On June 30, 2017, WGSW and a tax equity partner formed SFGF II to acquire distributed generation solar projects in the United States of America that are expected to be developed by WGL Energy Systems. WGSW is the managing member and will provide cash equity equal to the purchase price of the solar projects less any contributions from the tax-equity partner. As of June 30, 2017, no contributions have been made into the tax equity partnership.

WGL Energy Systems will be the operations and maintenance provider and the developer of the projects. Profits and losses are allocated between the partners under the HLBV method of accounting and the portion allocated to the tax equity partner is included in "Net income (loss) attributable to non-controlling interest" on the consolidated statements of income and is recorded to "Non-controlling interest" on the consolidated balance sheets.

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in our condensed consolidated balance sheet at June 30, 2017 and September 30, 2016 are as follows:

~~WGL Holdings, Inc.~~

~~Balance Sheet Location of Consolidated Investments~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the fair value amounts of SFEE’s assets and liabilities, as well as the estimated fair value of the non-controlling interest as of the date of consolidation.

(in millions) June 30, 2017 September 30, 2016
Current assets $ 2.1
$ —
Non-current assets 56.9
13.2
Total assets $ 59.0
$ 13.2
Current liabilities 0.4
0.6
Non-current liabilities 0.3
—
Total liabilities $ 0.7
$ 0.6



Fair Value of SFEE at Date of Consolidation
(in millions)	Fair Value
Property, plant and equipment	$	10.1
Other assets	0.1
Total assets	$	10.2
Net assets	$	10.2
Non-controlling interest	$	0.6
WGSW equity interest	$	9.6

Property, plant and equipment represents commercial solar assets for SFEE stated at cost. This amount was determined to be equal to the fair value provided by a third-party appraisal.

Balance Sheet Location of Consolidated Investments

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in our accompanying Condensed Consolidated Balance Sheets at June 30, 2018 and September 30, 2017 are as follows:

WGL Holdings, Inc.

Balance Sheet Location of Consolidated Investments



(in millions)	June 30, 2018		September 30, 2017
Current assets	$	9.6	$	4.4
Property, Plant and Equipment	202.2		121.7
Total assets	$	211.8	$	126.1
Current liabilities	0.4		0.2
Deferred credits	1.4		0.8
Total liabilities	$	1.8	$	1.0

Unconsolidated Investments

Variable Interest ~~Entities~~

~~WGL has a variable interest in two investments which are considered unconsolidated VIEs:~~

~~Meade and~~

~~ASD.~~

At June 30, 2017, these VIEs were not consolidated because WGL and its subsidiaries were not the primary beneficiaries. The nature of WGL’s involvement with these investments lacks the characteristics of a controlling financial interest. WGL either does not have control over any of the non-consolidated VIEs’ activities that are economically significant to the VIEs and/or WGL does not have the obligation to absorb expected losses or the right to receive expected gains that could be significant to the VIE.

~~Our maximum financial exposure to loss as a result of our involvement with the VIEs includes~~ ~~(a)~~ ~~the amount invested in, and advanced to, the VIE as of the reporting date and~~ ~~(b)~~ any legal or contractual obligation to provide financing in the future, such as liquidity arrangements, guarantees, and other contractual commitments. Any such arrangements, if applicable, are included below.Entity Investments-Pipelines

Meade

In 2014, WGL through its subsidiary WGL Midstream, entered into a limited liability company agreement and formed Meade Pipeline Co LLC (Meade), a Delaware limited liability company, with Transcontinental Gas Pipe Line Company, LLC (Williams) to invest in a regulated pipeline, a segment of Transco's Atlantic Sunrise project, called Central Penn Pipeline (Central Penn). Central Penn will be an approximately 185-mile pipeline originating in Susquehanna County, Pennsylvania and extending to Lancaster County, Pennsylvania that will have the capacity to transport and deliver up to approximately 1.7 million dekatherms per day of natural gas.

At June 30, 2018 and September 30, 2017, WGL Midstream held a $415.3 million and $146.7 million, respectively, equity method investment in Meade. WGL Midstream plans to invest an estimated ~~$410~~$450 million for a 55% interest in Meade. Although WGL Midstream holds greater than a 50% interest in Meade, Meade is not consolidated by WGL Midstream and instead is accounted for under the equity method of ~~accounting because~~accounting. WGL Midstream is not the primary beneficiary of Meade as it does not have the power to direct the activities most significant to the economic performance of Meade. ~~Profits and losses are allocated under~~WGL Midstream applies the HLBV equity method of accounting and any profits and losses are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Condensed Consolidated ~~Statement~~Statements of Income and are added to or subtracted from the carrying amount of WGL’s investment balance. ~~At June 30, 2017 and September 30, 2016, WGL Midstream held a $121.0 million and $80.8 million, respectively, equity method investment in Meade.~~

~~ASD~~

WGSW is a limited partner in ASD Solar LP (ASD), a limited partnership formed to own and operate a portfolio of residential solar projects, primarily rooftop photovoltaic power generation systems. As a limited partner, WGSW provided funding to the partnership but did not have power to direct the activities that most significantly affect the operations and economic performance of the entity. In January 2014, the funding commitment period ended for the partnership. As of June 30, 2017, ASD is being consolidated by the general partner, Solar Direct LLC (Solar Direct). Solar Direct is a wholly owned subsidiary of American Solar Direct Inc. (ASDI).

Our investment in ASD is accounted for under the HLBV equity method of accounting; any profits and losses are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Consolidated Statement of Income and are added to or subtracted from the carrying amount of WGSW’s investment balance. At June 30, 2017 and September 30, 2016, WGSW held a $66.7 million and $66.1 million, respectively, equity method investment in ASD. At June 30, 2017, the carrying amount of

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

WGSW’s investment in ASD exceeded the amount of the underlying equity in net assets by $35.8 million due to WGSW recording additions to its investment in ASD’s net assets at fair value of contributions in accordance with GAAP. This basis difference is being amortized over the life of the assets.

In June 2017, ASDI filed for Chapter 7 bankruptcy as a result of financial difficulties. To ensure continuing operations of the partnership and minimal disruptions to the customers, WGSW petitioned the Bankruptcy Court to remove Solar Direct as manager of ASD operations and to approve the appointment of SF ASD LLC (SF ASD), a subsidiary of WGSW, which was formed to take over the management and operations of the partnership, as manager of ASD operations. On July 10, 2017, the Bankruptcy Court granted the bankruptcy trustee's emergency motion to assign management rights and control of ASD to SF ASD. This change in partnership control will result in the consolidation of the ASD partnership by WGL as of July 10, 2017. WGSW's equity method investment will be eliminated with its partnership interest with ASDI's non-controlling interest in ASD to be recognized at fair value. It is anticipated that an estimated gain of approximately $2.0 million will be recognized to other income based on the difference between WGSW's net investment in the partnership and WGSW's partnership interest measured at fair value. Associated with the financial difficulties of ASDI, in April 2017, WGL paid $2.1 million to satisfy a bank guarantee on behalf of ASDI.

~~The following table summarizes the preliminary fair value amounts of ASD assets and liabilities, as well as the non-controlling interest recorded at estimated fair value as of the date of control.~~

(in millions) Preliminary Estimated Fair Value
Current assets $ 1.1
Other assets 0.8
Property, plant and equipment 76.4
Total assets $ 78.3
Current liabilities 0.9
Other liabilities 27.0
Total liabilities $ 27.9
Net assets $ 50.4

Non-controlling interest $ 0.5
WGSW equity interest $ 49.9

Property, plant and equipment represent residential solar assets that were measured at estimated fair value using the income derived from discounted cash flows while the other liabilities represent deferred income tax credits, treasury grants and state government grants. The fair values were determined based on significant estimates and assumptions that are judgmental in nature, including projected cash flows and discount rates reflecting inherent risk in the future cash flows. Accounting guidance provides that the business combination value may be modified for up to one year from the date of the transaction to the extent that additional information is obtained about the facts and circumstances which existed as of the consolidation date. The valuation performed to assess fair value is preliminary and is expected to be finalized by the end of fiscal year 2017.

~~SunEdison~~

As of June 30, 2017, WGSW ended its agreement with SunEdison, Inc. (SunEdison) by assigning the master purchase agreement and master lease agreement with SunEdison to its newly formed affiliate, SF Echo LLC.

In April 2017, EchoFirst Finance Company LLC (EchoFirst), the subsidiary of SunEdison that was party to our master purchase and lease agreements filed a voluntary petition with the United States Bankruptcy Court for relief under Title 11 of the United States Code. In April 2016, SunEdison filed a voluntary bankruptcy petition with the United States Bankruptcy Court for relief under Title 11 of the United States Code.

In April 2017, we executed an assignment of the master lease agreement, master purchase agreement and the EchoFirst customer leases from SunEdison, allowing SunEdison to divest the WGSW lease arrangement. SF Echo, a wholly-owned subsidiary of WGSW, will operate and maintain the assets and be entitled to all cash flows from the assets for the remainder of their lease terms. The master lease between SF Echo and WGSW will be accounted for as a direct financing lease. SF Echo accounts for the customer leases as operating leases. The fair value of the assets did not result in any adjustments during the period. Our maximum financial exposure to loss because of our involvement with this VIE is ~~limited~~equal to lease payment receivables from retail residential solar customers, future maintenance and performance payments and customer non-payments. On a quarterly basis, we will evaluate our lease receivables for credit losses.

SF Echo will record lease income in the accompanying condensed consolidated statements of income. WGSW did not hold an investment in SunEdison at June 30, 2017. Additionally, we had balances of $9.4 million of unamortized tax credits related

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 1—Financial Statements (continued)~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~to the leased assets in "Unamortized investment tax credits" on the accompanying condensed consolidated balance sheets at June 30, 2017.~~

~~Non-VIE Investments~~

~~Constitution~~

~~In 2013, Constitution Pipeline Company, LLC (Constitution) was formed, with WGL Midstream as an investor. At June 30, 2017,~~ WGL Midstream's share of the total forecasted cash contributions over the term of the construction agreement for Constitution is $95.5 million, reflecting a 10% share in the pipeline venture. This natural gas pipeline will transport natural gas from the Marcellus region in northern Pennsylvania to major northeastern markets. Constitution is accounted for under the equity method of accounting; any profits and losses are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Consolidated Statement of Income and are added to or subtracted from the carrying amount of WGL’s investment balance. The equity method is considered appropriate because Constitution is an LLC with specific ownership accounts and ownership between five and fifty percent resulting in WGL Midstream maintaining a more than minor influence over the partnership operating and financing policies.capital contributions.

On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution's application for a Section 401 Water Quality Certification (Section 401 Certification) for the pipeline, which is necessary for the construction and operation of the pipeline. Constitution has stated that it remains committed to pursuing the project and that it intends to pursue all available options to challenge the legality and appropriateness of NYSDEC’s decision. In May, 2016, Constitution filed actions in the U.S. Circuit Court of Appeals for the Second Circuit and the U.S. District Court for the Northern District of New York, respectively, appealing the decision and seeking declaratory judgment that the State of New York’s permitting authority is preempted by federal law. On March 16, 2017, the U.S. District Court for the Northern District of New York issued an order ruling, without prejudice, that it lacked subject matter jurisdiction to hear Constitution's complaint.

In light of the forgoing matters, Constitution has revised its target in-service date to as early as the first half of 2019, which assumes the timely receipt of a Notice to Proceed from the FERC. We can give no assurance, however, that Constitution’s efforts to obtain the Section 401 Certification will be successful. At June 30, 2017 and September 30, 2016, we held a $38.5 million and $38.6 million equity method investment in Constitution, respectively. We have evaluated our investment in Constitution for other than temporary impairment as of June 30, 2017. Our impairment assessment used income and market approaches in determining the fair value of our investment in Constitution, including consideration of the severity and duration of any decline in fair value of our investment in the project. Our key inputs included, but are not limited to, significant management judgments and estimates, including projections of the project’s cash flows, selection of a discount rate, market multipliers and probability weighting of potential outcomes of legal and regulatory proceedings. At this time, we do not have an other than temporary impairment and have not recorded any impairment charge to reduce the carrying value of our investment. If Constitution is ultimately unable to obtain the Section 401 Certification or other future developments or indicators of an unfavorable resolution arise subsequently, an impairment charge of up to substantially all of our investment in the capitalized project costs may be required. It is also possible that Constitution could incur certain supplier-related costs in the event of a prolonged delay or termination of the project. We will continue to monitor and update our impairment analysis as required.Non-Variable Investment Entity Investments-Pipelines

Mountain Valley Pipeline

In March 2015, WGL Midstream acquired a 7% equity interest in Mountain Valley Pipeline, LLC (Mountain Valley). On October 24, 2016, WGL Midstream acquired an additional 3% equity interest in Mountain Valley by assuming all of Vega Midstream MVP LLC's (Vega Energy) interest in the joint venture. WGL Midstream now owns a 10% interest in Mountain Valley.

The proposed pipeline to be developed, constructed, owned and operated by Mountain Valley, will transport approximately 2.0 million dekatherms of natural gas per day ~~from interconnects~~and connects with EQT Corporation's Equitrans system in Wetzel County, West Virginia to Transcontinental Gas Pipe Line Company LLC's Station 165 in Pittsylvania County, Virginia. ~~The pipeline is scheduled to be~~

At June 30, 2018 and September 30, 2017, WGL Midstream held a $121.0 million and $63.0 million equity method investment in ~~service in the fourth quarter of calendar year 2018.~~

Mountain Valley, respectively. WGL Midstream expects to invest approximately $350.0 million in scheduled capital contributions through the in-service date of the pipeline based on its pro rata share ~~(based on its 10% equity interest)~~ of project costs, an estimated aggregate amount of approximately $327.6 million. At June 30, 2017 and September 30, 2016, WGL Midstream held a $52.3 million and $22.5 million equity method investment in Mountain Valley, respectively.costs. The equity method is considered appropriate because Mountain Valley is an LLC with specific ownership accounts and ownership between five and fifty percent resulting in WGL Midstream maintaining a more than minor influence over the partnership operating and financing policies.

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 1—Financial Statements (continued)~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The carrying amount of WGL Midstream's investment in MVP exceeded the amount of the underlying equity in net assets by $0.5 million, which will be amortized over the life of the assets when it is put in production. Profits and losses are allocated under the HLBV method of accounting and are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Condensed Consolidated ~~Statement~~Statements of Income and are added to or subtracted from the carrying amount of WGL’s investment balance.

In April 2018, WGL Midstream entered into a separate agreement with Mountain Valley to acquire a 5% equity interest in a project to build a lateral interstate natural gas pipeline (the MVP Southgate project). The proposed lateral pipeline will receive gas from the Mountain Valley Pipeline mainline in Pittsylvania County, Virginia and extend approximately 70 miles south to new delivery points in Rockingham and Alamance counties, North Carolina. The total commitment by WGL Midstream is expected to be approximately $17.0 million.

Stonewall System

WGL Midstream has a 30% equity interest in an entity that owns and operates certain assets known as the Stonewall Gas Gathering System (the Stonewall System). WGL Midstream paid $89.4 million to acquire the equity interest pursuant to an option that WGL Midstream previously acquired. During the nine months ended June 30, 2017, WGL Midstream contributed an additional $45.5 million related to retiring debt at the entity level. The Stonewall System has the capacity to gather up to 1.4 billion cubic feet of natural gas per day from the Marcellus production region in West Virginia, and connects with an interstate pipeline system that serves markets in the mid-Atlantic region.

At June 30, 2018 and September 30, 2017, WGL Midstream held a $137.2 million and ~~$95.5~~$136.7 million equity method investment in the Stonewall System, ~~at June 30, 2017 and September 30, 2016,~~ respectively. The equity method is considered appropriate because the Stonewall System is an LLC with specific ownership accounts and ownership between five and fifty percent resulting in WGL Midstream maintaining a more than minor influence over the partnership operating and financing policies.

The carrying amount of WGL Midstream's investment in the Stonewall System exceeded the amount of the underlying equity in net assets by $8.9 million, which is being amortized over the life of the assets. Profits and losses are allocated under the HLBV method of accounting and are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Condensed Consolidated ~~Statement~~Statements of Income and are added to or subtracted from the carrying amount of WGL’s investment balance.

~~Nextility-Lease Settlement and Assignment~~

~~During~~The carrying amount of WGL Midstream's investment in the ~~nine months ended~~Stonewall System exceeded the amount of the underlying equity in net assets by $10.1 million as of June 30, 2017, WGSW terminated its sale/leaseback agreement with Nextility and entered into a new lease agreement with another unrelated third party, with significantly reduced payments and lease terms. Based on the lease classification criteria per ASC Topic 840, it was determined that the new lease2018, which is an operating lease. As a result, the net investment of $5.4 million on the consolidated balance sheet was eliminated. The solar assets were recorded at present fair value using the income approach as $4.0 million to "Property, plant and equipment" and $1.4 million was recorded as a receivable. The unamortized investment tax credits (ITC) balance associated with these assets continue to be deferred andbeing amortized over the assets' useful life. As of June 30, 2017, the deferred net ITC receivable related to these assets is $3.0 million. In May 2017, Nextility informed WGSW that it was unable to finalize a financing arrangement and is in the process of winding down its business. A $1.0 million reserve was recorded for the receivable due from Nextility as partlife of the ~~settlement to terminate the sale/leaseback agreement.~~assets.

~~SFEE~~Constitution

~~During the nine months ended June 30, 2017, WGSW and~~WGL Midstream owns a tax equity partner formed SFEE to acquire distributed generation solar projects that are developed by a third-party developer or WGL Energy Systems. New projects will be designed and constructed under long-term power purchase agreements. As of June 30, 2017, WGSW has contributed $6.5 million and held an $9.6 million10% interest in ~~SFEE.~~

~~SFEE~~Constitution. The Constitution Pipeline is ~~not considered a VIE and~~proposed to transport natural gas from the Marcellus region in northern Pennsylvania to major northeastern markets. Constitution is ~~not consolidated~~accounted for under the voting interest model for limited partnerships. WGSW is the managing member of SFEE. WGSW is also the operations and maintenance provider for SFEE. In addition, WGL Energy Systems has the option to sell its own distributed generation solar projects to the developer for sale to SFEE and these assets remain on WGL Energy System's books until we no longer have continuing involvement. The equity method ~~is considered appropriate because WGSW has significant influence over the operating~~of accounting; any profits and ~~financial policies of SFEE. Profits and~~ losses ~~are allocated between the partners under the HLBV method of accounting and~~ are included in “Equity in earnings of unconsolidated affiliates” in the accompanying Condensed Consolidated ~~Statement~~Statements of Income and are added to or subtracted from the carrying amount of ~~WGSW’s~~WGL’s investment balance. ~~For SFEE,~~The equity method is considered appropriate because Constitution is an LLC with specific ownership accounts and ownership between five and fifty percent resulting in WGL ~~has also provided~~Midstream maintaining a ~~guarantee that could require additional future payments~~more than minor influence over the partnership operating and financing policies.

In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the New York State Department of ~~$13.0 million.~~Environmental Conservation (NYSDEC) denied Constitution’s application for a Section 401 Certification for the pipeline, which is necessary for the construction and operation of the pipeline.

~~The following tables present summary information about our unconsolidated VIEs and non-VIEs:~~

~~WGL Holdings, Inc.~~

~~Balance Sheet Location of Unconsolidated Investments~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

In May 2016, Constitution filed actions in both the U.S. Circuit Court of Appeals for the Second Circuit (Second Circuit Court) and the U.S. District Court for the Northern District of New York, appealing the decision and seeking declaratory judgment that the State of New York’s permitting authority is preempted by federal law. In March 2017, the U.S. District Court for the Northern District of New York dismissed without prejudice Constitution's lawsuit claiming that New York's state law permit requirements are preempted by the Natural Gas Act. The Court concluded that it lacked subject matter jurisdiction because Constitution had not demonstrated a traceable injury in fact sufficient to establish standing. In August 2017, the Second Circuit Court issued a decision, declining to rule on Constitution’s argument that the NYSDEC’s decision on Constitution’s Section 401 application constitutes a waiver of the certification requirement. Constitution filed a petition for rehearing with the Second Circuit Court's decision, but in October 2017 the court denied the petition. In October 2017, Constitution filed a petition for declaratory order requesting FERC to find that, by operation of law, the Section 401 certification requirement for the New York State portion of Constitution’s pipeline project was waived due to the failure by the NYSDEC to act on Constitution’s Section 401 application within a reasonable period of time as required by the express terms of the statute. On January 11, 2018, the FERC denied the petition. On February 12, 2018, Constitution filed a request for rehearing with FERC, which was denied on July 19, 2018. On January 16, 2018, Constitution petitioned the U.S. Supreme Court to review the judgment of the Second Circuit Court, asserting that the Second Circuit Court’s decision conflicts with the decisions of the U.S. Supreme Court and federal Courts of Appeals on an important question of federal law. On April 30, 2018, the U.S. Supreme Court denied Constitution’s petition for writ of certiorari.

Solar Investments Pipelines
(in millions)
VIEs^(a)

Non-VIEs^(b)

VIEs^(c)

Non-VIEs^(d)
Total
June 30, 2017
Assets
Investments in unconsolidated affiliates $ 66.7
$ 9.6
$ 121.0
$ 228.0
$ 425.3
Total assets $ 66.7
$ 9.6
$ 121.0
$ 228.0
$ 425.3
September 30, 2016
Assets
Investments in unconsolidated affiliates $ 66.1
$ —
$ 80.8
$ 156.6
$ 303.5
Investments in direct financing leases, capital leases^(e)
29.8
—
—
—
29.8
Accounts receivable^(e)
1.1
—
—
9.2
10.3
Total assets $ 97.0
$ —
$ 80.8
$ 165.8
$ 343.6
The project’s sponsors remain committed to the project, and as such, on June 25, 2018, Constitution requested FERC grant a 24-month extension on construction of the pipeline.

~~(a) "Investments~~We evaluate our investment in Constitution for other than temporary impairment. Our impairment assessment uses income and market approaches in determining the fair value of our investment in Constitution. Refer to Note 9 - Fair Value Measurements. We recorded an other than temporary impairment charge of $34.0 million to “Equity in earnings of unconsolidated ~~affiliates" balance relates~~affiliates”, and recorded a reversal to “Operation and maintenance” expense of a previously recognized expense of $3.0 million during the second quarter of fiscal year 2018. We evaluated our remaining investment at June 30, 2018, and determined that there was no additional impairment. There could be additional losses in the value of the investment beyond the impairment charge already taken. However, we believe that recoveries from the sale of the inventories held by Constitution will mostly offset these expenditures. We also continue to incur legal fees associated with the project. At June 30, 2018, and September 30, 2017, WGL Midstream held a $3.9 million and $38.1 million equity method investment in ~~ASD.~~Constitution, respectively.

~~(b)~~ The following tables present summary information about our unconsolidated investments:

WGL Holdings, Inc.

