax loss in 2020 tax effected at statutory tax rates and increased amortization of excess deferred federal income taxes in 2020 compared to 2019. These items are offset by increased deferred tax expense recognized on the sale of the Columbia of Massachusetts' regulatory liability, established due to TCJA in 2017, that would have otherwise been recognized over the amortization period, non-cash impairment of goodwill related to Columbia of Massachusetts in 2019 (see Note 7, "Goodwill and Other Intangible Assets" for additional information) and one-time adjustments to deferred tax balances.

Refer to Note 11, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information on income taxes and the change in the effective tax rate.

RESULTS AND DISCUSSION OF OPERATIONS

Presentation of Segment Information

Our operations are divided into two primary reportable segments: Gas Distribution Operations and Electric Operations. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" within the Notes to the Consolidated Financial Statements and primarily are comprised of interest expense on holding company debt, and unallocated corporate costs and activities.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Gas Distribution Operations

Financial and operational data for the Gas Distribution Operations segment for the years ended December 31, 2020, 2019 and 2018, are presented below:


Year Ended December 31, (in millions)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Operating Revenues	$	3,140.1		$	3,522.8		$	3,419.5		$	(382.7)	$	103.3
Operating Expenses
Cost of energy	794.2			1,067.6			1,259.3			(273.4)		(191.7)
Operation and maintenance	1,138.0			935.7			1,908.1			202.3		(972.4)
Depreciation and amortization	363.1			403.2			301.0			(40.1)		102.2
Impairment of intangible assets	—			209.7			—			(209.7)		209.7
Loss on sale of fixed assets and impairments, net	412.4			0.1			0.2			412.3		(0.1)
Other taxes	233.3			231.1			205.0			2.2		26.1
Total Operating Expenses	2,941.0			2,847.4			3,673.6			93.6		(826.2)
Operating Income (Loss)	$	199.1		$	675.4		$	(254.1)		$	(476.3)	$	929.5
Revenues
Residential	$	2,110.6		$	2,317.2		$	2,248.3		$	(206.6)	$	68.9
Commercial	679.7			775.1			753.7			(95.4)		21.4
Industrial	213.8			245.8			228.6			(32.0)		17.2
Off-System	41.0			77.7			92.4			(36.7)		(14.7)
Other	95.0			107.0			96.5			(12.0)		10.5
Total	$	3,140.1		$	3,522.8		$	3,419.5		$	(382.7)	$	103.3
Sales and Transportation (MMDth)
Residential	249.5			274.9			280.3			(25.4)		(5.4)
Commercial	170.5			189.6			187.6			(19.1)		2.0
Industrial	538.1			542.5			555.7			(4.4)		(13.2)
Off-System	23.3			32.9			30.0			(9.6)		2.9
Other	0.3			0.3			—			—		0.3
Total	981.7			1,040.2			1,053.6			(58.5)		(13.4)
Heating Degree Days	5,097			5,375			5,562			(278)		(187)
Normal Heating Degree Days	5,485			5,452			5,610			33		(158)
% Warmer than Normal	(7)		%	(1)		%	(2)		%
Gas Distribution Customers
Residential	2,954,478			3,221,178			3,194,662			(266,700)		26,516
Commercial	253,184			282,778			281,517			(29,594)		1,261
Industrial	4,968			5,982			5,833			(1,014)		149
Other	3			3			3			—		—
Total	3,212,633			3,509,941			3,482,015			(297,308)		27,926

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Gas Distribution Operations (continued)

~~Comparability~~Cost of ~~line item~~energy for the Gas Distribution Operations segment is principally comprised of the cost of natural gas used while providing transportation and distribution services to customers. These are tracked costs that are passed through directly to the customer resulting in an equal and offsetting amount reflected in operating ~~results~~revenue. In addition, comparability of operation and maintenance expenses, depreciation and amortization, and other taxes may be impacted by regulatory, depreciation and ~~depreciation~~tax trackers ~~(other than those for cost of sales)~~ that allow for the recovery in rates of certain costs. Therefore, increases in these tracked operating expenses are offset by increases in ~~net~~operating revenues and have essentially no impact on ~~income from continuing operations.~~net income.

~~2017~~2020 vs. ~~2016~~2019 Operating Income

For ~~2017, Electric~~2020, Gas Distribution Operations reported operating income of ~~$364.8~~$199.1 million, ~~an increase~~a decrease of ~~$73.4~~$476.3 million from the comparable ~~2016~~2019 period.

~~Net~~Operating revenues for ~~2017~~2020 were ~~$1,272.6~~$3,140.1 million, ~~an increase~~a decrease of ~~$106.0~~$382.7 million from the same period in ~~2016.~~2019. The change in ~~net~~operating revenues was primarily driven by:

~~New rates~~•Lower cost of energy billed to customers, which is offset in operating expense, of $273.4 million.

•Lower revenues due to the sale of the Massachusetts Business of $102.2 million.

•Lower revenues from ~~base-rate proceedings~~the effects of ~~$63.6~~warmer weather in 2020 of $47.9 million.

~~Increased rates from incremental capital spend on electric transmission projects of $24.2 million.~~

~~Higher~~•Lower regulatory, depreciation, and ~~depreciation~~tax trackers, which are offset in operating expense, of ~~$18.0~~$20.7 million.

~~New rates from infrastructure replacement programs of $6.0 million.~~

•The effects of ~~increased customer count~~decreased commercial and industrial usage and decreased late and disconnection fees, both primarily related to the COVID-19 pandemic, of ~~$3.4~~$11.3 million.

Partially offset by:

•New rates from base rate proceedings, infrastructure replacement programs and Columbia of Ohio's CEP of $57.1 million.

•The effects of ~~cooler weather~~increased residential usage primarily related to the pandemic of ~~$16.1~~$5.0 million.

Operating expenses were ~~$32.6~~$93.6 million higher in ~~2017 than 2016.~~2020 compared to 2019. This change was primarily driven by:

~~Higher~~•Loss on sale of the Massachusetts Business of $412.4 million.

•Insurance recoveries recorded in 2019, net of third party claims and other costs, related to the Greater Lawrence Incident of $243.2 million.

•Severance and outside ~~service costs~~services expense related to NiSource Next initiative of ~~$20.1 million,~~$32.4 million.

•Increased expenses primarily due to ~~increased spend on strategic initiatives~~the impact of the pandemic related to ~~enhance safety, reliability~~materials and ~~customer value, generation-related maintenance, IT service provider transition costs~~supplies, outside services, and ~~vegetation management activities.~~

~~Increased regulatory and depreciation trackers, which are offset in net revenues, of $18.0 million.~~

~~Higher employee and administrative~~uncollectible expenses of ~~$11.9 million.~~$23.8 million, offset by $12.0 million of deferral of uncollectible and other expenses, net of benefits, related to the pandemic.

~~Increased~~•Higher depreciation ~~of $5.6 million~~and amortization and property tax expense primarily due to higher capital expenditures placed in ~~service.~~

~~Higher materials and supplies expenses~~service of ~~$4.5~~$24.3 million ~~driven by generation-related maintenance.~~

Partially offset by:

~~Plant retirement costs~~•Lower cost of ~~$22.1~~energy billed to customers, which is offset in operating revenue, of $273.4.

•Non-cash impairment of the Columbia of Massachusetts franchise rights of $209.7 million in ~~2016.~~2019.

~~Decreased~~•Lower operation and maintenance and depreciation and amortization expenses due to the Massachusetts Business sale of $98.7 million.

•Lower employee and administrative expense of $28.9 million.

•Lower regulatory, ~~assets~~depreciation, and tax trackers, which are offset in operating revenues, of ~~$10.8~~$20.7 million.

~~2016~~2019 vs. ~~2015~~2018 Operating Income

For ~~2016, Electric~~2019, Gas Distribution Operations reported operating income of ~~$291.4~~$675.4 million, an increase of ~~$27.0~~$929.5 million from the comparable ~~2015~~2018 period.

~~Net~~Operating revenues for ~~2016~~2019 were ~~$1,166.6~~$3,522.8 million, an increase of ~~$80.6~~$103.3 million from the same period in ~~2015.~~2018. The change in ~~net~~operating revenues was primarily driven by:

•New rates from ~~base-rate~~base rate proceedings and infrastructure replacement programs of ~~$36.3~~$243.2 million.

~~Increased~~•Higher regulatory, depreciation and ~~depreciation~~tax trackers, which are offset in operating expense, of ~~$30.2~~$36.2 million.

~~Increased rates from incremental capital spend on electric transmission projects of $17.8 million.~~

~~The effects of warmer weather of $15.6 million.~~

~~Partially offset by:~~

~~The absence of regulatory-deferred MISO cost amortization of $10.2 million.~~

~~Increased fuel handling costs of $7.8 million.~~

~~Operating expenses were $53.6 million higher in 2016 compared to 2015. This change was primarily driven by:~~

~~Increased regulatory and depreciation trackers, which are offset in net revenues, of $30.2 million.~~

~~Higher outside service costs of $24.4 million, primarily due to generation-related maintenance.~~

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Gas Distribution Operations (continued)

•Higher revenues of $14.5 million resulting from an update in the weather-related normal heating degree day methodology, partially offset by a $7.1 million revenue decrease from the effects of warmer weather in 2019.

•The effects of commercial and residential customer growth of $12.8 million.

Partially offset by:

•Lower cost of energy billed to customers, which is offset in operating expenses of $191.7 million.

Operating expenses were $826.2 million lower in 2019 compared to 2018. This change was primarily driven by:

•Decreased expenses related to third-party claims and other costs for the Greater Lawrence Incident of $1,090.7 million, net of insurance recoveries recorded.

•Lower cost of energy billed to customers, which is offset in operating revenues of $191.7 million.

Partially offset by:

•Non-cash impairment of the Columbia of Massachusetts franchise rights of $209.7 million.

•Increased depreciation of $103.8 million due to the regulatory outcome of NIPSCO's gas rate case, an increase in amortization of depreciation previously deferred as a regulator asset resulting from Columbia of Ohio's CEP, and higher capital expenditures placed in service.

•Higher employee and administrative expenses of $50.2 million driven by resources shifting from the temporary assistance on the Greater Lawrence Incident restoration to normal operations (offset in the decreased Greater Lawrence Incident costs discussed above) and an increase in headcount.

•Increased regulatory, depreciation and tax trackers, which are offset in operating revenues, of $36.2 million.

•Higher property taxes of $22.2 million primarily due to increased amortization of property taxes previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as higher capital expenditures placed in service.

•Higher outside services of $17.4 million primarily due to increased line location and safety-related work.

Weather

In general, we calculate the weather-related revenue variance based on changing customer demand driven by weather variance from normal heating degree days, net of weather normalization mechanisms. Our composite heating degree days reported do not directly correlate to the weather-related dollar impact on the results of Gas Distribution Operations. Heating degree days experienced during different times of the year or in different operating locations may have more or less impact on volume and dollars depending on when and where they occur. When the detailed results are combined for reporting, there may be weather-related dollar impacts on operations when there is not an apparent or significant change in our aggregated composite heating degree day comparison.

The definition of “normal” weather was updated during the first quarter of 2019 to reflect more current weather pattern data and to more closely align with the regulators' jurisdictional definitions of “normal” weather. Impacts of the change in methodology will be reflected prospectively and disclosed to the extent it results in notable year-over-year variances in operating revenues.

Weather in the Gas Distribution Operations service territories for 2020 was about 7% warmer than normal and about 5% warmer than 2019, leading to decreased operating revenues of $47.9 million for the year ended December 31, 2020 compared to 2019. The majority of these amounts were driven by NIPSCO and Columbia of Pennsylvania.

Weather in the Gas Distribution Operations service territories for 2019 was about 1% warmer than normal and about 3% warmer than 2018; however, due to the aforementioned change in methodology, the change in operating revenues attributed to weather resulted in an increase of $7.4 million for the year ended December 31, 2019 compared to 2018. The variance is detailed further below:

•An update in the weather-related normal heating degree day methodology resulting in a favorable variance attributed to weather of $14.5 million, as discussed above.

Offset by:

•The effects of warmer weather in 2019 of $7.1 million.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Gas Distribution Operations (continued)

Throughput

Total volumes sold and transported for the year ended December 31, 2020 were 981.7 MMDth, compared to 1,040.2 MMDth for 2019. This decrease is primarily attributable to warmer weather experienced in 2020 compared to 2019, the sale of the Massachusetts Business and decreased usage by commercial and industrial customers primarily due to the pandemic.

Total volumes sold and transported for the year ended December 31, 2019 were 1,040.2 MMDth, compared to 1,053.6 MMDth for 2018. This decrease is primarily attributable to warmer weather experienced in 2019 compared to 2018.

Commodity Price Impact

All of our Gas Distribution Operations companies have state-approved recovery mechanisms that provide a means for full recovery of prudently incurred gas costs. Gas costs are treated as pass-through costs and have no impact on the operating income recorded in the period. The gas costs included in revenues are matched with the gas cost expense recorded in the period and the difference is recorded on the Consolidated Balance Sheets as under-recovered or over-recovered gas cost to be included in future customer billings.

Certain Gas Distribution Operations companies continue to offer choice opportunities, where customers can choose to purchase gas from a third-party supplier, through regulatory initiatives in their respective jurisdictions. These programs serve to further reduce our exposure to gas prices.

Greater Lawrence Incident

Refer to Note 20-C. "Legal Proceedings," and Note 20-E. "Other Matters," in the Notes to Consolidated Financial Statements, "Summary of Consolidated Financial Results" and "Liquidity and Capital Resources" in this Management's Discussion, and Part I. Item 1A. "Risk Factors" for additional information related to the Greater Lawrence Incident.

Columbia of Massachusetts Asset Sale

On February 26, 2020, we entered into the Asset Purchase Agreement with Eversource providing for the sale of the Massachusetts Business to Eversource, subject to the terms and conditions set forth in the agreement. This sale was completed on October 9, 2020. For additional information, see Note 1, “Nature of Operations and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Electric Operations

Financial and operational data for the Electric Operations segment for the years ended December 31, 2020, 2019 and 2018, are presented below:


Year Ended December 31, (in millions)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Operating Revenues	$	1,536.6		$	1,699.2		$	1,708.2		$	(162.6)	$	(9.0)
Operating Expenses
Cost of energy	315.2			467.3			502.1			(152.1)		(34.8)
Operation and maintenance	497.6			495.0			500.0			2.6		(5.0)
Depreciation and amortization	321.3			277.3			262.9			44.0		14.4
Gain on sale of fixed assets and impairments, net	—			(0.1)			—			0.1		(0.1)
Other taxes	53.7			52.9			57.1			0.8		(4.2)
Total Operating Expenses	1,187.8			1,292.4			1,322.1			(104.6)		(29.7)
Operating Income	$	348.8		$	406.8		$	386.1		$	(58.0)	$	20.7
Revenues
Residential	$	527.8		$	481.6		$	494.7		$	46.2	$	(13.1)
Commercial	480.3			486.7			492.6			(6.4)		(5.9)
Industrial	412.9			608.4			614.4			(195.5)		(6.0)
Wholesale	12.3			11.7			15.7			0.6		(4.0)
Other	103.3			110.8			90.8			(7.5)		20.0
Total	$	1,536.6		$	1,699.2		$	1,708.2		$	(162.6)	$	(9.0)
Sales (Gigawatt Hours)
Residential	3,484.0			3,369.5			3,535.2			114.5		(165.7)
Commercial	3,550.0			3,760.3			3,844.6			(210.3)		(84.3)
Industrial	7,480.3			8,466.1			8,829.5			(985.8)		(363.4)
Wholesale	83.6			8.2			114.3			75.4		(106.1)
Other	106.0			117.2			124.4			(11.2)		(7.2)
Total	14,703.9			15,721.3			16,448.0			(1,017.4)		(726.7)
Cooling Degree Days	900			962			1,180			(62)		(218)
Normal Cooling Degree Days	803			803			806			—		(3)
% Warmer than Normal	12		%	20		%	46		%
Electric Customers
Residential	418,871			415,534			412,267			3,337		3,267
Commercial	57,435			57,058			56,605			377		453
Industrial	2,154			2,256			2,284			(102)		(28)
Wholesale	722			726			735			(4)		(9)
Other	2			2			2			—		—
Total	479,184			475,576			471,893			3,608		3,683

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Electric Operations (continued)

Cost of energy for the Electric Operations segment is principally comprised of the cost of coal, related handling costs, natural gas purchased for internal generation of electricity at NIPSCO, and the cost of power purchased from third-party generators of electricity. The majority of these are tracked costs that are passed through directly to the customer resulting in an equal and offsetting amount reflected in operating revenue. In addition, comparability of operation and maintenance expenses and depreciation and amortization may be impacted by regulatory and depreciation trackers that allow for the recovery in rates of certain costs. Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income.

~~Plant retirement costs~~2020 vs. 2019 Operating Income

For 2020, Electric Operations reported operating income of ~~$22.1~~$348.8 million, a decrease of $58.0 million from the comparable 2019 period.

Operating revenues for 2020 were $1,536.6 million, an decrease of $162.6 million from the same period in 2019. The change in operating revenues was primarily driven by:

•Lower cost of energy billed to customers, which is offset in operating expense, of $152.1 million.

•Lower regulatory and depreciation trackers, which are offset in operating expense, of $25.2 million.

•The effects of decreased commercial and industrial usage and decreased late and disconnection fees, both primarily related to the COVID-19 pandemic, of $24.9 million.

Partially offset by:

•Higher revenue from recent base rate proceedings of $22.5 million.

•The effects of increased residential usage primarily related to the pandemic of $13.5 million.

•The effects of customer growth of $4.0 million.

Operating expenses were $104.6 million lower in 2020 than 2019. This change was primarily driven by:

•Lower cost of energy billed to customers, which is offset in operating revenue, of $152.1 million.

•Lower regulatory and depreciation trackers, which are offset in operating revenues, of $25.2 million.

•Lower outside services costs of $16.0 million primarily related to lower generation-related maintenance.

•Lower employee and administrative costs of $8.1 million.

Partially offset by:

•Increased depreciation of $61.6 million primarily due to additional plant placed in service.

•Severance and outside services expenses related to the NiSource Next initiative of $13.0 million.

•Increased expenses primarily due to the impact of pandemic-related materials and supplies, outside services, uncollectible and sequestration expenses of $10.7 million, offset by a $5.3 million deferral of uncollectible and other expenses, related to the pandemic.

•Increased materials and supplies costs of $4.7 million

•Higher insurance expense of $2.7 million primarily driven by increased premiums.

•Increased environmental costs of ~~$10.7~~$1.3 million.

~~Decreased amortization~~2019 vs. 2018 Operating Income

For 2019, Electric Operations reported operating income of $406.8 million, an increase of $20.7 million from the comparable 2018 period.

Operating revenues for 2019 were $1,699.2 million, a decrease of $9.0 million from the same period in 2018. The change in operating revenues was primarily driven by:

•Lower cost of energy billed to customers, which is offset in operating expense, of ~~$9.6~~$34.8 million.

•Lower revenues from the effects of cooler weather of $15.1 million.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Electric Operations (continued)

•Decreased residential, commercial and industrial usage of $10.8 million.

Partially offset by:

•New rates from the recent rate case proceeding, incremental capital spend on infrastructure replacement programs, and electric transmission projects of $24.8 million.

•Decreased fuel handling costs of $11.0 million.

•Higher regulatory and depreciation trackers, which are offset in operating expense, of $8.4 million.

•Increased commercial and residential customer growth of $3.9 million.

Operating expenses were $29.7 million lower in 2019 than 2018. This change was primarily driven by:

•Lower cost of energy billed to customers, which is offset in operating revenue, of $34.8 million.

•Decreased materials and supplies costs of $7.8 million, primarily related to the retirement of Bailly Generating Station Units 7 and 8 on May 31, 2018.

•Decreased employee and administrative costs of $5.0 million.

Partially offset by:

•Higher regulatory and depreciation trackers, which are offset in operating revenues, of $8.4 million.

•Increased depreciation of $8.7 million due to higher capital expenditures placed in service.

Weather

In general, ~~NiSource calculates~~we calculate the weather-related revenue variance based on changing customer demand driven by weather variance from normal heating or cooling degree days. ~~NiSource's~~Our composite heating or cooling degree days reported do not directly correlate to the weather-related dollar impact on the results of Electric Operations. Heating or cooling degree days experienced during different times of the year may have more or less impact on volume and dollars depending on when they occur. When the detailed results are combined for reporting, there may be weather-related dollar impacts on operations when there is not an apparent or significant change in ~~the~~our aggregated ~~NiSource~~ composite heating or cooling degree day comparison.