Balance Sheet Location of Unconsolidated Investments



	Solar Investments			Pipelines
(in millions)		Non-VIEs^(a)		VIEs^(b)		Non-VIEs^(c)		Total
June 30, 2018
Assets
Investments in unconsolidated affiliates		$	—	$	415.3	$	262.1	$	677.4
Total assets		$	—	$	415.3	$	262.1	$	677.4
September 30, 2017
Assets
Investments in unconsolidated affiliates		$	9.6	$	146.7	$	237.9	$	394.2
Total assets		$	9.6	$	146.7	$	237.9	$	394.2

^(a)Balance relates to interest held in ~~SFEE.~~SFEE on September 30, 2017

~~(c)~~ ^(b)Balance relates to equity method investment in Meade.

~~(d)~~^(c) Balance relates to equity method investments in Constitution, Mountain Valley Pipeline and Stonewall System.

~~(e) Prior year balances relate to direct financing leases in Nextility and SunEdison.~~

NOTE 12. RELATED PARTY TRANSACTIONS

WGL and its subsidiaries engage in inter-company transactions in the ordinary course of business. Inter-company transactions and balances have been eliminated from the consolidated financial statements of WGL, except as described below. Washington Gas provides accounting, treasury, legal and other administrative and general support to affiliates, and files consolidated tax returns that include affiliated taxable transactions. Washington Gas bills its affiliates in accordance with

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

regulatory requirements for the actual cost of providing these services, which approximates their market value. To the extent such billings are outstanding, they are reflected in “Receivables from associated companies” on Washington Gas’ balance sheets. Washington Gas assigns or allocates these costs directly to its affiliates and, therefore, does not recognize revenues or expenses associated with providing these services. Washington Gas believes that allocations based on broad measures of business activity are appropriate for allocating expenses resulting from common services. Affiliate entities are allocated a portion of common services based on a formula driven by appropriate indicators of activity, as approved by management.

In connection with billing on behalf of unregulated ~~third party~~third-party marketers, including WGL Energy Services and with other miscellaneous billing processes, Washington Gas collects cash on behalf of affiliates and transfers the cash in a reasonable time period. Cash collected by Washington Gas on behalf of its affiliates but not yet transferred is recorded in “Payables to associated companies” on Washington Gas’ ~~balance sheets.~~Condensed Balance Sheets.

Washington Gas ~~has~~previously obtained third-party project financing on behalf of the ~~Federal~~federal government to provide funds during the construction of certain energy management services projects entered into under Washington Gas' ~~area- wide~~area-wide contract. In ~~connection~~December 2016, WGL Energy Systems entered into an agreement to obtain third-party financing and receive funds directly from the third-party lender during the construction period associated with ~~work completed under~~ the ~~area-wide contract,~~related energy management service projects. As part of the ongoing financing arrangement, Washington Gas records a receivable representing the government’s obligation, and records an inter-company payable to WGL Energy Systems for the construction work is performed ~~by WGL Energy Systems on behalf of Washington Gas and an~~for the same amount ~~is recorded~~ in "Payables to associated companies" ~~for work performed by WGL Energy Systems for which cash has not been transferred.~~. Refer to Note 3—Short Term Debt~~Short-Term Debt~~ of the Notes to Condensed Consolidated Financial Statements for further discussion of the project financing.

The following table presents the receivables from and payables to associated companies as of June 30, ~~2017~~2018 and September 30, ~~2016.~~2017.

									Washington Gas Receivables From / Payables To Associated Companies
(In millions)	June 30, 2017		September 30, 2016		June 30, 2018		September 30, 2017
Receivables from Associated Companies	$	16.1	$	13.8
Payables to Associated Companies	$	91.5	$	65.8
Receivables from associated companies					$	33.6	$	32.4
Payables to associated companies					$	109.3	$	94.8

Washington Gas provides gas balancing services related to storage, injections, withdrawals and deliveries to all energy marketers participating in the sale of natural gas on an unregulated basis through the customer choice programs that operate in

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 1—Financial Statements (continued)~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

its service territory. These balancing services include the sale of natural gas supply commodities related to various peaking arrangements contractually supplied to Washington Gas and then partially allocated and assigned by Washington Gas to the energy marketers, including WGL Energy Services. Washington Gas records revenues for these balancing services pursuant to tariffs approved by the appropriate regulatory bodies. These related party amounts ~~related to~~for balancing services provided to WGL Energy Services have been eliminated in the consolidated financial statements of WGL. The following table shows the amounts Washington Gas charged WGL Energy Services for balancing ~~services.~~services which are located in "Utility Operating Revenues".

																	Washington Gas - Gas Balancing Service Charges
	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended June 30,				Nine Months Ended June 30,
(In millions)	2017		2016		2017		2016		2018		2017		2018		2017
Gas balancing service charge	$	4.2	$	5.5	$	19.9	$	21.7	$	4.3	$	4.2	$	15.3	$	19.9

As a result of these balancing services, an imbalance is created for volumes of natural gas received by Washington Gas that are not equal to the volumes of natural gas delivered to customers of the energy marketers. At June 30, 2018 and September 30, 2017, WGL Energy Services recognized accounts receivable from Washington Gas of ~~$3.0~~$7.4 million ~~related to an imbalance in gas volumes. At September 30, 2016, WGL Energy Services recognized accounts payable to Washington Gas of $0.8~~and $1.4 million respectively, related to an imbalance in gas volumes. Due to regulatory treatment, these payables and receivables are not eliminated in the consolidated financial statements of WGL. Refer to Note 1—Accounting Policies of the Notes to Consolidated Financial Statements of ~~the~~our combined Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016~~2017 for further discussion of these imbalance transactions.

Washington Gas participates in a purchase of receivables (POR) program as approved by the Maryland Public Service Commission (PSC of MD), whereby it purchases receivables from participating energy marketers at approved discount rates. In

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

addition, WGL Energy Services participates in POR programs with certain Maryland and Pennsylvania utilities, whereby it sells its receivables to various utilities, including Washington Gas, at approved discount rates. The receivables purchased by Washington Gas are included in “Accounts receivable” in the accompanying balance sheet. Any activity between Washington Gas and WGL Energy Services related to the POR program has been eliminated in the accompanying financial statements for WGL. At June 30, ~~2017~~2018 and September 30, ~~2016,~~2017, Washington Gas had balances of ~~$3.9~~$4.0 million and ~~$4.2~~$3.2 million, respectively, of purchased receivables from WGL Energy ~~Services.~~Services which are located in "Accounts receivable".

NOTE 13. COMMITMENTS AND CONTINGENCIES

REGULATORY CONTINGENCIES

Certain legal and administrative proceedings incidental to our business, including regulatory contingencies, involve WGL and/or its subsidiaries. In our opinion, we have recorded an adequate provision for probable losses or refunds to customers for regulatory contingencies related to these proceedings.

~~District~~Application for Approval of ~~Columbia Jurisdiction~~Reduction of Distribution Rates

~~Investigation into~~On January 12, 2018, Washington ~~Gas’ Cash Reimbursement~~Gas filed applications to ~~Competitive Service Providers (CSPs).~~ ~~On August 5, 2014, the Office of the People’s Counsel’s (OPC) of DC filed a complaint with The Public Service Commission of~~reduce customer rates in Maryland, Virginia, and the District of Columbia ~~(PSC~~to reflect the impact of ~~DC) requesting that~~ the ~~Commission open an investigation into Washington Gas’ payments~~Tax Act, including both the impact of the re-measurement of deferred tax assets and liabilities and reduction of the federal tax rate to ~~CSPs to cash-out over-deliveries of natural gas supplies during the 2008-2009 winter heating season. OPC asserted that~~21%. Washington Gas ~~made excess payments~~began tracking the impact of the Tax Act on revenue requirements beginning January 1, 2018, recording all impacts to regulatory assets and liabilities. In Maryland, the PSC of MD approved the application effective for bills rendered on or after February 1, 2018.

In Virginia, the application was dismissed on March 15, 2018 and Washington Gas will file a new general rate case in ~~the amount of $2.4 million to CSPs.~~July 2018. On ~~December 19, 2014,~~June 29, 2018, the PSC of DC ~~granted~~approved the ~~OPC~~settlement agreement, reflecting an annual reduction in Washington Gas’ distribution rates of ~~DC’s request and opened~~$8.3 million, effective for service rendered on or after July 1, 2018. The settling parties were directed to file a ~~formal investigation. On October 27, 2015,~~joint proposal, by August 1, 2018, depicting the ~~PSC of DC issued an order finding that~~ regulatory liability balance for the period January 1, 2018 through June 30, 2018, which will be refunded to customers through a one-time bill credit beginning with Washington Gas’ December 2018 billing cycle.

Washington Gas ~~in performing~~has recorded regulatory liabilities, representing the ~~cash-out, had violated D.C. Code 34-1101’s requirement that no service shall be provided without Commission approval. The PSC~~amounts owed to customers for reduced rates between January 1, 2018 and June 30, 2018 of ~~DC directed Washington Gas~~11.5 million and $5.4 million, for Virginia and the District of Columbia respectively. Please refer to provide calculations showing what the impact would have been had Washington Gas made volumetric adjustments to CSP deliveries as of April 2009, which Washington Gas calculates would result in a refund of approximately $2.4 million, which was recognized by WGL in fiscal year 2015. On February 3, 2016, the PSC of DC issued an order denying OPC’s application Note 7— Income taxes for reconsideration and granting in part, and denying in part, Washington Gas’ application for reconsideration. Washington Gas and OPC filed initial briefs on February 18, 2016, and reply briefs on February 29, 2016, on the issue of whether there is a more reasonable way to reconcile the over-deliveries by CSPs such as through volumetric adjustments or through cash payments. On August 11, 2016, the PSC of DC issued an order requiring Washington Gas to refund approximately $2.4 million through the Actual Cost Adjustment ("ACA"). On August 26,information.

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 1—Financial Statements (continued)~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

2016, Washington Gas filed its plan for implementing the $2.4 million refund within a 12-month period. The PSC of DC issued an Order on October 7, 2016, clarifying Washington Gas' refunding and reporting requirements.

Virginia Jurisdiction

Virginia Rate Case. On June 30, 2016, Washington Gas filed an application with the Commonwealth of Virginia State Corporation Commission (SCC of VA) to increase its base rates for natural gas service by $45.6 million, which includes $22.3 million of revenue associated with natural gas pipeline replacement initiatives previously approved by the Commission and paid by customers through a monthly rider. Additionally, the proposed rate increase includes provisions designed to deliver the benefits of natural gas to more customers that include: ~~(i)~~ ~~facilitating conversion to natural gas in locations already served by Washington Gas;~~ ~~(ii)~~ ~~expanding the natural gas system to high-growth communities in Virginia and~~ ~~(iii)~~ ~~research and development that we believe will enable innovations to enhance service for our customers.~~

Interim rates went into effect, subject to refund, in the December 2016 billing cycle. Intervenors filed testimony on January 31, 2017, Staff of the SCC of VA filed testimony on February 28, 2017 and Washington Gas filed its rebuttal testimony on March 28, 2017. On April 17, 2017, Washington Gas filed with the SCC of VA a unanimous settlement as to a specific annual revenue increase, but not as to a specific return on equity, specific accounting adjustments, or specific ratemaking methodologies, except as otherwise set forth therein. The Stipulation ~~sets~~set forth, for purposes of settlement, a base rate increase of $34 million ~~($14.1~~(of which $14.1 million ~~net~~represents incremental base rate revenues over and above the inclusion of ~~Washington Gas' Steps to Advance Virginia’s Energy (SAVE)~~SAVE Plan costs which ~~are currently~~were previously recovered through monthly surcharges). For purposes of the settlement, the mid-point of the return on equity range of ~~9.0-10.0%~~9.0%-10.0%% will be used in any application or filing, other than a change in base rates, effective December 1, 2016. On June 30, 2017, the Chief Hearing Examiner issued a report recommending that the ~~Commission~~SCC of VA approve the Stipulation. ~~The Stipulation is pending review and approval by~~On September 8, 2017, Washington Gas received a final order from the SCC of ~~VA.~~VA accepting settlement subject to minor modifications to Washington Gas’ System Expansion Proposals. All parties agreed to a Revised Stipulation filed on September 20, 2017, reflecting the SCC of VA’s denial of one of the System Expansion Proposals and Washington Gas’ withdrawal of the second one. The SCC of VA issued its final order approving the revised stipulation on September 25, 2017. Refunds to customers, which have been accrued by Washington Gas at ~~June 30,~~December 31, 2017, ~~will be made related~~were completed on February 7, 2018. Washington Gas’ methodology to ~~the interim billings based on~~compute customer refunds is pending review by the SCC of ~~VA approval of the Stipulation and rates.~~

VA.

FINANCIAL GUARANTEES

WGL has guaranteed payments primarily for certain commitments on behalf of ~~certain~~some of its subsidiaries. At June 30, 2017, these guarantees totaled $30.7 million, $168.8 million, $114.0 million and $404.3 million for Washington Gas, WGL Energy Services, WGL Energy Systems and WGL Midstream, respectively. At June 30, 2017, WGL also had guarantees on behalf of other subsidiaries totaling $2.2 million. The amount of such guarantees is periodically adjusted to reflect changes in the level of WGL's financial exposure related to these commitments. For all of our financial guarantees, WGL may cancel any or all future obligations upon written notice to the counterparty, but WGL would continue to be responsible for the obligations created under the guarantees prior to the effective date of the cancellation. WGL has also guaranteed payments for certain of our external partners. At June 30, ~~2017,~~2018, the maximum potential amount of future payments under the guarantees for external parties totaled ~~$13.6~~$0.6 million.

ANTERO CONTRACT

Washington Gas and WGL Midstream contracted in June 2014 with Antero Resources Corporation (Antero) to buy gas from Antero at invoiced prices based on an index, and at a delivery point, specified in the contracts. Since deliveries began, however,

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

the index price paid has been more than the fair market value at the same physical delivery point, resulting in losses to date of ~~$23.0~~$29.6 million. Accordingly, Washington Gas and WGL Midstream notified Antero that it sought to apply a provision of the contracts that would permit a new index to be established. Antero objected, claiming that the contract provisions permitting re-pricing did not apply, unless Antero itself chose to sell gas at cheaper prices at the delivery point (which Antero claimed it had not). The dispute was arbitrated in January 2017, and the arbitral tribunal ruled in favor of Antero on the applicability of the re-pricing mechanism. However, the tribunal ruled that it lacked authority to determine whether Antero was in breach of its obligation to deliver gas to Washington Gas and WGL Midstream at a point where they could obtain the higher pricing. Accordingly, Washington Gas and WGL Midstream ~~have~~ filed suit in state court in Colorado for a determination of this issue. ~~Antero moved~~The state court granted Antero’s motion to dismiss the case and the case is currently on appeal.

Separately, Antero has initiated suit ~~and its motion to dismiss has been denied.~~against Washington Gas and WGL Midstream, ~~have filed a motion for partial summary judgment, seeking the Court to declare~~claiming that Antero is in breach of its obligation to deliver gas at the TCO Pool, leaving for trial only the issue of damages. Antero has opposed the motion, and the motion is pending before the court for ruling. Antero has filed a counterclaim alleging breach of contract. Antero alleges that Washington Gas and WGL Midstreamthey have failed to purchase specified daily quantities of gas and ~~refused to pay invoiced~~seeking alleged cover damages ~~and that Washington~~

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 1—Financial Statements (continued)~~

~~Notes~~exceeding $100 million as of April 4, 2018, according to ~~Condensed Consolidated Financial Statements (Unaudited)~~

~~Gas and WGL Midstream are in continuing breach of their obligations in this respect. Antero seeks unspecified damages in an amount to be proved at trial.~~Antero's complaint. Washington Gas and WGL Midstream ~~have filed an answer opposing this counterclaim.~~

oppose both the validity and amount of Antero’s claim. WGL believes any loss associated with these claims to be remote and therefore, no accrual was made as of June 30, 2018. In December 2017, WGL Midstream amended its purchase contract with Antero and, effective February 1, 2018, is no longer obligated to purchase gas at the delivery point that is the subject of these disputes.

SILVER SPRING, MARYLAND INCIDENT

Washington Gas continues to support the investigation by the NTSB into the August 10, 2016 explosion and fire at an apartment complex on Arliss Street in Silver Spring, Maryland, the cause of which has not been determined. Additional information will be made available by the NTSB at the appropriate time. ~~On November 2, 2016, two~~A total of 40 civil actions ~~were~~related to the incident have been filed ~~in the District of Columbia Superior Court~~ against WGL and Washington Gas (as well as a property management company that is not affiliated with WGL or Washington Gas), by residents of the apartment complex. In one lawsuit, twenty-nine plaintiffs seek unspecified damages for, among others, wrongful death and personal injury. The other action is a class action suit seeking total damages stated to be less than $5 million for, among others, property damage and various counts relating to the loss of the use of the premises. Both actions allege causes of action for negligence, product liability, and declaratory relief. Thirty-two civil actions have been filed in the Circuit Court for Montgomery County, ~~Maryland seeking~~Maryland. All of these suits seek unspecified damages for personal injury ~~and~~and/or property damage. The one action seeking class action status has been amended to assert property damage and loss of use claims. We maintain excess liability insurance coverage from highly-rated insurers, subject to a nominal self-insured retention. We believe that this coverage will be sufficient to cover any significant liability to it that may result from this incident. Management is unable to determine a range of potential losses that are reasonably possible of occurring and therefore we have not recorded a reserve associated with this incident. Washington Gas was invited by the NTSB to be a party to the investigation and in that capacity, continues to work closely with the NTSB to help determine the cause of this incident.

MERGER WITH ALTAGAS

For a discussion of merger related commitments, refer to Note 17 — Subsequent Events of the Notes to Condensed Consolidated Financial Statements.

NOTE 14. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

The following table shows the components of net periodic benefit costs (income) recognized in our financial statements during the three and nine months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

																										Components of Net Periodic Benefit Costs (Income)
	Three Months Ended June 30,												Three Months Ended June 30,
	2017						2016						2018							2017
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits			Pension Benefits				Health and Life Benefits			Pension Benefits			Health and Life Benefits
Service cost	$	4.1		$	1.4		$	3.6		$	1.2		$	3.7			$	1.3		$	4.1		$	1.4
Interest cost	9.6			2.9			10.3			3.2			9.9				2.9			9.6			2.9
Expected return on plan assets	(10.3		)	(5.5		)	(10.2		)	(5.1		)	(10.6		)		(5.9		)	(10.3		)	(5.5		)
Amortization of prior service cost (credit)	0.1			(4.4		)	—			(4.4		)	0.1				(4.4		)	0.1			(4.4		)
Amortization of net actuarial loss	5.5			0.2			4.3			0.3			3.9				—			5.5			0.2
Net periodic benefit cost (income)	9.0			(5.4		)	8.0			(4.8		)	7.0			��	(6.1		)	9.0			(5.4		)
Amount allocated to construction projects	(1.6		)	1.1			(1.5		)	1.1			(1.5		)		1.2			(1.6		)	1.1
Amount deferred as regulatory asset/liability—net	1.8			—			1.8			(0.1		)	1.8				—			1.8			—
Amount charged (credited) to expense	$	9.2		$	(4.3	)	$	8.3		$	(3.8	)	$	7.3			$	(4.9	)	$	9.2		$	(4.3	)
	Nine Months Ended June 30,												Nine Months Ended June 30,
	2017						2016						2018							2017
Service cost	$	12.3		$	4.3		$	10.7		$	3.4		$	11.1			$	3.9		$	12.3		$	4.3
Interest cost	28.8			8.7			31.0			9.8			29.7				8.7			28.8			8.7
Expected return on plan assets	(30.8		)	(16.6		)	(30.7		)	(15.3		)	(31.8		)		(17.7		)	(30.8		)	(16.6		)
Amortization of prior service cost (credit)	0.3			(13.2		)	0.2			(13.2		)	0.3				(13.2		)	0.3			(13.2		)
Amortization of net actuarial loss	16.5			0.6			12.7			0.9			11.7				—			16.5			0.6
Net periodic benefit cost (income)	27.1			(16.2		)	23.9			(14.4		)	21.0				(18.3		)	27.1			(16.2		)
Amount allocated to construction projects	(4.9		)	3.5			(4.1		)	3.0			(3.7		)		3.2			(4.9		)	3.5
Amount deferred as regulatory asset/liability—net	5.3			(0.1		)	5.3			(0.2		)	5.2				—			5.3			(0.1		)
Amount charged (credited) to expense	$	27.5		$	(12.8	)	$	25.1		$	(11.6	)	$	22.5			$	(15.1	)	$	27.5		$	(12.8	)

~~NOTE 16. PLANNED MERGER WITH ALTAGAS LTD.~~

On January 25, 2017, WGL entered into an agreement and plan of merger (Merger Agreement) to combine with AltaGas in an all cash transaction valued at approximately $6.4 billion. The Merger Agreement provides for the merger of a newly formed indirect wholly-owned subsidiary of AltaGas with and into WGL, with WGL continuing as the surviving corporation in the merger (the Merger) and becoming an indirect wholly-owned subsidiary of AltaGas. Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time (as defined in the Merger Agreement) of the Merger, WGL shareholders will receive $88.25 in cash, without interest, for each share of WGL common stock issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement). The Boards of Directors of each of WGL and AltaGas have unanimously approved the Merger, which is expected to close in the second quarter of 2018.

Consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including, among others, the approval of the Merger by the holders of more than two-thirds of the outstanding shares of WGL common stock, which approval occurred on May 10, 2017, and approvals required from the PSC of DC, the PSC of MD and the SCC of VA. WGL and AltaGas have also submitted the transaction for review by the Committee on Foreign Investment in the United States

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~(CFIUS)~~



Washington Gas Light Company Changes in Accumulated Other Comprehensive Loss by Component
(In thousands)	Three Months Ended June 30,						Nine Months Ended June 30,
	2018			2017			2018			2017
Beginning Balance	$	(4,147	)	$	(7,383	)	$	(4,522	)	$	(7,830	)
Change in prior service credit^(a)	(273		)	(217		)	(820		)	(651		)
Change in actuarial net loss^(a)	530			588			1,587			1,763
Current-period other comprehensive income	257			371			767			1,112
Income tax expense related to other comprehensive income	69			145			204			439
Ending Balance	$	(3,959	)	$	(7,157	)	$	(3,959	)	$	(7,157	)

^(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost. Refer to Note 14-Pension and other post-retirement benefit plans of the Notes to Condensed Consolidated Financial Statements for additional details.

NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION

The following tables detail the changes in operating assets and liabilities from operating activities, cash payments that have been included in the determination of earnings and non-cash investing and financing activities:

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

WGL Holdings Inc.



For the nine months ended June 30,	2018			2017
(In thousands)
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable and unbilled revenues—net	$	(49,268	)	$	(112,725	)
Gas costs and other regulatory assets/liabilities—net	31,100			(11,285		)
Storage gas	119,217			(3,399		)
Prepaid taxes	(4,711		)	11,309
Accounts payable and other accrued liabilities	(10,911		)	30,677
Customer deposits and advance payments	(1,325		)	(24,908		)
Accrued taxes	10,753			4,987
Other current assets	35,291			(17,386		)
Other current liabilities	(9,298		)	14,588
Deferred gas costs—net	26,212			12,702
Deferred assets—other	(20,424		)	(10,890		)
Deferred liabilities—other	3,837			76
Pension and other post-retirement benefits	(1,344		)	(7,178		)
Other—net	3,594			2,379
Changes in operating assets and liabilities	$	132,723		$	(111,053	)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded)—net	$	649		$	(3,890	)
Interest paid	$	54,533		$	53,027
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Extinguishment of project debt financing	$	(28,312	)	$	(27,927	)
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	40,986		$	38,101
Dividends paid in common stock	$	—		$	1,362
Stock based compensation	$	12,389		$	6,564
Transfer of investments to fixed assets	$	10,054		$	30,114
Transfer of notes receivables to investments	$	—		$	10,031

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

Washington Gas



For the nine months ended June 30,	2018			2017
(In thousands)
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable, unbilled revenues and receivables from associated companies—net	$	(45,234	)	$	(109,427	)
Gas costs and other regulatory assets/liabilities—net	31,100			(11,285		)
Storage gas	38,076			15,270
Prepaid taxes	346			5,127
Accounts payable and other accrued liabilities, including payables to associated companies	8,179			32,724
Customer deposits and advance payments	(125		)	(20,107		)
Accrued taxes	10,350			2,928
Other current assets	(7,329		)	(4,945		)
Other current liabilities	(368		)	37
Deferred gas costs—net	26,212			12,702
Deferred assets—other	(19,084		)	(7,527		)
Deferred liabilities—other	(10,233		)	489
Pension and other post-retirement benefits	(1,426		)	(7,178		)
Other—net	3,255			2,550
Changes in operating assets and liabilities	$	33,719		$	(88,642	)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded)—net	$	(958	)	$	—
Interest paid	$	31,061		$	36,202
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Extinguishment of project debt financing	$	(28,312	)	$	(27,927	)
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	26,472		$	28,666

NOTE 17. SUBSEQUENT EVENTS

MERGER WITH ALTAGAS

On January 25, 2017, WGL entered into an agreement and plan of Merger (Merger Agreement) to combine with AltaGas in an all cash transaction. The merger was consummated on July 6, 2018. The Merger Agreement ~~is also subject to FERC approval, which was obtained on July 6, 2017, and expiration or termination of any applicable waiting period under~~provided for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which occurred on July 17, 2017. The Merger Agreement also contains customary representations, warranties and covenants of both WGL and AltaGas. These covenants include, among others, an obligation on behalf of WGL to operate its business in the ordinary course until the Merger is consummated, subject to certain exceptions.

The Merger Agreement may be terminated by each of WGL and AltaGas under certain circumstances, including if the Merger is not consummated by January 25, 2018 (subject to a 180 day extension by either party subject to certain conditions being met). The Merger Agreement also contains certain additional termination rights for both AltaGas and WGL, and provides that, upon terminationmerger of the Merger ~~Agreement under specified circumstances,~~Sub, a newly formed indirect wholly-owned subsidiary of AltaGas ~~would be required~~with and into WGL, whereby WGL became an indirect wholly-owned subsidiary of AltaGas. Upon consummation of the merger, each share of WGL common stock issued and outstanding immediately prior to ~~pay a termination fee~~the closing was converted automatically into the right to receive $88.25 (Merger Consideration) in cash per share, without interest, less any applicable withholding taxes. Shares of ~~$205 million, $182 million, or $68 million (depending on the specific circumstances of termination) to~~ WGL ~~and~~common stock held by WGL, ~~would be required to pay~~ AltaGas, ~~a termination fee of $136 million, only under specific circumstances as outlined in~~ the Merger ~~Agreement.~~Sub or any subsidiaries were not entitled to receive the Merger Consideration. All shares of WGL common stock ceased to be outstanding and were automatically canceled. Each share of the Merger Sub's issued and outstanding common stock at the time of the consummation of the merger was converted into one share of WGL common stock for a total of 100 WGL post-Merger shares owned by Wrangler 1 LLC, an indirect wholly-owned subsidiary of AltaGas (Wrangler 1). As a result of the Merger, WGL's common stock was delisted from the New York Stock Exchange.

In connection with ~~entering into~~ the Merger, ~~Agreement,~~ WGL ~~entered into~~established Wrangler SPE LLC., the SPE for the purposes of owning the common stock of Washington Gas in a ~~subscription agreement with AltaGas, in which WGL agreed, upon~~bankruptcy remote entity. The SPE is a wholly-owned subsidiary of WGL. Following the ~~occurrence~~consummation of ~~certain conditions, to issue and sell to AltaGas up to an aggregate~~the merger, all of ~~15,000~~Washington Gas’ outstanding shares of ~~Series A Non-Voting Non-Convertible Perpetual Preferred Stock (Non-Voting Preferred Stock) for a purchase price of $10,000 per share. If~~common stock are now owned by the ~~consolidated debt to total capitalization ratio is forecasted~~SPE. The merger had no effect on the Washington Gas preferred stock, which continues to be in excess of 62% at December 31, 2017 or any quarterly period thereafter, AltaGas will purchase a number of shares of Non-Voting Preferred Stock to produce a forecasted ratio equal to 62%, but not more than 5,000 shares in any single quarter or more than 15,000 shares in the aggregate. If the Merger Agreement is terminated or the Outside Date (as defined in the Merger Agreement) expires, no subscription will be made after the date of termination or expiration, and WGL will have six months thereafter to redeem any Non-Voting Preferred Stock previously issued.outstanding.

Merger Approval Proceedings

District of Columbia

On April 24, 2017, AltaGas, WGL and Washington Gas (Applicants) filed an application with the PSC of DC seeking approval of the Merger Agreement. In an order issued on April 25, 2017, the PSC of DC scheduled a procedural conference on May 18, 2017 with the Staff of the PSC of DC and interested parties to consider the factors to be considered in the case to determine whether the Merger is in the public interest, identify factual issues in dispute and consider a procedural schedule for the proceeding. To approve the Merger Agreement, the PSC of DC ~~must~~needed to find that the ~~Merger~~merger taken as a whole is in the public interest. In the April 25, 2017 order, the PSC of DC stated that in making this determination, it has balanced the interests of shareholders and investors with ratepayers and the community; determined that benefits to shareholders must not come at the expense of ratepayers; and found that to be approved, the transaction must produce a direct and tangible benefit to ratepayers. It stated further that in determining whether the public interest requirements are met, the PSC of DC has in past merger cases identified seven factors it has considered in reviewing each transaction, including the effects of the transaction on ~~(i)~~ ~~ratepayers, shareholders, the financial health of the utilities standing alone and as merged, and the economy of the District;~~ ~~(ii)~~ ~~utility management and administrative operations;~~ ~~(iii)~~ ~~public safety and the safety and reliability of services;~~ ~~(iv)~~ ~~risks associated with all of the applicants' affiliated non-jurisdictional business operations;~~ ~~(v)~~ ~~the PSC of DC's ability to regulate~~On May 8, 2018, Washington Gas, ~~effectively;~~ ~~(vi)~~ ~~competition in the local retail~~AltaGas, and ~~wholesale markets that impact the District and District ratepayers; and~~ ~~(vii)~~ ~~conservation of natural resources and preservation of environmental quality. The law of the District of Columbia does not impose any time limit on the PSC of DC’s review of the Merger.~~other key stakeholders filed a proposed

~~Maryland~~

On April 24, 2017, AltaGas, WGL and Washington Gas filed an application with the PSC of MD seeking approval of the Merger Agreement. On April 26, 2017, the PSC of MD issued an order scheduling a pre-hearing conference on May 30, 2017, to set a procedural schedule for the proceeding, to consider any petition to intervene that have been filed, and to consider any other preliminary matters requested by the parties. Maryland law requires the PSC of MD to approve a merger subject to its review if it finds that the merger agreement is consistent with the public interest, convenience and necessity, including benefits and no harm to consumers. In making this determination, the PSC of MD is required to consider the following criteria: ~~(i)~~ ~~the potential impact of the acquisition on rates and charges paid by customers and on the services and conditions of operation of the public service company;~~ ~~(ii)~~ ~~the potential impact of the acquisition on continuing investment needs for the maintenance of~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (concluded)

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~utility services, plant,~~unanimous settlement agreement and ~~related infrastructure;~~ ~~(iii)~~ ~~the proposed capital structure that will result from the acquisition, including allocation of earnings from Washington Gas;~~ ~~(iv)~~ ~~the potential effects on employment;~~ ~~(v)~~ ~~the projected allocation of any savings that are expected between stockholders and rate payers;~~ ~~(vi)~~ ~~issues of reliability, quality of service, and quality of customer service;~~ ~~(vii)~~ ~~the potential impact of the acquisition on community investment;~~ ~~(viii)~~ ~~affiliate and cross-subsidization issues;~~ ~~(ix)~~ ~~the use or pledge of utility assets for the benefit of an affiliate;~~ ~~(x)~~ ~~jurisdictional and choice-of-law issues;~~ ~~(xi)~~ ~~whether it is necessary to revise~~stipulation with the PSC of ~~MD's ring-fencing and code~~DC. On May 23, the PSC of ~~conduct regulations~~DC issued an Order granting the parties’ request to reopen the record in ~~light~~the proceeding to permit consideration of the ~~acquisition;~~Settlement Agreement. On June 28, 2018, the PSC of DC issued an Order granting approval of the Settlement Agreement subject to conditions. The Applicants accepted the conditions set forth in the Order on July 2, 2018.

Maryland and ~~(xii)~~ ~~any other issues~~ Virginia

In April 2017, the Applicants filed applications with the PSC of MD ~~considers relevant to the assessment of the acquisition in relation to the public interest, convenience,~~ and necessity. The PSC of MD is required to issue an order within 180 days of the date the application was filed, but may extend the date by 45 days for good cause. An order is expected by December 5, 2017.

~~Virginia~~

~~On April 24, 2017, AltaGas and WGL and Washington Gas, filed a petition with the~~ SCC of VA seeking approval of the Merger Agreement. ~~Virginia law provides that, if~~Orders granting approval were received from the PSC of MD and the SCC of VA ~~determines,~~on April 4, 2018 and October 20, 2017, respectively.

On December 21, 2017, Washington Gas filed an application with ~~or without hearing, that adequate service to the public at just and reasonable rates will not be impaired or jeopardized by granting the petition for approval, then~~ the SCC of VA ~~shall approve~~for approval of a ~~merger with such conditions that~~new service agreement between Washington Gas and AltaGas Services (U.S.) Inc. (ASUS) for Washington Gas to receive centralized corporate services, and to authorize affiliate transactions for a period of five years. On March 15, 2018, the SCC of VA ~~deems~~issued an Order directing Washington Gas to ~~be appropriate in order~~institute certain corrective measures (Revised Agreement) to ~~satisfy this standard. The~~the original Agreement. On July 25, 2018, Washington Gas filed with the SCC of VA ~~is required to issue an order within 60 days from the date of filing~~a signed and executed copy of the ~~petition, but may extend~~approved Revised Agreement.

Other Federal Approvals

In addition to the ~~review period for up to 120 additional days. An order is expected to be issued by October 20, 2017.~~approvals discussed above, AltaGas and WGL received the following approvals on the dates indicated:

FERC - July 6, 2017

Committee on Foreign Investment in the United States (CFIUS) - August 18, 2017

~~On April 24, 2017, AltaGas, WGL and Washington Gas, filed a joint voluntary notice with the CFIUS.~~


•	Federal Trade Commission and the Antitrust Division of the Department of Justice - July 17, 2017^(a)

~~HSR~~

On June 15, 2017, AltaGas and WGL submitted to the Federal Trade Commission and the Antitrust Division of the Department of Justice completed Premerger Notification and Report Forms with respect to the proposed acquisition by AltaGas Ltd. of certain voting securities of WGL. ^(a)The waiting period required by ~~Section 7A(b)(1) of~~ the Clayton Act, ~~15 U.S.C. Section 18a(b)(1) (aka~~and the Hart-Scott Rodino Antitrust Improvements Act of 1976, as ~~amended)~~amended, expired on July 17, 2017. The expiration of the Clayton Act’s waiting period ~~deems~~deemed the ~~Merger~~merger approved by the Federal Trade Commission and the Department of Justice.

~~FERC~~

Merger Related Costs

~~On April 24, 2017,~~Merger Commitments

Approval of the merger across all jurisdictions was conditioned upon AltaGas and WGL ~~Energy Services submitted~~agreeing to ~~FERC~~certain financial commitments including: customer bill credits, funding for low-income weatherization and energy efficiency initiatives, public safety programs, energy educational programs, gas expansion fund contributions, workplace development initiatives, charitable contributions, and other required commitments. The commitments will be funded by AltaGas within various timeframes from 30 days to 10 years after the merger close. In addition, the commitments related to Maryland and the District of Columbia are subject to a ~~Joint Application for Authorization of Disposition of Jurisdictional Assets and Merger under Section 203~~Most Favored Nation (MFN) provision that may change the amount or nature of the ~~Federal Power Act. Under~~commitments. We did not recognize any merger commitment liabilities on our consolidated financial statements as of June 30, 2018. The following table lists commitment obligations that ~~section, FERC shall approve a merger if it finds that the proposed transaction~~ will be ~~consistent with~~recorded to “Operation and maintenance” expense on our Condensed Consolidated Financial Statements in the ~~public interest.~~ fourth quarter of fiscal year 2018.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)



Washington Gas Light Company Merger Commitments
(in millions)
Commitment Description	Amount
Customer bill credits	$	56.4
Low-income weatherization and energy efficiency initiatives	4.5
Charitable contributions	13.5
Work place development initiatives	7.4
Gas expansion fund contributions	30.3
Public safety programs	0.5
Energy customer or education programs	22.8
Total merger commitments	$	135.4

The following additional commitments by Washington Gas will have an impact on our consolidated financial statements when the transactions are incurred in the future:


1)	Hiring of three damage prevention trainers in each jurisdiction for a total of $2.8 million over 5 years;


2)	Investment of $70.0 million over a 10 year period to further extend natural gas service to areas within Washington Gas's service territory, which will be incorporated into Washington Gas's ongoing capital plan; and


3)	Spending $8.0 million on leak mitigation and reducing leak backlogs.

In ~~making this determination,~~addition, there are a number of operational commitments that will have a impact on the ~~FERC~~ongoing business of Washington Gas, including reductions of leak backlogs, conducting a root cause analysis related to customer service, increasing supplier diversity, achieving synergy savings benefits, developing protocols for moving meters from inside to outside customers’ premises, as well as reporting and tracking related to all the commitments.

Other Merger Related Costs

Upon consummation of the merger, it is anticipated that WGL will ~~consider~~recognize merger related expenses in “Operation and maintenance” expense in the fourth quarter of fiscal year 2018 for the following ~~criteria:~~ ~~(i)~~ ~~horizontal competition analysis;~~ ~~(ii)~~ ~~vertical competition issues;~~ ~~(iii)~~ ~~no adverse effect on rates;~~ ~~(iv)~~ ~~no adverse effect on regulation;~~items:


1)	$26.1 million for retention payments to senior executives and key employees and acceleration of stock-based incentive compensation plans;


2)	$29.7 million related to investment banking and legal fees owed upon completion of the merger; and


3)	$38.0 million impairment in “Net property, plant and equipment” associated with the merger.

Additional acceleration of stock-based incentive compensation plans and ~~(v)~~ ~~no improper cross-subsidization. On July 6, 2017,~~severance costs related to senior executives following the ~~FERC issued an order authorizing~~merger could be recognized in future quarters.

Pursuant to the Merger ~~concluding that~~agreement, WGL contributed $61.8 million to rabbi trusts formed to fully satisfy certain outstanding employee benefit obligations immediately prior to the ~~proposed~~merger close.

We recognized merger transaction ~~is consistent with~~costs of $1.5 million and $2.3 million for the ~~public interest.~~three and nine months ended June 30, 2018, and $0.8 million and $12.7 million for the three and nine months ended June 30, 2017, respectively, in “Operations and maintenance” in our Condensed Consolidated Statements of Income.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion) analyzes the financial condition, results of operations and cash flows of WGL and its subsidiaries. It also includes management’s analysis of past financial results and potential factors that may affect future results, potential future risks and

approaches that may be used to manage them. Except where the content clearly indicates otherwise, “WGL,” “we,” “us” or “our” refers to the holding company or the consolidated entity of WGL Holdings, Inc. and all of its subsidiaries.

Management’s Discussion is divided into the following two major sections:

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 2—Management’s Discussion and Analysis of~~

~~Financial Condition and Results of Operations (continued)~~

WGL—This section describes the financial condition and results of operations of WGL Holdings, Inc. and its subsidiaries on a consolidated basis. It includes discussions of our regulated operations, including Washington Gas and Hampshire, ~~Gas Company (Hampshire),~~ and our non-utility operations.

Washington Gas—This section describes the financial condition and results of operations of Washington Gas, a subsidiary of WGL, which comprises the majority of the regulated utility segment.

Both sections of Management’s Discussion—WGL and Washington Gas—are designed to provide an understanding of our operations and financial performance and should be read in conjunction with the respective company’s financial statements and the combined Notes to Condensed Consolidated Financial Statements in this quarterly report as well as our combined Annual Report on Form 10-K for WGL and Washington Gas for the fiscal year ended September 30, ~~2016 (2016 Annual Report).~~2017.

Unless otherwise noted, earnings per share amounts are presented on a diluted basis, and are based on weighted average common and common equivalent shares outstanding. Our operations are seasonal and, accordingly, our operating results for the interim periods presented are not indicative of the results to be expected for the full fiscal year.

EXECUTIVE OVERVIEW

Introduction

WGL, through its subsidiaries, sells and delivers natural gas and provides a variety of energy-related products and services to customers primarily in the District of Columbia and the surrounding metropolitan areas in Maryland and Virginia. In addition to our primary markets, WGL’s non-utility subsidiaries provide customized energy solutions across a much wider footprint, with business activities across the United States.

WGL has four operating segments:

regulated utility;

retail energy-marketing;

commercial energy ~~systems~~systems; and

midstream energy services.

Regulated Utility Operating Segment

The regulated utility operating segment is composed of our core subsidiary, Washington Gas. Washington Gas engages in the delivery and sale of natural gas that is regulated by regulatory commissions in the District of Columbia, Maryland and Virginia. During the third fiscal quarter of 2018 compared to prior year, our utility earnings ~~showed improved results primarily due to~~ ~~(i)~~reflect higher customer growth. These favorable variances were offset by lower unrealized margins associated with our asset optimization program ~~(ii)~~ ~~new base rates in Virginia~~ and ~~the District of Columbia,~~ ~~(iii)~~ ~~increased customer growth of approximately 12,000 and~~ ~~(iv)~~ ~~lower~~higher operation and maintenance ~~expenses. Partially offsetting these favorable variances were~~expenses primarily related to uncollectible accounts and higher ~~depreciation~~system safety and ~~amortization~~integrity expenses.

Retail Energy-Marketing Operating Segment

We offer competitively priced natural gas, electricity and energy from renewable sources to customers through WGL Energy Services, our non-utility retail energy-marketing subsidiary. ~~This~~During the third fiscal quarter of 2018 compared to the prior year, this segment saw ~~lower~~higher earnings reflecting higher unrealized margins; higher realized gas margins due to~~lower natural gas margins resulting from~~ ~~(i)~~ ~~lower portfolio optimization,~~ ~~(ii)~~ ~~unfavorable weather and price conditions and~~ ~~(iii)~~ differences in storage injection timing; lower realized ~~and unrealized margins. Electricity~~electric margins ~~were lower~~ due to lower average unit margins and lower sales volume; and higher ~~capacity charges from the regional power grid operator (PJM) associated with fixed-price retail contracts.~~operating expenses.

Commercial Energy Systems Operating Segment

Through WGL Energy Systems and WGSW, we offer efficient and sustainable commercial energy solutions focused on owning and operating distributed generation assets such as Solar Photovoltaic (Solar PV) systems and upgrading energy ~~related systems of large government and commercial facilities. During the quarter this segment continued to deliver improved results. Growth is attributed to increasedgrowth in distributed generation assets in service, including increased solar renewable energy credit sales and higher earnings from alternative energy investments, including tax equity ventures.~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Partially offsetting these favorable variances were lower revenues from~~related systems of large government and commercial facilities. During the ~~energy-efficiency contracting business~~third fiscal quarter of 2018 compared to prior year, this segment had reduced earnings due to ~~the completion of certain projects and~~ higher operating expenses ~~related to~~in our commercial distributed generation business, ~~development costs.~~partially offset by higher earnings from our investment distributed generation business, including investments in tax equity partnerships.

Midstream Energy Services Operating Segment

WGL Midstream specializes in the investment, management, development and optimization of natural gas storage and transportation midstream infrastructure projects. ~~Improved~~Lower results for the third fiscal quarter of 2018 compared to prior year primarily ~~reflects:~~ ~~(i)~~ ~~higher~~include lower mark-to-market valuations and ~~realized~~lower margins ~~related to storage inventory and the associated economic hedging transactions,~~ ~~(ii)~~ ~~higher realized margins on our transportation strategies, and~~ ~~(iii)~~ ~~higher income related to our pipeline investments. Partially offsetting these increases are lower valuations on our derivative contracts~~ associated with our ~~long-term transportation~~storage strategies. This was partially offset by the impact of our contract with GAIL Global (USA) LNG LLC (GAIL) which recently came into effect, which provides for the sale of up to 430,000 dth/day of natural gas per day for a term of 20 years.

Other Activities

Activities and transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and are included as part of non-utility operations. Administrative and business development costs associated with WGL and Washington Gas Resources are also included in “Other Activities.” Results for ~~Other Activities primarily relate~~the third fiscal quarter of 2018 compared to ~~external~~prior year reflect higher costs associated with the ~~planned~~ merger with AltaGas.

~~Planned~~ Merger with AltaGas

On January 25, 2017, WGL entered into the Merger Agreement to combine with ~~AltaGas in an all cash transaction valued at approximately $6.4 billion.~~AltaGas. The ~~Boards~~merger was finalized on July 6, 2018 and each share of ~~Directors of each of WGL and AltaGas have unanimously approved~~WGL’s outstanding common stock was converted into the ~~Merger, which is expected~~right to ~~close in the second quarter of 2018. Subject to the conditions in the Merger Agreement, at the effective time of the Merger, WGL's shareholders will~~ receive $88.25 in ~~cash, without interest, for each share of WGL common stock issued and outstanding prior to the Effective Time (as defined in the Merger Agreement).~~

Consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including, among others, the approval of the Merger by the holders of more than two-thirds of the outstanding shares of WGL common stock, which occurred on May 10, 2017 and approvals required from certain antitrust and other regulatory bodies. Should WGL terminate the Merger Agreement under specified circumstances, WGL may be obligated to pay AltaGas a termination fee of $136 million.