~~Weather~~The definition of “normal” weather was updated during the first quarter of 2019 to reflect more current weather pattern data and to more closely align with the regulators' jurisdictional definitions of “normal” weather. Impacts of the change in methodology will be reflected prospectively and disclosed to the ~~Electric Operations’ territories for the twelve months ended December 31, 2017 was 4% warmer than normal and 15% cooler than the same period~~extent it results in ~~2016, leading to a decrease~~notable year-over-year variances in ~~net revenues of approximately $16.1 million for the twelve months ended December 31, 2017 compared to 2016.~~operating revenues.

Weather in the Electric Operations’ territories for ~~the twelve months ended December 31, 2016~~2020 was ~~23%~~12% warmer than normal and ~~30% warmer~~6% cooler than the same period in ~~2015, leading~~2019, which had an immaterial impact on operating revenues for the year ended December 31, 2020 compared to ~~an increase~~2019.

Weather in ~~net~~the Electric Operations’ territories for 2019 was 20% warmer than normal and 18% cooler than the same period in 2018, decreasing operating revenues ~~of approximately $15.6~~$15.1 million for the ~~twelve months~~year ended December 31, ~~2016~~2019 compared to ~~2015.~~2018.

Sales

Electric Operations sales were ~~16,725.6 gwh~~14,703.9 GWh for ~~2017,~~2020, a decrease of ~~105.6 gwh,~~1,017.4 GWh, or ~~0.6%~~6.5% compared to ~~2016.~~2019. This decrease was primarily attributable to decreased usage by industrial and commercial customers due to the pandemic and higher self-generation by industrial customers, partially offset by increased usage by residential customers primarily due to the pandemic.

Electric Operations sales were ~~16,831.2 gwh~~15,721.3 GWh for ~~2016,~~2019, a ~~increase~~decrease of ~~72.9 gwh,~~726.7 GWh, or ~~0.4%~~4.4% compared to ~~2015.~~2018. This decrease was primarily attributable to higher internal generation from large industrial customers in 2019 and the effects of cooler weather on residential and commercial customers.

~~Economic Conditions~~Commodity Price Impact

NIPSCO has a state-approved recovery mechanism that provides a means for full recovery of prudently incurred fuel costs. ~~As noted above, fuel~~Fuel costs are treated as pass-through costs and have no impact on the ~~net~~operating revenues recorded in the period. The fuel costs included in revenues are matched with the fuel cost expense recorded in the period and the difference is recorded on the Consolidated Balance Sheets as under-recovered or over-recovered fuel cost to be included in future customer billings.

At NIPSCO, sales revenues and customer billings are adjusted for amounts related to under and over-recovered purchased fuel costs from prior periods per regulatory order. These amounts are primarily reflected in the “Other” operating revenues statistic provided at the beginning

Table of this segment discussion. The adjustments to other operating revenues for the twelve months ended December 31, 2017, 2016 and 2015 were a revenue decrease of $5.2 million, a revenue increase of $33.1 million and a revenue decrease of $11.6 million, respectively.Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Electric Operations (continued)

NIPSCO's performance remains closely linked to the performance of the steel industry. NIPSCO’s ~~mwh~~MWh sales to steel-related industries accounted for approximately ~~54.5%~~45.9% and ~~52.3%~~51.5% of the total industrial ~~mwh~~MWh sales for the years ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

Electric Supply

NIPSCO ~~2016~~2018 Integrated Resource Plan. ~~Environmental, regulatory and economic factors, including low natural gas prices and aging coal-fired units, have led~~ NIPSCO ~~to pursue modification of~~concluded in its current electric generation supply mix to include less coal-fired generation. Due to enacted CCR and ELG (subsequently postponed) regulations, NIPSCO would expect to have incurred over $1 billion in operating, maintenance, environmental and other costs if theOctober 2018 Integrated Resource Plan submission that NIPSCO’s current fleet of ~~coal-fired generating units were to remain operational.~~

~~On November 1, 2016, NIPSCO submitted its 2016~~coal generation facilities will be retired earlier than previous Integrated Resource ~~Plan with the IURC.~~Plan’s had indicated. The ~~plan~~Integrated Resource Plan evaluated demand-side and supply-side resource alternatives to reliably and cost effectively meet NIPSCO customers' future energy requirements over the ensuing 20 years. The ~~2016~~preferred option within the Integrated Resource Plan ~~indicates that the most viable option for customers and NIPSCO involves the retirement of Bailly Generating Station (Units 7 and 8) as soon as mid-2018 and two units (Units 17 and 18) at~~retires the R.M. Schahfer Generating Station by mid-2023 and the Michigan City Generating Station by the end of ~~2023. It is projected over~~2028. These stations represent 2,080 MW of generating capacity, equal to 72% of NIPSCO’s remaining capacity and 100% of NIPSCO's remaining coal-fired generating capacity. In the ~~long term that~~second quarter of 2020, the ~~cost to customers~~MISO approved NIPSCO's plan to retire ~~these~~the R.M. Schahfer Generating Station in 2023. The planned replacement by the end of 2023 of approximately 1,400 MW of retiring coal-fired generation station could provide incremental capital investment opportunities of approximately $1.8 to $2.0 billion, primarily in 2022 and 2023. Refer to Note 6, "Property, Plant and Equipment" and Note 20-E, "Other Matters," in the Notes to Consolidated Financial Statements for further information. In February 2021, NIPSCO decided to submit modified Attachment Y Notices to MISO requesting accelerated retirement of two of the four coal fired units at ~~these dates~~R.M. Schahfer Generating Station. The two units are now expected to be retired by the end of 2021, with the remaining two units still scheduled to be retired in 2023. At retirement, the net book value of the retired units will be ~~lower than maintaining~~reclassified from "Non-Utility and ~~upgrading them for continuing generation.~~Other property", to current and long-term “Regulatory Assets.”

The current replacement plan includes renewable sources of energy, including wind, solar, and battery storage to be obtained through a combination of NIPSCO ownership and PPAs. NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh. Each facility supplying the energy will have an associated nameplate capacity, and payments under the PPAs will not begin until the associated generation facility is constructed by the owner/seller. NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. The following table summarizes the executed PPAs and BTAs that have not yet been placed into service:

Project Name

Transaction Type

Technology

Nameplate Capacity (MW)

Storage Capacity (MW)

Submitted to IURC

IURC Approval

Estimated Construction Completion

Jordan Creek

20 year PPA

Wind

400

—

02/01/2019

6/05/2019

In Service (12/10/2020)

Rosewater(1)

BTA

Wind

100

—

02/01/2019

8/07/2019

In Service (12/29/2020)

Indiana Crossroads(2)

BTA

Wind

300

—

10/22/2019

2/19/2020

12/31/2021

Greensboro

20 year PPA

Solar & Storage

100

7/17/2020

1/27/2021

6/30/2023

Brickyard

20 year PPA

Solar

200

—

7/17/2020

1/27/2021

6/30/2023

Green River

20 year PPA

Solar

200

—

12/23/2020

Pending

6/30/2023

Cavalry(2)

BTA

Solar & Storage

200

11/30/2020

Pending

12/31/2023

Dunn's Bridge I(2)

BTA

Solar

265

—

11/30/2020

Pending

12/31/2022

Dunn's Bridge II(2)

BTA

Solar & Storage

435

11/30/2020

Pending

12/31/2023

Gibson

22 year PPA

Solar

280

—

01/29/2021

Pending

12/31/2023

(1) Ownership of the facility was transferred to a joint venture whose members include NIPSCO and an unrelated tax equity partner.

(2) Ownership of the facilities will be transferred to joint ventures whose members include NIPSCO and an unrelated tax equity partner.

We expect to secure additional agreements with counterparties and initiate regulatory compliance filings into 2021.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

NIS~~OURCE~~ INC.

~~Electric Operations (continued)~~

Liquidity and Capital Resources

~~NiSource~~We continually evaluate the availability of adequate financing to fund our ongoing business operations, working capital and ~~NIPSCO~~core safety and infrastructure investment programs. Our financing is sourced through cash flow from operations and the issuance of debt and/or equity. External debt financing is provided primarily through the issuance of long-term debt, accounts receivable securitization programs and our $1.5 billion commercial paper program, which is backstopped by our committed revolving credit facility with a total availability from third-party lenders of $1.85 billion. The commercial paper program and credit facility provide cost-effective, short-term financing until it can be replaced with a balance of long-term debt and equity financing that achieves our desired capital structure. We have also utilized an at-the-market (ATM) equity sales program that allowed us to issue and sell shares of our common stock up to an aggregate offering price of $434.4 million. The program expired on December 31, 2020, but we expect to issue additional equity under ATM offerings from time to time.

We believe these sources provide adequate capital to fund our operating activities and capital expenditures in 2021 and beyond.

Greater Lawrence Incident. As discussed in the "Executive Summary", Part I, Item 1A “Risk Factors,” and in Note 20, “Other Commitments and Contingencies” in the Notes to Consolidated Financial Statements, due to the ~~retirement~~inherent uncertainty of litigation, there can be no assurance that the outcome or resolution of any particular claim related to the Greater Lawrence Incident will not continue to have an adverse impact on our cash flows. Through income generated from operating activities, amounts available under the short-term revolving credit facility, and our ability to access capital markets, we believe we have adequate capital available to settle remaining anticipated claims associated with the Greater Lawrence Incident. Previous costs in excess of insurance recoveries were primarily funded through short-term borrowings. The sale of the ~~Bailly Generating Station units in connection with the filing~~Massachusetts Business was completed on October 9, 2020. On October 14, 2020, we used a portion of the ~~2016 Integrated Resource Plan, pending approval~~proceeds from the Massachusetts Business sale to pay down these short-term borrowings.

Operating Activities

Net cash from operating activities for the year ended December 31, 2020 was $1,104.0 million, a decrease of $479.3 million from 2019. This decrease was primarily driven by ~~the MISO. In the fourth quarter of 2016, the MISO approved NIPSCO's plan to retire the Bailly Generating Station units by May 31, 2018. In accordance with ASC 980-360, the remaining~~a year over year increase in net ~~book value of the Bailly Generating Station units was reclassified from "Net utility plant" to "Other property, at cost, less accumulated depreciation" on the Consolidated Balance Sheets.~~

In connection with the MISO's approval of NIPSCO's planned retirement of the Bailly Generating Station units, NiSource recorded $22.1 million of plant retirement-related charges in the fourth quarter of 2016. These charges were comprised of contract termination chargespayments related to ~~NIPSCO's capital lease with Pure Air, voluntary employee severance benefits, and write downs~~the Greater Lawrence Incident. During 2020, we paid approximately $227 million compared to net receipts of ~~certain materials and supplies inventory balances. These charges are presented within "Operation and maintenance" on the Statements of Consolidated Income.~~

~~On February 1, 2018, as previously approved~~$289 million, representing insurance recoveries offset by the MISO, NIPSCO commenced a four-month outage of Bailly Generating Station Unit 8 in order to begin work on converting the unit to a synchronous condenser (a piece of equipment designed to maintain voltage to ensure continued reliability on the transmission system). Approximately $15 million of net book value of Unit 8 remained in “Net Utility Plant” as it is expected to remain used and useful upon completion of the synchronous condenser, while the remaining net book value of approximately $143 million was reclassified to “Regulatory assets (noncurrent)” on the Consolidated Balance Sheets. These amounts continue to be amortized at a rate consistent with their inclusion in customer rates. NIPSCO expects to complete the retirement of Units 7 and 8 by May 31, 2018.payments, during 2019. Refer to Note ~~18-E,~~20, "Other ~~Matters,"~~Commitments and Contingencies" in the Notes to Consolidated Financial Statements for ~~information.~~

~~Table of Contents~~

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

~~Liquidity and Capital Resources~~

~~Operating Activities~~

Net cash from operating activities from continuing operations for the year ended December 31, 2017 was $742.1 million, a decrease of $62.0 million from 2016. This decrease was driven by $282.3 million of pension plan contributions in 2017, partially offset by a combination of changes in weather, gas prices and the related approved rates for recovery, which significantly impacted regulatory assets and regulatory liabilities between the two periods as discussed further ~~below.~~

Net cash from operating activities from continuing operations for the year ended December 31, 2016 was $804.1 million, a decrease of $359.3 million from 2015. This decrease was driven by a combination of changes in weather, gas prices and the related approved rates for recovery, which significantly impacted regulatory assets, regulatory liabilities and working capital between the two periods. During 2015, natural gas prices were declining faster than the gas cost adjustments being collected from customers, resulting in an associated source of cash from working capital. During 2016, these over-collected gas costs from 2015 were returned to customers, resulting in a use of working capital.

~~Regulatory Assets and Liabilities.~~ During the year ended December 31, 2016, over-collected gas costs from 2015 were returned to customers resulting in a use of cash. In 2017, less cash was required to be returned to customers because the balance of over-collected gas costs from 2016 was smaller than in 2015.

~~Pension and Other Postretirement Plan Funding~~. In 2017, NiSource contributed $282.3 million to its pension plans (including a $277 million discretionary contribution made during the third quarter of 2017) and $31.6 million to its other postretirement benefit plans. The return on assetsinformation related to the discretionary pension contribution is expected to result in a decrease to net periodic benefit costs beginning in 2018. However, due to increasing workforce retirements, certain NiSource pension plans are expected to trigger settlement accounting annually for the foreseeable future. The resulting charges from settlement accounting, if realized, are expected to partially offset this decrease in periodic benefits costs.Greater Lawrence Incident.

In 2018, NiSource expects to make contributions of $2.9 million to its pension plans and $25.0 million to its postretirement medical and life plans. Given the current funded status of the pension plans, and barring unforeseen market volatility that may negatively impact the valuation of its plan assets, NiSource does not believe additional material contributions to its pension plans will be required for the foreseeable future.

~~Income Taxes.~~ Rates for NiSource’s regulated customers include provisions for the collection of U.S. federal income taxes. The reduction in the U.S. federal corporate income tax rate as a result of the TCJA is expected to lead to a decrease in the amount billed to customers through rates, ultimately resulting in lower cash collections from operating activities. NiSource is currently working to estimate the impact of this revenue reduction.

In addition, NiSource will be required to pass back to customers “excess deferred taxes” which represent amounts collected from customers in the past to cover deferred tax liabilities which, as a result of the passage of the TCJA, are now expected to be less than the originally billed amounts. Approximately $1.5 billion of excess deferred taxes related to implementation of the TCJA are presented within "Regulatory liabilities (noncurrent)" on the Consolidated Balance Sheets as of December 31, 2017. The majority of this balance relates to temporary book-to-tax differences on utility property protected by IRS normalization rules. NiSource expects this portion of the balance will be passed back to customers over the remaining average useful life of the associated property. The pass back period for the remainder of this balance will be determined by NiSource's state utility commissions in future proceedings. NiSource’s estimate of the amount and pass-back period of excess deferred taxes is subject to change pending final review by the utility commissions of the states in which NiSource operates.

As of December 31, 2017, NiSource has a recorded deferred tax asset of $508.5 million related to a Federal NOL carryforward. As a result of being in an NOL position, NiSource was not required to make any cash payments for Federal income tax purposes during the years ended December 31, 2017, 2016 or 2015. For NiSource NOLs generated before December 31, 2017, the NOL carryforward expires in 2037, however, NiSource expects to fully utilize the carryforward benefit prior to its expiration.

Per the TCJA, utilization of NOL carryforwards generated after December 31, 2017 is limited to 80% of current year taxable income. Accordingly, NiSource may be required to make cash payments for Federal income taxes in future years despite having NOL carryforwards in excess of current taxes payable.

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~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

Investing Activities

~~NiSource's~~Our cash used for investing activities varies year over year primarily as a result of changes in the level of annual capital expenditures. See below for further details of our capital expenditures and related regulatory programs. In 2020, our typical investing cash outflows were offset by $1,115.9 million of proceeds from the sale of assets, driven by the sale of the Massachusetts Business. Refer to Note 1 "Nature of Operations and Summary of Significant Accounting Policies" for more information.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Capital Expenditures. The table below reflects capital expenditures and certain other investing activities by segment for ~~2017, 2016~~2020, 2019 and ~~2015.~~2018.


(in millions)	2020		2019		2018(3)
Gas Distribution Operations
System Growth and Tracker	$	975.7	$	1,006.1	$	897.5
Maintenance	291.2		374.3		417.8
Total Gas Distribution Operations	1,266.9		1,380.3		1,315.3
Electric Operations
System Growth and Tracker	222.1		279.5		346.0
Maintenance	200.7		189.4		153.3
Total Electric Operations	422.8		468.9		499.3
Corporate and Other Operations - Maintenance(1)	31.1		18.6		—
Total(2)	$	1,720.8	$	1,867.8	$	1,814.6

(in millions) 2017 2016 2015
Gas Distribution Operations
System Growth and Tracker $ 909.2
$ 835.0
$ 729.6
Maintenance 216.4
219.4
187.4
Total Gas Distribution Operations 1,125.6
1,054.4
917.0
Electric Operations
System Growth and Tracker 435.3
314.1
274.8
Maintenance 157.1
106.5
125.5
Total Electric Operations 592.4
420.6
400.3
Corporate and Other Operations - Maintenance 35.8
15.4
50.2
Total⁽¹⁾
$ 1,753.8

$ 1,490.4

$ 1,367.5
(1) Corporate and Other capital expenditures were zero in 2018 as specific IT assets were leased in 2018. Certain IT and other maintenance related assets were purchased in 2019 and 2020.

⁽¹⁾(2)Amounts differ from those presented on the Statements of Consolidated Cash Flows primarily due to the capitalized portion of the Corporate Incentive Plan payout, inclusion of capital expenditures included in current liabilities and AFUDC Equity.

(3) The 2018 capital expenditures for Gas Distribution Operations reflects reclassifying the Greater Lawrence Incident pipeline replacement from system growth and tracker to maintenance.

For ~~2017,~~2020, capital expenditures and certain other investing activities were ~~$1,753.8~~$1,720.8 million, which was ~~$263.4~~$147.0 million ~~higher~~lower than the ~~2016~~2019 capital program. This ~~increased~~decrease in spending is ~~mainly~~primarily due to ~~electric transmission projects, environmental investments~~the sale of the Massachusetts Business and ~~system modernization projects.~~impact of COVID 19.

For ~~2016,~~2019, capital expenditures and certain other investing activities were ~~$1,490.4~~$1,867.8 million, which was ~~$122.9~~$53.2 million higher than the ~~2015~~2018 capital program. This increased spending is ~~mainly~~primarily due to growth, safety and system modernization ~~projects and segment growth at the Gas Distribution Operations segment.~~projects.

For ~~2018, NiSource projects~~2021, we project to invest approximately ~~$1.7~~$1.9 to ~~$1.8~~$2.1 billion in ~~its~~our capital program. This projected level of spend is ~~consistent with 2017~~an increase from our 2020 spend levels and ~~is expected to focus primarily on the continuation of the modernization projects, segment~~supports continued investment in safety and reliability through modernizing gas and electric systems while meeting customer growth ~~across the Gas Distribution Operations segment, and TDSIC spend.~~

~~Financing Activities~~

~~Short-term Debt.~~ ~~Refer to Note 15, “Short-Term Borrowings,” in the Notes to Consolidated Financial Statements for information on short-term debt.~~

~~Long-term Debt.~~ ~~Refer to Note 14, “Long-Term Debt,” in the Notes to Consolidated Financial Statements for information on long-term debt.~~

~~Net Available Liquidity.~~ As of December 31, 2017, an aggregate of $998.9 million of net liquidity was available. Net available liquidity includes cash and credit available under the revolving credit facility and accounts receivable securitization programs.

demands.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

NIS~~OURCE~~ INC.