On April 24, 2017, joint applications for approval of the Merger were filed with the PSC of DC and with the PSC of MD. A joint petition for approval of the Merger was also filed with the SCC of VA, FERC, and CFIUS.

On June 15, 2017, AltaGas and WGL submitted to the Federal Trade Commission and the Antitrust Division of the Department of Justice completed Premerger Notification and Report Forms with respect to the proposed acquisition by AltaGas Ltd. of certain voting securities of WGL Holdings, Inc. The waiting period expired on July 17, 2017. The expiration of the Clayton Act’s waiting period deems the Merger approved by the Federal Trade Commission and the Department of Justice.

~~On July 6, 2017, the FERC issued an order authorizing the Merger, concluding that the proposed transaction is consistent with the public interest.~~cash.

For further information on the ~~Merger,~~merger, see "Safe Harbor and ~~Forward Looking~~Forward-Looking Statements" in the Introduction and Item I, Note 1617 — ~~Planned Merger with AltaGas Ltd.~~Subsequent Events to the ~~condensed consolidated financial statements and Part II, Item 1A. Risk Factors, in this Form 10-Q.~~Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

Preparation of financial statements and related disclosures in compliance with ~~Generally Accepted Accounting Principles in the United States of America~~GAAP requires the selection and the application of appropriate technical accounting guidance to the relevant facts and circumstances of our operations, as well as our use of estimates to compile the consolidated financial statements. The application of these accounting policies involves judgment regarding estimates and projected outcomes of future events, including the likelihood of success of particular regulatory initiatives, the likelihood of realizing estimates for legal and environmental contingencies, and the probability of recovering costs and investments in both the regulated utility and non-regulated business segments.

We have identified the following critical accounting policies that require our judgment and estimation, where the resulting estimates may have a material effect on the consolidated financial statements:

accounting for unbilled revenue;

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part I—Financial Information~~

~~Item 2—Management’s Discussion and Analysis of~~

~~Financial Condition and Results of Operations (continued)~~

accounting for ~~regulatory~~regulated operations — regulatory assets and liabilities;

accounting for income taxes;

accounting for contingencies;

accounting for derivatives;

accounting for fair value instruments;

accounting for investments;

impairment of long-lived assets and equity method investments;

principles of consolidation and non-controlling interests and

accounting for pension and other post-retirement benefit plans.

For a description of these critical accounting policies, refer to Management’s Discussion within our combined Annual Report on Form 10-K for WGL and Washington Gas for the ~~2016 Annual Report.~~fiscal year ended September 30, 2017. There were no new critical accounting policies or changes to our critical accounting policies during the nine month period ended June 30, ~~2017.~~2018 and we do not expect any changes to our critical accounting policies as a result of the merger.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

WGL HOLDINGS, INC.

RESULTS OF OPERATIONS—Three Months Ended June 30, ~~2017~~2018 vs. June 30, ~~2016~~2017

Our chief operating decision maker utilizes earnings before interest and tax (EBIT) as the primary measure of profit and loss in assessing the results of each segment’s operations. EBIT includes operating income, other income (expense) and earnings from unconsolidated affiliates and is adjusted by amounts attributable to non-controlling interests. We believe that our use of EBIT enhances the ability to evaluate segment performance because it excludes interest and income tax expense, which are affected by corporate-wide strategies such as capital financing and tax sharing allocations.

EBIT should not be considered an alternative to, or a more meaningful indicator of our operating performance than, net income. Refer to summary results below for a reconciliation of EBIT to net income applicable to common stock.

Summary Results

For the three months ended June 30, ~~2017,~~2018, WGL reported net ~~income~~loss applicable to common stock of ~~$8.3~~$49.0 million, or ~~$0.16~~$0.95 per share, compared to net income of ~~$2.0~~$8.3 million, or ~~$0.04~~$0.16 per share, reported for the three months ended June 30, ~~2016.~~2017. For the twelve month periods ended June 30, ~~2017~~2018 and ~~2016,~~2017, we earned a return on average common equity of ~~12.3%~~14.4% and ~~13.3%~~12.3%, respectively. The income tax expense for the three months ended June 30, 2018 includes a $44.5 million expense resulting from a revision to our estimate for the re-measurement of accumulated deferred income taxes in connection with the Tax Act. Refer to the "Consolidated Income Taxes" section below for more information.

The following table summarizes our EBIT by operating segment for the three months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

																			Analysis of Consolidated Results
	Three Months Ended June 30,						Increase/			Three Months Ended June 30,						Increase/
(In millions)	2017			2016			(Decrease)			2018			2017			(Decrease)
EBIT:
Regulated utility	$	11.2		$	(20.5	)	$	31.7		$	(6.0	)	$	11.2		$	(17.2	)
Retail energy-marketing	4.3			49.5			(45.2		)	10.8			4.3			6.5
Commercial energy systems	14.4			8.3			6.1			13.3			14.4			(1.1		)
Midstream energy services	7.7			(16.9		)	24.6			(5.6		)	7.7			(13.3		)
Other activities	(1.6		)	(0.5		)	(1.1		)	(2.7		)	(1.6		)	(1.1		)
Intersegment eliminations	(0.2		)	0.2			(0.4		)	(0.8		)	(0.2		)	(0.6		)
Total	$	35.8		$	20.1		$	15.7		$	9.0		$	35.8		$	(26.8	)
Interest expense	25.1			13.0			12.1			20.6			25.1			(4.5		)
Income tax expense	2.1			4.8			(2.7		)	37.1			2.1			35.0
Dividends on Washington Gas preferred stock	0.3			0.3			—			0.3			0.3			—
Net income applicable to common stock	$	8.3		$	2.0		$	6.3		$	(49.0	)	$	8.3		$	(57.3	)
EARNINGS PER AVERAGE COMMON SHARE
Basic	$	0.16		$	0.04		$	0.12		$	(0.95	)	$	0.16		$	(1.11	)
Diluted	$	0.16		$	0.04		$	0.12		$	(0.95	)	$	0.16		$	(1.11	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Regulated Utility Operating Results

The following table summarizes the regulated utility segment’s financial data for the three months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

																	Regulated Utility Financial Data
	Three Months Ended June 30,					Increase/			Three Months Ended June 30,					Increase/
(In millions)	2017		2016			(Decrease)			2018			2017		(Decrease)
Utility net revenues⁽¹⁾:
Operating revenues	$	203.2	$	187.1		$	16.1		$	199.5		$	203.2	$	(3.7	)
Less: Cost of gas	54.1		71.3			(17.2		)	56.1			54.1		2.0
Revenue taxes	13.6		14.2			(0.6		)	16.1			13.6		2.5
Total utility net revenues	135.5		101.6			33.9			127.3			135.5		(8.2		)
Operation and maintenance	76.2		78.3			(2.1		)	81.3			76.2		5.1
Depreciation and amortization	33.2		29.6			3.6			34.5			33.2		1.3
General taxes and other assessments	13.9		13.8			0.1			14.8			13.9		0.9
Other expenses—net	1.0		0.4			0.6			2.7			1.0		1.7
EBIT	$	11.2	$	(20.5	)	$	31.7		$	(6.0	)	$	11.2	$	(17.2	)

⁽¹⁾We utilize utility net revenues, calculated as revenues less the associated cost of energy and applicable revenue taxes, to assist in the analysis of profitability for the regulated utility segment. The cost of the natural gas commodity and revenue taxes are generally included in the rates that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in the cost of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues, operating income or net income. Utility net revenues should not be considered an alternative to, or a more meaningful indicator of our operating performance than, operating income. Additionally, utility net revenues may not be comparable to similarly titled measures of other companies.

The ~~comparison~~variance in EBIT ~~primarily~~ reflects ~~the following:~~higher customer growth.

~~new base rates in Virginia and the District of Columbia;~~Offsetting this favorable variance were:

~~increased customer growth;~~

~~higher~~lower unrealized margins associated with our asset optimization ~~program~~program;

lower billed and estimated utility rates associated with the pass-through of future tax savings from the Tax Act, offset in income tax expense; and

~~lower~~higher operation and maintenance ~~expenses.~~

~~Partially offsetting these favorable variances were:~~

~~unfavorable effects of warmer weather in the District of Columbia and~~

~~higher depreciation and amortization expense~~expenses primarily related to ~~our new billing~~uncollectible accounts and higher system ~~as well as the growth in our utility plant.~~safety and integrity expenses.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Utility Net Revenues. The following table provides the key factors contributing to the changes in the utility net revenues of the regulated utility segment between the three months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

							Composition of Changes in Utility Net Revenues
(In millions)	Increase/ (Decrease)			Increase/ (Decrease)
Customer growth	$	2.6		$	3.5
Estimated effects of weather and consumption patterns	(1.1		)	1.0
Impact of rate case	8.4
Accelerated pipe replacement programs	(2.8		)
Impact of rate cases				(1.8		)
Impact of lower tax rates per Tax Act				(6.4		)
Asset optimization:
Realized margins				(0.2		)
Unrealized mark-to-market valuations	28.4			(7.0		)
Late fees				2.0
Other	(1.6		)	0.7
Total	$	33.9		$	(8.2	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Commercial Energy Systems~~



Commercial Energy Systems Segment Financial Information
	Three Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
Operating revenues	$	21.3		$	25.6		$	(4.3	)
Operating expenses:
Cost of sales	2.0			8.2			(6.2		)
Operations	7.7			6.1			1.6
Depreciation and amortization	5.6			5.6			—
General taxes and other assessments	0.3			0.1			0.2
Operating expenses	$	15.6		$	20.0		$	(4.4	)
Equity earnings	—			2.4			(2.4		)
Other income	0.9			1.8			(0.9		)
Less: Non-controlling interest	(6.7		)	(4.6		)	(2.1		)
EBIT	$	13.3		$	14.4		$	(1.1	)
EBIT by division:
Energy efficiency	$	0.2		$	—		$	0.2
Commercial distributed generation	4.6			7.5			(2.9		)
Investment distributed generation	8.5			6.9			1.6
Total	$	13.3		$	14.4		$	(1.1	)

The ~~table below represents the financial results of the commercial energy systems segment for the three months ended June 30, 2017 and 2016.~~

Commercial Energy Systems Segment Financial Information

Three Months Ended June 30, Increase/
(In millions) 2017 2016 (Decrease)
Operating revenues $ 25.6
$ 20.8
$ 4.8
Operating expenses:
   Cost of sales 8.2
7.4
0.8
   Operations 6.1
5.5
0.6
   Depreciation and amortization 5.6
3.9
1.7
   General taxes and other assessments 0.1
0.1
—
Operating expenses $ 20.0
$ 16.9
$ 3.1
Equity earnings 2.4
2.2
0.2
Other income 1.8
2.2
(0.4 )
Less: Non-controlling interest (4.6 ) —
(4.6 )
EBIT $ 14.4
$ 8.3
$ 6.1
EBIT by division:
   Energy-efficiency contracting $ —
$ —
$ —
   Commercial distributed generation 7.5
6.5
1.0
   Investments in distributed generation 6.9
1.8
5.1
Total $ 14.4
$ 8.3
$ 6.1

~~The increase~~decrease in EBIT reflects~~the growth in~~ lower earnings from our commercial distributed generation ~~assets in service, including increased solar renewable energy credit sales and~~business, partially offset by higher earnings from ~~alternative energy~~our investment distributed generation business, including investments ~~including~~in tax equity ~~ventures. These improvements were partially offset bylower revenues from the energy-efficiency contracting business and higher expenses related to business development costs.~~partnerships.

Additionally, not reflected in EBIT is the amortization of investment tax credits related to our distributed generation assets which were ~~$1.8~~$1.7 million and ~~$1.4~~$1.8 million for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Midstream Energy Services

The table below represents the financial results of the midstream energy services segment for the three months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

																Midstream Energy Services Segment Financial Information
	Three Months Ended June 30,					Increase/		Three Months Ended June 30,					Increase/
(In millions)	2017		2016			(Decrease)		2018			2017		(Decrease)
Operating revenues ^(a)	$	4.5	$	(18.0	)	$	22.5	$	(10.3	)	$	4.5	$	(14.8	)
Operating expenses	$	2.0	$	1.3		$	0.7	2.4			2.0		0.4
Equity earnings	5.2		2.4			2.8		7.1			5.2		1.9
EBIT	$	7.7	$	(16.9	)	$	24.6	$	(5.6	)	$	7.7	$	(13.3	)

^(a) The trading margins of Midstream Energy Services, including unrealized gains and losses on derivative instruments, are netted within operating revenues.

~~The increase in EBIT~~Lower results for the quarter primarily ~~reflects:~~ ~~(i)~~ ~~higher~~reflect lower mark-to-market valuations associated with our long-term transportation strategies and lower valuations and realized margins related to storage inventory and the associated economic hedging ~~transactions,~~ ~~(ii)~~ ~~higher realized~~transactions. These unfavorable variances were partially offset by increases in transportation margins ~~on our transportation strategies, and~~ ~~(iii)~~ ~~higher income related~~attributable to our ~~pipeline investments. Partially offsetting these increases are lower valuations on our derivative contracts associated with our long-term transportation strategies.~~agreement to sell natural gas to GAIL Global (USA) LNG LLC, a subsidiary of GAIL (India) Limited, at the Cove Point LNG export facility. Under this agreement, WGL Midstream will sell and deliver a minimum of 340,000 dekatherms per day and up to 430,000 dekatherms per day of natural gas, for a term of 20 years starting March 31, 2018, the in-service date of the Cove Point LNG export facility.

Other Non-Utility Activities

Transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and included as part of non-utility operations. Our other non-utility activities reflect EBIT of ~~$(1.6)~~$(2.7) million and ~~$(0.5)~~$(1.6) million for the three months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively. ~~The~~This decrease in EBIT primarily relates to ~~external~~higher costs associated with the ~~planned~~ merger with AltaGas.

Intersegment Eliminations

Intersegment eliminations include any mark-to-market valuations associated with trading activities between WGL Midstream and WGL Energy Services, and timing differences between Commercial Energy Systems’ recognition of revenue for the sale of ~~REC's~~RECs to Retail Energy-Marketing and Retail Energy-Marketing’s recognition of the associated expense. Our intersegment eliminations reflect EBIT of $(0.8) million and $(0.2) million for the three months ended June 30, 2018 and 2017, respectively. This variance primarily relates to the timing differences between Commercial Energy Systems’ recognition of revenue for the sale of RECs to Retail Energy-Marketing and Retail Energy-Marketing’s recognition of the associated expense.

For further discussion of our financial performance by operating segment, refer to Note 10 - Operating Segment Reporting of the Notes to Condensed Consolidated Financial Statements.

Consolidated Interest Expense ~~and Income Taxes~~

~~Please refer to~~The following table shows the ~~nine~~components of WGL's consolidated interest expense for the three months ended June 30, ~~2017, for information about WGL's consolidated interest expense, income tax expense~~2018 and ~~effective income tax rate.~~

2017.

~~RESULTS OF OPERATIONS—Nine Months Ended June 30, 2017 vs. June 30, 2016~~

~~Summary Results~~

For the nine months ended June 30, 2017, WGL reported net income applicable to common stock of $189.3 million, or $3.68 per share, compared to net income of $176.5 million, or $3.50 per share, reported for the nine months ended June 30, 2016.

~~The following table summarizes our EBIT by operating segment for the nine months ended June 30, 2017 and 2016.~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Analysis of Consolidated Results

Nine Months Ended June 30, Increase/
(In millions) 2017 2016 (Decrease)
EBIT:
Regulated utility $ 279.1
$ 243.1
$ 36.0
Retail energy-marketing 42.8
52.1
(9.3 )
Commercial energy systems 27.6
10.3
17.3
Midstream energy services 21.2
17.6
3.6
Other activities (17.9 ) (2.8 ) (15.1 )
Intersegment eliminations (0.6 ) (0.4 ) (0.2 )
Total $ 352.2
$ 319.9
$ 32.3
Interest expense 55.5
38.8
16.7
Income tax expense 106.4
103.6
2.8
Dividends on Washington Gas preferred stock 1.0
1.0
—
Net income applicable to common stock $ 189.3
$ 176.5
$ 12.8
EARNINGS PER AVERAGE COMMON SHARE
Basic $ 3.70
$ 3.52
$ 0.18
Diluted $ 3.68
$ 3.50
$ 0.18



Composition of Consolidated Interest Expense
	Three Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
Interest on long-term debt	$	21.1		$	16.3		$	4.8
Interest on short-term debt	2.5			1.5			1.0
Loss on interest rate swap	—			7.8			(7.8		)
Other net, including allowance for funds used during construction	(3.0		)	(0.5		)	(2.5		)
Total	$	20.6		$	25.1		$	(4.5	)

The decrease in interest expense is due to a loss in the prior year related to the settlement of interest rate swaps, partially offset by the issuance of additional long-term debt by both WGL and Washington Gas.

Consolidated Income Taxes

WGL's income tax expense for the three months ended June 30, 2018 and 2017 was $37.1 million and $2.1 million, respectively.



Consolidated Income Taxes
	Three Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
Income before income taxes	$	(18.3	)	$	6.2		$	(24.5	)
Income tax expense	37.1			2.1			35.0
Effective income tax rate	(202.7		)%	33.9		%	(236.6		)%
Income tax expense	37.1			2.1			35.0
Less discrete re-measurement impact of Tax Act	44.5			—			44.5
Income tax (benefit) expense excluding discrete re-measurement impact	(7.4		)	2.1			(9.5		)
Effective income tax rate excluding discrete re-measurement impact^(a)	40.4		%	33.9		%	6.5		%

^(a) The effective tax rate for the quarter can be impacted by seasonality reflected in our earnings.

The increase in the effective income tax rate is due to adjustments relating to the enactment of the Tax Act. Refer to Note 7 - Income Taxes of the Notes to Condensed Consolidated Financial Statements for a detailed discussion.

RESULTS OF OPERATIONS—Nine Months Ended June 30, 2018 vs. June 30, 2017

Summary Results

For the nine months ended June 30, 2018, WGL reported net income applicable to common stock of $224.6 million, or $4.35 per share, compared to net income of $189.3 million, or $3.68 per share, reported for the nine months ended June 30, 2017. The income tax expense for the nine months ended June 30, 2018 includes a $15.8 million benefit resulting from the re-measurement of accumulated deferred income taxes in connection with the Tax Act. Refer to the "Consolidated Income Taxes" section below for a detailed discussion of the Tax Act.

The following table summarizes our EBIT by operating segment for the nine months ended June 30, 2018 and 2017.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)



Analysis of Consolidated Results
	Nine Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
EBIT:
Regulated utility	$	243.5		$	279.1		$	(35.6	)
Retail energy-marketing	29.6			42.8			(13.2		)
Commercial energy systems	22.5			27.6			(5.1		)
Midstream energy services	23.9			21.2			2.7
Other activities	(9.0		)	(17.9		)	8.9
Intersegment eliminations	(3.3		)	(0.6		)	(2.7		)
Total	$	307.2		$	352.2		$	(45.0	)
Interest expense	48.4			55.5			(7.1		)
Income tax (benefit) expense	33.2			106.4			(73.2		)
Dividends on Washington Gas preferred stock	1.0			1.0			—
Net income applicable to common stock	$	224.6		$	189.3		$	35.3
EARNINGS PER AVERAGE COMMON SHARE
Basic	$	4.37		$	3.70		$	0.67
Diluted	$	4.35		$	3.68		$	0.67

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Regulated Utility Operating Results

The following table summarizes the regulated utility segment’s financial data for the nine months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

														Regulated Utility Financial Data
	Nine Months Ended June 30,				Increase/		Nine Months Ended June 30,				Increase/
(In millions)	2017		2016		(Decrease)		2018		2017		(Decrease)
Utility net revenues⁽¹⁾:
Operating revenues	$	1,012.2	$	934.3	$	77.9	$	1,109.0	$	1,012.2	$	96.8
Less: Cost of gas	279.7		258.6		21.1		386.1		279.7		106.4
Revenue taxes	63.1		63.0		0.1		70.8		63.1		7.7
Total utility net revenues	669.4		612.7		56.7		652.1		669.4		(17.3		)
Operation and maintenance	243.0		236.9		6.1		249.7		243.0		6.7
Depreciation and amortization	97.3		86.3		11.0		102.5		97.3		5.2
General taxes and other assessments	46.9		45.4		1.5		50.8		46.9		3.9
Other expenses—net	3.1		1.0		2.1		5.6		3.1		2.5
EBIT	$	279.1	$	243.1	$	36.0	$	243.5	$	279.1	$	(35.6	)

The ~~comparison~~variance in EBIT ~~primarily~~ reflects the following:

higher customer growth;

new base rates in ~~Virginia and~~ the District of ~~Columbia;~~

~~higher customer growth;~~Columbia and Virginia; and

~~higher~~the effects of colder-than-normal weather in the District of Columbia.

Offsetting these favorable variances were:

lower unrealized margins associated with our asset optimization ~~program.~~program;

lower billed and estimated utility rates associated with the pass-through of future tax savings from the Tax Act, however the decrease is offset by lower income tax expense;

~~Partially offsetting these favorable variances were:~~

~~unfavorable effects of warmer weather in the District of Columbia;~~higher operation and maintenance expenses primarily related to uncollectible accounts and higher system safety and integrity expenses; and

higher depreciation and amortization ~~expense; and~~expenses associated with growth in our utility plant.

~~higher operation and maintenance expenses.~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Utility Net Revenues. The following table provides the key factors contributing to the changes in the utility net revenues of the regulated utility segment between the nine months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

							Composition of Changes in Utility Net Revenues
(In millions)	Increase/ (Decrease)			Increase/ (Decrease)
Customer growth	$	6.1		$	10.0
Estimated effects of weather and consumption patterns	(2.1		)	8.6
Impact of rate case	27.2
Accelerated pipe replacement programs	(2.6		)
Impact of rate cases				14.7
Impact of lower tax rates per Tax Act				(25.1		)
Asset optimization:
Realized margins	0.4			(3.3		)
Unrealized mark-to-market valuations	31.8			(32.8		)
Late fees				6.7
Other	(4.1		)	3.9
Total	$	56.7		$	(17.3	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Commercial Energy Systems~~



Commercial Energy Systems Segment Financial Information
	Nine Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
Operating revenues	$	57.8		$	61.5		$	(3.7	)
Operating expenses:
Cost of sales	13.7			24.5			(10.8		)
Operations	21.5			18.0			3.5
Depreciation and amortization	18.7			15.2			3.5
General taxes and other assessments	0.7			0.3			0.4
Operating expenses	$	54.6		$	58.0		$	(3.4	)
Equity earnings	—			7.2			(7.2		)
Other income	2.5			4.4			(1.9		)
Less: Non-controlling interest	(16.8		)	(12.5		)	(4.3		)
EBIT	$	22.5		$	27.6		$	(5.1	)
EBIT by division:
Energy efficiency	$	(1.8	)	$	(0.9	)	$	(0.9	)
Commercial distributed generation	4.3			10.1			(5.8		)
Investment distributed generation	20.0			18.4			1.6
Total	$	22.5		$	27.6		$	(5.1	)

The ~~table below represents the financial results of the commercial energy systems segment for the nine months ended June 30, 2017 and 2016.~~

Commercial Energy Systems Segment Financial Information

Nine Months Ended June 30, Increase/
(In millions) 2017 2016 (Decrease)
Operating revenues $ 61.5
$ 57.1
$ 4.4
Operating expenses:

   Cost of sales 24.5
27.9
(3.4 )
   Operations 18.0
17.5
0.5
   Depreciation and amortization 15.2
11.1
4.1
   General taxes and other assessments 0.3
0.3
—
Operating expenses $ 58.0
$ 56.8
$ 1.2
Equity earnings 7.2
5.6
1.6
Other income 4.4
4.4
—
Less: Non-controlling interest (12.5 ) —
(12.5 )
EBIT $ 27.6
$ 10.3
$ 17.3
EBIT by division:
   Energy-efficiency contracting $ (0.9 ) $ 1.7
$ (2.6 )
   Commercial distributed generation 10.1
6.5
3.6
   Investments in distributed generation 18.4
2.1
16.3
Total $ 27.6
$ 10.3
$ 17.3

~~The increase~~decrease in EBIT ~~primarily~~ reflects~~the growth in~~ lower earnings from our commercial distributed generation assets in service, including increased solar renewable energy credit sales and higher earnings from alternative energy investments, including tax equity ventures as well as lower expenses this year compared to the prior year due to a $3.0 million dollar impairment recorded in the prior year. These improvements were partially offset by~~lower revenues from the energy-efficiency contracting business and higher expenses related to business development costs.~~business.

Additionally, not reflected in EBIT is the amortization of investment tax credits related to our distributed generation assets which were $5.0 million and ~~$3.9~~$5.0 million for the nine months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Midstream Energy Services

The table below represents the financial results of the midstream energy services segment for the nine months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

																Midstream Energy Services Segment Financial Information
	Nine Months Ended June 30,				Increase/			Nine Months Ended June 30,					Increase/
(In millions)	2017		2016		(Decrease)			2018			2017		(Decrease)
Operating revenues ^(a)	$	18.2	$	16.2	$	2.0		$	40.7		$	18.2	$	22.5
Operating expenses:
Operations	4.7		3.4		1.3
Depreciation and amortization	—		0.1		(0.1		)
General taxes and other assessments	0.2		0.2		—
Operating expenses	$	4.9	$	3.7	$	1.2		2.4			4.9		(2.5		)
Equity earnings	7.9		5.0		2.9			(14.4		)	7.9		(22.3		)
Other Income	—		0.1		(0.1		)
EBIT	$	21.2	$	17.6	$	3.6		$	23.9		$	21.2	$	2.7

^(a) The trading margins of Midstream Energy Services, including unrealized gains and losses on derivative instruments, are netted within operating revenues.

~~The increase in EBIT~~Improved results for the nine months ended June 30, 2018 over the same period of the prior fiscal year primarily ~~reflects~~reflect higher margins on both our transportation and storage strategies, partially offset by lower mark-to-market valuations associated with long-term transportation strategies and ~~realized margins~~a $34.0 million impairment related to ~~storage inventory and~~our investment in Constitution. Also contributing to the ~~associated economic hedging transactions and higher realized~~improved results was the impact of our contract with GAIL which recently came into effect, which provides for the sale of up to 430,000 dth/day of natural gas per day for a term of 20 years.

Realized margins on our transportation strategies partially offset by lower valuations on our derivative contracts associated with our long-term transportation strategies. Additionally, the increase in EBIT reflects higher income related to our pipeline investments.

~~Although realized margins on our transportation strategies have increased year-over-year, both years~~ reflect losses associated with certain gas purchases from Antero ~~Resources Corporation (Antero)~~ beginning in January 2016. The index price used to invoice these purchases had been the subject of an arbitration ~~proceeding;~~proceeding: however, in February 2017, the arbitral tribunal ruled in favor of Antero. Losses realized during the nine months ended June 30, 2018 and 2017 ~~and 2016~~ were ~~$7.7~~$4.6 million and ~~$8.8~~$7.7 million, respectively, associated with this purchase contract. Accumulated losses from the inception of the contract are ~~$23.0~~$29.6 million. In March 2017, we filed suit in state court in Colorado related to the delivery point to which the gas is being delivered by Antero. ~~Antero moved~~The state court granted Antero's motion to dismiss the case and the case is currently on appeal.

Separately, Antero has initiated suit ~~and its motion to dismiss has been denied.~~against Washington Gas and WGL Midstream ~~have filed a motion for partial summary judgment, seeking the Court to declare~~claiming that Antero is in breach of its obligation to deliver gas at the TCO Pool, leaving for trial only the issue of damages. Antero has opposed the motion, and the motion is pending before the court for ruling. Antero has filed a counterclaim alleging breach of contract. Antero alleges that Washington Gas and WGL Midstreamthey have failed to purchase specified daily quantities of gas and ~~refused~~seeking alleged cover damages exceeding $100 million as of April 4, 2018, according to ~~pay invoiced cover damages. Antero seeks unspecified damages in an amount to be proved at trial.~~Antero's complaint. Washington Gas and WGL Midstream ~~have filed an answer opposing this counterclaim.~~oppose both the validity and amount of Antero's claim. WGL believes the probability that Antero could succeed in collecting these penalties is remote and therefore, no accrual was made as of June 30, 2018.

In December 2017, WGL Midstream amended its purchase contract with Antero and, effective February 1, 2018, was no longer obligated to purchase gas at the delivery point that is the subject of these disputes. Refer to Note 13 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for further discussion of this matter.

Other Non-Utility Activities

Transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and included as part of non-utility operations. Our other non-utility activities reflect EBIT of ~~$(17.9)~~$(9.0) million and ~~$(2.8)~~$(17.9) million for the nine months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The ~~decrease~~increase in EBIT primarily relates to ~~external~~lower costs associated with the ~~planned~~ merger with AltaGas.

Intersegment Eliminations

Intersegment eliminations include any mark-to-market valuations associated with trading activities between WGL Midstream and WGL Energy Services, and timing differences between Commercial Energy Systems’ recognition of revenue for the sale of REC's to Retail Energy-Marketing and Retail Energy-Marketing’s recognition of the associated expense. Our intersegment eliminations reflect EBIT of $(3.3) million and $(0.6) million for the nine months ended June 30, 2018 and 2017, respectively. This variance primarily relates to timing differences between Commercial Energy

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Systems’ recognition of revenue for the sale of RECs to Retail Energy-Marketing and Retail Energy-Marketing’s recognition of the associated expense.

For further discussion of our financial performance by operating segment, refer to Note 10 - Operating Segment Reporting of the Notes to Condensed Consolidated Financial Statements.

Consolidated Interest Expense

The following table shows the components of ~~WGL’s~~WGL's consolidated interest expense for the nine months ended June 30, ~~2017~~2018 and ~~2016.~~ 2017.



Composition of Consolidated Interest Expense
	Nine Months Ended June 30,						Increase/
(In millions)	2018			2017			(Decrease)
Interest on long-term debt	$	60.1		$	48.1		$	12.0
Interest on short-term debt	7.1			3.7			3.4
(Gain) loss on interest rate swap	(12.8		)	5.2			(18.0		)
Other net, including capitalized interest	(6.0		)	(1.5		)	(4.5		)
Total	$	48.4		$	55.5		$	(7.1	)

The ~~increase~~decrease in interest expense is due to the gain on ~~long-term debt primarily reflects~~interest rate swap settlements partially offset by higher interest expense due to the issuance of additional ~~notes~~long-term debt by both WGL and Washington Gas and term loans by WGL. In addition, we recognized unrealized losses of $5.2 million on forward starting interest rate swaps. We had elected hedge accounting for these swaps; however, due to certain covenants in the Merger Agreement with AltaGas, it is no longer probable that the 30-year debt issuance that the swaps were originally intended to hedge will occur and, therefore, these hedges were de-designated in January 2017. We do believe, however, that financing will continue to be required. The increase in other interest is primarily due to increased interest rates associated with our short-term borrowings.

Composition of Consolidated Interest Expense

Nine Months Ended June 30, Increase/
(In millions) 2017 2016 (Decrease)
Interest on long-term debt $ 48.1
$ 38.4
$ 9.7
Interest on derivative hedge swap 5.2
0.4
4.8
Other Interest 2.5
0.4
2.1
Allowance for funds used during construction and other- net (0.3 ) (0.4 ) 0.1
Total $ 55.5
$ 38.8
$ 16.7
Gas.

Consolidated Income Taxes

The following table shows ~~WGL’s consolidated~~WGL's income tax expense and effective income tax rate for the nine months ended June 30, ~~2017~~2018 and ~~2016.~~2017.

																	Consolidated Income Taxes
	Nine Months Ended June 30,						Increase/			Nine Months Ended June 30,				Increase/
(In millions)	2017			2016			(Decrease)			2018		2017		(Decrease)
Income before income taxes	$	284.1		$	281.1		$	3.0		242.0		284.1		$	(42.1	)
Income tax (benefit) expense										33.2		106.4		(73.2		)
Effective income tax rate										13.7	%	37.5	%	(23.8		)%
Income tax expense	106.4			103.6			2.8			33.2		106.4		(73.2		)
Effective income tax rate	37.5		%	36.9		%	0.6		%
Less Discrete re-measurement impact of Tax Act										(15.8	)	—		(15.8		)
Income tax expense excluding discrete re-measurement impact										49.0		106.4		(57.4		)
Effective income tax rate excluding discrete re-measurement impact										20.2	%	37.5	%	(17.3		)%

~~Virginia Rate Case.~~ On June 30, 2016, Washington Gas filed an application with the SCC of VA to increase its base rates for natural gas service by $45.6 million, which includes $22.3 million of revenue associated with natural gas pipeline replacement initiatives previously approved by the Commission and paid by customers through a monthly rider. Additionally, the proposed rate increase includes provisions designed to deliver the benefits of natural gas to more customers that include: ~~(i)~~ ~~facilitating conversion to natural gas in locations already served by Washington Gas;~~ ~~(ii)~~ ~~expanding the natural gas system to high-growth communities in Virginia and~~ ~~(iii)~~ ~~research and development that we believe will enable innovations to enhance service for our customers.~~

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Interim rates went into effect, subject to refund, in the December 2016 billing cycle. Intervenors filed testimony on~~

Application for Approval of Reduction of Distribution Rates. On January ~~31, 2017, Staff of the SCC of VA filed testimony on February 28, 2017, and~~12, 2018, Washington Gas filed ~~its rebuttal testimony on March 28, 2017. On April 17, 2017,~~an application with the PSC of MD for approval of reduction of distribution rates to reflect the Tax Act. Washington Gas sought to change current distribution service rates for all classes of customers served in Maryland, effective for meter readings on and after January 29, 2018. On January 31, 2018, the PSC of MD approved the application effective for bills rendered on or after February 1, 2018. Refer to Note 7—Income Taxes of theNotes to Condensed Consolidated Financial Statements for a discussion of regulatory liabilities we have established related to tax reform.

Virginia Jurisdiction

Application for Approval of Reduction of Distribution Rates. On January 12, 2018, Washington Gas filed an application with the SCC of VA ~~a unanimous settlement as~~for approval of reduction of distribution rates to ~~a specific annual revenue increase, but not as~~reflect the Tax Act. Washington Gas seeks to ~~a specific return~~change current distribution service rates for all classes of customers served in Virginia, effective for meter readings on ~~equity, specific accounting adjustments, or specific ratemaking methodologies, except as otherwise set forth therein. The Stipulation sets forth,~~and after January 29, 2018 solely for ~~purposes of settlement, a base rate increase of $34 million ($14.1 million net of SAVE Plan costs which are currently recovered through monthly surcharges). For purposes~~the effect of the settlement, the mid-point of the return on equity range of 9.0-10.0% will be used in any application or filing, other than a change in base rates, effective December 1, 2016. On June 30, 2017, the Chief Hearing Examiner issued a report recommending that the Commission approve the Stipulation. The Stipulation is pending review and approval by the SCC of VA. Refunds to customers, which have been accrued by Washington Gas at June 30, 2017, will be made related to the interim billings based onTax Act. In addition, the SCC of VA ~~approval of the Stipulation and rates.~~

~~Affiliate Transactions.~~ ~~On December 30, 2016, Washington Gas~~Staff filed an application for approval to permanently release its contracts with Transcontinental Gas Pipe Line Company LLC’ (“Transco”) for MarketLink and Leidy East interstate pipeline transportation capacity to WGL Midstream, Inc. Washington Gas has not used the MarketLink and Leidy East interstate pipeline transportation capacity to provide gas utility service since 2013 and will not use these resources for system supply in the future. On March 29, 2017,a motion requesting the SCC of VA ~~issued~~to require Washington Gas to file all of the schedules required for a rate case and treat this filing as a general rate case rather than a single issue proceeding. On February 7, 2018, the SCC of VA Staff filed a motion requesting the SCC of VA to, among other things, permit Washington Gas to place into effect, on an ~~order approving~~interim basis, its revised rate schedules proposed in the ~~transfer of MarketLink~~rate application. On February 21, 2018, Washington Gas filed its response to the Staff’s motion which included, among other things, a proposal to file a new general rate case in July 2018 and ~~Leidy East interstate pipeline transportation capacity~~ to ~~WGL Midstream.~~dismiss the current rate application which will be addressed in the proposed general rate case filing. On March ~~29, 2017,~~15, 2018, the SCC of VA issued an Order ~~approving~~denying Staff’s motions and granting Washington Gas’ request to file a new general rate case in July 2018 and to dismiss the ~~transfer~~current rate application. Refer to Note 7—Income Taxes for a discussion of ~~the MarketLink and Leidy East capacity contracts~~regulatory liabilities we have established related to ~~WGL Midstream, Inc. The transfer of the contracts occurred on May 1, 2017.~~tax reform.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following issues related to our market risks are included under Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and are incorporated by reference into this discussion.

Price Risk Related to the Regulated Utility Segment

Price Risk Related to the Non-Utility Segments

Value-At-Risk

Weather Risk

Interest-Rate Risk

ITEM 4. CONTROLS AND PROCEDURES—WGL Holdings, Inc.

Senior management, including the ~~Chairman~~President and Chief Executive Officer and the ~~Senior~~Executive Vice President and Chief Financial Officer of WGL, evaluated the effectiveness of WGL’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, ~~2017.~~2018. Based on this evaluation process, the ~~Chairman~~President and Chief Executive Officer and the ~~Senior~~Executive Vice President and Chief Financial Officer have concluded that disclosure controls and procedures of WGL were effective as of June 30, ~~2017.~~2018. There have been no changes in the internal control over financial reporting of WGL during the quarter ended June 30, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of WGL.

ITEM 4. CONTROLS AND PROCEDURES—Washington Gas Light Company

Senior management, including the ~~Chairman~~President and Chief Executive Officer and the ~~Senior~~Executive Vice President and Chief Financial Officer of Washington Gas, evaluated the effectiveness of Washington Gas' disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, ~~2017.~~2018. Based on this evaluation process, the ~~Chairman~~President and Chief Executive Officer and the ~~Senior~~Executive Vice President and Chief Financial Officer have concluded that disclosure controls and procedures of Washington Gas were effective as of June 30, ~~2017.~~2018. There have been no changes in the internal control over financial reporting of Washington Gas during the quarter ended June 30, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Washington Gas.

WGL Holdings, Inc.

Washington Gas Light Company

Part II—Other Information

ITEM 1. LEGAL PROCEEDINGS

The nature of our business ordinarily results in periodic regulatory proceedings before various state and federal authorities. For information regarding pending federal and state regulatory matters, see Note 13—Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements.

Silver Spring, Maryland Incident

WGL Holdings, Inc.

Washington Gas Light Company

Part II—Other Information

ITEM 1A. RISK FACTORS

RISKS RELATING TO WGL AND ALL OF ITS SUBSIDIARIES

~~Risks Relating to the Proposed Merger with AltaGas~~

The ~~proposed~~ merger with AltaGas ~~is subject~~may not achieve its anticipated results, and WGL may be unable to ~~shareholder and regulatory approval.~~integrate the operations of AltaGas in the manner expected.

~~On January 25, 2017,~~ WGL and AltaGas entered into a Merger Agreement for WGL to be combined with AltaGas in an all cash transaction valued at approximately $6.4 billion. Consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including ~~(i)~~ ~~the approval of the Merger by the holders of more than two-thirds of the outstanding shares of WGL common stock, which was obtained on May 10, 2017,~~ ~~(ii)~~ the receipt of regulatory approvals required to consummate the Merger, including approval from the Public Service Commission of the District of Columbia, the Public Service Commission of Maryland, the State Corporation Commission of Virginia, the Federal Energy Regulatory Commission and the CFIUS, ~~(iii)~~ ~~the expiration or termination of the applicable waiting period under HSR, which occurred on July 17, 2017,~~ ~~(iv)~~ ~~the absence of any order of any governmental authority and the absence of the enactment of any law, in each case that enjoins, prohibits or makes illegal the consummation of the Merger, and~~ ~~(v)~~ other customary closing conditions, including (a) the accuracy of each party’s representations and warranties (subject to customary materiality qualifiers), and (b) each party’s compliance in all material respects with its obligations and covenants contained in the Merger Agreement. In addition, the obligations of AltaGas and its merger subsidiary to consummate the Merger are subject to (a) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) and (b) the required regulatory approvals and any law not imposing or requiring any undertakings, terms, conditions, obligations, commitments, sanctions or remedial actions that constitute a Burdensome Condition (as defined in the Merger Agreement).

WGL may not receive the remaining required statutory approvals and other clearances for the Merger, or they may not be received in a timely manner. If such approvals are received, they may impose terms, conditions or restrictions ~~(i)~~ ~~that cause a failure of the closing conditions set forth in~~ the Merger Agreement or ~~(ii)~~ ~~could have a detrimental impact on~~with the ~~combined company following completion~~expectation that the merger will result in various benefits, including, among other things, cost savings and operating efficiencies. Achieving the anticipated benefits of the Merger. A substantial delay in obtaining the required authorizations, approvals or consents or the imposition of unfavorable terms, conditions or restrictions could prevent the completion of the Merger. Even though the waiting period under HSR has expired, government authorities could seek to block or challenge the Merger as they deem necessary or desirable in the public interest.

~~Failure to complete the Merger could adversely affect WGL’s stock price and future business operations and financial results.~~

~~If WGL~~merger is unable to consummate the Merger, holders of WGL common stock will not receive any payment for their shares pursuant to the Merger Agreement. WGL’s ongoing business may be adversely affected and would be subject to a number of ~~risks,~~uncertainties, including whether the ~~following:~~businesses of WGL and AltaGas can be integrated in an efficient, effective and timely manner. The combination of two independent businesses is complex, costly and time-consuming and may divert significant management attention and resources to combining WGL’s and AltaGas’ business practices and operations, which could otherwise have been devoted to WGL’s business opportunities. This process may disrupt WGL’s and AltaGas’ respective businesses.

In addition, it is possible that the integration process could take longer than anticipated and could result in the disruption of WGL’s businesses, processes and systems or inconsistencies in standards, controls, procedures, practices and policies, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger as and when expected. The overall combination of WGL’s and AltaGas’ businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses and loss of customer and other business relationships. Failure to achieve these anticipated benefits or the incurrence of unanticipated expenses and liabilities result could materially adversely affect WGL’s business, financial condition, operating results and prospects, as well as that of the combined company.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

WGL ~~would~~and AltaGas are dependent on the experience and industry knowledge of their officers and other key employees to execute their respective business plans. The combined company’s success will depend in part upon its ability to retain key management personnel and other key employees of WGL and AltaGas. Current and prospective employees of WGL and AltaGas may experience uncertainty about their future roles with the combined company, which may materially adversely affect the ability of each of WGL and AltaGas to attract and retain key personnel going forward. WGL may also have ~~paid significant~~difficulty addressing possible differences in corporate cultures and management philosophies. Accordingly, no assurance can be given that the combined company will be able to retain key management personnel and other key employees of WGL and AltaGas, which could materially adversely affect WGL’s business, financial condition, operating results and prospects.

WGL may incur unexpected transaction fees and merger-related costs in connection with the merger.

WGL expects to incur a number of non-recurring expenses associated with consummating the merger, as well as expenses related to combining the operations of the two companies. WGL may incur additional unanticipated costs in the integration of the businesses of WGL and AltaGas. Although WGL expects that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the incremental transaction and merger-related costs over time, the combined company may not achieve this net benefit in the near term, or at all.

WGL may encounter unexpected difficulties or costs in meeting commitments it made under various orders and agreements associated with regulatory approvals for the merger.

As a result of the process to obtain regulatory approvals required for the merger, WGL is committed to various programs, contributions and investments in several agreements and regulatory approval orders. It is possible that WGL may encounter delays, unexpected difficulties or additional costs in meeting these commitments in compliance with the terms of the relevant agreements and orders. Failure to fulfill the commitments in accordance with their terms could result in increased costs or result in penalties or fines that could materially adversely affect WGL’s business, financial condition, operating results and prospects.

WGL and AltaGas may become targets of securities class action suits and derivative suits, which could result in substantial costs and ~~may~~divert management attention and resources.

Securities class action suits and derivative suits are often brought against companies who have entered into mergers and acquisition transactions. There can be no assurance that WGL or AltaGas will not be targets of such suits in ~~certain circumstances be obligated~~the future, and no guarantee that WGL or AltaGas can successfully defend against any such actions. Defending against these claims, even if meritless, could result in substantial costs to ~~pay a termination fee to~~WGL and AltaGas ~~of $136 million;~~

and could divert the attention of ~~management may have been diverted~~management.

A downgrade in WGL’s or AltaGas’ credit ratings could negatively affect WGL’s cost of and ability to ~~the Merger rather than to operations and the pursuit of other opportunities;~~

though the merger terms contemplate management and employees remaining to operate WGL, there is the chance of the potential loss of key personnel, as personnel may feel uncertain about their future with the combined company;

WGL will have been subject to certain restrictions on the conduct of business, which may prevent the Company from making certain acquisitions or dispositions or pursuing other business opportunities; and

~~the trading price of WGL’s stock may decline if the market believes the Merger may not be completed.~~access capital.

Failure to complete the Merger may result in negative publicity, additional litigation against WGL or its directors and officers, and a negative impression of WGL in the investment community. The occurrence of these events, individually or in the aggregate, could have a material adverse effect on the results of operations or the price of WGL’s common stock.