Regulatory Capital Improvement Programs. In 2020, we continued to move forward on core infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all seven states of our operating area. The following table describes the most recent vintage of our regulatory programs to recover infrastructure replacement and other federally-mandated compliance investments currently in rates and those pending commission approval:


(in millions)
Company	Program	Incremental Revenue		Incremental Capital Investment		Investment Period	Costs Covered(1)	Rates Effective


Columbia of Ohio	IRP - 2020	$	32.9	$	234.4	1/19-12/19	Replacement of (1) hazardous service lines, (2) cast iron, wrought iron, uncoated steel, and bare steel pipe, (3) natural gas risers prone to failure and installation of AMR devices.	May 2020


Columbia of Ohio	CEP - 2020	$	18.0	$	185.1	1/19-12/19	Assets not included in the IRP.	September 2020





NIPSCO - Gas	TDSIC 1	$	0.6	$	26.0	1/20-6/20	New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development.	January 2021



NIPSCO - Gas	FMCA 5	$	4.8	$	42.3	4/20-9/20	Project costs to comply with federal mandates.	April 2021



Columbia of Pennsylvania	DSIC-Q4 2020(2)	$	0.8	$	25.0	9/20-11/20	Eligible project costs including piping, couplings, gas service lines, excess flow valves, risers, meter bars, meters, and other related capitalized cost, to improve the distribution system.	January 2021



Columbia of Virginia	SAVE - 2021	$	5.2	$	46.4	1/21-12/21	Replacement projects that (1) enhance system safety or reliability, or (2) reduce, or potentially reduce, greenhouse gas emissions.	January 2021



Columbia of Kentucky	SMRP - 2021(3)	$	5.8	$	50.0	1/21-12/21	Replacement of mains and inclusion of system safety investments.	Q2 2021




Columbia of Maryland	STRIDE - 2021	$	1.3	$	16.9	1/21-12/21	Pipeline upgrades designed to improve public safety or infrastructure reliability.	January 2021




NIPSCO - Electric	TDSIC - 7(4)	$	11.3	$	122.3	7/19-7/20	New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development.	February 2021







NIPSCO - Electric	FMCA - 13(5)(6)	$	(1.2)	$	—	9/19-2/20	Project costs to comply with federal mandates.	August 2020

(1)Programs do not include any costs already included in base rates.

(2)Due to a cap on the revenues permitted to flow through the DSIC, Columbia Gas of Pennsylvania is only able to request recovery of a portion of the capital investment for this period.

(3)On December 17, 2020, the Kentucky PSC issued an Order suspending the rates through May 30, 2021. An Order for approval can be received from the Commission prior to this date.

(4)Incremental capital and revenue are net of amounts included in the step 2 rates. See Part 1, Item 1. "Business" for additional information.

(5)Incremental revenue is inclusive of tracker eligible operations and maintenance expense.

(6)No eligible capital investments were made during the investment period.

Refer to Note 9, “Regulatory Matters” and Note 20-E, "Other Matters," in the Notes to Consolidated Financial Statements for a further discussion of regulatory developments during 2020.

Financing Activities

Short-term Debt. Refer to Note 16, “Short-Term Borrowings,” in the Notes to Consolidated Financial Statements for information on short-term debt.

Long-term Debt. Refer to Note 15, “Long-Term Debt,” in the Notes to Consolidated Financial Statements for information on long-term debt.

Net Available Liquidity. As of December 31, 2020, an aggregate of $1,721.6 million of net liquidity was available, including cash and credit available under the revolving credit facility and accounts receivable securitization programs.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Sources of Liquidity

The following table displays ~~NiSource's~~our liquidity position as of December 31, ~~2017~~2020 and ~~2016:~~2019:


Year Ended December 31, (in millions)	2020		2019
Current Liquidity
Revolving Credit Facility	$	1,850.0	$	1,850.0
Accounts Receivable Program(1)	273.3		353.2
Less:
Commercial Paper	503.0		570.0
Accounts Receivable Programs Utilized	—		353.2
Letters of Credit Outstanding Under Credit Facility	15.2		10.2
Add:
Cash and Cash Equivalents	116.5		139.3
Net Available Liquidity	$	1,721.6	$	1,409.1

Year Ended December 31, (in millions)
2017 2016
Current Liquidity
Revolving Credit Facility $ 1,850.0
$ 1,850.0
Accounts Receivable Program⁽¹⁾
336.7
310.0
Less:
Drawn on Revolving Credit Facility —
—
Commercial Paper 869.0
1,178.0
Accounts Receivable Program Utilized 336.7
310.0
Letters of Credit Outstanding Under Credit Facility 11.1
14.7
Add:
Cash and Cash Equivalents 29.0
26.4
Net Available Liquidity $ 998.9
$ 683.7

⁽¹⁾Represents the lesser of the seasonal limit or maximum borrowings supportable by the underlying receivables.

~~The change in net available liquidity between 2017 and 2016 was driven by lower utilization of short-term debt in the current year as a result of cash proceeds from other forms of financing.~~

Debt Covenants. ~~NiSource is~~ We are subject to a financial covenant under ~~its~~our revolving credit facility, which requires ~~NiSource~~us to maintain a debt to capitalization ratio that does not exceed 70%. ~~A similar covenant in a 2005 private placement note purchase agreement requires NiSource to maintain a debt to capitalization ratio that does not exceed 75%.~~ As of December 31, ~~2017,~~2020, the ratio was ~~67.6%~~62.5%.

Sale of Trade Accounts Receivables. Refer to Note ~~17,~~19, “Transfers of Financial Assets,” in the Notes to Consolidated Financial Statements for information on the sale of trade accounts receivable.

Credit Ratings. The credit rating agencies periodically review ~~the Company’s~~our ratings, taking into account factors such as ~~its~~our capital structure and earnings profile. The following table includes ~~NiSource's~~our and certain of our subsidiaries' credit ratings and ratings outlook as of December 31, ~~2017.~~2020. In February 2020, S&P changed our and certain of our subsidiaries' outlook from Negative to Stable. There were no other changes to the below credit ratings or outlooks since December 31, ~~2016.~~ 2019.

A credit rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the assigning rating organization.

S&P

Moody's

Fitch

Rating

Outlook

Rating

Outlook

Rating

Outlook

NiSource

BBB+

Stable

Baa2

Stable

BBB

Stable

NIPSCO

BBB+

Stable

Baa1

Stable

BBB

Stable

Columbia of Massachusetts

BBB+

Stable

Baa2

Stable

Not rated

Commercial Paper

A-2

Stable

P-2

Stable

F3F2

Stable

Certain ~~NiSource~~of our subsidiaries have agreements that contain “ratings triggers” that require increased collateral if our credit ratings or the credit ratings of ~~NiSource or~~ certain of ~~its~~our subsidiaries are below investment grade. These agreements are primarily for insurance purposes and for the physical purchase or sale of power. As of December 31, ~~2017,~~2020, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately ~~$46.1~~$53.9 million. In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business.

Equity. ~~The~~Our authorized capital stock ~~of NiSource~~ consists of ~~420,000,000~~620,000,000 shares, $0.01 par value, of which ~~400,000,000~~600,000,000 are common stock and 20,000,000 are preferred stock. As of December 31, ~~2017, 337,015,806~~2020, 391,760,051 shares of common stock and 440,000 shares of preferred stock were outstanding. ~~NiSource has no~~For more information regarding our common and preferred stock, ~~outstanding as of December 31, 2017.~~

see Note 13, "Equity," in the Notes to Consolidated Financial Statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

NIS~~OURCE~~ INC.

Contractual Obligations. ~~NiSource has~~

We have certain contractual obligations requiring payments at specified periods. The obligations include long-term debt, lease obligations, energy commodity contracts and obligations for various services including pipeline capacity and outsourcing of IT services. The total contractual obligations in existence at December 31, ~~2017~~2020 and their maturities were:


(in millions)	Total		2021		2022		2023		2024		2025		After
Long-term debt (1)	$	9,135.0	$	—	$	30.0	$	—	$	—	$	1,260.0	$	7,845.0
Interest payments on long-term debt	6,046.3		336.3		335.7		334.1		334.1		334.1		4,372.0
Finance leases(2)	264.7		32.7		32.2		28.8		20.8		16.1		134.1
Operating leases(3)	48.0		11.7		5.2		4.7		4.5		3.7		18.2
Energy commodity contracts	42.1		42.1		—		—		—		—		—
Service obligations:
Pipeline service obligations(4)	1,495.6		468.7		422.5		256.0		150.5		56.2		141.7
IT service obligations	240.3		74.9		74.0		38.1		30.5		22.8		—
Other service obligations(5)	12.6		12.6		—		—		—		—		—
Other liabilities(6)	116.9		26.0		0.8		90.1		—		—		—
Total contractual obligations	$	17,401.5	$	1,005.0	$	900.4	$	751.8	$	540.4	$	1,692.9	$	12,511.0

(in millions) Total 2018 2019 2020 2021 2022 After
Long-term debt ⁽¹⁾
$ 7,714.9
$ 275.1
$ 296.1
$ 325.1
$ 63.6
$ 710.0
$ 6,045.0
Capital leases ⁽²⁾
254.4
18.1
15.7
15.4
15.5
15.5
174.2
Interest payments on long-term debt 6,701.2
364.4
344.4
334.6
316.8
307.7
5,033.3
Operating leases⁽³⁾
57.2
13.8
10.2
7.3
6.2
4.4
15.3
Energy commodity contracts 216.7
102.5
57.3
56.9
—
—
—
Service obligations:
Pipeline service obligations 2,649.9
538.9
520.5
390.7
344.7
331.0
524.1
IT service obligations 311.5
88.3
71.5
63.5
50.7
37.5
—
Other service obligations 178.2
48.3
43.3
43.3
43.3
—
—
Other liabilities 28.7
28.7
—
—
—
—
—
Total contractual obligations $ 18,112.7
$ 1,478.1
$ 1,359.0
$ 1,236.8
$ 840.8
$ 1,406.1
$ 11,791.9

⁽¹⁾ Long-term debt balance excludes unamortized issuance costs and discounts of ~~$71.5~~$86.9 million.

⁽²⁾ ~~Capital~~ Finance lease payments shown above are inclusive of interest totaling ~~$91.9~~$69.7 million.

⁽³⁾Operating lease payments shown above are inclusive of interest totaling $7.8 million. Operating lease balances do not include ~~amounts~~obligations for possible fleet ~~leases that can be renewed~~vehicle lease renewals beyond the initial lease term. ~~The Company anticipates renewing~~While we have the ability to renew these leases beyond the initial term, ~~but the anticipated payments associated with the renewals do not meet the definition of expected minimum lease payments and therefore~~we are not ~~included above. Expected~~reasonably certain (as that term is defined in ASC 842) to do so as they are renewed month-to-month after the first year. If we were to continue the fleet vehicle leases outstanding at December 31, 2020, payments ~~are $29.3 million in 2018, $27.5 million in 2019, $19.7 million in 2020, $13.9~~would be $30.0 million in 2021, ~~$9.6~~$27.7 million in 2022, $24.9 million in 2023, $22.0 million in 2024, $19.0 million in 2025 and ~~$7.4~~$21.5 million thereafter.

~~NiSource~~(4)In February 2021, the demand rate increased for our pipeline service obligations, resulting in a total increase of $638.6 million in addition to our future pipeline service obligations shown above.

(5)On February 9, 2021, a rail transportation contract for the transportation of coal was fully executed between NIPSCO and a counterparty, replacing the prior agreement. The minimum coal tonnage shipment commitment for 2021 was eliminated under the new agreement, reducing our contractual obligation for 2021 by $12.1 million.

(6)Other liabilities shown above are inclusive of the Rosewater Developer payment due in 2023.

Our calculated estimated interest payments for long-term debt is based on the stated coupon and payment dates. For ~~2018, NiSource projects~~2021, we project that itwe will be required to make interest payments of approximately ~~$388.1~~$339.4 million, which includes ~~$364.4~~$336.3 million of interest payments related to ~~its~~our long-term debt outstanding as of December 31, ~~2017.~~2020. At December 31, ~~2017, NiSource~~2020, we had ~~$1,205.7~~$503.0 million in short-term borrowings outstanding.

~~NiSource’s~~Our expected payments included within “Other liabilities” in the table of contractual commitments above contains employer contributions to pension and other postretirement benefits plans expected to be made in ~~2018.~~2021. Plan contributions beyond ~~2018~~2021 are dependent upon a number of factors, including actual returns on plan assets, which cannot be reliably estimated at this time. In ~~2018, NiSource expects~~2021, we expect to make contributions of approximately $2.9 million to ~~its~~our pension plans and approximately ~~$25.0~~$21.8 million to ~~its~~our postretirement medical and life plans. Refer to Note ~~11,~~12, “Pension and Other Postretirement Benefits,” in the Notes to Consolidated Financial Statements for more information.

~~NiSource~~We cannot reasonably estimate the settlement amounts or timing of cash flows related to long-term obligations classified as “Total Other Liabilities” on the Consolidated Balance Sheets, other than those described above.

~~NiSource~~We also ~~has~~have obligations associated with income, property, gross receipts, franchise, ~~payroll,~~ sales and use, and various other taxes and ~~expects~~expect to make tax payments of approximately ~~$222.1~~$253.4 million in ~~2018,~~2021, which are not included in the table above.

In addition, we have uncertain income tax positions that are not included in the table above as we are unable to predict when the matters will be resolved. Refer to Note ~~18-A,~~14, "Income Taxes," in the Notes to Consolidated Financial Statements for more information.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh. Each facility supplying the energy will have an associated nameplate capacity, and payments under the PPAs will not begin until the associated generation facility is constructed by the owner/seller. NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. NIPSCO's purchase requirement under the BTAs is dependent on satisfactory approval of the BTA by the IURC, successful execution of an agreement with a tax equity partner and timely completion of construction. NIPSCO and the tax equity partner are obligated to make cash contributions to the partnership at the date construction is substantially complete. Once the tax equity partner has earned their negotiated rate of return and we have reached the agreed upon contractual date, NIPSCO has the option to purchase at fair market value from the tax equity partner the remaining interest in the aforementioned joint venture. See Note 20-A, “Contractual Obligations,” and Note 20-E. “Other Matters - NIPSCO 2018 Integrated Resource Plan,” in the Notes to Consolidated Financial Statements for ~~further~~additional information.

Off-Balance Sheet Arrangements

~~As a part~~We, along with certain of ~~normal business, NiSource and certain~~our subsidiaries, enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries. Such agreements include guarantees and stand-by letters of credit.

Refer to Note ~~18,~~20, “Other Commitments and Contingencies,” in the Notes to Consolidated Financial Statements for additional information about ~~NiSource’s off-balance sheet~~such arrangements.

~~Table of Contents~~

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

Market Risk Disclosures

Risk is an inherent part of ~~NiSource’s~~our businesses. The extent to which ~~NiSource~~we properly and effectively ~~identifies, assesses, monitors~~identify, assess, monitor and ~~manages~~manage each of the various types of risk involved in ~~its~~our businesses is critical to ~~its~~our profitability. ~~NiSource seeks~~We seek to identify, assess, monitor and manage, in accordance with defined policies and procedures, the following principal market risks that are involved in ~~NiSource’s~~our businesses: commodity price risk, interest rate risk and credit risk. ~~Risk management at NiSource is~~We manage risk through a multi-faceted process with oversight by the Risk Management Committee that requires constant communication, judgment and knowledge of specialized products and markets. ~~NiSource’s~~Our senior management takes an active role in the risk management process and has developed policies and procedures that require specific administrative and business functions to assist in the identification, assessment and control of various risks. These may include, but are not limited to market, operational, financial, compliance and strategic risk types. In recognition of the increasingly varied and complex nature of the energy business, ~~NiSource’s~~our risk management process, policies and procedures continue to evolve and are subject to ongoing review and modification.

Commodity Price Risk

~~NiSource is~~We are exposed to commodity price risk as a result of ~~its~~our subsidiaries’ operations involving natural gas and power. To manage this market risk, ~~NiSource’s~~our subsidiaries use derivatives, including commodity futures contracts, swaps, forwards and options. ~~NiSource does~~We do not participate in speculative energy trading activity.

Commodity price risk resulting from derivative activities at ~~NiSource’s~~our rate-regulated subsidiaries is limited, since regulations allow recovery of prudently incurred purchased power, fuel and gas costs through the ~~ratemaking~~rate-making process, including gains or losses on these derivative instruments. If states should explore additional regulatory reform, these subsidiaries may begin providing services without the benefit of the traditional ~~ratemaking~~rate-making process and may be more exposed to commodity price risk.

~~NiSource~~Our subsidiaries are required to make cash margin deposits with their brokers to cover actual and potential losses in the value of outstanding exchange traded derivative contracts. The amount of these deposits, some of which ~~are~~is reflected in ~~NiSource’s~~our restricted cash balance, may fluctuate significantly during periods of high volatility in the energy commodity markets.

Refer to Note 9,10, "Risk Management Activities," in the Notes to the Consolidated Financial Statements for further information on ~~NiSource's~~our commodity price risk assets and liabilities as of December 31, ~~2017~~2020 and ~~2016.~~2019.

Interest Rate Risk

~~NiSource is~~We are exposed to interest rate risk as a result of changes in interest rates on borrowings under ~~its~~our revolving credit agreement, commercial paper program, ~~and~~ accounts receivable programs and now-settled term loan, which have interest rates that are indexed to short-term market interest rates. Based upon average borrowings and debt obligations subject to fluctuations in short-term market interest rates, an increase (or decrease) in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest expense by ~~$15.8~~$12.3 million and ~~$11.7~~$19.0 million for ~~2017~~2020 and ~~2016,~~2019, respectively. ~~NiSource is~~We are also exposed to interest rate risk as a result of changes in benchmark rates that can influence the interest rates of future debt issuances. ~~NiSource and its subsidiaries manage interest rate risk on long-term debt through forward starting interest rate swaps that hedge the interest rate risk related to forecasted issuances.~~

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Refer to Note 9,10, "Risk Management Activities," in the Notes to Consolidated Financial Statements for further information on ~~NiSource's~~our interest rate risk assets and liabilities as of December 31, ~~2017~~2020 and ~~2016.~~2019.

Credit Risk

Due to the nature of the industry, credit risk is embedded in many of ~~NiSource’s~~our business activities. ~~NiSource’s~~Our extension of credit is governed by a Corporate Credit Risk Policy. In addition, Risk Management Committee guidelines are in place which document management approval levels for credit limits, evaluation of creditworthiness, and credit risk mitigation efforts. Exposures to credit risks are monitored by the risk management function, which is independent of commercial operations. Credit risk arises due to the possibility that a customer, supplier or counterparty will not be able or willing to fulfill its obligations on a transaction on or before the settlement date. For derivative-related contracts, credit risk arises when counterparties are obligated to deliver or purchase defined commodity units of gas or power to ~~NiSource~~us at a future date per execution of contractual terms and conditions. Exposure to credit risk is measured in terms of both current obligations and the market value of forward positions net of any posted collateral such as cash and letters of credit.

~~NiSource~~We closely ~~monitors~~monitor the financial status of ~~its~~our banking credit providers. ~~NiSource evaluates~~We evaluate the financial status of ~~its~~our banking partners through the use of market-based metrics such as credit default swap pricing levels, and also through traditional credit ratings provided by major credit rating agencies.

Certain individual state regulatory commissions instituted regulatory moratoriums in connection with the COVID-19 pandemic that impacted our ability to pursue our credit risk mitigation practices for customer accounts receivable. Following the issuances of these moratoriums, certain of our regulated operations have been authorized to recognize a regulatory asset for bad debt costs above levels currently in rates. We have reinstated our common credit mitigation practices where moratoriums have expired. See the COVID-19 pandemic discussion in Part I. Item 1A, "Risk Factors" for risks that have been identified related to the pandemic and refer to Note 9, "Regulatory Matters" in the Notes to Consolidated Financial Statements for state specific regulatory moratoriums.

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~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

Other Information

Critical Accounting Policies

~~NiSource applies~~We apply certain accounting policies based on the accounting requirements discussed below that have had, and may continue to have, significant impacts on ~~NiSource’s results of~~our operations and Consolidated Financial Statements.

Basis of Accounting for Rate-Regulated Subsidiaries. ASC Topic 980, Regulated Operations, provides that rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and if the competitive environment makes it probable that such rates can be charged and collected. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the Consolidated Balance Sheets and are recognized in income as the related amounts are included in service rates and recovered from or refunded to customers. The total amounts of regulatory assets and liabilities reflected on the Consolidated Balance Sheets were ~~$1,801.2~~$1,930.5 million and ~~$2,795.6~~$2,065.5 million at December 31, ~~2017,~~2020, and ~~$1,885.4~~$2,239.6 million and ~~$1,381.8~~$2,512.2 million at December 31, ~~2016,~~2019, respectively. For additional information, refer to Note 8,9, “Regulatory Matters,” in the Notes to Consolidated Financial Statements.

In the event that regulation significantly changes the opportunity for ~~NiSource~~us to recover ~~its~~our costs in the future, all or a portion of ~~NiSource’s~~our regulated operations may no longer meet the criteria for the application of ASC Topic 980, Regulated Operations. In such event, a write-down of all or a portion of ~~NiSource’s~~our existing regulatory assets and liabilities could result. If transition cost recovery is approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts. If we were unable to continue to apply the provisions of ASC Topic 980, Regulated Operations, ~~NiSource~~we would be required to apply the provisions of ASC Topic 980-20, Discontinuation of Rate-Regulated Accounting. In management’s opinion, ~~NiSource’s~~our regulated subsidiaries will be subject to ASC Topic 980, Regulated Operations for the foreseeable future.

Certain of the regulatory assets reflected on ~~NiSource’s~~our Consolidated Balance Sheets require specific regulatory action in order to be included in future service rates. Although recovery of these amounts is not guaranteed, ~~NiSource believes~~we believe that these costs meet the requirements for deferral as regulatory assets. ~~Regulatory assets requiring specific regulatory action amounted to $398.4 million at December 31, 2017.~~ If ~~NiSource determined~~we determine that the amounts included as regulatory assets ~~were not~~are no longer recoverable, a charge to income would immediately be required to the extent of the unrecoverable amounts.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

The passage of the TCJA into law in December 2017 necessitated the remeasurement of ~~NiSource’s~~our deferred income tax balances to reflect the ~~new U.S. corporate income~~change in the statutory federal tax rate offrom 35% to 21%. For ~~NiSource’s~~our regulated entities, substantially all of the impact of this remeasurement was recorded to a regulatory ~~asset or regulatory~~ liability and is being passed backed to customers, as ~~appropriate, until such time that NiSource receives final regulatory orders prescribing~~established during the ~~required accounting treatment~~rate making process. For additional information, refer to Note 9, "Regulatory Matters," and ~~related impact on future customer rates. To~~Note 11, "Income Taxes," in the extent final regulatory orders received prescribe accounting treatment different from what is currently reflected in NiSource’s financial statements, NiSource’s results of operations could be impacted.Notes to Consolidated Financial Statements.

Pension and Postretirement Benefits. ~~NiSource has~~ We have defined benefit plans for both pension and other postretirement benefits. The calculation of the net obligations and annual expense related to the plans requires a significant degree of judgment regarding the discount rates to be used in bringing the liabilities to present value, expected long-term rates of return on plan assets, health care trend rates, and mortality rates, among other assumptions. Due to the size of the plans and the long-term nature of the associated liabilities, changes in the assumptions used in the actuarial estimates could have material impacts on the measurement of the net obligations and annual expense recognition. Differences between actuarial assumptions and actual plan results are deferred into AOCI or a regulatory balance sheet account, depending on the jurisdiction of ~~the NiSource~~our entity. These deferred gains or losses are then amortized into the income statement when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the fair value of plan assets (known in GAAP as the “corridor” method) or when settlement accounting is triggered.

The discount rates, expected long-term rates of return on plan assets, health care cost trend rates and mortality rates are critical assumptions. Methods used to develop these assumptions are described below. While a third party actuarial firm assists with the development of many of these assumptions, ~~NiSource is~~we are ultimately responsible for selecting the final assumptions.

The discount rate is utilized principally in calculating the actuarial present value of pension and other postretirement benefit obligations and net periodic pension and other postretirement benefit plan costs. ~~NiSource’s~~Our discount rates for both pension and other postretirement benefits are determined using spot rates along an AA-rated above median yield curve with cash flows matching the expected duration of benefit payments to be made to plan participants.

The expected long-term rate of return on plan assets is a component utilized in calculating annual pension and other postretirement

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~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

benefit plan costs. ~~NiSource estimates~~We estimate the expected return on plan assets by evaluating expected bond returns, equity risk premiums, target asset allocations, the effects of active plan management, the impact of periodic plan asset rebalancing and historical performance. ~~NiSource~~We also ~~considers~~consider the guidance from ~~its~~our investment advisors in making a final determination of ~~its~~our expected rate of return on assets.

For measurement of ~~2018~~2021 net periodic benefit cost, ~~NiSource~~we selected an expected pre-tax long-term rate of return of ~~7.00%~~5.20% and ~~5.80%~~5.50% for ~~its~~our pension and other postretirement benefit plan assets, respectively.

~~NiSource estimates~~We estimate the assumed health care cost trend rate, which is used in determining ~~the Company's~~our other postretirement benefit net expense, based upon ~~its~~our actual health care cost experience, the effects of recently enacted legislation, third-party actuarial surveys and general economic conditions.

~~NiSource uses~~We utilize a full yield curve approach to estimate the service and interest components of net periodic benefit cost for pension and other postretirement benefits by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. For further discussion of our pension and other postretirement benefits, see Note 12, “Pension and Other Postretirement Benefits,” in the Notes to Consolidated Financial Statements.

Typically, we use the Society of Actuaries’ most recently published mortality data in developing a best estimate of mortality as part of the calculation of the pension and other postretirement benefit obligations. Due to the ongoing COVID-19 pandemic, we adjusted our mortality assumption through 2023 to reflect anticipated slow recovery.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

The following tables illustrate the effects of changes in these actuarial assumptions while holding all other assumptions constant:


	Impact on December 31, 2020 Projected Benefit Obligation Increase/(Decrease)
Change in Assumptions (in millions)	Pension Benefits		Other Postretirement Benefits
+50 basis points change in discount rate	$	(88.7)	$	(29.8)
-50 basis points change in discount rate	96.5		32.7



	Impact on 2020 Expense Increase/(Decrease)(1)
Change in Assumptions (in millions)	Pension Benefits		Other Postretirement Benefits
+50 basis points change in discount rate	$	(2.0)	$	(0.8)
-50 basis points change in discount rate	1.6		0.9
+50 basis points change in expected long-term rate of return on plan assets	(9.8)		(1.3)
-50 basis points change in expected long-term rate of return on plan assets	9.8		1.3

Impact on December 31, 2017 Projected Benefit Obligation Increase/(Decrease)
Change in Assumptions (in millions)
Pension Benefits Other Postretirement Benefits
+50 basis points change in discount rate $ (94.8 ) $ (28.7 )
-50 basis points change in discount rate 103.0
31.5
+50 basis points change in health care trend rates 14.9
-50 basis points change in health care trend rates (12.9 )

Impact on 2017 Expense Increase/(Decrease)⁽¹⁾
Change in Assumptions (in millions)
Pension Benefits Other Postretirement Benefits
+50 basis points change in discount rate $ (2.3 ) $ (0.7 )
-50 basis points change in discount rate 2.5
0.6
+50 basis points change in expected long-term rate of return on plan assets (8.5 ) (1.1 )
-50 basis points change in expected long-term rate of return on plan assets 8.5
1.1
+50 basis points change in health care trend rates 0.5
-50 basis points change in health care trend rates (0.5 )

⁽¹⁾Before labor capitalization and regulatory deferrals.

In January 2017, NiSource changed the method used to estimate the service and interest components of net periodic benefit cost for pension and other postretirement benefits. This change, compared to the previous method, resulted in a decrease in the actuarially-determined service and interest cost components. Historically, NiSource estimated service and interest cost utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. For fiscal 2017 and beyond, NiSource now utilizes a full yield curve approach to estimate these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. For further discussion of NiSource’s pension and other postretirement benefits, see Note 11, “PensionGoodwill and Other ~~Postretirement Benefits,” in the Notes to Consolidated Financial Statements.~~

~~Goodwill.~~ ~~NiSource has seven~~Intangible Assets. We have six goodwill reporting units, comprised of the ~~seven~~six state operating companies within the Gas Distribution Operations reportable segment. ~~NiSource’s~~Our goodwill assets at December 31, ~~2017~~2020 were ~~$1,690.7~~$1,486 million, most of which resulted from the acquisition of Columbia on November 1, 2000.

As required by GAAP, ~~NiSource tests~~we test for impairment of goodwill on an annual basis and on an interim basis when events or circumstances indicate that a potential impairment may exist. ~~NiSource’s~~Our annual goodwill test takes place in the second quarter of each year and was ~~most recently finalized as of~~performed on May 1, ~~2017.~~2020.

~~NiSource completed a~~A quantitative ("step 1") test was completed on May 1, 2020 for all reporting units. Columbia of Massachusetts was not considered to be a reporting unit for the May 1, 2020 fair value measurement as the goodwill balance had been reduced to zero as of ~~its reporting units during the May 1, 2016 goodwill test.~~

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~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NIS~~OURCE~~ INC.

December 31, 2019. Consistent with ~~NiSource’s~~our historical impairment testing of goodwill, fair value of the reporting units was determined based on a weighting of income and market approaches. These approaches require significant judgments including appropriate long-term growth rates and discount rates for the income approach and appropriate multiples of earnings for peer companies and control premiums for the market approach. A qualitative ("step 0") test was completed on May 1, 2017. NiSource assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units in its baseline May 1, 2016 test. The results of this assessment indicated that it is not more likely than not that its reporting unit fair values are less than the reporting unit carrying values and no impairments are necessary.

The discount rates were derived using peer company data compiled with the assistance of a third party valuation services firm. The discount rates used are subject to change based on changes in tax rates at both the state and federal level, debt and equity ratios at each reporting unit and general economic conditions.

The long-term growth rate was derived by evaluating historic growth rates, new business and investment opportunities beyond the near term horizon. The long-term growth rate is subject to change depending on inflationary impacts to the U.S. economy and the individual business environments in which each reporting unit operates.

The ~~May~~Step 1 ~~2016 test~~analysis performed indicated that the fair value of each of the reporting units ~~that carry or are allocated goodwill exceeded~~exceeds their carrying ~~values, indicating that~~value. As a result, no impairment ~~existed under~~charges were recorded.

We recorded impairment charges related to goodwill and other intangible assets in 2019. See Note 7, "Goodwill and Other Intangible Assets," in the ~~step 1 annual impairment test. If the estimates of free cash flow used in this step 1 analysis had been 10% lower, the resulting fair values would have still been greater than the carrying value~~Notes to Consolidated Financial Statements for ~~each of the reporting units tested, holding all other assumptions constant.~~information regarding our 2019 analyses and assumptions.

Revenue Recognition. Revenue is recorded as products and services are delivered. Utility revenues are billed to customers monthly on a cycle basis. Revenues are recorded on the accrual basis and include estimates for electricity and gas delivered but not billed. ~~Refer to Note 1-I, “Revenue Recognition,” in the Notes to Consolidated Financial Statements.~~

~~NiSource~~We adopted the provisions of ASC 606 beginning on January 1, 2018 using a modified retrospective method, which was applied to all contracts. No material adjustments were made to January 1, 2018 opening balances ~~as a result of the adoption~~ and ~~NiSource does not anticipate~~no material changes in the amount or timing of future revenue recognition occurred as a result of the adoption of ASC 606. Refer to Note 3 "Revenue Recognition," in the Notes to Consolidated Financial Statements for additional information regarding our significant judgments and estimates related to revenue recognition.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

NISOURCE INC.

Variable Interest Entities. A VIE is an entity in which the controlling interest is determined through means other than a majority voting interest. The primary beneficiary of a VIE is the business enterprise which has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Also, the primary beneficiary either absorbs a significant amount of the VIE’s losses or has the right to receive benefits that could be significant to the VIE. We consider these qualitative elements in determining whether we are the primary beneficiary of a VIE, and we consolidate those VIEs for which we are determined to be the primary beneficiary. As the managing member of a partnership, we would control decisions that are significant to the ongoing operations and economic results. Therefore, we have concluded that we are the primary beneficiary of Rosewater and have consolidated Rosewater even though we own less than 100% of the total equity membership interest.

We have determined that the use of HLBV accounting is reasonable and appropriate to attribute income and loss to the noncontrolling interest held by the tax equity partner. HLBV accounting was selected as the allocation of Rosewater's economic results to members differ from the members' relative ownership percentages. Using the HLBV method, our earnings are calculated based on how the partnership would distribute its cash if it were to hypothetically sell all of its assets for their carrying amounts and liquidate at each reporting period. Under HLBV, we calculate the liquidation value allocable to each partner at the beginning and end of each period based on the contractual liquidation waterfall and adjust our income for the period to reflect the change our associated book value. Refer to Note 4, "Variable Interest Entities" in the Notes to Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Refer to Note 2, "Recent Accounting Pronouncements," in the Notes to Consolidated Financial Statements.

~~ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Quantitative and Qualitative Disclosures about Market Risk are reported in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.”

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NIS~~OURCE~~ INC.

NISOURCE INC.



Index			Page
Report of Independent Registered Public Accounting Firm			4251
Statements of Consolidated Income (Loss)			4453
Statements of Consolidated Comprehensive Income (Loss)			4554
Consolidated Balance Sheets			4655
Statements of Consolidated Cash Flows			4857
Statements of Consolidated ~~Common Stockholders’~~Stockholders' Equity			4958
Notes to Consolidated Financial Statements			5160
11.. Nature of Operations and Summary of Significant Accounting Policies			5160
22.. Recent Accounting Pronouncements			5463
3~~3. Discontinued Operations~~. Revenue Recognition			5765
44.. Variable Interest Entities			68
5. Earnings Per Share			5869
65.. Property, Plant and Equipment			5970
76.. Goodwill and Other Intangible Assets			5971
87.. Asset Retirement Obligations			6071
98.. Regulatory Matters			6172
109.. Risk Management Activities			6676
11~~10.~~. Income Taxes			6777
12~~11.~~. Pension and Other Postretirement Benefits			7080
13~~12. Common Stock~~. Equity			8290
14~~13.~~. Share-Based Compensation			8393
15~~14.~~. Long-Term Debt			8696
16~~15.~~. Short-Term Borrowings			8897
17~~16. Fair Value~~. Leases			8998
18~~17.~~. Fair Value			101
19. Transfers of Financial Assets			91104
20~~18.~~. Other Commitments and Contingencies			92105
21~~19.~~. Accumulated Other Comprehensive Loss			96112
22~~20.~~. Other, Net			97112
23~~21.~~. Interest Expense, Net			97113
24~~22.~~. Segments of Business			97113
25~~23.~~. Quarterly Financial Data (Unaudited)			99115
26~~24.~~. Supplemental Cash Flow Information			~~100~~116
~~25. Subsequent Event~~			~~100~~
Schedule II			~~101~~117

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~stockholders~~shareholders and the Board of Directors of NiSource Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of NiSource Inc. and subsidiaries (the "Company") as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related statements of consolidated income (loss), comprehensive income ~~common~~(loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, and the related notes and the schedule listed in the Index at ~~item~~Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017, in conformity with~~2020 accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February ~~20, 2018,~~17, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

~~Emphasis of a Matter~~

~~As discussed in Note 3 to the consolidated financial statements, on July 1, 2015 the Company completed the spin-off of its subsidiary Columbia Pipeline Group, Inc.~~

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impact of Rate Regulation on the Financial Statements - Refer to Note 9 to the consolidated financial statements

Critical Audit Matter Description

The Company’s subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states. These rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the manner in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and it is probable that such rates can be charged to and collected from customers. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the consolidated balance sheets and are later recognized in income as the related amounts are included in customer rates and recovered from or refunded to customers.

The Company’s subsidiaries’ rates are subject to regulatory rate-setting processes. Rates are determined and approved in regulatory proceedings based on an analysis of the subsidiaries’ costs to provide utility service and a return on, and recovery of, the subsidiaries’ investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The respective commissions' regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the commission in the future will impact the accounting for regulated operations, including

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the commission will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

We identified the accounting for rate-regulated subsidiaries as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing (1) the likelihood of recovery in future rates of incurred costs and (2) the likelihood of refund of amounts previously collected from customers. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by regulatory commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate making process due its inherent complexities.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the commissions included the following, among others:

• We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments, that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

• We read relevant regulatory orders issued by the commissions for the Company, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.

• For regulatory matters in process, we inspected the Company’s filings with the commissions and the filings with the commissions by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions related to recoverability of recorded assets.

• We inquired of management about property, plant, and equipment that may be abandoned. For assets that were abandoned, we inquired of management about their considerations regarding the abandonment. We inspected minutes of the board of directors and regulatory orders and other filings with the commissions to identify evidence that may contradict management’s assertion regarding probability of an abandonment.

• We obtained an analysis from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Columbus, Ohio

February ~~20, 2018~~17, 2021

We have served as the Company's auditor since 2002.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the stockholders and the Board of Directors of NiSource Inc.~~

~~Opinion on Internal Control over Financial Reporting~~

~~We have audited the internal control over financial reporting of NiSource Inc. and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in~~ ~~Internal Control - Integrated Framework (2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in ~~Internal Control - Integrated Framework (2013)~~ ~~issued by COSO.~~

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements as of and for year ended December 31, 2017, of the Company and our report dated February 20, 2018, expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the Company's spin-off of its subsidiary Columbia Pipeline Group, Inc. on July 1, 2015.

~~Basis for Opinion~~

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

~~Definition and Limitations of Internal Control over Financial Reporting~~

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~/s/ DELOITTE & TOUCHE LLP~~

~~Columbus, Ohio~~

~~February 20, 2018~~

~~Table of Contents~~

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)~~

NIS~~OURCE~~ INC.

STATEMENTS OF CONSOLIDATED INCOME (LOSS)

Year Ended December 31, (in millions, except per share amounts)
2017 2016 2015
Operating Revenues
Gas Distribution $ 2,063.2
$ 1,850.9
$ 2,081.9
Gas Transportation 1,021.5
964.6
969.8
Electric 1,785.5
1,660.8
1,572.9
Other 4.4
16.2
27.2
Total Operating Revenues 4,874.6
4,492.5
4,651.8
Operating Expenses
Cost of Sales (excluding depreciation and amortization) 1,518.7
1,390.2
1,643.7
Operation and maintenance 1,612.3
1,453.7
1,426.1
Depreciation and amortization 570.3
547.1
524.4
(Gain) Loss on sale of assets and impairments, net 5.5
(1.0 ) 1.6
Other taxes 257.2
244.3
256.1
Total Operating Expenses 3,964.0
3,634.3
3,851.9
Operating Income 910.6
858.2
799.9
Other Income (Deductions)
Interest expense, net (353.2 ) (349.5 ) (380.2 )
Other, net (2.8 ) 1.5
17.4
Loss on early extinguishment of long-term debt (111.5 ) —
(97.2 )
Total Other Deductions (467.5 ) (348.0 ) (460.0 )
Income from Continuing Operations before Income Taxes 443.1
510.2
339.9
Income Taxes 314.5
182.1
141.3
Income from Continuing Operations 128.6
328.1
198.6
Income (Loss) from Discontinued Operations - net of taxes (0.1 ) 3.4
103.5
Net Income $ 128.5
$ 331.5
$ 302.1
Less: Net income attributable to noncontrolling interest

—
—
15.6
Net Income attributable to NiSource
$ 128.5
$ 331.5
$ 286.5
Amounts attributable to NiSource:
Income from continuing operations $ 128.6
$ 328.1
$ 198.6
Income (Loss) from discontinued operations (0.1 ) 3.4
87.9
Net Income attributable to NiSource $ 128.5
$ 331.5
$ 286.5
Basic Earnings Per Share
Continuing operations $ 0.39
$ 1.02
$ 0.63
Discontinued operations —
0.01
0.27
Basic Earnings Per Share $ 0.39
$ 1.03
$ 0.90
Diluted Earnings Per Share
Continuing operations $ 0.39
$ 1.01
$ 0.63
Discontinued operations —
0.01
0.27
Diluted Earnings Per Share $ 0.39
$ 1.02
$ 0.90
Basic Average Common Shares Outstanding 329.4
321.8
317.7
Diluted Average Common Shares 330.8
323.5
319.8


Year Ended December 31, (in millions, except per share amounts)	2020		2019		2018
Operating Revenues
Customer revenues	$	4,473.2	$	5,053.4	$	4,991.1
Other revenues	208.5		155.5		123.4
Total Operating Revenues	4,681.7		5,208.9		5,114.5
Operating Expenses
Cost of energy	1,109.3		1,534.8		1,761.3
Operation and maintenance	1,585.9		1,354.7		2,352.9
Depreciation and amortization	725.9		717.4		599.6
Impairment of goodwill and intangible assets	0		414.5		0