~~The business of WGL and Washington Gas will be impacted by the terms and conditions of the Merger Agreement.~~

The Merger Agreement restricts WGL, without AltaGas’s consent (which will not be unreasonably withheld), from undertaking certain specified actions until the Merger occurs or the Merger Agreement terminates. These restrictions may prevent WGL from pursuing otherwise attractive business opportunities and making other changes to its business prior to completion of the Merger or termination of the Merger Agreement. For example, the Merger Agreement prohibits WGL from raising common

WGL Holdings, Inc.

Washington Gas Light Company

Part II—Other Information

~~equity capital. Given that Washington Gas is solely dependent~~WGL’s ability to obtain adequate and cost-effective financing depends in part on ~~WGL to raise new common equity capital and to contribute that common equity to Washington Gas, WGL’s inability to raise common equity~~its credit ratings. A negative change in its ratings outlook or any downgrade in its current investment-grade credit ratings by the rating agencies, particularly below investment grade, could adversely affect ~~both WGL's~~WGL’s costs of borrowing and/or access to sources of liquidity and ~~Washington Gas’~~capital. Further, a negative change in AltaGas’ ratings outlook or any downgrade in its credit ratings could negatively impact WGL’s ratings outlook or downgrade its credit ratings. Such downgrades could limit WGL’s access to the credit markets and ~~coverage ratios.~~

~~WGL will incur significant~~increase the costs ~~associated with~~of borrowing under available credit lines. Should WGL’s credit ratings be downgraded, the ~~Merger.~~

interest rate on its borrowings under its existing credit facilities and commercial paper program, as well as on any future public or private debt issuances, would increase. An increase in borrowing costs without the ability to recover these higher costs in the rates charged to WGL’s customers could adversely affect earnings or cash flows by limiting WGL’s ability to earn its allowed rate of return.

WGL ~~expects~~may be unable to ~~incur~~access capital or the cost of capital may significantly increase.

WGL’s ability to obtain adequate and cost-effective financing is dependent upon the liquidity of the financial markets, in addition to its credit ratings. Disruptions in the capital and credit markets or waning investor sentiment could adversely affect WGL’s ability to access short-term and long-term capital. WGL’s access to funds under its commercial paper program is dependent on investor demand for its commercial paper. Disruptions and volatility in the global credit markets could limit the demand for WGL’s commercial paper or result in the need to offer higher interest rates to investors, which would result in higher expense and could adversely impact liquidity.

As a subsidiary of AltaGas, WGL also may become a party to AltaGas’ existing debt arrangements or rely on access to short-term intercompany borrowings. The inability to access adequate capital or the increase in cost of capital may require WGL to conserve cash, prevent or delay WGL from making capital expenditures, require WGL to reduce or eliminate distributions to AltaGas or other discretionary uses of cash or could negatively affect its future growth or earnings. A significant reduction in WGL’s liquidity could cause a negative change in its ratings outlook or even a reduction in its credit ratings. This could in turn further limit WGL’s access to credit markets and increase its costs ~~associated with the Merger for financial advisory services, legal services, re-evaluation~~ of ~~share-based compensation~~borrowing.

As an indirect, wholly-owned subsidiary of AltaGas, WGL is affected by AltaGas’ strategic decisions and ~~acceleration~~operating performance.

As an indirect, wholly-owned subsidiary of ~~executive compensation. Some of these costs will be incurred even if the Merger is not completed.~~

AltaGas, WGL’s business ~~will~~and operating performance can be ~~subject~~affected by a wide range of strategic decisions that AltaGas may make from time to ~~uncertainties while~~time. Significant changes in AltaGas’ strategy, its relationship with WGL, as well as material adverse changes in the ~~Merger is pending.~~

~~Uncertainty about the effect~~performance of ~~the Merger on employees, suppliers and customers may~~AltaGas, could have ana material adverse effect on ~~WGL. Although WGL intends~~WGL’s business, financial condition, operating results and prospects.

Changes to ~~take steps~~government fiscal and trade policies and state/local renewable energy mandates could adversely affect WGL’s strategic decisions and operating performance.

Any changes in the US trade policy could trigger retaliatory actions by affected companies resulting in increased costs for goods used in our normal course of business, such as solar panels and steel pipe. Additionally, state and local initiatives adopting or increasing renewable portfolio standards could result in lower demand of natural gas due to ~~reduce any adverse effects, these uncertainties may impair WGL’s abilities to attract, retain and motivate employees until the Merger is completed and for a period of time thereafter.~~mandatory or voluntary efforts.

~~Potential future actions against WGL and its directors and officers challenging the Merger may prevent the Merger from being completed within the anticipated time frame.~~

WGL and/or its directors and officers may potentially be named as defendants in class action lawsuits filed on behalf of public shareholders challenging the Merger and potentially seeking to enjoin the defendants from consummating the Merger on the agreed-upon terms.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~WGL Holdings, Inc.~~

~~Washington Gas Light Company~~

~~Part II—Other Information~~

ITEM 6. EXHIBITS

Exhibits:

WGL Holdings, Inc.

Washington Gas Light Company

Part II—Other Information



Schedule/ Exhibit		Description
(a)(3)		Exhibits

		Exhibits ~~Incorporated by Reference:~~Filed Herewith:

~~10.1~~ 3.1		~~Second~~Bylaws of WGL Holdings, Inc., as amended effective July 6, 2018 (incorporated by reference to Exhibit 3.1 to WGL Holdings, Inc.’s Form 8-K filed July 12, 2018).

3.2		Bylaws of Washington Gas Light Company, as amended effective July 6, 2018 (incorporated by reference to Exhibit 3.2 to Washington Gas Light Company’s Form 8-K filed July 12, 2018).

10.1		Third Amendment to Credit Agreement, ~~and Commitment Increase,~~ dated ~~as of June 23, 2017, among~~May 16, 2018, between WGL Holdings, Inc., the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent for the ~~Lenders~~lenders (incorporated by reference to Exhibit 10.1 to WGL Holdings, Inc. ~~Current Report on~~’s Form 8-K filed ~~June 29, 2017)~~May 22, 2018).

10.2		~~Second~~Third Amendment to Credit Agreement, dated ~~as of June 23, 2017, among~~May 16, 2018, between Washington Gas Light Company, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent for the ~~Lenders~~lenders (incorporated by reference to Exhibit 10.2 to Washington Gas Light ~~Company Current Report on~~Company’s Form 8-K filed ~~June 29, 2017)~~May 22, 2018).

		Exhibits Filed Herewith:

31.1		Certification of ~~Terry D. McCallister,~~Adrian P. Chapman, the ~~Chairman~~President and Chief Executive Officer of WGL Holdings, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Vincent L. Ammann, Jr., the ~~Senior~~Executive Vice President and Chief Financial Officer of WGL Holdings, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3		Certification of ~~Terry D. McCallister,~~Adrian P. Chapman, the ~~Chairman~~President and Chief Executive Officer of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4		Certification of Vincent L. Ammann, Jr., the ~~Senior~~Executive Vice President and Chief Financial Officer of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of ~~Terry D. McCallister,~~Adrian P. Chapman, the ~~Chairman~~President and Chief Executive Officer of the Registrants, and Vincent L. Ammann, Jr., the ~~Senior~~Executive Vice President and Chief Financial Officer of the Registrants, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Schema Document

101.CAL		XBRL Calculation Linkbase Document

101.LAB		XBRL Labels Linkbase Document

101.PRE		XBRL Presentation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

WGL Holdings, Inc.

Washington Gas Light Company

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.



	WGL HOLDINGS, INC. and WASHINGTON GAS LIGHT COMPANY (Co-registrants)

Date: August ~~3, 2017~~1, 2018	/s/ William R. Ford
	William R. Ford
	Vice President and Chief Accounting Officer (signing on behalf of the Registrants and as Principal Accounting Officer of each of the Registrants)

9098



Commission File Number	Exact name of registrant as specified in its charter; address of principal executive offices; registrant's telephone number, including area code	State or Other Jurisdiction of Incorporation	I.R.S. Employer Identification No.
~~1-16163~~ 0-55968	WGL Holdings, Inc. ~~101 Constitution~~1000 Maine Ave., ~~N.W.~~S.W. Washington, D.C. ~~20080~~20024 (703) 750-2000	Virginia	52-2210912
0-49807	Washington Gas Light Company ~~101 Constitution~~1000 Maine Ave., ~~N.W.~~S.W. Washington, D.C. ~~20080~~20024 (703) 750-4440	District of Columbia and Virginia	53-0162882



Large accelerated filer þ¨	Accelerated filer ¨	Non-accelerated filer ¨þ	Smaller reporting company ¨
	(Do not check if a smaller reporting company)
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨



Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer þ	Smaller reporting company ¨
	(Do not check if a smaller reporting company)
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨



PART I. Financial Information

Item 1. Financial Statements (Unaudited)
WGL Holdings, Inc.
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Income	5
Condensed Consolidated Statements of Comprehensive Income	6
Condensed Consolidated Statements of Cash Flows	7

Washington Gas Light Company
Condensed Balance Sheets	8
Condensed Statements of Income	9
Condensed Statements of Comprehensive Income	10
Condensed Statements of Cash Flows	11

Notes to Condensed Consolidated Financial Statements
WGL Holdings, Inc. and Washington Gas Light Company — Combined	12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4754
WGL Holdings, Inc.	5156
Washington Gas Light Company	8087

Item 3. Quantitative and Qualitative Disclosures About Market Risk	8593

Item 4. Controls and Procedures	8593

PART II. Other Information

Item 1. Legal Proceedings	8694

Item 1A. Risk Factors	8795

Item 4. Mine Safety Disclosures	8896

Item 5. Other Information	96

Item 6. Exhibits	8996

Signature	9098


(In thousands)	June 30, 2017			September 30, 2016			June 30, 2018			September 30, 2017
ASSETS
Property, Plant and Equipment
At original cost	$	5,856,655		$	5,542,916		$	6,320,171		$	6,143,841
Accumulated depreciation and amortization	(1,509,869		)	(1,415,679		)	(1,570,890		)	(1,513,790		)
Net property, plant and equipment	4,346,786			4,127,237			4,749,281			4,630,051
Current Assets
Cash and cash equivalents	9,570			5,573			33,064			8,524
Receivables
Accounts receivable	412,590			329,989			432,278			398,149
Gas costs and other regulatory assets	34,258			15,294			3,439			21,705
Unbilled revenues	156,041			173,076			144,469			165,483
Allowance for doubtful accounts	(28,876		)	(27,339		)	(36,257		)	(32,025		)
Net receivables	574,013			491,020			543,929			553,312
Materials and supplies—principally at average cost	17,741			18,414			18,513			20,172
Storage gas	210,531			207,132			124,767			243,984
Prepaid taxes	22,088			33,397			36,260			31,549
Other prepayments	77,135			42,626			62,258			86,465
Derivatives	23,842			18,510			12,066			15,327
Other	27,375			26,802			13,660			26,556
Total current assets	962,295			843,474			844,517			985,889
Deferred Charges and Other Assets
Regulatory assets
Gas costs	96,964			179,856			54,391			90,136
Pension and other post-retirement benefits	200,648			223,242			121,678			139,499
Other	101,910			98,592			116,650			104,596
Prepaid post-retirement benefits	191,491			180,686			240,577			231,577
Derivatives	36,219			55,020			19,643			38,389
Investments in direct financing leases, capital leases	—			29,780
Investments in unconsolidated affiliates	425,304			303,491			677,404			394,201
Other	11,876			8,072			14,144			11,671
Total deferred charges and other assets	1,064,412			1,078,739			1,244,487			1,010,069
Total Assets	$	6,373,493		$	6,049,450		$	6,838,285		$	6,626,009
CAPITALIZATION AND LIABILITIES
Capitalization
WGL Holdings common shareholders’ equity	$	1,521,283		$	1,375,561		$	1,648,553		$	1,502,690
Non-controlling interest	5,234			409			6,889			6,851
Washington Gas Light Company preferred stock	28,173			28,173			28,173			28,173
Total equity	1,554,690			1,404,143			1,683,615			1,537,714
Long-term debt	1,235,623			1,435,045			1,879,316			1,430,861
Total capitalization	2,790,313			2,839,188			3,562,931			2,968,575
Current Liabilities
Current maturities of long-term debt	250,000			—			100,000			250,000
Notes payable and project financing	538,854			331,385			429,520			559,844
Accounts payable and other accrued liabilities	377,133			405,351			387,326			423,824
Wages payable	21,160			17,908			24,144			18,096
Accrued interest	15,030			7,645			18,353			7,806
Dividends declared	26,452			25,283			25,620			26,452
Customer deposits and advance payments	61,476			86,384			64,516			65,841
Gas costs and other regulatory liabilities	20,652			12,973			35,648			22,814
Accrued taxes	20,659			15,672			28,410			17,657
Derivatives	45,898			82,334			20,142			43,990
Other	56,579			41,991			42,609			52,664
Total current liabilities	1,433,893			1,026,926			1,176,288			1,488,988
Deferred Credits
Unamortized investment tax credits	175,263			163,493			152,316			155,007
Deferred income taxes	845,109			726,763			444,903			868,067
Accrued pensions and benefits	235,050			228,377			189,521			181,552
Asset retirement obligations	209,612			203,105			306,603			296,810
Regulatory liabilities
Accrued asset removal costs	290,476			310,788			272,355			292,173
Other post-retirement benefits	103,352			113,875			124,072			135,035
Other	7,300			14,450
Excess deferred taxes and other							445,354			9,403
Derivatives	162,941			304,198			114,383			122,607
Other	120,184			118,287			49,559			107,792
Total deferred credits	2,149,287			2,183,336			2,099,066			2,168,446
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities	$	6,373,493		$	6,049,450		$	6,838,285		$	6,626,009



þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended June 30,						Nine Months Ended June 30,
(In thousands, except per share data)	2017			2016		2017			2016		2018			2017			2018			2017
OPERATING REVENUES
Utility	$	198,968		$	181,622	$	992,301		$	912,612	$	195,177		$	198,968		$	1,093,647		$	992,301
Non-utility	275,396			258,965		933,300			977,048		228,288			275,396			868,709			933,300
Total Operating Revenues	474,364			440,587		1,925,601			1,889,660		423,465			474,364			1,962,356			1,925,601
OPERATING EXPENSES
Utility cost of gas	49,881			65,739		259,839			236,819		51,737			49,881			370,767			259,839
Non-utility cost of energy-related sales	233,025			197,880		787,691			832,087		191,198			233,025			703,904			787,691
Operation and maintenance	97,477			97,461		316,455			296,813		107,719			97,477			322,501			316,455
Depreciation and amortization	39,094			33,786		113,487			98,368		40,388			39,094			122,095			113,487
General taxes and other assessments	32,032			32,038		122,964			119,970		35,491			32,032			135,417			122,964
Total Operating Expenses	451,509			426,904		1,600,436			1,584,057		426,533			451,509			1,654,684			1,600,436
OPERATING INCOME	22,855			13,683		325,165			305,603
OPERATING INCOME (LOSS)											(3,068		)	22,855			307,672			325,165
Equity in earnings of unconsolidated affiliates	7,508			4,527		15,117			10,558		7,065			7,508			(14,457		)	15,117
Other income (expenses) — net	884			1,915		(591		)	3,689		(1,663		)	884			(2,834		)	(591		)
Interest expense	25,062			12,998		55,552			38,757		20,593			25,062			48,427			55,552
INCOME BEFORE INCOME TAXES	6,185			7,127		284,139			281,093
INCOME (LOSS) BEFORE INCOME TAXES											(18,259		)	6,185			241,954			284,139
INCOME TAX EXPENSE	2,149			4,772		106,381			103,619		37,068			2,149			33,181			106,381
NET INCOME	$	4,036		$	2,355	$	177,758		$	177,474
NET INCOME (LOSS)											$	(55,327	)	$	4,036		$	208,773		$	177,758
Non-controlling interest	(4,559		)	—		(12,533		)	—		(6,651		)	(4,559		)	(16,801		)	(12,533		)
Dividends on Washington Gas Light Company preferred stock	330			330		990			990		330			330			990			990
NET INCOME APPLICABLE TO COMMON STOCK	$	8,265		$	2,025	$	189,301		$	176,484
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK											$	(49,006	)	$	8,265		$	224,584		$	189,301
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	51,219			50,622		51,200			50,158		51,359			51,219			51,343			51,200
Diluted	51,493			50,905		51,469			50,418		51,359			51,493			51,571			51,469
EARNINGS PER AVERAGE COMMON SHARE
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Basic	$	0.16		$	0.04	$	3.70		$	3.52	$	(0.95	)	$	0.16		$	4.37		$	3.70
Diluted	$	0.16		$	0.04	$	3.68		$	3.50	$	(0.95	)	$	0.16		$	4.35		$	3.68
DIVIDENDS DECLARED PER COMMON SHARE	$	0.5100		$	0.4875	$	1.5075		$	1.4375	$	0.5150		$	0.5100		$	1.5400		$	1.5075



ACCOUNTING STANDARDS ADOPTED IN FISCAL YEAR ~~2017~~2018
Standard	Description	Date of adoption	Effect on the financial statements or other significant matters
ASU 2015-03 and ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost and Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements2018-05, Income Taxes (Topic 740)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118	~~The~~This standard ~~requires an entity~~adds to ~~present debt issuance costs~~the Codification various SEC paragraphs pursuant to the Issuance of Staff Accounting Bulletin (SAB) No. 118. and addresses the specific situation in which the ~~balance sheet as a direct deduction~~initial accounting for certain income tax effects of the ~~debt liability and~~Tax Act will not be complete at the ~~amortization~~time that financial statements were issued covering the reporting period that includes the enactment date of ~~debt issuance costs be presented as interest expense in a manner consistent with its accounting treatment of debt discounts. The standard requires retrospective application.~~ An entity can defer and present debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ~~The new guidance does not change the recognition and measurement guidance for debt issuance costs.~~ December 22, 2017.	October 1, ~~2016~~	Implementation of these standards resulted in a reduction of other deferred assets and long-term debt in our Consolidated Balance Sheets. The amounts that were reclassified at September 30, 2016 for WGL and Washington Gas were $9.3 million and $6.8 million, respectively.
~~ASU 2015-02 and ASU 2016-17, Consolidation (Topic 810): Amendments to the Consolidation Analysis and Interests Held through Related Parties that are Under Common Control~~ 2017	The standards changed the analysis to be performed in determining whether certain types of legal entities should be consolidated, specifically the analysis of limited partnerships and similar entities, fee arrangements and related party relationships. The standard permits prospective or retrospective application for different parts. ~~The consolidation guidance was also amended as to how a reporting entity, that is the single decision maker of a VIE, should treat indirect interests~~Quarterly disclosures were incorporated in the ~~entity held through related parties that are under common control~~Income Tax footnote in the first quarter FY 2018 10-Q filed with the ~~reporting entity, when determining whether it is~~SEC on February 8, 2018, which will be updated each quarter until the ~~primary beneficiary~~end of ~~that VIE.~~the measurement period. See Note 7, Income Taxes, of theNotes to Condensed Consolidated Financial Statements for additional information.
ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting	This standard simplifies several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows.	October 1, ~~2016~~2017	~~The amendments~~ Forfeitures - WGL has elected to continue to estimate forfeitures for its share-based payment awards rather than account for forfeitures when they occur. Income Taxes - On October 1, 2017, WGL and Washington Gas recorded $4.3 million and $4.2 million, respectively, on a modified retrospective basis, as a cumulative effect adjustment to retained earnings. For the ~~consolidation guidance under these standards were applied~~nine months ended June 30, 2018, WGL and ~~did not have an impact~~Washington Gas recorded $3.4 million and $3.2 million, respectively, to current tax expense for excess tax benefits related to performance shares that vested in the period. Cash Flows - WGL and Washington Gas reclassified $3.6 million and $3.5 million, respectively, retroactively on the ~~financial statements.~~statement of cash flows for the nine months ended June 30, 2017 from operating to financing activities related to shares withheld to pay for employee taxes. For the presentation of excess tax benefits in the statement of cash flow as in the operating activities, WGL elected to present the change prospectively. Statutory Tax Withholding - No changes were made.



OTHER NEWLY ISSUED ACCOUNTING STANDARDS
Standard	Description	Required date of adoption	Effect on the financial statements or other significant matters
ASU ~~2016-09, Compensation—Stock Compensation~~2016-18, Statement of Cash Flows (Topic ~~718)~~230): ~~Improvements to Employee Share-Based Payment Accounting~~Restricted Cash (a consensus of the FASB Emerging Issues Task Force)	This standard ~~simplifies several aspects~~requires restricted cash and restricted cash equivalents to be included in the cash and cash equivalents balances when reconciling the statement of cash flows. Presentation of restricted cash balances should be applied retrospectively to the ~~accounting for share-based payment transactions, including accounting for income taxes, forfeitures, and statutory tax withholding requirements.~~statement of cash flows. Early adoption is permitted.	October 1, ~~2017~~2018*	~~We are finalizing our evaluation~~In July 2018, pursuant to the Merger Agreement, WGL contributed $61.8 million to fund multiple rabbi trusts. Amounts in the rabbi trusts deemed to be restricted cash or restricted cash equivalents will be included in the cash and cash equivalents balances in the statement of ~~this standard but do not expect~~cash flows. Early adoption is expected to occur in the ~~adoption~~fourth quarter of ~~this standard to have a material impact on the financial statements.~~ fiscal year 2018.
ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost	This standard requires entities to report the service cost component in the same financial statement line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are to be presented separately from service cost and outside of operating income. In addition, only the service cost component of net benefit cost is eligible for capitalization. Changes to the presentation of service costs and other components of net benefit cost should be applied retrospectively. Changes in capitalization practices should be implemented prospectively.	October 1, 2018 ~~(subject to acceleration if the merger with AltaGas is consummated)~~	We are ~~in the process of~~currently evaluating the ~~impact the adoption~~interaction of this standard with the various regulatory provisions concerning pensions and post-retirement benefit costs. We anticipate that the change in capitalization of retirement benefits will not have a material impact on ~~our~~WGL or Washington Gas' financial statements.
ASU 2016-15, Statement of Cash Flows (Topic 230)—Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)	This update provides guidance on the classification of certain cash receipts and payments in the statement of cash flows.	October 1, ~~2018 (subject to acceleration if the merger with AltaGas is consummated)~~ 2018*	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements. We do not anticipate that adoption of this standard will have a material effect on WGL or Washington Gas' financial statements.