Loss on sale of assets, net	410.6		0		1.2
Other taxes	299.2		296.8		274.8
Total Operating Expenses	4,130.9		4,318.2		4,989.8

Operating Income	550.8		890.7		124.7
Other Income (Deductions)
Interest expense, net	(370.7)		(378.9)		(353.3)
Other, net	32.1		(5.2)		43.5
Loss on early extinguishment of long-term debt	(243.5)		0		(45.5)
Total Other Deductions, Net	(582.1)		(384.1)		(355.3)
Income (Loss) before Income Taxes	(31.3)		506.6		(230.6)
Income Taxes	(17.1)		123.5		(180.0)



Net Income (Loss)	(14.2)		383.1		(50.6)
Net income attributable to noncontrolling interest	3.4		0		0
Net Income (Loss) attributable to NiSource	(17.6)		383.1		(50.6)
Preferred dividends	(55.1)		(55.1)		(15.0)

Net Income (Loss) Available to Common Shareholders	(72.7)		328.0		(65.6)




Earnings (Loss) Per Share


Basic Earnings (Loss) Per Share	$	(0.19)	$	0.88	$	(0.18)



Diluted Earnings (Loss) Per Share	$	(0.19)	$	0.87	$	(0.18)

Basic Average Common Shares Outstanding	384.3		374.6		356.5
Diluted Average Common Shares	384.3		376.0		356.5

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)


Year Ended December 31, (in millions, net of taxes)	2020		2019		2018
Net Income (Loss)	$	(14.2)	$	383.1	$	(50.6)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities(1)	2.7		5.7		(2.6)
Net unrealized gain (loss) on cash flow hedges(2)	(70.7)		(64.2)		22.7
Unrecognized pension and OPEB benefit (costs)(3)	3.9		3.1		(4.4)
Total other comprehensive income (loss)	(64.1)		(55.4)		15.7
Total Comprehensive Income (Loss)	$	(78.3)	$	327.7	$	(34.9)

Year Ended December 31, (in millions, net of taxes)
2017 2016 2015
Net Income $ 128.5
$ 331.5
$ 302.1
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities⁽¹⁾
0.8
(0.1 ) (0.8 )
Net unrealized gain (loss) on cash flow hedges⁽²⁾
(22.5 ) 8.6
(7.8 )
Unrecognized pension and OPEB benefit (costs)⁽³⁾
3.4
1.5
(2.4 )
Total other comprehensive income (loss) (18.3 ) 10.0
(11.0 )
Total Comprehensive Income $ 110.2
$ 341.5
$ 291.1
Less: Comprehensive income attributable to noncontrolling interest —
—
15.6
Comprehensive Income attributable to NiSource $ 110.2

$ 341.5

$ 275.5

⁽¹⁾Net unrealized gain (loss) on available-for-sale securities, net of ~~$0.4~~$0.7 million tax expense, ~~$0.1~~$1.5 million tax ~~benefit~~expense and ~~$0.4~~$0.6 million tax benefit in ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

⁽²⁾Net unrealized gain (loss) on derivatives qualifying as cash flow hedges, net of ~~$13.9~~$23.4 million tax benefit, ~~$5.6~~$21.2 million tax benefit and $7.5 million tax expense in 2020, 2019 and ~~$4.8 million~~ ~~tax benefit in 2017, 2016 and 2015,~~2018, respectively.

⁽³⁾Unrecognized pension and OPEB benefit (costs), net of ~~$2.1~~$0.1 million tax ~~expense,~~ ~~$0.1~~benefit, $1.6 million tax expense and ~~$4.6~~$1.5 million tax benefit in ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

CONSOLIDATED BALANCE SHEETS


(in millions)	December 31, 2020		December 31, 2019
ASSETS
Property, Plant and Equipment
Plant	$	24,179.9	$	24,541.9
Accumulated depreciation and amortization	(7,560.4)		(7,629.7)


Net Property, Plant and Equipment(1)	16,619.5		16,912.2
Investments and Other Assets
Unconsolidated affiliates	0		1.3
Available-for-sale debt securities (amortized cost of $163.9 and $150.1, allowance for credit losses of $0.5 and $0, respectively)	170.9		154.2
Other investments	81.1		74.7
Total Investments and Other Assets	252.0		230.2
Current Assets
Cash and cash equivalents	116.5		139.3
Restricted cash	9.1		9.1
Accounts receivable	843.6		876.1

Allowance for credit losses	(52.3)		(19.2)
Accounts receivable, net	791.3		856.9
Gas inventory	191.2		250.9

Materials and supplies, at average cost	141.5		120.2
Electric production fuel, at average cost	68.4		53.6

Exchange gas receivable	34.1		48.5

Regulatory assets	135.7		225.7
Deferred property taxes	85.6		79.5

Prepayments and other	86.0		70.2
Total Current Assets(1)	1,659.4		1,853.9
Other Assets

Regulatory assets	1,794.8		2,013.9
Goodwill	1,485.9		1,485.9



Deferred charges and other	228.9		163.7
Total Other Assets	3,509.6		3,663.5
Total Assets	$	22,040.5	$	22,659.8

(in millions) December 31, 2017 December 31, 2016
ASSETS
Property, Plant and Equipment
Utility plant $ 21,026.6
$ 19,368.0
Accumulated depreciation and amortization (6,953.6 ) (6,613.7 )
Net utility plant 14,073.0
12,754.3
Other property, at cost, less accumulated depreciation 286.5
313.7
Net Property, Plant and Equipment 14,359.5
13,068.0
Investments and Other Assets
Unconsolidated affiliates 5.5
6.6
Other investments 204.1
193.3
Total Investments and Other Assets 209.6
199.9
Current Assets
Cash and cash equivalents 29.0
26.4
Restricted cash 9.4
9.6
Accounts receivable (less reserve of $18.3 and $23.3, respectively) 898.9
847.0
Gas inventory 285.1
279.9
Materials and supplies, at average cost 105.9
101.7
Electric production fuel, at average cost 80.1
112.8
Exchange gas receivable 45.8
5.4
Regulatory assets 176.3
248.7
Prepayments and other 132.8
130.6
Total Current Assets 1,763.3
1,762.1
Other Assets
Regulatory assets 1,624.9
1,636.7
Goodwill 1,690.7
1,690.7
Intangible assets 231.7
242.7
Deferred charges and other 82.0
91.8
Total Other Assets 3,629.3
3,661.9
Total Assets $ 19,961.7
$ 18,691.9
(1)Includes $175.6 million of net property, plant and equipment assets and $1.7 million of current assets of a consolidated VIE that may be used only to settle obligations of the consolidated VIE. Refer to Note 4 "Variable Interest Entity" for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

CONSOLIDATED BALANCE SHEETS


(in millions, except share amounts)	December 31, 2017			December 31, 2016			(in millions, except share amounts)	December 31, 2020		December 31, 2019
CAPITALIZATION AND LIABILITIES							CAPITALIZATION AND LIABILITIES
Capitalization							Capitalization
Common Stockholders’ Equity
Common stock - $0.01 par value, 400,000,000 shares authorized; 337,015,806 and 323,159,672 shares outstanding, respectively	$	3.4		$	3.3
Stockholders’ Equity							Stockholders’ Equity
Common stock - $0.01 par value, 600,000,000 shares authorized; 391,760,051 and 382,135,680 shares outstanding, respectively							Common stock - $0.01 par value, 600,000,000 shares authorized; 391,760,051 and 382,135,680 shares outstanding, respectively	$	3.9	$	3.8
Preferred stock - $0.01 par value, 20,000,000 shares authorized; 440,000 shares outstanding							Preferred stock - $0.01 par value, 20,000,000 shares authorized; 440,000 shares outstanding	880.0		880.0
Treasury stock	(95.9		)	(88.7		)	Treasury stock	(99.9)		(99.9)
Additional paid-in capital	5,529.1			5,153.9			Additional paid-in capital	6,890.1		6,666.2
Retained deficit	(1,073.1		)	(972.2		)	Retained deficit	(1,765.2)		(1,370.8)
Accumulated other comprehensive loss	(43.4		)	(25.1		)	Accumulated other comprehensive loss	(156.7)		(92.6)
Total Common Stockholders’ Equity	4,320.1			4,071.2
Total NiSource Stockholders' Equity							Total NiSource Stockholders' Equity	5,752.2		5,986.7
Noncontrolling interest in consolidated subsidiaries							Noncontrolling interest in consolidated subsidiaries	85.6		0
Total Stockholders’ Equity							Total Stockholders’ Equity	5,837.8		5,986.7
Long-term debt, excluding amounts due within one year	7,512.2			6,058.2			Long-term debt, excluding amounts due within one year	9,219.8		7,856.2
Total Capitalization	11,832.3			10,129.4			Total Capitalization	15,057.6		13,842.9
Current Liabilities							Current Liabilities
Current portion of long-term debt	284.3			363.1			Current portion of long-term debt	23.3		13.4
Short-term borrowings	1,205.7			1,488.0			Short-term borrowings	503.0		1,773.2
Accounts payable	625.6			539.4			Accounts payable	589.0		666.0

Customer deposits and credits	262.6			264.1			Customer deposits and credits	243.3		256.4
Taxes accrued	208.1			195.4			Taxes accrued	244.1		231.6
Interest accrued	112.3			120.3			Interest accrued	104.7		99.4
Risk management liabilities	43.2			16.8			Risk management liabilities	78.2		12.6

Exchange gas payable	59.6			83.7			Exchange gas payable	48.5		59.7

Regulatory liabilities	58.7			116.7			Regulatory liabilities	161.3		160.2
Legal and environmental	32.1			37.4

Accrued compensation and employee benefits	195.4			161.4			Accrued compensation and employee benefits	141.8		156.3
Claims accrued							Claims accrued	28.6		165.4
Other accruals	90.8			65.9			Other accruals	113.6		151.6
Total Current Liabilities	3,178.4			3,452.2			Total Current Liabilities	2,279.4		3,745.8
Other Liabilities							Other Liabilities
Risk management liabilities	28.5			44.5			Risk management liabilities	144.6		134.0
Deferred income taxes	1,292.9			2,528.0			Deferred income taxes	1,470.6		1,485.3
Deferred investment tax credits	12.4			13.4

Accrued insurance liabilities	80.1			82.8			Accrued insurance liabilities	84.8		81.5
Accrued liability for postretirement and postemployment benefits	337.1			713.4			Accrued liability for postretirement and postemployment benefits	336.1		373.2

Regulatory liabilities	2,736.9			1,265.1			Regulatory liabilities	1,904.2		2,352.0
Asset retirement obligations	268.7			262.6			Asset retirement obligations	477.1		416.9

Other noncurrent liabilities	194.4			200.5			Other noncurrent liabilities	286.1		228.2
Total Other Liabilities	4,951.0			5,110.3			Total Other Liabilities	4,703.5		5,071.1
Commitments and Contingencies (Refer to Note 18, "Other Commitments and Contingencies")	—			—
Commitments and Contingencies (Refer to Note 20, "Other Commitments and Contingencies")							Commitments and Contingencies (Refer to Note 20, "Other Commitments and Contingencies")
Total Capitalization and Liabilities	$	19,961.7		$	18,691.9		Total Capitalization and Liabilities	$	22,040.5	$	22,659.8

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS

Year Ended December 31, (in millions) 2017 2016 2015
Operating Activities
Net Income $ 128.5
$ 331.5
$ 302.1
Adjustments to Reconcile Net Income to Net Cash from Continuing Operations:
Loss on early extinguishment of debt 111.5
—
97.2
Depreciation and amortization 570.3
547.1
524.4
Deferred income taxes and investment tax credits 306.7
182.3
135.3
Stock compensation expense and 401(k) profit sharing contribution 40.1
46.5
50.7
(Income) loss from discontinued operations - net of taxes 0.1
(3.4 ) (103.5 )
Amortization of discount/premium on debt 7.4
7.6
8.7
AFUDC equity (12.6 ) (11.6 ) (11.5 )
Other adjustments 6.5
(3.8 ) 13.1
Changes in Assets and Liabilities:
Accounts receivable (52.3 ) (188.0 ) 262.2
Inventories 19.0
38.9
46.9
Accounts payable 49.0
108.8
(190.5 )
Customer deposits and credits (2.5 ) (52.3 ) 35.5
Taxes accrued 10.2
12.1
8.7
Interest accrued (33.9 ) (8.7 ) (11.6 )
Exchange gas receivable/payable (64.5 ) 36.9
(31.7 )
Other accruals 31.8
(6.0 ) (55.1 )
Prepayments and other current assets (13.3 ) (0.4 ) 0.1
Regulatory assets/liabilities 57.5
(187.9 ) 82.0
Postretirement and postemployment benefits (380.9 ) (44.8 ) 25.6
Deferred charges and other noncurrent assets (2.0 ) (1.2 ) 5.2
Other noncurrent liabilities (34.5 ) 0.5
(30.4 )
Net Operating Activities from Continuing Operations 742.1
804.1
1,163.4
Net Operating Activities from (used for) Discontinued Operations 0.1
(0.8 ) 293.4
Net Cash Flows from Operating Activities 742.2
803.3
1,456.8
Investing Activities
Capital expenditures (1,695.8 ) (1,475.2 ) (1,360.7 )
Cash contributions from CPG —
—
3,798.2
Cost of removal (109.0 ) (110.1 ) (79.2 )
Purchases of available-for-sale securities (168.4 ) (38.3 ) (54.9 )
Sales of available-for-sale securities 163.1
33.0
58.4
Other investing activities 1.6
(12.4 ) 18.0
Net Investing Activities from (used for) Continuing Operations (1,808.5 ) (1,603.0 ) 2,379.8
Net Investing Activities used for Discontinued Operations —
—
(430.1 )
Net Cash Flows from (used for) Investing Activities (1,808.5 ) (1,603.0 ) 1,949.7
Financing Activities
Cash of CPG at Separation —
—
(136.8 )
Issuance of long-term debt 3,250.0
500.0
—
Repayments of long-term debt and capital lease obligations (1,855.0 ) (434.6 ) (2,092.2 )
Premiums and other debt related costs (144.3 ) (3.7 ) (93.5 )
Change in short-term borrowings, net (282.4 ) 920.6
(936.4 )
Issuance of common stock 336.7
23.1
22.5
Acquisition of treasury stock (7.2 ) (9.4 ) (20.4 )
Dividends paid - common stock (229.1 ) (205.5 ) (263.4 )
Net Financing Activities from (used for) Continuing Operations 1,068.7
790.5
(3,520.2 )
Net Financing Activities from Discontinued Operations —
—
108.6
Net Cash Flows from (used for) Financing Activities 1,068.7
790.5
(3,411.6 )
Change in cash, cash equivalents and restricted cash from (used for) continuing operations 2.3
(8.4 ) 23.0
Change in cash, cash equivalents and restricted cash from (used for) discontinued operations 0.1
(0.8 ) (28.1 )
Change in cash included in discontinued operations —
—
0.5
Cash, cash equivalents and restricted cash at beginning of period 36.0
45.2
49.8
Cash, Cash Equivalents and Restricted Cash at End of Period $ 38.4
$ 36.0
$ 45.2

~~The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.~~

~~Table of Contents~~

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)~~

NIS~~OURCE~~ INC.

~~STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS’ EQUITY~~

(in millions)
Common
Stock

Treasury
Stock

Additional
Paid-In
Capital
Retained Earnings/(Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Balance as of January 1, 2015 $ 3.2
$ (58.9 ) $ 4,787.6
$ 1,494.0
$ (50.6 ) $ 6,175.3
Comprehensive Income (Loss):
Net Income —
—
—
286.5
—
286.5
Other comprehensive loss, net of tax —
—
—
—
(11.0 ) (11.0 )
Allocation of AOCI to noncontrolling interest⁽¹⁾
—
—
—
—
2.0
2.0
Sale of interest in Columbia OpCo to CPPL⁽¹⁾⁽²⁾
—
—
227.1
—
—
227.1
Dividends:
Common stock ($0.83 per share) —
—
—
(263.5 ) —
(263.5 )
Distribution of CPG stock to shareholders (Note 3) —
—
—
(2,640.3 ) 24.5
(2,615.8 )
Treasury stock acquired —
(20.4 ) —
—
—
(20.4 )
Stock issuances:
Employee stock purchase plan —
—
5.1
—
—
5.1
Long-term incentive plan —
—
4.2
—
—
4.2
401(k) and profit sharing —
—
46.7
—
—
46.7
Dividend reinvestment plan —
—
7.3
—
—
7.3
Balance as of December 31, 2015 $ 3.2
$ (79.3 ) $ 5,078.0
$ (1,123.3 ) $ (35.1 ) $ 3,843.5
Comprehensive Income (Loss):
Net Income —
—
—
331.5
—
331.5
Other comprehensive income, net of tax —
—
—
—
10.0
10.0
Common stock dividends ($0.64 per share) —
—
—
(205.7 ) —
(205.7 )
Treasury stock acquired —
(9.4 ) —
—
—
(9.4 )
Cumulative effect of change in accounting principle —
—
—
25.3
—
25.3
Stock issuances:

Common stock 0.1
—
—
—
—
0.1
Employee stock purchase plan —
—
4.7
—
—
4.7
Long-term incentive plan —
—
20.9
—
—
20.9
401(k) and profit sharing —
—
41.4
—
—
41.4
Dividend reinvestment plan —
—
8.9
—
—
8.9
Balance as of December 31, 2016 $ 3.3
$ (88.7 ) $ 5,153.9
$ (972.2 ) $ (25.1 ) $ 4,071.2

⁽¹⁾~~This transaction, which occurred prior to the Separation, was distributed through retained earnings as part of the Separation on July 1, 2015.~~

⁽²⁾Represents the purchase of an additional 8.4% limited partner interest in Columbia OpCo by an affiliate of CPG, recorded at the historical carrying value of Columbia OpCo's net assets after giving effect to the $1,168.4 million equity contribution from CPPL's IPO completed on February 11, 2015.


Year Ended December 31, (in millions)	2020		2019		2018
Operating Activities
Net Income (Loss)	$	(14.2)	$	383.1	$	(50.6)
Adjustments to Reconcile Net Income (Loss) to Net Cash from Operating Activities:
Loss on early extinguishment of debt	243.5		0		45.5
Depreciation and amortization	725.9		717.4		599.6

Deferred income taxes and investment tax credits	(29.0)		118.2		(188.2)

Stock compensation expense and 401(k) profit sharing contribution	17.4		25.9		28.6
Impairment of goodwill and intangible assets	0		414.5		0

Loss (gain) on sale of assets	409.8		(0.6)		1.3

Amortization of discount/premium on debt	9.4		8.2		7.5
AFUDC equity	(9.9)		(8.0)		(14.2)
Other adjustments	0.2		(0.3)		0.4
Changes in Assets and Liabilities:
Accounts receivable	(3.9)		187.8		(186.2)

Inventories	(1.5)		(2.0)		41.4
Accounts payable	(29.7)		(299.9)		268.4
Customer deposits and credits	10.0		16.9		(25.4)
Taxes accrued	28.4		7.3		20.2
Interest accrued	5.3		8.8		(21.7)

Exchange gas receivable/payable	(6.9)		55.5		(21.5)
Other accruals	(218.8)		105.3		43.5
Prepayments and other current assets	(5.9)		(33.6)		(14.5)
Regulatory assets/liabilities	70.8		(85.6)		(53.2)
Postretirement and postemployment benefits	(103.6)		(21.1)		58.2

Deferred charges and other noncurrent assets	(15.0)		(76.1)		3.8
Other noncurrent liabilities	21.7		61.6		(2.8)


Net Cash Flows from Operating Activities	1,104.0		1,583.3		540.1
Investing Activities
Capital expenditures	(1,758.1)		(1,802.4)		(1,818.2)
Cost of removal	(138.2)		(113.2)		(104.3)
Proceeds from disposition of assets	1,115.9		0.4		1.8

Purchases of available-for-sale securities	(144.7)		(140.4)		(90.0)
Sales of available-for-sale securities	131.4		132.1		82.3
Payment to renewable generation asset developer	(85.3)		0		0
Other investing activities	(0.1)		1.1		2.3


Net Cash Flows used for Investing Activities	(879.1)		(1,922.4)		(1,926.1)
Financing Activities
Proceeds from issuance of long-term debt	2,974.0		750.0		350.0
Repayments of long-term debt and finance lease obligations	(1,622.0)		(51.6)		(1,046.1)
Issuance of short-term debt (maturity > 90 days)	1,350.0		600.0		950.0
Repayment of short-term debt (maturity > 90 days)	(2,200.0)		(700.0)		0
Change in short-term borrowings, net (maturity ≤ 90 days)	(420.1)		(104.0)		(178.5)
Issuance of common stock, net of issuance costs	211.4		244.4		848.2
Issuance of preferred stock, net of issuance costs	0		0		880.0
Equity costs, premiums and other debt related costs	(246.5)		(17.8)		(46.0)
Acquisition of treasury stock	0		0		(4.0)
Contributions from non-controlling interest, net of issuance costs	82.2		0		0
Dividends paid - common stock	(321.6)		(298.5)		(273.3)
Dividends paid - preferred stock	(55.1)		(56.1)		(11.6)


Net Cash Flows from Financing Activities	(247.7)		366.4		1,468.7
Change in cash, cash equivalents and restricted cash	(22.8)		27.3		82.7


Cash, cash equivalents and restricted cash at beginning of period	148.4		121.1		38.4
Cash, Cash Equivalents and Restricted Cash at End of Period	$	125.6	$	148.4	$	121.1

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED ~~COMMON~~ STOCKHOLDERS’ EQUITY


(in millions)	Common Stock		Preferred Stock(1)		Treasury Stock		Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interest in Consolidated Subsidiaries		Total
Balance as of January 1, 2018	$	3.4	$	0	$	(95.9)	$	5,529.1	$	(1,073.1)	$	(43.4)	$	0	$	4,320.1
Comprehensive Loss:
Net Loss	0		0		0		0		(50.6)		0		0		(50.6)
Other comprehensive income, net of tax	0		0		0		0		0		15.7		0		15.7

Dividends
Common stock ($0.78 per share)	0		0		0		0		(273.5)		0		0		(273.5)
Preferred stock ($28.88 per share)	0		0		0		0		(11.6)		0		0		(11.6)
Treasury stock acquired	0		0		(4.0)		0		0		0		0		(4.0)
Cumulative effect of change in accounting principle	—		—		—		—		9.5		(9.5)		—		—
Stock issuances:
Common stock - private placement	0.3		0		0		599.3		0		0		0		599.6
Preferred stock	0		880.0		0		0		0		0		0		880.0
Employee stock purchase plan	0		0		0		5.5		0		0		0		5.5
Long-term incentive plan	0		0		0		15.4		0		0		0		15.4
401(k) and profit sharing	0		0		0		21.8		0		0		0		21.8

ATM Program	0.1		0		0		232.4		0		0		0		232.5
Balance as of December 31, 2018	$	3.8	$	880.0	$	(99.9)	$	6,403.5	$	(1,399.3)	$	(37.2)	$	0	$	5,750.9
Comprehensive Income:
Net Income	0		0		0		0		383.1		0		0		383.1
Other comprehensive loss, net of tax	0		0		0		0		0		(55.4)		0		(55.4)
Dividends
Common stock ($0.80 per share)	0		0		0		0		(298.5)		0		0		(298.5)
Preferred stock (See Note 13)	0		0		0		0		(56.1)		0		0		(56.1)


Stock issuances:


Employee stock purchase plan	0		0		0		5.6		0		0		0		5.6
Long-term incentive plan	0		0		0		10.4		0		0		0		10.4
401(k) and profit sharing	0		0		0		17.6		0		0		0		17.6

ATM Program	0		0		0		229.1		0		0		0		229.1
Balance as of December 31, 2019	$	3.8	$	880.0	$	(99.9)	$	6,666.2	$	(1,370.8)	$	(92.6)	$	0	$	5,986.7
Comprehensive Loss:
Net Income (Loss)	0		0		0		0		(17.6)		0		3.4		(14.2)
Other comprehensive loss, net of tax	0		0		0		0		0		(64.1)		0		(64.1)
Dividends:
Common stock ($0.84 per share)	0		0		0		0		(321.7)		0		0		(321.7)
Preferred stock (See Note 13)	0		0		0		0		(55.1)		0		0		(55.1)


Contribution from noncontrolling interest	0		0		0		0		0		0		82.2		82.2

Stock issuances:


Employee stock purchase plan	0		0		0		5.7		0		0		0		5.7
Long-term incentive plan	0		0		0		8.4		0		0		0		8.4
401(k) and profit sharing	0		0		0		13.4		0		0		0		13.4
ATM program	0.1		0		0		196.4		0		0		0		196.5
Balance as of December 31, 2020	$	3.9	$	880.0	$	(99.9)	$	6,890.1	$	(1,765.2)	$	(156.7)	$	85.6	$	5,837.8

(1)Series A and Series B shares have an aggregate liquidation preference of $400M and $500M, respectively. See Note 13, "Equity" for additional information.

(in millions) Common
Stock Treasury
Stock Additional
Paid-In
Capital Retained Deficit Accumulated
Other
Comprehensive Loss Total
Balance as of December 31, 2016 $ 3.3
$ (88.7 ) $ 5,153.9
$ (972.2 ) $ (25.1 ) $ 4,071.2
Comprehensive Income (Loss):
Net Income —
—
—
128.5
—
128.5
Other comprehensive loss, net of tax —
—
—
—
(18.3 ) (18.3 )
Common stock dividends ($0.70 per share) —
—
—
(229.4 ) —
(229.4 )
Treasury stock acquired —
(7.2 ) —
—
—
(7.2 )
Stock issuances:
Employee stock purchase plan —
—
5.0
—
—
5.0
Long-term incentive plan —
—
14.9
—
—
14.9
401(k) and profit sharing —
—
34.3
—
—
34.3
Dividend reinvestment plan —
—
6.4
—
—
6.4
ATM program 0.1
—
314.6
—
—
314.7
Balance as of December 31, 2017 $ 3.4
$ (95.9 ) $ 5,529.1
$ (1,073.1 ) $ (43.4 ) $ 4,320.1

Shares (in thousands)
Common
Shares

Treasury
Shares

Outstanding
Shares
Balance as of January 1, 2015 318,636
(2,599 ) 316,037
Treasury stock acquired (472 ) (472 )
Issued:
Employee stock purchase plan 203
—
203
Long-term incentive plan 1,423
—
1,423
401(k) and profit sharing plan 1,644
—
1,644
Dividend reinvestment plan 275
—
275
Balance as of December 31, 2015 322,181
(3,071 ) 319,110
Treasury stock acquired (433 ) (433 )
Issued:
Employee stock purchase plan 201
—
201
Long-term incentive plan 2,103
—
2,103
401(k) and profit sharing plan 1,793
—
1,793
Dividend reinvestment plan 386
—
386
Balance as of December 31, 2016 326,664
(3,504 ) 323,160
Treasury stock acquired (293 ) (293 )
Issued:
Employee stock purchase plan 207
—
207
Long-term incentive plan 351
—
351
401(k) and profit sharing plan 1,396
—
1,396
Dividend reinvestment plan 264
—
264
ATM program 11,931
—
11,931
Balance as of December 31, 2017 340,813
(3,797 ) 337,016

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (continued)


	Preferred	Common
(in thousands)	Shares	Shares	Treasury	Outstanding
Balance as of January 1, 2018	0	340,813	(3,797)	337,016
Treasury stock acquired	0	0	(166)	(166)
Issued:
Common stock - private placement	0	24,964	0	24,964
Preferred stock	420	0	0	0
Employee stock purchase plan	0	223	0	223
Long-term incentive plan	0	561	0	561
401(k) and profit sharing plan	0	882	0	882

ATM program	0	8,883	0	8,883
Balance as of December 31, 2018	420	376,326	(3,963)	372,363

Issued:

Preferred stock(1)	20	0	0	0
Employee stock purchase plan	0	201	0	201
Long-term incentive plan	0	518	0	518
401(k) and profit sharing plan	0	631	0	631

ATM Program	0	8,423	0	8,423
Balance as of December 31, 2019	440	386,099	(3,963)	382,136
Issued:


Employee stock purchase plan	0	236	0	236
Long-term incentive plan	0	385	0	385
401(k) and profit sharing plan	0	544	0	544
ATM program	0	8,459	0	8,459
Balance as of December 31, 2020	440	395,723	(3,963)	391,760

(1)See Note 13, "Equity," for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)


1.	1. Nature of Operations and Summary of Significant Accounting Policies

A. Company Structure and Principles of Consolidation. ~~NiSource, a Delaware corporation headquartered in Merrillville, Indiana, is~~ We are an energy holding company ~~whose~~incorporated in Delaware and headquartered in Merrillville, Indiana. Our subsidiaries are fully regulated natural gas and electric utility companies serving approximately ~~3.9~~3.7 million customers in ~~seven~~six states. ~~NiSource generates~~We generate substantially all of ~~its~~our operating income through these rate-regulated businesses. The consolidated financial statements include the accounts of ~~NiSource~~us, our majority-owned subsidiaries, and ~~its majority-owned subsidiaries~~VIEs of which we are the primary beneficiary after the elimination of all intercompany accounts and transactions.

On February 26, 2020, NiSource and Columbia of Massachusetts entered into an Asset Purchase Agreement with Eversource (the "Asset Purchase Agreement"). On October 9, 2020, NiSource and Columbia of Massachusetts received net proceeds from the sale of approximately $1,113 million, which included, a $1,100 million purchase price, an estimate of Columbia of Massachusetts' net working capital, net of closing costs and a $56.0 million payment in lieu of penalties that NiSource agreed to make in full settlement of all of the pending and potential claims, lawsuits, investigations or proceedings settled by and released by a settlement agreement approved by the Massachusetts DPU. As of December 31, 2020, we have recorded a loss on the sale of $412.4 million based on asset and liability balances as of the close of the transaction on October 9, 2020, estimated net working capital and estimated transaction costs. This estimated pre-tax loss is presented as "Loss on sale of assets, net" on the Statements of Consolidated Income (Loss) and is subject to change based on the final net working capital determination.

The Massachusetts Business had the following pretax income (loss) for the twelve months ended December 31, 2020, 2019 and 2018:


	Twelve Months Ended December 31,
(in millions)	2020	2019	2018
Pretax Income (Loss)	($422.3)	$36.8	($835.6)

We continue to monitor how the COVID-19 pandemic is affecting our workforce, customers, suppliers, operations, financial results and cash flow. See Note 3, "Revenue Recognition," Note 9, "Regulatory Matters," and Note 11, "Income Taxes," for information on the pandemic.

B. Use of Estimates.The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

C. Cash, Cash Equivalents and Restricted Cash. ~~NiSource considers~~ We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. ~~NiSource reports~~We report amounts deposited in brokerage accounts for margin requirements as restricted cash. In addition, ~~NiSource has~~we have amounts deposited in trust to satisfy requirements for the provision of various property, liability, workers compensation, and long-term disability insurance, which is classified as restricted cash on the Consolidated Balance Sheets and disclosed aswith cash and cash equivalents on the Statements of Consolidated Cash Flows.

D. Accounts Receivable and Unbilled Revenue. Accounts receivable on the Consolidated Balance Sheets includes both billed and unbilled amounts. Unbilled amounts of accounts receivable relate to a portion of a customer’s consumption of gas or electricity from the ~~date of the~~ last cycle billing date through the last day of the month (balance sheet date). Factors taken into consideration when estimating unbilled revenue include historical usage, customer rates, weather and ~~weather.~~reasonable and supportable forecasts. Accounts receivable fluctuates from year to year depending in large part on weather impacts and price volatility. ~~NiSource's~~Our accounts receivable on the Consolidated Balance Sheets include unbilled revenue, less reserves, in the amounts of ~~$359.4~~$338.3 million and ~~$329.7~~$350.5 million as of December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. The reserve for uncollectible receivables is ~~NiSource’s~~our best estimate of the amount of probable credit losses in the existing accounts receivable. ~~NiSource~~We determined the reserve based on historical experience and in consideration of current market conditions. Account balances are charged against the allowance when it is anticipated the receivable will not be recovered. Refer to Note 3, "Revenue Recognition," for additional information on customer-related accounts receivable.

E. Investments in Debt Securities. ~~NiSource’s~~ Our investments in debt securities are carried at fair value and are designated as available-for-sale. These investments are included within “Other investments” on the Consolidated Balance Sheets. Unrealized gains and losses, net of deferred income taxes, are ~~reflected as~~recorded to accumulated other comprehensive ~~income.~~income or loss. These

Table of Contents

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

investments are monitored for other than temporary declines in market value. Realized gains and losses and permanent impairments are reflected in the Statements of Consolidated ~~Income. No~~Income (Loss). NaN material impairment charges were recorded for the years ended December 31, ~~2017, 2016~~2020, 2019 or ~~2015.~~2018. Refer to Note ~~16,~~18, "Fair Value," for additional information.

F. Basis of Accounting for Rate-Regulated Subsidiaries. Rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and it is probable that such rates can be charged and collected. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the Consolidated Balance Sheets and are later recognized in income as the related amounts are included in customer rates and recovered from or refunded to customers.

InWe continually evaluate whether or not our operations are within the event that regulation significantly changes the opportunity for NiSource to recover its costs in the future, all or a portion of NiSource’s regulated operations may no longer meet the criteria for regulatory accounting. In such an event, a write-down of all or a portion of NiSource’s existing regulatory assets and liabilities could result. If transition cost recovery was approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts. If unable to continue to apply the provisions of regulatory accounting, NiSource would be required to apply the provisionsscope of ASC ~~980-20,~~ ~~Discontinuation~~980 and rate regulations. As part of ~~Rate-Regulated Accounting~~.that analysis, we evaluate probability of recovery for our regulatory assets. In management’s opinion, ~~NiSource’s~~our regulated subsidiaries will be subject to regulatory accounting for the foreseeable future. Refer to Note 8,9, "Regulatory Matters," for additional information.

G. Plant and Other Property and Related Depreciation and Maintenance. Property, plant and equipment (principally utility plant) is stated at cost. ~~The~~Our rate-regulated subsidiaries record depreciation using composite rates on a straight-line basis over the remaining service lives of the electric, gas and common properties, as approved by the appropriate regulators.

~~Table of Contents~~

NIS~~OURCE~~ INC.

~~Notes to Consolidated Financial Statements~~

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)~~

Non-utility property includes renewable generation assets owned by a joint venture of which we are the primary beneficiary and is generally depreciated on a straight-line basis over the life of the associated asset. Refer to Note 5,6, "Property, Plant and Equipment," for additional information related to depreciation ~~expense at Units 7 and 8 at Bailly Generating Station.~~expense.

For rate-regulated companies, AFUDC is capitalized on all classes of property except organization costs, land, autos, office equipment, tools and other general property purchases. The allowance is applied to construction costs for that period of time between the date of the expenditure and the date on which such project is placed in service. ~~The~~Our pre-tax rate for AFUDC was ~~4.0%~~2.6% in ~~2017, 4.5%~~2020, 3.0% in ~~2016~~2019 and ~~4.7%~~3.5% in ~~2015.~~2018.

Generally, ~~NiSource’s~~our subsidiaries follow the practice of charging maintenance and repairs, including the cost of removal of minor items of property, to expense as incurred. When ~~NiSource’s~~our subsidiaries retire regulated property, plant and equipment, original cost plus the cost of retirement, less salvage value, is charged to accumulated depreciation. However, when it becomes probable a regulated asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the ~~net amount is~~gross amounts are classified as ~~"Other property, at cost, less accumulated depreciation" on the Consolidated Balance Sheets.~~"Non-Utility and Other " as described in Note 6, "Property, Plant and Equipment." If the asset is no longer operating but still subject to recovery, the net amount is classified in "Regulatory assets" on the Consolidated Balance Sheets. If ~~NiSource is~~we are able to recover a full return of and on investment, the carrying value of the asset is based on historical cost. If ~~NiSource is~~we are not able to recover a full return on investment, a loss on impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.

When ~~NiSource’s~~our subsidiaries sell entire regulated operating units, or retire or sell nonregulated properties, the original cost and accumulated depreciation and amortization balances are removed from ~~"Property,~~"Net Property, Plant and Equipment" on the Consolidated Balance Sheets. Any gain or loss is recorded in earnings, unless otherwise required by the applicable regulatory body. Refer to Note 5,6, "Property, Plant and Equipment," for further information.

External and internal costs associated with computer software developed for internal use are capitalized. Capitalization of such costs commences upon the completion of the preliminary stage of each project. Once the installed software is ready for its intended use, such capitalized costs are amortized on a straight-line basis generally over a period of five years ~~except~~

External and internal up-front implementation costs associated with cloud computing arrangements that are service contracts are deferred on the Consolidated Balance Sheets. Once the installed software is ready for ~~certain significant enterprise-wide technology investments which~~its intended use, such deferred costs are amortized on a straight-line basis to "Operation and maintenance," over ~~a ten-year period.~~the minimum term of the contract plus contractually-provided renewal periods that are reasonable expected to be exercised.

H. Goodwill and Other Intangible Assets. Substantially all of ~~NiSource's~~our goodwill relates to the excess of cost over the fair value of the net assets acquired in the Columbia acquisition on November 1, 2000. ~~NiSource tests its~~We test our goodwill for impairment annually as of May 1, or more frequently if events and circumstances indicate that goodwill might be impaired. Fair value of ~~NiSource's~~our reporting

Table of Contents

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

units is determined using a combination of income and market approaches.

NiSource has other intangible assets consisting primarily of franchise rights apart from goodwill that were identified as part of the purchase price allocations associated with the acquisition of Columbia of Massachusetts which is being amortized on a straight-line basis over forty years from the date of acquisition. See Note 6,7, "Goodwill and Other Intangible Assets," for additional information.

I. ~~Revenue Recognition.~~ Revenue is recorded as products and services are delivered. Utility revenues are billed to customers monthly on a cycle basis. Revenues are recorded on the accrual basis and also include estimates for electricity and gas delivered but not billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed.

On occasion, NiSource's regulated subsidiaries are permitted to implement new rates that have not been formally approved by their state regulatory commissions, which are subject to refund. As permitted by accounting principles generally accepted in the United States, each regulated subsidiary recognizes this revenue and establishes a reserve for amounts that could be refunded based on its experience for the jurisdiction in which the rates were implemented. In connection with such revenues, estimated rate refund liabilities are recorded which reflect management’s current judgment of the ultimate outcomes of the proceedings. No provisions are made when, in the opinion of management, the facts and circumstances preclude a reasonable estimate of the outcome.

J. Accounts Receivable Transfer Program. Certain of ~~NiSource’s~~our subsidiaries have agreements with third parties to ~~sell~~transfer certain accounts receivable without recourse. These transfers of accounts receivable are accounted for as secured borrowings. The entire gross receivables balance remains on the December 31, ~~2017~~2020 and ~~2016~~2019 Consolidated Balance Sheets and short-term debt is recorded in the amount of proceeds received from the ~~purchasers~~transferees involved in the transactions. Refer to Note ~~17,~~19, "Transfers of Financial Assets," for further information.

~~Table of Contents~~

NIS~~OURCE~~ INC.

~~Notes to Consolidated Financial Statements~~

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)~~

K.J. Gas Cost and Fuel Adjustment Clause. ~~NiSource’s~~ Our regulated subsidiaries defer most differences between gas and fuel purchase costs and the recovery of such costs in revenues and adjust future billings for such deferrals on a basis consistent with applicable state-approved tariff provisions. These deferred balances are recorded as "Regulatory assets" or "Regulatory liabilities," as appropriate, on the Consolidated Balance Sheets. Refer to Note 8,9, "Regulatory Matters," for additional information.

L.K. Inventory. Both the LIFO inventory methodology and the weighted average cost methodology are used to value natural gas in storage, as approved by regulators for all of ~~NiSource’s~~our regulated subsidiaries. Inventory valued using LIFO was ~~$45.5~~$42.3 million and ~~$46.1~~$47.2 million at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. Based on the average cost of gas using the LIFO method, the estimated replacement cost of gas in storage was less than the stated LIFO cost by ~~$17.4~~$19.6 million and ~~$9.4~~$25.5 million at December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. Gas inventory valued using the weighted average cost methodology was ~~$239.6~~$148.8 million at December 31, ~~2017~~2020 and ~~$233.8~~$203.7 million at December 31, ~~2016.~~2019.

Electric production fuel is valued using the weighted average cost inventory methodology, as approved by NIPSCO's regulator.

Materials and supplies are valued using the weighted average cost inventory methodology.