ASU 2014-09, Revenue from Contracts with Customers (Topic 606), including subsequent ASUs clarifying the guidance.	ASU 2014-09 establishes a comprehensive revenue recognition model clarifying the method used to determine the timing and requirements for revenue recognition from contracts with customers. The disclosure requirements under the new standard will enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.	October 1, 2018 ~~(subject to acceleration if the merger with AltaGas is consummated)~~	An implementation team is currently evaluating all revenue streams and reviewing contracts with customers, as well as, related financial statement disclosures to determine the impact the adoption of this standard will have on our financial statements. WGL ~~is also monitoring unresolved industry specific implementation issues that could impact~~has performed assessments and contract reviews of its revenue streams under the ~~timing of~~new revenue recognition ~~for our regulated utility tariff based sales, including~~model. WGL is finalizing its review and developing the ~~evaluation~~new disclosures required by the standard. Currently, WGL does not expect adoption of ~~collectability from customers if~~this standard to have a ~~utility has regulatory mechanisms~~material effect to ~~help assure recovery~~its Consolidated Statements of ~~uncollected accounts from ratepayers and accounting for contributions in aid~~Income or require a cumulative adjustment to retained earnings upon adoption of ~~construction (CIAC).~~the standard. WGL will adopt using the modified retrospective approach.
ASU 2016-01, Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities including subsequent ASUs clarifying the guidance.	The new standard amends certain disclosure requirements associated with the fair value of financial instruments, and significantly revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption is permitted.	October 1, ~~2018 (subject to acceleration if the merger with AltaGas is consummated)~~ 2018*	We have performed a preliminary evaluation and the adoption of this standard will primarily impact the disclosure of our financial instruments in our Fair Value Measurements ~~Footnote.~~Footnote however, we do not expect the impact to be material.
ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	This update provides an option to reclassify the stranded tax effects resulting from the enactment of the Tax Act from accumulated other comprehensive income to retained earnings. The amendment only relates to the reclassification of the income tax effects of the Tax Act and the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. Election to reclassify the income tax effects in accumulated other comprehensive income (AOCI) to retained earnings is voluntary and should be disclosed if AOCI is not adjusted. Early adoption is permitted and can be applied either at the beginning of the period adopted or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax is recognized.	October 1, 2019*	WGL applied the effect of the change in the U.S. federal corporate income tax rate due to the Tax Act in the first quarter of fiscal year 2018. The updates were recorded to the deferred tax asset and liability accounts and the income statement. Tax entries recorded to AOCI for the employee benefit plans, stock compensation and the cash flow hedge were not adjusted to the new rate. We are performing an analysis to determine the amount to adjust to the new tax rate. Early adoption is expected to occur in fourth quarter of fiscal year 2018.



ASU 2016-02, Leases (Topic 842) including subsequent ASUs with additional guidance.	This standard requires recognition of a right-to-use asset and lease liability on the statement of financial position and disclosure of key information about leasing arrangements. The standard requires application using a modified retrospective approach.	October 1, 2019 ~~(subject to acceleration if the merger with AltaGas is consummated)~~	~~We are~~ WGL is performing a scoping exercise by gathering a complete inventory of lease contracts in ~~the process of evaluating~~order to evaluate the impact of adopting ASC 842 on its consolidated financial statements, but expects that the ~~adoption of this~~new standard will have an impact on ~~our financial statements.~~the Company’s balance sheet as all operating leases will need to be reflected on the balance sheet upon adoption. In addition, WGL currently expects to utilize the transition practical expedients which allow entities to not have to reassess whether an arrangement contains a lease under the provisions of ASC 842.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	For credit losses on financial instruments, this standard changes the current incurred loss impairment methodology to an expected loss methodology and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.	October 1, 2020 ~~(subject to acceleration if the merger with AltaGas is consummated)~~	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities	The new standard amends the hedge accounting and recognition requirements by expanding an entity's ability to hedge non-financial and financial risk components and reduce the complexity in fair value hedges of interest rate risk. Additionally, this standard eliminates the requirement to separately measure and disclose the ineffective portion of the hedge with the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item.	October 1, 2020*	It is not expected that the adoption of this standard will have a material effect on our financial statements.



Committed Credit Available ($ In millions)
June 30, 2018	WGL^(b)			Washington Gas			Total Consolidated
Committed credit agreements
Unsecured revolving credit facility, expires December 19, 2019^(a)	$	650.0		$	350.0		$	1,000.0
Less: Commercial Paper	(402.0		)	—			(402.0		)
Net committed credit available	$	248.0		$	350.0		$	598.0
Weighted average interest rate	2.57		%	—		%	2.57		%
September 30, 2017
Committed credit agreements
Unsecured revolving credit facility, expires December 19, 2019^(a)	$	650.0		$	350.0		$	1,000.0
Less: Commercial Paper	(382.0		)	(123.0		)	(505.0		)
Net committed credit available	$	268.0		$	227.0		$	495.0
Weighted average interest rate	1.52		%	1.22		%	1.45		%


^(a)^(b)WGL includes WGL Holdings, Inc. and all subsidiaries other than Washington Gas.	Washington Gas has the right to request extensions with the banks’ approval. Washington Gas’ revolving credit facility permits it to borrow an additional $100 million, with the banks’ approval, for a total of $450 million.


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
OPERATING REVENUES	$	203,186		$	187,077		$	1,012,193		$	934,347		$	199,512		$	203,186		$	1,109,022		$	1,012,193
OPERATING EXPENSES
Utility cost of gas	54,093			71,194			279,713			258,554			56,063			54,093			386,104			279,713
Operation and maintenance	77,370			79,178			246,290			239,696			82,389			77,370			252,924			246,290
Depreciation and amortization	32,761			29,232			96,003			85,194			34,043			32,761			101,157			96,003
General taxes and other assessments	27,498			28,001			109,857			108,228			30,845			27,498			121,321			109,857
Total Operating Expenses	191,722			207,605			731,863			691,672			203,340			191,722			861,506			731,863
OPERATING INCOME (LOSS)	11,464			(20,528		)	280,330			242,675			(3,828		)	11,464			247,516			280,330
Other expense — net	(908		)	(358		)	(3,044		)	(1,079		)	(2,628		)	(908		)	(5,647		)	(3,044		)
Interest expense	12,960			10,067			38,727			30,785			14,455			12,960			44,100			38,727
INCOME (LOSS) BEFORE INCOME TAXES	(2,404		)	(30,953		)	238,559			210,811			(20,911		)	(2,404		)	197,769			238,559
INCOME TAX EXPENSE (BENEFIT)	(733		)	(12,434		)	91,159			80,285			(9,412		)	(733		)	43,258			91,159
NET INCOME (LOSS)	$	(1,671	)	$	(18,519	)	$	147,400		$	130,526		$	(11,499	)	$	(1,671	)	$	154,511		$	147,400
Dividends on Washington Gas preferred stock	330			330			990			990			330			330			990			990
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(2,001	)	$	(18,849	)	$	146,410		$	129,536		$	(11,829	)	$	(2,001	)	$	153,521		$	146,410



Long-Term Debt Issuances and Retirements
($ In millions)	Principal^(b)		Interest Rate			Effective Cost^(d)		Nominal Maturity Date
Nine Months Ended June 30, 2017
WGL^(a)
Issuances:
1/26/2017	$	50.0	1.57	%	^(c)	1.57	%	1/26/2019
Total consolidated issuances	$	50.0
Nine Months Ended June 30, 2016
WGL ^(a)
Issuances:
2/18/2016	250.0		2.10	%	^(c)	2.10	%	2/18/2018
Total	$	250.0
Washington Gas
Retirements:	$	25.0	5.17	%		n/a		1/18/2016
Total	$	25.0



WGL Long-Term Debt Issuances and Retirements^(a)
($ In millions)	Principal^(b)		Interest Rate ^(f)			Effective Cost ^(f)		Nominal Maturity Date
Nine Months Ended June 30, 2018
Issuances:
11/29/2017	$	300.0	1.88	%	^(c)	2.01	%	11/29/2019
03/14/2018	$	250.0	2.66	%	^(d)	2.79	%	03/12/2020
Total consolidated issuances	$	550.0
Retirements:	$	250.0	1.24	%		1.24	%	02/18/2018
Total	$	250.0
Nine Months Ended June 30, 2017
Issuances:
1/26/2017	$	50.0	1.57	%	^(e)	1.57	%	1/26/2019
Total consolidated issuances	$	50.0


^(b)	~~WGL includes WGL Holdings, Inc. and all subsidiaries other than Washington Gas.~~

																			Long-Term Debt Outstanding
($ In millions)	WGL^(a)			Washington Gas			Total Consolidated			WGL^(a)			Washington Gas			Total Consolidated
June 30, 2017
June 30, 2018
Long-term debt ^(b)	$	550.0		$	946.0		$	1,496.0		$	850.0		$	1,146.0		$	1,996.0
Unamortized discount	(1.5		)	(0.1		)	(1.6		)	(1.4		)	(3.0		)	(4.4		)
Unamortized debt expense	(2.2		)	(6.6		)	(8.8		)	(4.0		)	(8.3		)	(12.3		)
Total Long-Term Debt	$	546.3		$	939.3		$	1,485.6		$	844.6		$	1,134.7		$	1,979.3
Weighted average interest rate	2.81		%	5.12		%	4.27		%	3.06		%	4.89		%	4.11		%
September 30, 2016
September 30, 2017										.
Long-term debt ^(b)	$	500.0		$	946.0		$	1,446.0		$	550.0		$	1,146.0		$	1,696.0
Unamortized discount	(1.6		)	(0.1		)	(1.7		)	(1.5		)	(3.0		)	(4.5		)
Unamortized debt expense	(2.4		)	(6.9		)	(9.3		)	(2.1		)	(8.5		)	(10.6		)
Total Long-Term Debt	$	496.0		$	939.0		$	1,435.0		$	546.4		$	1,134.5		$	1,680.9
Weighted average interest rate	2.50		%	5.12		%	4.21		%	2.81		%	4.89		%	4.21		%


^(a)	~~WGL includes WGL Holdings, Inc. and all subsidiaries other than Washington Gas.~~


^(b)	~~Includes Senior Notes and term loans for WGL and both MTNs and private placement notes for Washington Gas. Represents face value including current maturities.~~



WGL Holdings, Inc. Components of Common Shareholders’ Equity
(In thousands, except shares)	Common Stock			Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Taxes			WGL Holdings Common Shareholders' Equity			Non-controlling Interest			Washington Gas Light Company Preferred Stock			Total Equity
(In thousands, except shares)	Shares	Amount		Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Taxes			WGL Holdings Common Shareholders' Equity			Non-controlling Interest			Washington Gas Light Company Preferred Stock			Total Equity
Balance at September 30, 2016	51,080,612	$	574,496	$	12,519		$	827,085		$	(38,539	)	$	1,375,561		$	409		$	28,173		$	1,404,143
Net income (loss)	—	—		—			189,301			—			189,301			(12,533		)	990			177,758
Contributions from non-controlling interest	—	—		—			—			—			—			17,358			—			17,358
Other comprehensive income	—	—		—			—			29,852			29,852			—			—			29,852
Stock-based compensation^(a)	112,146	6,564		(3,971		)	(468		)	—			2,125			—			—			2,125
Issuance of common stock^(b)	26,242	1,657		—			—			—			1,657			—			—			1,657
Dividends declared:
Common stock	—	—		—			(77,213		)	—			(77,213		)	—			—			(77,213		)
Preferred stock	—	—		—			—			—			—			—			(990		)	(990		)
Balance at June 30, 2017	51,219,000	$	582,717	$	8,548		$	938,705		$	(8,687	)	$	1,521,283		$	5,234		$	28,173		$	1,554,690
Balance at September 30, 2015	49,728,662	$	485,456	$	14,934		$	757,093		$	(14,236	)	$	1,243,247		$	—		$	28,173		$	1,271,420
Net income	—	—		—			176,484			—			176,484			—			990			177,474
Other comprehensive income	—	—		—			—			(19,844		)	(19,844		)	—			—			(19,844		)
Stock-based compensation^(a)	115,974	6,742		(3,652		)	(122		)	—			2,968			—			—			2,968
Issuance of common stock^(c)	1,213,373	80,711		—			—			—			80,711			—			—			80,711
Dividends declared:
Common stock	—	—		—			(72,485		)	—			(72,485		)	—			—			(72,485		)
Preferred stock	—	—		—			—			—			—			—			(990		)	(990		)
Balance at June 30, 2016	51,058,009	$	572,909	$	11,282		$	860,970		$	(34,080	)	$	1,411,081		$	—		$	28,173		$	1,439,254


Washington Gas Light Company Components of Common Shareholder’s Equity
WGL Holdings, Inc. Components of Total Equity																		WGL Holdings, Inc. Components of Total Equity
(In thousands, except shares)	Common Stock			Paid-In Capital			Retained Earnings				Accumulated Other Comprehensive Income (Loss), Net of Taxes				Total			Common Stock				Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Taxes			WGL Holdings Common Shareholders' Equity			Non-controlling Interest				Washington Gas Light Company Preferred Stock			Total Equity
(In thousands, except shares)	Shares	Amount				Shares				Amount												Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Taxes			WGL Holdings Common Shareholders' Equity			Non-controlling Interest				Washington Gas Light Company Preferred Stock			Total Equity
Balance at September 30, 2017																		51,219,000	$	582,716		$	10,149			$	915,822		$	(5,997	)	$	1,502,690		$	6,851			$	28,173		$	1,537,714
Net income (loss)																		—	—			—				224,584			—			224,584			(16,801		)		990			208,773
Contributions from non-controlling interest																		—	—			—				—			—			—			16,697				—			16,697
Distributions to non-controlling interest																		—	—			—				—			—			—			(472		)		—			(472		)
Business combination^(a)																		—	—			—				—			—			—			614				—			614
Other comprehensive income																		—	—			—				—			677			677			—				—			677
Stock-based compensation^(b)																		140,182	12,390			(17,618		)		3,832			—			(1,396		)	—				—			(1,396		)
Dividends declared:
Common stock																		—	—			—				(78,002		)	—			(78,002		)	—				—			(78,002		)
Preferred stock																		—	—			—				—			—			—			—				(990		)	(990		)
Balance at June 30, 2018^(d)																		51,359,182	$	595,106		$	(7,469	)		$	1,066,236		$	(5,320	)	$	1,648,553		$	6,889			$	28,173		$	1,683,615
Balance at September 30, 2016	46,479,536	$	46,479	Paid-In Capital		$	Retained Earnings	488,135			Accumulated Other Comprehensive Income (Loss), Net of Taxes		$	586,662	Total				$	(7,830	)	$	1,113,446		51,080,612		$	574,496		$	12,519		$	827,085		$	(38,539	)		$	1,375,561		$	409	$	28,173	$	1,404,143
Net income	—	—		—			147,400				—				147,400
Net income (loss)																		—	—			—				189,301			—			189,301			(12,533		)		990			177,758
Contributions from non-controlling interest																		—	—			—				—			—			—			17,358				—			17,358
Other comprehensive income	—	—		—			—				673				673			—	—			—				—			29,852			29,852			—				—			29,852
Stock-based compensation^(a)	—	—		2,319			—				—				2,319
Stock-based compensation^(b)																		112,146	6,564			(3,971		)		(468		)	—			2,125			—				—			2,125
Issuance of common stock^(c)																		26,242	1,657			—				—			—			1,657			—				—			1,657
Dividends declared:
Common stock	—	—		—			(64,675		)		—				(64,675		)	—	—			—				(77,213		)	—			(77,213		)	—				—			(77,213		)
Preferred stock	—	—		—			(990		)		—				(990		)	—	—			—				—			—			—			—				(990		)	(990		)
Balance at June 30, 2017	46,479,536	$	46,479	$	490,454		$	668,397			$	(7,157	)		$	1,198,173		51,219,000	$	582,717		$	8,548			$	938,705		$	(8,687	)	$	1,521,283		$	5,234			$	28,173		$	1,554,690

													Basic and Diluted EPS
(In thousands, except per share data)	Net Income Applicable to Common Stock		Shares	Per Share Amount		Net Income (Loss) Applicable to Common Stock			Shares	Per Share Amount
Three Months Ended June 30, 2018
Basic EPS						$	(49,006	)	51,359	$	(0.95	)
Stock-based compensation plans						—			—
Diluted EPS						$	(49,006	)	51,359	$	(0.95	)
Three Months Ended June 30, 2017
Basic EPS	$	8,265	51,219	$	0.16	$	8,265		51,219	$	0.16
Stock-based compensation plans	—		274			—			274
Diluted EPS	$	8,265	51,493	$	0.16	$	8,265		51,493	$	0.16
Three Months Ended June 30, 2016
Nine Months Ended June 30, 2018
Basic EPS	$	2,025	50,622	$	0.04	$	224,584		51,343	$	4.37
Stock-based compensation plans	—		283			—			228
Diluted EPS	$	2,025	50,905	$	0.04	$	224,584		51,571	$	4.35
Nine Months Ended June 30, 2017
Basic EPS	$	189,301	51,200	$	3.70	$	189,301		51,200	$	3.70
Stock-based compensation plans	—		269			—			269
Diluted EPS	$	189,301	51,469	$	3.68	$	189,301		51,469	$	3.68
Nine Months Ended June 30, 2016
Basic EPS	$	176,484	50,158	$	3.52
Stock-based compensation plans	—		260
Diluted EPS	$	176,484	50,418	$	3.50


Absolute Notional Amounts of Open Positions on Derivative Instruments	Absolute Notional Amounts of Open Positions on Derivative Instruments			Absolute Notional Amounts of Open Positions on Derivative Instruments
Derivative transactions	WGL Holdings, Inc.		Washington Gas	WGL Holdings, Inc.		Washington Gas
June 30, 2017	Notional Amounts
June 30, 2018				Notional Amounts
Natural Gas (In millions of therms)
Asset optimization & trading				24,569.9		11,698.4
Retail sales				117.1		—
Other risk-management activities				1,453.7		1,101.2
Electricity (In millions of kWhs)
Retail sales				8,408.4		—
Other risk-management activities^(a)				26,355.3		—
September 30, 2017
Natural Gas (In millions of therms)
Asset optimization & trading	23,019.0		11,614.0	21,663.5		11,223.0
Retail sales	12.5		—	124.3		—
Other risk-management activities	1,546.6		1,201.0	1,546.7		1,181.0
Electricity (In millions of kWhs)
Retail sales	10,728.9		—	10,011.7		—
Other risk-management activities^(a)	24,878.5		—	22,962.1		—
Interest Rate Swaps (In millions of dollars)	$	250.0	—	$	250.0	—
September 30, 2016
Natural Gas (In millions of therms)
Asset optimization & trading	21,084.5		12,725.0
Retail sales	50.2		—
Other risk-management activities	1,789.0		1,309.0
Electricity (In millions of kWhs)
Retail sales	4,377.5		—
Other risk-management activities^(a)	21,070.4		—
Interest Rate Swaps (In millions of dollars)	$	250.0	—



WGL Holdings, Inc. Balance Sheet Classification of Derivative Instruments^(b)
(In millions)
As of June 30, 2018	Gross Derivative Assets			Gross Derivative Liabilities			Netting of Collateral			Total^(a)
Current Assets—Derivatives	$	16.3		$	(4.2	)	$	—		$	12.1
Deferred Charges and Other Assets—Derivatives	19.6			—			—			19.6
Accounts payable	(0.5		)	—			—			(0.5		)
Current Liabilities—Derivatives	22.6			(45.0		)	2.3			(20.1		)
Deferred Credits—Derivatives	10.9			(135.5		)	10.2			(114.4		)
Total	$	68.9		$	(184.7	)	$	12.5		$	(103.3	)
As of September 30, 2017
Current Assets—Derivatives	$	26.6		$	(11.3	)	$	—		$	15.3
Deferred Charges and Other Assets—Derivatives	38.9			(0.4		)	(0.1		)	38.4
Accounts payable	1.0			—			—			1.0
Current Liabilities—Derivatives	10.9			(57.0		)	2.1			(44.0		)
Deferred Credits—Derivatives	19.2			(148.8		)	7.0			(122.6		)
Total	$	96.6		$	(217.5	)	$	9.0		$	(111.9	)


WGL Holdings, Inc. Balance Sheet Classification of Derivative Instruments
Washington Gas Light Company Balance Sheet Classification of Derivative Instruments^(b)																Washington Gas Light Company Balance Sheet Classification of Derivative Instruments^(b)
(In millions)	Derivative Instruments Not Designated as Hedging Instruments					Derivative Instruments Designated as Hedging Instruments
As of June 30, 2017	Gross Derivative Assets		Gross Derivative Liabilities			Gross Derivative Assets		Gross Derivative Liabilities			Netting of Collateral		Total^(a)
Current Assets—Derivatives	$	32.6	$	(8.8	)	$	—	$	—		$	—	$	23.8
Deferred Charges and Other Assets—Derivatives	37.0		(0.8		)	—		—			—		36.2
Accounts payable and other accrued liabilities	0.5		—			—		—			—		0.5
Current Liabilities—Derivatives	11.9		(58.6		)	—		—			0.8		(45.9		)
Deferred Credits—Derivatives	14.2		(183.5		)	—		—			6.4		(162.9		)
Total	$	96.2	$	(251.7	)	$	—	$	—		$	7.2	$	(148.3	)
As of September 30, 2016
As of June 30, 2018																Gross Derivative Assets		Gross Derivative Liabilities			Netting of Collateral		Total^(a)
Current Assets—Derivatives	$	24.0	$	(5.5	)	$	—	$	—		$	—	$	18.5		$	1.4	$	—		$	—	$	1.4
Deferred Charges and Other Assets—Derivatives	55.6		(0.6		)	—		—			—		55.0			9.1		—			—		9.1
Current Liabilities—Derivatives	18.3		(113.2		)	—		—			12.6		(82.3		)	3.5		(20.5		)	0.7		(16.3		)
Deferred Credits—Derivatives	6.4		(279.3		)	0.2		(43.1		)	11.6		(304.2		)	—		(98.1		)	—		(98.1		)
Total	$	104.3	$	(398.6	)	$	0.2	$	(43.1	)	$	24.2	$	(313.0	)	$	14.0	$	(118.6	)	$	0.7	$	(103.9	)
As of September 30, 2017
Current Assets—Derivatives																$	7.5	$	(2.4	)	$	—	$	5.1
Deferred Charges and Other Assets—Derivatives																16.5		(0.3		)	—		16.2
Current Liabilities—Derivatives																—		(30.3		)	—		(30.3		)
Deferred Credits—Derivatives																—		(112.3		)	—		(112.3		)
Total																$	24.0	$	(145.3	)	$	—	$	(121.3	)