M.L. Accounting for Exchange and Balancing Arrangements of Natural Gas. ~~NiSource’s~~ Our Gas Distribution Operations segment enters into balancing and exchange arrangements of natural gas as part of its operations and off-system sales programs. ~~NiSource records~~We record a receivable or payable for any of ~~its~~our respective cumulative gas imbalances, as well as for any gas inventory borrowed or lent under a Gas Distribution Operations exchange agreement. Exchange gas is valued based on individual regulatory jurisdiction requirements (for example, historical spot rate, spot at the beginning of the month). These receivables and payables are recorded as “Exchange gas receivable” or “Exchange gas payable” on ~~NiSource’s~~our Consolidated Balance Sheets, as appropriate.

N.M. Accounting for Risk Management Activities. ~~NiSource accounts~~We account for ~~its~~our derivatives and hedging activities in accordance with ASC 815. ~~NiSource recognizes~~We recognize all derivatives as either assets or liabilities on the Consolidated Balance Sheets at fair value, unless such contracts are exempted as a normal purchase normal sale under the provisions of the standard. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and resulting designation.

~~NiSource has~~We have elected not to net fair value amounts for any of ~~its~~our derivative instruments or the fair value amounts recognized for ~~its~~the right to receive cash collateral or obligation to pay cash collateral arising from those derivative instruments recognized at fair value, which are executed with the same counterparty under a master netting arrangement. See Note 9,10, "Risk Management Activities," for additional information.

O.N. Income Taxes and Investment Tax Credits. ~~NiSource records~~We record income taxes to recognize full interperiod tax allocations.Under the asset and liability method, deferred income taxes are provided for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amount and the tax basis of existing assets and liabilities. ~~Previously recorded investment~~Investment tax credits ~~of the~~associated with regulated ~~subsidiaries were~~operations are deferred ~~on the balance sheet~~ and ~~are being~~ amortized as a reduction to ~~book~~ income tax expense over the ~~regulatory life~~estimated useful lives of the related ~~properties to conform to regulatory policy.~~properties.

To the extent certain deferred income taxes of the regulated companies are recoverable or payable through future rates, regulatory assets and liabilities have been established. Regulatory assets for income taxes are primarily attributable to property-related tax timing differences for which deferred taxes had not been provided in the past, when regulators did not recognize such taxes as costs in the ~~ratemaking~~rate-making process. Regulatory liabilities for income taxes are primarily attributable to the regulated companies’ obligation to refund to ratepayers deferred income taxes provided at rates higher than the current Federal income tax rate. Such property-related amounts are credited to ratepayers using either the average rate assumption method or the reverse South Georgia method. Non property-related amounts are credited to ratepayers consistent with state utility commission direction.

Table of Contents

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Pursuant to the ~~U.S.~~ Internal Revenue Code and relevant state taxing authorities, ~~NiSource~~we and ~~its~~our subsidiaries file consolidated income tax returns for ~~Federal~~federal and certain state jurisdictions. ~~NiSource~~We and ~~its~~our subsidiaries are parties to ~~an agreement (the “Intercompany~~a tax sharing agreement. Income ~~Tax Allocation Agreement”) that provides for the allocation of consolidated tax liabilities. The Intercompany Income Tax Allocation Agreement generally provides that~~taxes recorded by each party ~~is allocated an amount of tax similar to~~represent amounts that ~~which~~ would be owed had the party been separately subject to tax.

P.O. Environmental Expenditures. ~~NiSource accrues~~ We accrue for costs associated with environmental remediation obligations, including expenditures related to asset retirement obligations and cost of removal, when the incurrence of such costs is probable and the amounts can be reasonably estimated, regardless of when the expenditures are actually made. The undiscounted estimated future expenditures are based on currently enacted laws and regulations, existing

~~Table of Contents~~

NIS~~OURCE~~ INC.

~~Notes to Consolidated Financial Statements~~

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)~~

technology and estimated site-specific costs where assumptions may be made about the nature and extent of site contamination, the extent of cleanup efforts, costs of alternative cleanup methods and other variables. The liability is adjusted as further information is discovered or circumstances change. The ~~reserves~~accruals for estimated environmental expenditures are recorded on the Consolidated Balance Sheets in ~~“Legal and environmental”~~“Other accruals” for short-term portions of these liabilities and “Other noncurrent liabilities” for the respective long-term portions of these liabilities. Rate-regulated subsidiaries applying regulatory accounting establish regulatory assets on the Consolidated Balance Sheets to the extent that future recovery of environmental remediation costs is probable through the regulatory process. Refer to Note ~~18,~~8, "Asset Retirement Obligations," and Note 20, "Other Commitments and Contingencies," for further information.

Q.P. Excise Taxes. ~~NiSource accounts~~ As an agent for some state and local governments, we invoice and collect certain excise taxes ~~that are customer liabilities~~levied by ~~separately stating~~state and local governments on ~~its invoices the tax to its~~ customers and ~~recording~~record these amounts ~~invoiced~~ as liabilities payable to the applicable taxing jurisdiction. Such balances are presented within "Other accruals" on the Consolidated Balance Sheets. These types of taxes collected from customers, comprised largely of sales taxes, are presented on a net basis affecting neither revenues nor cost of sales. ~~NiSource accounts~~We account for excise taxes for which ~~it is~~we are liable by recording a liability for the expected tax with a corresponding charge to “Other taxes” expense on the Statements of Consolidated ~~Income.~~Income (Loss).

R.Q. Accrued Insurance Liabilities. ~~NiSource accrues~~ We accrue for insurance costs related to workers compensation, automobile, property, general and employment practices liabilities based on the most probable value of each claim. ~~Claim~~In general, claim values are determined by professional, licensed loss adjusters who consider the facts of the claim, anticipated indemnification and legal expenses, and respective state rules. Claims are reviewed by ~~NiSource~~us at least quarterly and an adjustment is made to the accrual based on the most current information. ~~NiSource’s actual exposure~~Refer to ~~liability is minimal due~~Note 20-E "Other Matters" for further information on accrued insurance liabilities related to ~~coverage from its wholly-owned captive insurer who then transfers risk to third party insurance providers for~~ the ~~majority of costs paid to claimants above NiSource's deductible.~~Greater Lawrence Incident.


2.	2. Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

~~NiSource is~~We are currently evaluating the impact of certain ASUs on ~~its~~our Consolidated Financial Statements or Notes to Consolidated Financial Statements, which are described below:

Standard

Description

Effective Date

Effect on the financial statements or other significant matters

ASU ~~2016-13,~~ 2020-04,

Reference Rate Reform

(Topic 848):

Facilitation of the

Effects of Reference

Rate Reform on

Financial ~~Instruments-Credit Losses (Topic 326)~~Statement

~~The~~This pronouncement ~~changes~~provides
temporary optional expedients
and exceptions for applying
GAAP principles to contract
modifications and hedging
relationships to ease the ~~impairment model for most~~ financial ~~assets, replacing~~
reporting burdens of the ~~current "incurred loss" model. ASU 2016-13~~ expected
market transition from LIBOR
and other interbank offered rates
to alternative reference rates.

Upon issuance on
March 12, 2020, and
will ~~require~~apply though
December 31, 2022.

We continue to evaluate the ~~use~~temporary expedients and options available under this guidance, and the effects of ~~an "expected loss" model for instruments measured at amortized cost and will also require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount.~~

~~Annual periods beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for annual or interim periods beginning after December 15, 2018.~~

~~NiSource is currently evaluating the impact of adoption, if any,~~these pronouncements on ~~the~~our Consolidated Financial Statements and Notes to Consolidated Financial Statements. We are currently identifying and evaluating contracts that may be impacted. As of December 31, 2020, we have not applied any expedients and options available under this ASU.

ASU 2021-01, Reference Rate Reform (Topic 848): Scope

5463



~~Delaware~~ DE		35-2108964
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

801 East 86th Avenue ~~Merrillville, Indiana~~		~~46410~~
Merrillville,	IN	46410
(Address of principal executive offices)		(Zip Code)



	Title of ~~each class~~ Each Class	Trading Symbol(s)		Name of ~~each exchange~~Each Exchange on ~~which registered~~	Which Registered
	Common Stock, par value $0.01 per share	NI		~~New York~~NYSE
Depositary Shares, each representing a 1/1,000th ownership interest in a share of 6.50% Series B	NI PR B		NYSE
Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, liquidation preference $25,000 per share and a 1/1,000th ownership interest in a share of Series B-1 Preferred Stock, par value $0.01 per share, liquidation preference $0.01 per share



~~Large accelerated filer~~ þ	~~Accelerated filer~~ ¨	~~Emerging growth company~~ ¨
~~Non-accelerated filer~~ ¨	~~Smaller reporting company~~ ¨



		Page No.
Defined Terms		3
Part I
Item 1.	Business	6
Item 1A.	Risk Factors	911
Item 1B.	Unresolved Staff Comments	1624
Item 2.	Properties	1624
Item 3.	Legal Proceedings	1624
Item 4.4	Mine Safety Disclosures	1624
~~Supplemental Item. Executive Officers of the Registrant~~	17
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1826
Item 6.	Selected Financial Data	2027
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2128
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4049
Item 8.	Financial Statements and Supplementary Data	4150
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~102~~118
Item 9A.	Controls and Procedures	~~102~~118
Item 9B.	Other Information	~~102~~120
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	~~103~~121
Item 11.	Executive Compensation	~~103~~121
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~103~~121
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~103~~121
Item 14.	Principal Accounting Fees and Services	~~103~~121
Part IV
Item 15.	Exhibits, Financial Statement Schedules	~~104~~122
Item 16.	Form 10-K Summary	128
Signatures		~~108~~129


DEFINED TERMS

The following is a list of abbreviations or acronyms that are used in this report:

NiSource Subsidiaries, Affiliates and Former Subsidiaries
~~Capital Markets~~		~~NiSource Capital Markets, Inc.~~
~~Columbia~~	~~Columbia Energy Group~~
Columbia of Kentucky		Columbia Gas of Kentucky, Inc.
Columbia of Maryland			Columbia Gas of Maryland, Inc.
Columbia of Massachusetts			Bay State Gas Company
Columbia of Ohio			Columbia Gas of Ohio, Inc.
Columbia of Pennsylvania			Columbia Gas of Pennsylvania, Inc.
Columbia of Virginia			Columbia Gas of Virginia, Inc.
Company			NiSource Inc. and its subsidiaries, unless otherwise indicated by the context
~~CPG~~NIPSCO			~~Columbia Pipeline Group, Inc.~~
~~CPPL~~	~~Columbia Pipeline Partners LP~~
~~CPRC~~	~~Columbia Gas of Pennsylvania Receivables Corporation~~
~~NIPSCO~~	Northern Indiana Public Service Company LLC
NiSource ("we," "us" or "our")			NiSource Inc.
NiSource Corporate Services			NiSource Corporate Services Company
~~NiSource Finance~~				~~NiSource Finance Corporation~~
Abbreviations
~~Abbreviations~~ACE			Affordable clean energy
AFUDC			Allowance for funds used during construction
~~AMRP~~AMR			~~Accelerated Main Replacement Program~~Automatic meter reading
AOCI			Accumulated Other Comprehensive Income
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
ATM			At-the-market
Board			Board of Directors
~~CAA~~BTA			~~Clean Air Act~~Build-transfer agreement
~~CCGT~~CAP			Compliance Assurance Process
CCGT			Combined Cycle Gas Turbine
CCRs			Coal Combustion Residuals
CEP			Capital Expenditure Program
CERCLA			Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund)
CO2 COVID-19 ("the COVID-19 pandemic" or "the pandemic")			~~Carbon Dioxide~~Novel Coronavirus 2019
~~Columbia OpCo~~DPA			~~CPG OpCo LP~~Deferred prosecution agreement
~~CPP~~DPU			~~Clean Power Plan~~
~~DPU~~	Department of Public Utilities
~~DSM~~DSIC			Distribution System Investment Charge
DSM			Demand Side Management
~~ECR~~	~~Environmental Cost Recovery~~
~~ECT~~	~~Environmental Cost Tracker~~
~~EERM~~	~~Environmental Expense Recovery Mechanism~~
~~EGUs~~	~~Electric utility steam generating unit~~
~~ELG~~	~~Effluence limitations guidelines~~

~~DEFINED TERMS~~

~~EPA~~

EPA						United States Environmental Protection Agency
EPS						Earnings per share
FAC						Fuel adjustment clause
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
~~FTRs~~FMCA						~~Financial Transmission Rights~~Federally Mandated Cost Adjustment
GAAP						Generally Accepted Accounting Principles
GCA						Gas cost adjustment
~~GCR~~						~~Gas cost recovery~~
GHG						Greenhouse ~~gases~~gas
~~GSEP~~GWh						~~Gas System Enhancement Program~~Gigawatt hours


~~gwh~~			~~Gigawatt hours~~DEFINED TERMS
~~IBM~~HLBV		~~International Business Machines Corp.~~Hypothetical Liquidation at Book Value
~~IPO~~IRP		~~Initial Public Offering~~
~~IRP~~	Infrastructure Replacement Program
IRS		Internal Revenue Service
IURC		Indiana Utility Regulatory Commission
LDCs		Local distribution companies
~~LIFO~~LIBOR		~~Last-in, first-out~~London inter-bank offered rate
~~MGP~~LIFO		Last-in, first-out
MA DOR		Massachusetts Department of Revenue
Massachusetts Business		All of the assets sold to, and liabilities assumed by, Eversource pursuant to the Asset Purchase Agreement
MGP		Manufactured Gas Plant
MISO		Midcontinent Independent System Operator
~~Mizuho~~MMDth		~~Mizuho Corporate Bank Ltd.~~Million dekatherms
~~MMDth~~MW		~~Million dekatherms~~Megawatts
~~MPSC~~MWh		~~Maryland Public Service Commission~~Megawatt hours
mwNOL		~~Megawatts~~
~~mwh~~	~~Megawatt hours~~
~~NAAQS~~	~~National Ambient Air Quality Standards~~
~~NOL~~	Net Operating Loss
~~NYMEX~~NTSB		National Transportation Safety Board
NYMEX		The New York Mercantile Exchange
NYSE		The New York Stock Exchange
~~OCC~~OPEB		~~Ohio Consumers' Counsel~~
~~OPEB~~	Other Postretirement and Postemployment Benefits
~~PATH~~PCB		~~Protecting Americans from Tax Hikes Act of 2015~~Polychlorinated biphenyls
~~PCB~~PHMSA		~~Polychlorinated biphenyls~~
~~PHMSA~~	U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration
~~PISCC~~PPA		~~Post-in-service carrying charges~~Power Purchase Agreement
~~PNC~~PSC		~~PNC Bank N.A.~~
~~ppb~~	~~Parts per billion~~
~~PSC~~	Public Service Commission
~~PUC~~	~~Public Utility Commission~~
~~PUCO~~	~~Public Utilities Commission of Ohio~~
~~RCRA~~	~~Resource Conservation and Recovery Act~~
~~RDAF~~	~~Revenue decoupling adjustment factor~~

~~DEFINED TERMS~~

~~Separation~~PUC						The separation of NiSource's natural gas pipeline, midstream and storage business from NiSource's natural gas and electric utility business accomplished through the pro rata distribution by NiSource to holders of its outstanding common stock of all the outstanding shares of common stock of CPG. The separation was completed on July 1, 2015.Public Utility Commission
~~SEC~~PUCO						Public Utilities Commission of Ohio
RCRA						Resource Conservation and Recovery Act
ROE						Return on Equity
Rosewater						Rosewater Wind Generation LLC
ROU						Right of use

SAVE						Steps to Advance Virginia's Energy Plan
SEC						Securities and Exchange Commission
SMRP						Safety Modification and Replacement Program
SMS						Safety Management System
STRIDE						Strategic Infrastructure Development and Enhancement
Sugar Creek						Sugar Creek electric generating plant
TCJA						Tax Cuts and Jobs Act of 2017
TDSIC						Transmission, Distribution and Storage System Improvement Charge
~~TUAs~~TSA						~~Transmission Upgrade Agreements~~Transition Service Agreement
~~VIE~~U.S. Attorney's Office						U.S. Attorney's Office for the District of Massachusetts
VIE						Variable Interest Entity
VSCC						Virginia State Corporation Commission



	2017						2016
	High		Low		Dividend Per Share		High		Low		Dividend Per Share
First Quarter	$	24.29	$	21.65	$	0.175	$	23.74	$	19.05	$	0.155
Second Quarter	26.56		23.53		0.175		26.53		21.97		0.155
Third Quarter	27.29		24.96		0.175		26.94		23.20		0.165
Fourth Quarter	27.76		24.63		0.175		24.06		21.17		0.165
					$	0.700					$	0.640



Year Ended December 31, (in millions	2017		2016		2015		2017 vs. 2016		2016 vs. 2015
Operating Income	$	910.6	$	858.2	$	799.9	$	52.4	$	58.3



Shares (in thousands)	Common Shares	Treasury Shares		Outstanding Shares
Balance as of January 1, 2015	318,636	(2,599	)	316,037
Treasury stock acquired		(472	)	(472	)
Issued:
Employee stock purchase plan	203	—		203
Long-term incentive plan	1,423	—		1,423
401(k) and profit sharing plan	1,644	—		1,644
Dividend reinvestment plan	275	—		275
Balance as of December 31, 2015	322,181	(3,071	)	319,110
Treasury stock acquired		(433	)	(433	)
Issued:
Employee stock purchase plan	201	—		201
Long-term incentive plan	2,103	—		2,103
401(k) and profit sharing plan	1,793	—		1,793
Dividend reinvestment plan	386	—		386
Balance as of December 31, 2016	326,664	(3,504	)	323,160
Treasury stock acquired		(293	)	(293	)
Issued:
Employee stock purchase plan	207	—		207
Long-term incentive plan	351	—		351
401(k) and profit sharing plan	1,396	—		1,396
Dividend reinvestment plan	264	—		264
ATM program	11,931	—		11,931
Balance as of December 31, 2017	340,813	(3,797	)	337,016



~~Standard~~	~~Adoption~~
~~ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements~~ Statements as it pertains to ~~accounting for Hedging Activities~~	~~NiSource elected~~any relevant future activity. We expect to adopt this ASU on its effective ~~September 30, 2017. As a result, NiSource~~date.


Standard			Adoption
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments			In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASC 326). ASC 326 revised the GAAP guidance on the impairment of most financial assets and certain other instruments that are not measured at fair value through net income. ASC 326 introduces the current expected credit loss (CECL) model that is ~~no longer required~~based on expected losses for instruments measured at amortized cost rather than incurred losses. It also requires entities to ~~separately measure~~record an allowance for available-for-sale debt securities rather than impair the carrying amount of the securities. Subsequent improvements to the estimated credit losses of available-for-sale debt securities will be recognized immediately in earnings, instead of over-time as they would under historic guidance. In 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivative and ~~report hedge ineffectiveness. The~~Hedging, and Topic 825, Financial Instruments. This pronouncement clarified and improved certain areas of guidance ~~also eases the requirements~~ related to ~~ongoing hedge effectiveness assessments at NiSource. The adoption~~the recently issued standards on credit losses, hedging, and recognition and measurement. We adopted ASC 326 effective January 1, 2020, using a modified retrospective method. Adoption of this standard did not have a material impact on ~~the~~our Consolidated Financial ~~Statements or Notes to Consolidated Financial~~ Statements.



~~Standard~~	~~Adoption~~
~~ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~	NiSource elected to adopt this ASU effective July 1, 2017. The adoption of this standard did not have a material impact on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.
~~ASU 2017-07,~~ ~~Compensation -~~ ~~Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~	NiSource adopted this ASU effective January 1, 2018. Beginning with NiSource's Form 10-Q for the first quarter of 2018, NiSource will continue to present the service cost component of net periodic benefit cost within "Operation and maintenance"; however, other components of the net periodic benefit cost (including regulatory deferrals) will be presented separately within "Other, net" in the Statement of Consolidated Income. This change in income statement presentation will be implemented on a retrospective basis. Beginning prospectively on the date of adoption, only the service cost component of NiSource's net periodic benefit cost is eligible for capitalization as "Property, Plant and Equipment" on the Consolidated Balance Sheets. NiSource's regulated subsidiaries have adopted this ASU for regulatory reporting purposes.
~~ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~	NiSource elected to adopt this ASU effective January 1, 2017. The adoption of this standard did not have a material impact on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.
~~ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)~~	NiSource elected to adopt this ASU effective October 1, 2017. Restricted cash on the Statements of Consolidated Cash Flows is no longer presented as an investing activity and is instead included as a component of beginning and ending cash balances. The adoption of this standard is reflected in the Statements of Consolidated Cash Flows beginning with NiSource's Annual Report on Form 10-K for the year ended December 31, 2017 (including all prior periods presented).
~~ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)~~	NiSource adopted this ASU effective January 1, 2018. The adoption of this standard did not have a material impact on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.
~~ASU 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~	~~NiSource adopted the provisions of ASC 606 beginning on January 1, 2018 using a modified retrospective method, which was applied to all contracts.~~ No ~~material~~ adjustments were made to the January 1, ~~2018~~2020 opening balances as a result of ~~the~~this adoption. During the process of implementation, NiSource first separated its various revenue streams into high-level categories, which served as the basis for accounting analysis and documentation as it related to the pronouncement's impact on NiSource's revenues. Substantially all of NiSource’s revenues are tariff based, which NiSource concluded are in the scope of ASC 606. NiSource has identified its performance obligations created under tariff-based sales as the commodity (natural gas or electric, which includes generation and capacity) and delivery. Under ASC 606, NiSource's revenue from such tariff based sales continues to be equivalent to the natural gas or electricity supplied and billed each period (including unbilled revenues), and the adoption of the standards did not result in a material shift in the amount or timing of revenue recognition for such sales. In addition, the pattern and amount of revenue recognized for the remaining NiSource revenue streams were not materially affected as a result of the adoption of ASC 606. NiSource has outlined footnote disclosures intended to satisfy ASC 606's disclosure requirements, which will enhance its disclosures on revenue recognition policies and elections. Beginning prospectively upon date of adoption, NiSource will include revenue disaggregated by customer class and by operating segment in its footnote disclosures. In addition, NiSource will separately disclose those revenues that are not in scope of ASC 606, such as revenue earned under ASC 980 Alternative Revenue Programs. As required under the modified retrospective method of adoption, results for the reporting periods beginning after January 1, ~~2018 will be~~2020 are presented under ASC ~~606,~~326, while prior period amounts ~~will~~are not ~~be adjusted~~adjusted. See Note 3, "Revenue Recognition," and ~~will continue to be reported in accordance with historic accounting guidance.~~Note 18, "Fair Value," for our discussion of the implementing these standards.
ASU ~~2016-08,~~ ~~Revenue from Contracts with Customers~~2016-13, Financial Instruments-Credit Losses (Topic ~~606): Principal versus Agent Considerations~~326)
ASU ~~2014-09,~~ ~~Revenue from Contracts~~2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans		Issued in August 2018, the pronouncement modifies the disclosure requirements for defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. The modifications affect annual period disclosures for fiscal years ending after December 15, 2020, and are applied on a retrospective basis to all periods presented. These disclosure requirements are reflected in the Note 12, "Pension and Postretirement Benefits."
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes		This pronouncement simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, income taxes. It also improves consistency of application for other areas of the guidance by clarifying and amending existing guidance. We adopted the amendments of this pronouncement as of January 1, 2021 with ~~Customers (Topic 606)~~no material impact to the Consolidated Financial Statements.


Year Ended December 31, 2020 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other(2)		Total
Customer Revenues(1)
Residential	$	2,075.0	$	527.8	$	0	$	2,602.8
Commercial	670.5		480.3		0		1,150.8
Industrial	212.8		412.1		0		624.9
Off-system	41.0		0		0		41.0
Miscellaneous	32.7		20.2		0.8		53.7
Total Customer Revenues	$	3,032.0	$	1,440.4	$	0.8	$	4,473.2
Other Revenues	96.1		95.5		16.9		208.5
Total Operating Revenues	$	3,128.1	$	1,535.9	$	17.7	$	4,681.7



			þ☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)



			¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)



Year Ended December 31, (dollars in millions)	2017			2016			2015			2017 vs. 2016			2016 vs. 2015
Net Revenues
Operating revenues	$	3,102.1		$	2,830.6		$	3,069.1		$	271.5		$	(238.5	)
Less: Cost of sales (excluding depreciation and amortization)	1,005.0			895.4			1,155.5			109.6			(260.1		)
Net Revenues	2,097.1			1,935.2			1,913.6			161.9			21.6
Operating Expenses
Operation and maintenance	1,095.3			937.2			945.3			158.1			(8.1		)
Depreciation and amortization	269.3			252.9			232.6			16.4			20.3
Loss on sale of assets and impairments, net	2.8			—			0.8			2.8			(0.8		)
Other taxes	184.1			171.1			179.1			13.0			(8.0		)
Total Operating Expenses	1,551.5			1,361.2			1,357.8			190.3			3.4
Operating Income	$	545.6		$	574.0		$	555.8		$	(28.4	)	$	18.2
Revenues
Residential	$	2,029.4		$	1,823.4		$	2,055.2		$	206.0		$	(231.8	)
Commercial	669.4			588.1			691.4			81.3			(103.3		)
Industrial	217.5			194.3			217.6			23.2			(23.3		)
Off-System	111.8			94.4			87.3			17.4			7.1
Other	74.0			130.4			17.6			(56.4		)	112.8
Total	$	3,102.1		$	2,830.6		$	3,069.1		$	271.5		$	(238.5	)
Sales and Transportation (MMDth)
Residential	247.1			248.9			262.0			(1.8		)	(13.1		)
Commercial	169.3			165.6			171.5			3.7			(5.9		)
Industrial	517.5			517.7			522.7			(0.2		)	(5.0		)
Off-System	39.0			39.6			32.7			(0.6		)	6.9
Other	0.3			(0.1		)	(0.2		)	0.4			0.1
Total	973.2			971.7			988.7			1.5			(17.0		)
Heating Degree Days	4,927			5,148			5,459			(221		)	(311		)
Normal Heating Degree Days	5,610			5,642			5,610			(32		)	32
% Warmer than Normal	(12		)%	(9		)%	(3		)%
Gas Distribution Customers
Residential	3,168,516			3,141,736			3,113,337			26,780			28,399
Commercial	280,362			279,556			277,239			806			2,317
Industrial	6,228			6,240			6,465			(12		)	(225		)
Other	4			—			—			4			—
Total	3,455,110			3,427,532			3,397,041			27,578			30,491



	Year Ended
	December 31, 2015
(in millions)	Columbia Pipeline Group Operations				Corporate and Other			Total
Operating Revenues
Transportation and storage	$	561.4			$	—		$	561.4
Other	94.3				—			94.3
Total Operating Revenues	655.7				—			655.7
Operating Expenses
Cost of sales (excluding depreciation and amortization)	0.2				—			0.2
Operation and maintenance	375.8			⁽¹⁾	—			375.8
Depreciation and amortization	66.4				—			66.4
Gain on sale of assets	(13.6		)		—			(13.6		)
Other taxes	38.0				—			38.0
Total Operating Expenses	466.8				—			466.8
Equity Earnings in Unconsolidated Affiliates	29.1				—			29.1
Operating Income from Discontinued Operations	218.0				—			218.0
Other Income (Deductions)
Interest expense, net	(37.1		)		—			(37.1		)
Other, net	7.8				0.4			8.2
Total Other Income (Deductions)	(29.3		)		0.4			(28.9		)
Income from Discontinued Operations before Income Taxes	188.7				0.4			189.1
Income Taxes	84.7				0.9			85.6
Income (Loss) from Discontinued Operations - net of taxes	$	104.0			$	(0.5	)	$	103.5


Year Ended December 31, 2019 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Customer Revenues(1)
Residential	$	2,309.0	$	481.6	$	0	$	2,790.6
Commercial	771.3		486.6		0		1,257.9
Industrial	245.2		607.7		0		852.9
Off-system	77.7		0		0		77.7
Miscellaneous	52.0		21.5		0.8		74.3
Total Customer Revenues	$	3,455.2	$	1,597.4	$	0.8	$	5,053.4
Other Revenues	54.5		101.0		0		155.5
Total Operating Revenues	$	3,509.7	$	1,698.4	$	0.8	$	5,208.9


Year Ended December 31, 2018 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Customer Revenues(1)
Residential	$	2,250.0	$	494.7	$	0	$	2,744.7
Commercial	751.9		492.7		0		1,244.6
Industrial	228.0		613.6		0		841.6
Off-system	92.4		0		0		92.4
Miscellaneous	49.7		17.4		0.7		67.8
Total Customer Revenues	$	3,372.0	$	1,618.4	$	0.7	$	4,991.1
Other Revenues	34.4		89.0		0		123.4
Total Operating Revenues	$	3,406.4	$	1,707.4	$	0.7	$	5,114.5


(in millions)	Customer Accounts Receivable, Billed (less reserve)(1)		Customer Accounts Receivable, Unbilled (less reserve)
Balance as of December 31, 2019	$	466.6	$	346.6
Balance as of December 31, 2020	400.0		327.2
Decrease	$	(66.6)	$	(19.4)


(in millions)
Net Property, Plant and Equipment	$	175.6
Current assets	1.7

Total assets(1)	$	177.3
Current liabilities	$	15.3
Asset retirement obligations	5.5
Other noncurrent liabilities	0.1
Total liabilities	$	20.9


Year Ended December 31, (in thousands)	2020	2019	2018
Denominator
Basic average common shares outstanding	384,347	374,650	356,491
Dilutive potential common shares:

Shares contingently issuable under employee stock plans	0	929	0
Shares restricted under employee stock plans	0	154	0
Forward agreements	0	253	0
Diluted Average Common Shares	384,347	375,986	356,491


At December 31, (in millions)	2020		2019
Property, Plant and Equipment
Gas Distribution Utility(1)	$	14,010.2	$	14,989.7
Electric Utility(1)	6,478.0		8,902.3
Corporate	197.3		153.3
Construction Work in Process	572.6		457.3
Renewable Generation Assets(2)	175.7		0
Non-Utility and Other(3)	2,746.1		39.3
Total Property, Plant and Equipment	$	24,179.9	$	24,541.9
Accumulated Depreciation and Amortization
Gas Distribution Utility(1)	$	(3,292.9)	$	(3,556.0)
Electric Utility(1)	(2,305.0)		(3,973.8)
Corporate	(109.3)		(79.5)
Renewable Generation Assets(2)	(0.1)		0
Non-Utility and Other(3)	(1,853.1)		(20.4)
Total Accumulated Depreciation and Amortization	$	(7,560.4)	$	(7,629.7)
Net Property, Plant and Equipment	$	16,619.5	$	16,912.2


December 31, (in millions)	2020		2019
Risk Management Assets - Current(1)
Interest rate risk programs	$	0	$	0
Commodity price risk programs	10.4		0.6
Total	$	10.4	$	0.6
Risk Management Assets - Noncurrent(2)
Interest rate risk programs	$	0	$	0
Commodity price risk programs	2.8		3.8
Total	$	2.8	$	3.8
Risk Management Liabilities - Current
Interest rate risk programs	$	70.9	$	0
Commodity price risk programs	7.3		12.6
Total	$	78.2	$	12.6
Risk Management Liabilities - Noncurrent
Interest rate risk programs	$	99.5	$	76.2
Commodity price risk programs	45.1		57.8
Total	$	144.6	$	134.0


Reconciliation of Unrecognized Tax Benefits (in millions)	2020		2019		2018
Unrecognized Tax Benefits - Opening Balance	$	23.2	$	1.2	$	1.4

Gross decreases - tax positions in prior period	(1.5)		(0.6)		(0.4)
Gross increases - current period tax positions	0		22.6		0.2
Unrecognized Tax Benefits - Ending Balance	$	21.7	$	23.2	$	1.2

Offset for net operating loss carryforwards	(21.7)		(22.6)		0
Balance - Less Net Operating Loss Carryforwards	$	0	$	0.6	$	1.2


	Defined Benefit Pension Plan		Postretirement Benefit Plan
Asset Category	Minimum	Maximum	Minimum	Maximum
Domestic Equities	12%	32%	0%	55%
International Equities	6%	16%	0%	25%
Fixed Income	59%	71%	20%	100%

Real Estate	0%	7%	0%	0%
Private Equity	0%	5%	0%	0%
Short-Term Investments	0%	10%	0%	10%


										Defined Benefit Pension Assets		December 31, 2020		Postretirement Benefit Plan Assets		December 31, 2020
Asset Class (in millions)									Asset Class (in millions)	Asset Value		% of Total Assets		Asset Value		% of Total Assets
Domestic Equities									Domestic Equities	$	446.3	21.0	%	$	108.8	38.0	%
International Equities									International Equities	230.1		10.9	%	48.2		16.8	%
Fixed Income									Fixed Income	1,291.2		61.0	%	122.0		42.6	%

Real Estate									Real Estate	52.9		2.5	%	0		0
Cash/Other									Cash/Other	97.2		4.6	%	7.4		2.6	%
Total									Total	$	2,117.7	100.0	%	$	286.4	100.0	%

	Defined Benefit Pension Assets		December 31, 2017		Postretirement Benefit Plan Assets		December 31, 2017			Defined Benefit Pension Assets		December 31, 2019		Postretirement Benefit Plan Assets		December 31, 2019
Asset Class (in millions)	Asset Value		% of Total Assets		Asset Value		% of Total Assets		Asset Class (in millions)	Asset Value		% of Total Assets		Asset Value		% of Total Assets
Domestic Equities	$	698.2	32.3	%	$	96.0	36.6	%	Domestic Equities	$	446.4	21.5	%	$	93.8	35.9	%
International Equities	351.0		16.2	%	39.8		15.2	%	International Equities	205.0		9.9	%	40.7		15.6	%
Fixed Income	977.6		45.3	%	117.5		44.8	%	Fixed Income	1,337.2		64.2	%	119.5		45.7	%
Real Estate	49.9		2.3	%	—		—		Real Estate	53.9		2.6	%	0		0
Cash/Other	83.3		3.9	%	9.2		3.4	%	Cash/Other	38.4		1.8	%	7.4		2.8	%
Total	$	2,160.0	100.0	%	$	262.5	100.0	%	Total	$	2,080.9	100.0	%	$	261.4	100.0	%

	Defined Benefit Pension Assets		December 31, 2016		Postretirement Benefit Plan Assets		December 31, 2016
Asset Class (in millions)	Asset Value		% of Total Assets		Asset Value		% of Total Assets
Domestic Equities	$	755.2	43.1	%	$	97.9	42.3	%
International Equities	339.9		19.4	%	41.8		18.0	%
Fixed Income	565.8		32.3	%	87.0		37.6	%
Real Estate/Private Equity/Hedge Funds	74.8		4.3	%	—		—
Cash/Other	15.2		0.9	%	4.7		2.1	%
Total	$	1,750.9	100.0	%	$	231.4	100.0	%


(in millions)	December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Pension plan assets:
Cash	$	11.9	$	11.9	$	0	$	0
Equity securities
U.S. equities	2.4		2.4		0		0
Fixed income securities
Government	243.4		0		243.4		0
Corporate	692.6		0		692.6		0

Mutual Funds
U.S. multi-strategy	161.3		161.3		0		0
International equities	55.4		55.4		0		0
Fixed income	0.1		0.1		0		0
Private equity limited partnerships(3)
U.S. multi-strategy(1)	10.9		0		0		0
International multi-strategy(2)	6.6		0		0		0
Distressed opportunities	0.3		0		0		0
Real estate	52.9		0		0		0
Commingled funds(3)
Short-term money markets	78.8		0		0		0
U.S. equities	279.7		0		0		0
International equities	176.8		0		0		0
Fixed income	337.6		0		0		0
Pension plan assets subtotal	2,110.7		231.1		936.0		0
Other postretirement benefit plan assets:
Mutual funds
U.S. multi-strategy	94.8		94.8		0		0
International equities	24.1		24.1		0		0
Fixed income	121.8		121.8		0		0
Commingled funds(3)
Short-term money markets	7.6		0		0		0
U.S. equities	14.0		0		0		0
International equities	24.1		0		0		0

Other postretirement benefit plan assets subtotal	286.4		240.7		0		0
Due to brokers, net(4)	(1.6)		0		(1.6)		0
Accrued income/dividends	8.6		8.6		0		0
Total pension and other postretirement benefit plan assets	$	2,404.1	$	480.4	$	934.4	$	0



	Balance at January 1, 2017		Total gains or losses (unrealized / realized)			Purchases		(Sales)			Balance at December 31, 2017
Fixed income securities
Other fixed income	$	0.1	$	(0.1	)	$	—	$	—		$	—
Private equity limited partnerships
U.S. multi-strategy	34.8		2.1			0.9		(11.1		)	26.7
International multi-strategy	24.9		1.1			0.1		(7.0		)	19.1
Distressed opportunities	4.1		0.4			—		(1.3		)	3.2
Real estate	9.2		(0.6		)	42.1		(0.8		)	49.9
Total	$	73.1	$	2.9		$	43.1	$	(20.2	)	$	98.9



(in millions)	Fair Value		Redemption Frequency	Redemption Notice Period
Commingled Funds
Short-term money markets	$	43.5	Daily	1 day
U.S. equities	478.8		Monthly	3 days
International equities	265.1		Monthly	10-30 days
Fixed income	244.9		Monthly	3 days
Total	$	1,032.3


(in millions)	December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Pension plan assets:
Cash	$	6.7	$	6.7	$	0	$	0



Fixed income securities
Government	319.6		0		319.6		0
Corporate	651.8		0		651.8		0


Mutual Funds
U.S. multi-strategy	140.5		140.5		0		0
International equities	56.9		56.9		0		0

Private equity limited partnerships(3)
U.S. multi-strategy(1)	14.0		0		0		0
International multi-strategy(2)	8.5		0		0		0
Distressed opportunities	0.5		0		0		0
Real Estate	53.9		0		0		0
Commingled funds(3)
Short-term money markets	14.8		0		0		0
U.S. equities	305.9		0		0		0
International equities	148.1		0		0		0
Fixed income	351.8		0		0		0
Pension plan assets subtotal	2,073.0		204.1		971.4		0
Other postretirement benefit plan assets:
Mutual funds
U.S. multi-strategy	81.7		81.7		0		0
International equities	20.6		20.6		0		0
Fixed income	119.2		119.2		0		0
Commingled funds(3)
Short-term money markets	7.7		0		0		0
U.S. equities	12.1		0		0		0
International equities	20.1		0		0		0
Other postretirement benefit plan assets subtotal	261.4		221.5		0		0
Due to brokers, net(4)	(2.8)		0		(2.8)		0
Accrued income/dividends	10.7		10.7		0		0

Total pension and other postretirement benefit plan assets	$	2,342.3	$	436.3	$	968.6	$	0


	Balance at January 1, 2019		Transfers out (Level 3)(1)		Balance at December 31, 2019








Private equity limited partnerships
U.S. multi-strategy	18.5		(18.5)		0
International multi-strategy	12.5		(12.5)		0
Distress opportunities	2.4		(2.4)		0
Real estate	52.7		(52.7)		0
Total	$	86.1	$	(86.1)	$	0



	Balance at January 1, 2016		Total gains or losses (unrealized / realized)			Purchases		(Sales)			Balance at December 31, 2016
Fixed income securities
Other fixed income	$	0.1	$	—		$	—	$	—		$	0.1
Private equity limited partnerships
U.S. multi-strategy	46.4		2.1			0.8		(14.5		)	34.8
International multi-strategy	29.3		2.0			1.0		(7.4		)	24.9
Distress opportunities	5.9		(0.4		)	0.1		(1.5		)	4.1
Real estate	13.6		0.1			0.1		(4.6		)	9.2
Total	$	95.3	$	3.8		$	2.0	$	(28.0	)	$	73.1


	December 31,
	2020(1)		2019
Accumulated Benefit Obligation	$	32.1	$	1,473.9
Funded Status
Projected Benefit Obligation	32.1		1,492.9
Fair Value of Plan Assets	0		1,435.1
Funded Status of Underfunded Pension Plans at End of Year	$	(32.1)	$	(57.8)



(in millions)	1% point increase		1% point decrease
Effect on service and interest components of net periodic cost	$	1.1	$	(0.9	)
Effect on accumulated postretirement benefit obligation	29.7		(25.9		)



(in millions)	Pension Benefits		Other Postretirement Benefits		Federal Subsidy Receipts
Year(s)
2018	$	176.2	$	34.3	$	0.5
2019	173.7		35.3		0.5
2020	172.1		36.3		0.5
2021	172.0		36.9		0.5
2022	171.3		36.9		0.5
2023-2027	784.7		178.9		1.9