Gains and Losses on Derivative Instruments
Gains and (Losses) on Derivative Instruments												Gains and (Losses) on Derivative Instruments
(In millions)	WGL Holdings, Inc.						Washington Gas					WGL Holdings, Inc.						Washington Gas
Three Months Ended June 30,	2017			2016			2017		2016			2018			2017			2018			2017
Recorded to income
Operating revenues—non-utility	$	8.3		$	(39.0	)	$	—	$	—		$	(22.5	)	$	8.3		$	—		$	—
Utility cost of gas	5.5			(24.9		)	5.5		(24.9		)	(4.5		)	5.5			(4.5		)	5.5
Non-utility cost of energy-related sales	(0.8		)	48.4			—		—			10.7			(0.8		)	—			—
Interest expense	(7.9		)	(0.1		)	—		—			(0.1		)	(7.9		)	—			—
Recorded to regulatory assets
Gas costs	6.4			(29.4		)	6.4		(29.4		)	(9.0		)	6.4			(9.0		)	6.4
Other	—			(8.8		)	—		(8.8		)
Recorded to other comprehensive income	0.1			(16.9		)	—		—			0.1			0.1			—			—
Total	$	11.6		$	(70.7	)	$	11.9	$	(63.1	)	$	(25.3	)	$	11.6		$	(13.5	)	$	11.9
Nine Months Ended June 30,	2017			2016			2017		2016			2018			2017			2018			2017
Recorded to income
Operating revenues—non-utility	$	25.8		$	7.6		$	—	$	—		$	(26.2	)	$	25.8		$	—		$	—
Utility cost of gas	40.0			9.2			40.0		9.2			(4.1		)	40.0			(4.1		)	40.0
Non-utility cost of energy-related sales	25.9			50.6			—		—			12.3			25.9			—			—
Interest expense	(5.4		)	(0.2		)	—		—			12.7			(5.4		)	—			—
Recorded to regulatory assets
Gas costs	62.6			24.9			62.6		24.9			(11.3		)	62.6			(11.3		)	62.6
Other	—			(8.8		)	—		(8.8		)
Recorded to other comprehensive income	49.6			(34.5		)	—		—			0.2			49.6			—			—
Total	$	198.5		$	48.8		$	102.6	$	25.3		$	(16.4	)	$	198.5		$	(15.4	)	$	102.6


Collateral Not Offset Against Derivative Assets and Liabilities (In millions)	Collateral Not Offset Against Derivative Assets and Liabilities (In millions)				Collateral Not Offset Against Derivative Assets and Liabilities (In millions)
June 30, 2017	Collateral deposits posted with counterparties		Cash collateral held representing an obligation
June 30, 2018					Collateral deposits posted with counterparties		Cash collateral held representing an obligation
Washington Gas	$	4.9	$	0.1	$	10.9	$	20.5
WGL Energy Services	18.5		—		14.7		—
WGL Midstream	33.6		0.6		22.0		0.4
September 30, 2016
September 30, 2017
Washington Gas	$	4.3	$	0.1	$	3.7	$	0.1
WGL Energy Services	9.1		—		23.7		—
WGL Midstream	18.5		5.4		44.4		1.6


Potential Collateral Requirements for Derivative Liabilities with Credit-Risk-Contingent Features	Potential Collateral Requirements for Derivative Liabilities with Credit-Risk-Contingent Features				Potential Collateral Requirements for Derivative Liabilities with Credit-Risk-Contingent Features
(In millions)	WGL Holdings, Inc.		Washington Gas		WGL Holdings, Inc.		Washington Gas
June 30, 2017
June 30, 2018
Derivative liabilities with credit-risk-contingent features	$	26.0	$	2.4	$	8.4	$	0.7
Maximum potential collateral requirements	$	23.4	$	2.4	$	1.7	$	0.7
September 30, 2016
September 30, 2017
Derivative liabilities with credit-risk-contingent features	$	53.9	$	11.3	$	25.0	$	2.8
Maximum potential collateral requirements	$	41.4	$	11.3	$	21.9	$	2.8


WGL Holdings, Inc. Fair Value Measurements Under the Fair Value Hierarchy	WGL Holdings, Inc. Fair Value Measurements Under the Fair Value Hierarchy											WGL Holdings, Inc. Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
At June 30, 2017
At June 30, 2018
Assets
Natural gas related derivatives												$	—	$	21.7		$	36.6		$	58.3
Electricity related derivatives												—		1.0			9.6			10.6
Total Assets												$	—	$	22.7		$	46.2		$	68.9
Liabilities
Natural gas related derivatives												$	—	$	(21.1	)	$	(144.7	)	$	(165.8	)
Electricity related derivatives												—		(1.2		)	(17.7		)	(18.9		)
Total Liabilities												$	—	$	(22.3	)	$	(162.4	)	$	(184.7	)
At September 30, 2017
Assets
Natural gas related derivatives	$	—	$	20.4		$	46.7		$	67.1		$	—	$	18.4		$	52.8		$	71.2
Electricity related derivatives	—		—			19.3			19.3			—		0.1			15.5			$	15.6
Interest rate derivatives	—		9.8			—			9.8			—		9.8			—			$	9.8
Total Assets	$	—	$	30.2		$	66.0		$	96.2		$	—	$	28.3		$	68.3		$	96.6
Liabilities
Natural gas related derivatives	$	—	$	(16.5	)	$	(199.0	)	$	(215.5	)	$	—	$	(15.5	)	$	(167.4	)	$	(182.9	)
Electricity related derivatives	—		(4.6		)	(23.1		)	(27.7		)	—		(4.1		)	(21.7		)	(25.8		)
Interest rate derivatives	—		(8.5		)	—			(8.5		)	—		(8.8		)	—			(8.8		)
Total Liabilities	$	—	$	(29.6	)	$	(222.1	)	$	(251.7	)	$	—	$	(28.4	)	$	(189.1	)	$	(217.5	)
At September 30, 2016
Assets
Natural gas related derivatives	$	—	$	28.8		$	54.0		$	82.8
Electricity related derivatives	—		0.6			20.9			21.5
Interest rate derivatives	—		0.2			—			0.2
Total Assets	$	—	$	29.6		$	74.9		$	104.5
Liabilities
Natural gas related derivatives	$	—	$	(46.7	)	$	(318.2	)	$	(364.9	)
Electricity related derivatives	—		(3.8		)	(29.9		)	(33.7		)
Interest rate derivatives	—		(43.1		)	—			(43.1		)
Total Liabilities	$	—	$	(93.6	)	$	(348.1	)	$	(441.7	)


Washington Gas Light Company Fair Value Measurements Under the Fair Value Hierarchy	Washington Gas Light Company Fair Value Measurements Under the Fair Value Hierarchy											Washington Gas Light Company Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
At June 30, 2017
At June 30, 2018
Assets
Natural gas related derivatives	$	—	$	8.7		$	17.6		$	26.3		$	—	$	3.7		$	10.3		$	14.0
Total Assets	$	—	$	8.7		$	17.6		$	26.3		$	—	$	3.7		$	10.3		$	14.0
Liabilities
Natural gas related derivatives	$	—	$	(5.9	)	$	(168.3	)	$	(174.2	)	$	—	$	(4.7	)	$	(113.9	)	$	(118.6	)
Total Liabilities	$	—	$	(5.9	)	$	(168.3	)	$	(174.2	)	$	—	$	(4.7	)	$	(113.9	)	$	(118.6	)
At September 30, 2016
At September 30, 2017
Assets
Natural gas related derivatives	$	—	$	15.4		$	24.4		$	39.8		$	—	$	7.0		$	17.0		$	24.0
Total Assets	$	—	$	15.4		$	24.4		$	39.8		$	—	$	7.0		$	17.0		$	24.0
Liabilities
Natural gas related derivatives	$	—	$	(21.2	)	$	(276.0	)	$	(297.2	)	$	—	$	(5.7	)	$	(139.6	)	$	(145.3	)
Total Liabilities	$	—	$	(21.2	)	$	(276.0	)	$	(297.2	)	$	—	$	(5.7	)	$	(139.6	)	$	(145.3	)



Quantitative Information about Level 3 Fair Value Measurements
(In millions)	Net Fair Value June 30, ~~2017~~2018	Valuation Techniques	Unobservable Inputs	Range

WGL Holdings, Inc.
Natural gas related derivatives	$~~(152.3)~~(104.8)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	~~($1.300)~~$(1.638) - ~~$2.898~~$2.753
		Option Model	Natural Gas Basis Price (per dekatherm)	~~($1.468)~~$(0.920) - ~~$2.543~~$2.718
	$(3.3)		Annualized Volatility of Spot Market Natural Gas	~~25.5%~~30.2% - ~~566.8%~~901.0%
Electricity related derivatives	$~~(3.8)~~(8.1)	Discounted Cash Flow	Electricity Congestion Price (per megawatt hour)	~~($4.154)~~$(6.075) - ~~$60.000~~$57.200

Washington Gas Light Company
Natural gas related derivatives	$~~(150.7)~~(103.6)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	~~($1.300)~~$(0.980) - ~~$2.898~~$0.108

(In millions)	Net Fair Value September 30, ~~2016~~2017

WGL Holdings, Inc.
Natural gas related derivatives	$~~(264.1)~~(112.4)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	~~($2.021)~~$(2.095) - ~~$3.290~~$2.805
		Option Model	Natural Gas Basis Price (per dekatherm)	~~($2.105)~~$(2.095) - ~~$3.310~~$2.358
	$~~(0.1)~~(2.2)		Annualized Volatility of Spot Market Natural Gas	~~25.5%~~28.7% - ~~869.9%~~566.8%
Electricity related derivatives	$~~(9.1)~~(6.2)	Discounted Cash Flow	Electricity Congestion Price (per megawatt hour)	~~($6.199)~~$(2.736) - ~~$68.700~~$56.500

Washington Gas Light Company
Natural gas related derivatives	$~~(251.6)~~(122.6)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	~~($2.021)~~$(1.928) - ~~$3.290~~$2.805


Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs	Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs												Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs
	WGL Holdings, Inc.									Washington Gas Light Company			WGL Holdings, Inc.									Washington Gas Light Company
(In millions)	Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives			Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives
Three Months Ended June 30, 2018
Balance at April 1, 2018													$	(85.0	)	$	(10.3	)	$	(95.3	)	$	(89.0	)
Realized and unrealized gains (losses)
Recorded to income													(13.7		)	4.6			(9.1		)	(3.5		)
Recorded to regulatory assets—gas costs													(7.6		)	—			(7.6		)	(7.6		)
Transfers into Level 3													(7.1		)	—			(7.1		)	(7.0		)
Transfers out of Level 3													0.1			—			0.1			—
Purchases													—			(2.5		)	(2.5		)	—
Settlements													5.2			0.1			5.3			3.5
Balance at June 30, 2018													$	(108.1	)	$	(8.1	)	$	(116.2	)	$	(103.6	)
Three Months Ended June 30, 2017
Balance at April 1, 2017	$	(150.2	)	$	(8.4	)	$	(158.6	)	$	(155.4	)	$	(150.2	)	$	(8.4	)	$	(158.6	)	$	(155.4	)
Realized and unrealized gains (losses)
Recorded to income	(6.0		)	1.7			(4.3		)	2.9			(6.0		)	1.7			(4.3		)	2.9
Recorded to regulatory assets—gas costs	3.0			—			3.0			3.0			3.0			—			3.0			3.0
Transfers into Level 3	0.1			—			0.1			—			0.1			—			0.1			—
Purchases	—			2.0			2.0			—			—			2.0			2.0			—
Settlements	0.8			0.9			1.7			(1.2		)	0.8			0.9			1.7			(1.2		)
Balance at June 30, 2017	$	(152.3	)	$	(3.8	)	$	(156.1	)	$	(150.7	)	$	(152.3	)	$	(3.8	)	$	(156.1	)	$	(150.7	)
Three Months Ended June 30, 2016
Balance at April 1, 2016	$	(204.3	)	$	(30.5	)	$	(234.8	)	$	(194.3	)
Nine Months Ended June 30, 2018
Balance at October 1, 2017													$	(114.6	)	$	(6.2	)	$	(120.8	)	$	(122.6	)
Realized and unrealized gains (losses)
Recorded to income	(8.9		)	22.5			13.6			(21.6		)	(28.8		)	3.0			(25.8		)	(8.0		)
Recorded to regulatory assets—gas costs	(27.6		)	—			(27.6		)	(27.6		)	(15.6		)	—			(15.6		)	(15.6		)
Transfers into Level 3	0.1			—			0.1			—			(6.8		)	—			(6.8		)	(6.8		)
Transfers out of Level 3	(0.2		)	—			(0.2		)	—			8.9			—			8.9			9.0
Purchases	—			(10.7		)	(10.7		)	—
Settlements	0.4			8.0			8.4			0.2			48.8			(4.9		)	43.9			40.4
Balance at June 30, 2016	$	(240.5	)	$	(10.7	)	$	(251.2	)	$	(243.3	)
Balance at June 30, 2018													$	(108.1	)	$	(8.1	)	$	(116.2	)	$	(103.6	)
Nine Months Ended June 30, 2017
Balance at October 1, 2016	$	(264.1	)	$	(9.1	)	$	(273.2	)	$	(251.6	)	$	(264.1	)	$	(9.1	)	$	(273.2	)	$	(251.6	)
Realized and unrealized gains (losses)
Recorded to income	46.6			(2.5		)	44.1			34.7			46.6			(2.5		)	44.1			34.7
Recorded to regulatory assets—gas costs	55.4			—			55.4			55.4			55.4			—			55.4			55.4
Transfers into Level 3	(0.7		)	—			(0.7		)	(0.4		)	(0.7		)	—			(0.7		)	(0.4		)
Transfers out of Level 3	(0.5		)	—			(0.5		)	(0.3		)	(0.5		)	—			(0.5		)	(0.3		)
Purchases	—			(1.0		)	(1.0		)	—			—			(1.0		)	(1.0		)	—
Settlements	11.0			8.8			19.8			11.5			11.0			8.8			19.8			11.5
Balance at June 30, 2017	$	(152.3	)	$	(3.8	)	$	(156.1	)	$	(150.7	)	$	(152.3	)	$	(3.8	)	$	(156.1	)	$	(150.7	)
Nine Months Ended June 30, 2016
Balance at October 1, 2015	$	(309.7	)	$	(16.0	)	$	(325.7	)	$	(281.1	)
Realized and unrealized gains (losses)
Recorded to income	34.6			(14.2		)	20.4			3.3
Recorded to regulatory assets—gas costs	15.9			—			15.9			15.9
Transfers into Level 3	(0.8		)	—			(0.8		)	(0.2		)
Transfers out of Level 3	8.7			—			8.7			8.8
Purchases	—			(4.4		)	(4.4		)	—
Settlements	10.8			23.9			34.7			10.0
Balance at June 30, 2016	$	(240.5	)	$	(10.7	)	$	(251.2	)	$	(243.3	)


Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements	Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements												Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements
	WGL Holdings, Inc.									Washington Gas Light Company			WGL Holdings, Inc.									Washington Gas Light Company
(In millions)	Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives			Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives
Three Months Ended June 30, 2018
Operating revenues—non-utility													$	(10.9	)	$	(6.9	)	$	(17.8	)	$	—
Utility cost of gas													(3.5		)	—			(3.5		)	(3.5		)
Non-utility cost of energy-related sales													0.7			11.5			12.2			—
Total													$	(13.7	)	$	4.6		$	(9.1	)	$	(3.5	)
Three Months Ended June 30, 2017
Operating revenues—non-utility	$	(8.9	)	$	(1.1	)	$	(10.0	)	$	—		$	(8.9	)	$	(1.1	)	$	(10.0	)	$	—
Utility cost of gas	2.9			—			2.9			2.9			2.9			—			2.9			2.9
Non-utility cost of energy-related sales	—			2.8			2.8			—			—			2.8			2.8			—
Total	$	(6.0	)	$	1.7		$	(4.3	)	$	2.9		$	(6.0	)	$	1.7		$	(4.3	)	$	2.9
Three Months Ended June 30, 2016
Nine Months Ended June 30, 2018
Operating revenues—non-utility	$	6.5		$	(17.4	)	$	(10.9	)	$	—		$	(18.3	)	$	(10.7	)	$	(29.0	)	$	—
Utility cost of gas	(21.6		)	—			(21.6		)	(21.6		)	(8.0		)	—			(8.0		)	(8.0		)
Non-utility cost of energy-related sales	6.2			39.9			46.1			—			(2.5		)	13.7			11.2			—
Total	$	(8.9	)	$	22.5		$	13.6		$	(21.6	)	$	(28.8	)	$	3.0		$	(25.8	)	$	(8.0	)
Nine Months Ended June 30, 2017
Operating revenues—non-utility	$	6.3		$	(9.6	)	$	(3.3	)	$	—		$	6.3		$	(9.6	)	$	(3.3	)	$	—
Utility cost of gas	34.7			—			34.7			34.7			34.7			—			34.7			34.7
Non-utility cost of energy-related sales	5.6			7.1			12.7			—			5.6			7.1			12.7			—
Total	$	46.6		$	(2.5	)	$	44.1		$	34.7		$	46.6		$	(2.5	)	$	44.1		$	34.7
Nine Months Ended June 30, 2016
Operating revenues—non-utility	$	22.5		$	(25.9	)	$	(3.4	)	$	—
Utility cost of gas	3.3			—			3.3			3.3
Non-utility cost of energy-related sales	8.8			11.7			20.5			—
Total	$	34.6		$	(14.2	)	$	20.4		$	3.3


Unrealized Gains (Losses) Recorded for Level 3 Measurements	Unrealized Gains (Losses) Recorded for Level 3 Measurements												Unrealized Gains (Losses) Recorded for Level 3 Measurements
	WGL Holdings, Inc.									Washington Gas Light Company			WGL Holdings, Inc.									Washington Gas Light Company
(In millions)	Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives			Natural Gas Related Derivatives			Electricity Related Derivatives			Total			Total - Natural Gas Related Derivatives
Three Months Ended June 30, 2018
Recorded to income
Operating revenues—non-utility													$	(9.3	)	$	(4.8	)	$	(14.1	)	$	—
Utility cost of gas													(5.9		)	—			(5.9		)	(5.9		)
Non-utility cost of energy-related sales													0.6			8.9			9.5			—
Recorded to regulatory assets—gas costs													(9.9		)	—			(9.9		)	(9.9		)
Total													$	(24.5	)	$	4.1		$	(20.4	)	$	(15.8	)
Three Months Ended June 30, 2017
Recorded to income
Operating revenues—non-utility	$	(7.1	)	$	5.1		$	(2.0	)	$	—		$	(7.1	)	$	5.1		$	(2.0	)	$	—
Utility cost of gas	2.6			—			2.6			2.6			2.6			—			2.6			2.6
Non-utility cost of energy-related sales	(0.2		)	2.0			1.8			—			(0.2		)	2.0			1.8			—
Recorded to regulatory assets—gas costs	2.7			—			2.7			2.7			2.7			—			2.7			2.7
Total	$	(2.0	)	$	7.1		$	5.1		$	5.3		$	(2.0	)	$	7.1		$	5.1		$	5.3
Three Months Ended June 30, 2016
Nine Months Ended June 30, 2018
Recorded to income
Operating revenues—non-utility	$	6.7		$	(10.3	)	$	(3.6	)	$	—		$	(16.9	)	$	(13.5	)	$	(30.4	)	$	—
Utility cost of gas	(22.2		)	—			(22.2		)	(22.2		)	(1.3		)	—			(1.3		)	(1.3		)
Non-utility cost of energy-related sales	5.2			33.2			38.4			—			2.0			15.0			17.0			—
Recorded to regulatory assets—gas costs	(28.9		)	—			(28.9		)	(28.9		)	(5.4		)	—			(5.4		)	(5.4		)
Total	$	(39.2	)	$	22.9		$	(16.3	)	$	(51.1	)	$	(21.6	)	$	1.5		$	(20.1	)	$	(6.7	)
Nine Months Ended June 30, 2017
Recorded to income
Operating revenues—non-utility	$	5.2		$	4.0		$	9.2		$	—		$	5.2		$	4.0		$	9.2		$	—
Utility cost of gas	22.4			—			22.4			22.4			22.4			—			22.4			22.4
Non-utility cost of energy-related sales	(0.1		)	8.4			8.3			—			(0.1		)	8.4			8.3			—
Recorded to regulatory assets—gas costs	38.0			—			38.0			38.0			38.0			—			38.0			38.0
Total	$	65.5		$	12.4		$	77.9		$	60.4		$	65.5		$	12.4		$	77.9		$	60.4
Nine Months Ended June 30, 2016
Recorded to income
Operating revenues—non-utility	$	26.1		$	(6.7	)	$	19.4		$	—
Utility cost of gas	(0.2		)	—			(0.2		)	(0.2		)
Non-utility cost of energy-related sales	2.6			15.1			17.7			—
Recorded to regulatory assets—gas costs	9.2			—			9.2			9.2
Total	$	37.7		$	8.4		$	46.1		$	9.0


WGL Holdings, Inc. Fair Value of Financial Instruments	WGL Holdings, Inc. Fair Value of Financial Instruments								WGL Holdings, Inc. Fair Value of Financial Instruments
	June 30, 2017				September 30, 2016				June 30, 2018				September 30, 2017
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Money market funds^(a)	$	15.4	$	15.4	$	10.6	$	10.6	$	40.9	$	40.9	$	11.8	$	11.8
Other short-term investments^(a)	$	0.1	$	0.1	$	1.4	$	1.4
Commercial paper ^(b)	$	486.0	$	486.0	$	269.0	$	269.0	$	402.0	$	402.0	$	505.0	$	505.0
Project financing ^(b)	$	52.9	$	52.9	$	62.4	$	62.4	$	27.5	$	27.5	$	54.8	$	54.8
Long-term debt^(c)	$	1,235.6	$	1,378.8	$	1,435.0	$	1,641.9	$	1,879.3	$	1,942.2	$	1,430.9	$	1,577.3

ASU ~~2015-05, Intangibles-Goodwill~~2016-06, Derivatives and ~~Other -Internal-Use Software (Subtopic 350-40)-Customer’s Accounting for Fees Paid~~Hedging (Topic 815) - Contingent Put and Call Options in ~~a Cloud Computing Arrangement~~
Debt Instruments

The ~~standard clarifies~~amendments in this update clarify the requirements for assessing whether contingent call (put) options that ~~a cloud computing customer may account~~can accelerate the payment of principal on debt
instruments are clearly and closely related to their debt hosts. The guidance states that for contingent call (put) options to be considered clearly and closely related, they can be indexed only to interest rates or credit risk. An entity is required to assess the ~~arrangement as a software license when (1)~~embedded call (put) options solely in accordance with the customer has a contractual right to take possession of the software at any time during the hosting period without significant penalty, and (2) it is feasible for the customer to either operate the software on its own hardware or contract with another party unrelated to the vendor to host the software. If the arrangement does not meet these criteria, it would be accounted for as a service contract and accounted for as an operating expense in the period incurred.

four-step decision sequence.

October 1, ~~2016~~2017

The implementation of this standard did not have an effect on WGL ~~elected~~or Washington Gas' financial statements.

ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory

This standard reduces the complexity in the current measurement of inventory. This ASU requires inventory to ~~apply~~be measured at the lower of cost and net realizable value, where net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation (no change to the definition of net realizable value). The amendment eliminates the guidance that requires inventory to be stated at the lower of cost or market, which includes consideration of the replacement cost of inventory and the net realizable value of inventory, less an approximately normal profit margin.

October 1, 2017

The implementation of this standard ~~on a prospective basis, which~~ did not have a material ~~impact~~effect on ~~the~~WGL or Washington Gas' financial statements.