UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2019~~March 31, 2020

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-16189

NiSource Inc.

(Exact name of registrant as specified in its charter)



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

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

(877) 647-5990

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 Par Value: ~~373,542,659~~382,799,472 shares outstanding at ~~October 22, 2019.~~April 29, 2020.

NISOURCE INC.

FORM 10-Q QUARTERLY REPORT

FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2019~~MARCH 31, 2020

Table of Contents



			Page

	Defined Terms		3

PART I	FINANCIAL INFORMATION

	Item 1.	Financial Statements - unaudited

		Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited)	7

		Condensed Statements of Consolidated Comprehensive Income (Loss) (unaudited)	8

		Condensed Consolidated Balance Sheets (unaudited)	9

		Condensed Statements of Consolidated Cash Flows (unaudited)	11

		Condensed Statements of Consolidated Equity (unaudited)	12

		Notes to Condensed Consolidated Financial Statements (unaudited)	1514

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4538

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6154

	Item 4.	Controls and Procedures	6154

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	6255

	Item 1A.	Risk Factors	6255

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6255

	Item 3.	Defaults Upon Senior Securities	6255

	Item 4.	Mine Safety Disclosures	6255

	Item 5.	Other Information	6255

	Item 6.	Exhibits	6356

	Signature		6457



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

NiSource Subsidiaries, Affiliates and Former Subsidiaries
Columbia of Kentucky	Columbia Gas of Kentucky, Inc.
Columbia of Maryland	Columbia Gas of Maryland, Inc.
Columbia of Massachusetts	Bay State Gas Company
Columbia of Ohio	Columbia Gas of Ohio, Inc.
Columbia of Pennsylvania	Columbia Gas of Pennsylvania, Inc.
Columbia of Virginia	Columbia Gas of Virginia, Inc.
NIPSCO	Northern Indiana Public Service Company LLC
NiSource ("we," "us" or “our”)	NiSource Inc.

Abbreviations and Other
ACE	Affordable Clean Energy
AFUDC	Allowance for funds used during construction
~~AMRP~~	~~Accelerated Main Replacement Program~~
AOCI	Accumulated Other Comprehensive Income (Loss)
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
ATM	At-the-market
BTA	Build-transfer agreement
CARES Act	The Coronavirus Aid, Relief and Economic Security Act provides more than $2 trillion to battle COVID-19 and its economic effects, including various types of economic relief for impacted business and industries.
CCRs	Coal Combustion Residuals
CEP	Capital Expenditure Program
CERCLA	Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund)
~~CPP~~COVID-19	~~Clean Power Plan~~Novel Coronavirus 2019
DSIC	Distribution System Improvement Charge
DPU	Department of Public Utilities
ELG	Effluent limitations guidelines
EPA	United States Environmental Protection Agency
EPS	Earnings per share
FAC	Fuel adjustment clause
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FMCA	Federally Mandated Cost Adjustment
GAAP	Generally Accepted Accounting Principles
GCA	Gas cost adjustment
GCR	Gas cost recovery
GHG	Greenhouse gases
GSEP	Gas System Enhancement Program
GWh	Gigawatt hours
IRP	Infrastructure Replacement Program
IT	~~Information technology~~
IURC	Indiana Utility Regulatory Commission
LIBOR	London InterBank Offered Rate
~~MGP~~	~~Manufactured Gas Plant~~
~~MISO~~	~~Midcontinent Independent System Operator~~



DEFINED TERMS
MA DOR	Massachusetts Department of Revenue
Massachusetts Business	All of the assets being sold to, and liabilities being assumed by, Eversource pursuant to the Asset Purchase Agreement
MGP	Manufactured Gas Plant
MISO	Midcontinent Independent System Operator
MMDth	Million dekatherms
MW	Megawatts
NTSB	National Transportation Safety Board
NYMEX	New York Mercantile Exchange
OPEB	Other Postretirement Benefits
PHMSA	Pipeline and Hazardous Materials Safety Administration
PPA	Power Purchase ~~power agreement~~Agreement
PTC	Production tax credit
RCRA	Resource Conservation and Recovery Act
RFP	Request for proposals
~~ROU~~	~~Right of use~~
SAVE	Steps to Advance Virginia's Energy Plan
SEC	Securities and Exchange Commission
SMRP	Safety Modification and Replacement Program
STRIDE	Strategic Infrastructure Development Enhancement
TCJA	An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (commonly known as the Tax Cuts and Jobs Act of 2017)
TDSIC	Transmission, Distribution and Storage System Improvement Charge
~~WCE~~	~~Whiting Clean Energy~~

Note regarding forward-looking statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Investors and prospective investors should understand that many factors govern whether any forward-looking statement contained herein will be or can be realized. Any one of those factors could cause actual results to differ materially from those projected. These forward-looking statements include, but are not limited to, statements concerning ~~NiSource’s~~our plans, strategies, objectives, expected performance, expenditures, recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially.

Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Quarterly Report on Form 10-Q include among other things, our debt obligations; any changes to our credit rating or the credit rating of ~~our or~~ certain of our subsidiaries; our ability to execute our growth strategy; changes in general economic, capital and commodity market conditions; pension funding obligations; economic regulation and the impact of regulatory rate reviews; our ability to obtain expected financial or regulatory outcomes; our ability to adapt to, and manage costs related to, advances in technology; any changes in our assumptions regarding the financial implications of the Greater Lawrence Incident; compliance with the agreements entered into with the U.S. Attorney’s Office to settle the U.S. Attorney’s Office’s investigation relating to the Greater Lawrence Incident; the pending sale of the Massachusetts Business, including the terms and closing conditions under the Asset Purchase Agreement;potential incidents and other operating risks associated with our business; continuing and potential future impacts from the COVID-19 pandemic; our ability to obtain sufficient insurance ~~coverage;~~coverage and whether such coverage will protect us against significant losses; the outcome of legal and regulatory proceedings, investigations, incidents, claims and litigation; any damage to our reputation, including in connection with the Greater Lawrence Incident; compliance with applicable laws, regulations and tariffs; compliance with environmental laws and the costs of associated liabilities; fluctuations in demand from residential commercial and ~~commercial~~industrial customers; economic conditions of certain industries; the success of NIPSCO's electric generation strategy; the price of energy commodities and related transportation costs; the reliability of customers and suppliers to fulfill their payment and contractual obligations; potential ~~impairments~~impairment of ~~goodwill or definite-lived intangible assets;~~goodwill; changes in taxation and accounting principles; the impact of an aging infrastructure; the impact of climate change; potential cyber-attacks; construction risks and natural gas costs and supply risks; extreme weather conditions; the attraction and retention of a qualified workforce; the ability of our subsidiaries to generate

cash; ~~uncertainties related to the expected benefits of the separation from Columbia Pipeline Group;~~ our ability to manage new initiatives and organizational changes; the performance of third-party suppliers and service providers; changes in the ~~transition to a~~method for determining LIBOR and the potential replacement ~~for~~of the LIBOR benchmark interest rate; and other matters in the “Risk Factors” section of this report and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, as supplemented by the risk factor set forth herein in Part II, Item 1A. Risk Factors, many of which risks are beyond our control. In addition, the relative contributions to profitability by each business segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time.

All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed

assumptions, the occurrence of anticipated or unanticipated events or changes to the future results over time or otherwise, except as required by law.



Index	Page
Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited)	7
Condensed Statements of Consolidated Comprehensive Income (Loss) (unaudited)	8
Condensed Consolidated Balance Sheets (unaudited)	9
Condensed Statements of Consolidated Cash Flows (unaudited)	11
Condensed Statements of Consolidated Equity (unaudited)	12
Notes to Condensed Consolidated Financial Statements (unaudited)	1514
1. Basis of Accounting Presentation	1514
2. Recent Accounting Pronouncements	15
3. Revenue Recognition	1716
4. Earnings Per Share	2018
5. Equity	2018
6. ~~Regulatory Matters~~Gas in Storage	2119
7. Assets and Liabilities Held For Sale	19
8. Asset Retirement Obligations	20
9. Regulatory Matters	20
10. Risk Management Activities	22
11. Fair Value	23
~~8. Fair Value~~12. Transfers of Financial Assets	2526
~~9. Transfers of Financial Assets~~13. Goodwill	26
14. Income Taxes	27
~~10. Goodwill~~15. Pension and Other Postretirement Benefits	27
~~11. Income Taxes~~16. Long-Term Debt	28
~~12. Pension and Other Postretirement Benefits~~17. Short-Term Borrowings	28
~~13. Long-Term Debt~~	30
~~14. Short-Term Borrowings~~	30
~~15. Leases~~	30
~~16.~~18. Other Commitments and Contingencies	3329
~~17.~~19. Accumulated Other Comprehensive Loss	4336
~~18.~~20. Other, Net	4436
~~19.~~21. Business Segment Information	4436

PART I

ITEM 1. FINANCIAL STATEMENTS

NiSource Inc.

Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions, except per share amounts)	2019			2018			2019			2018			2020			2019
Operating Revenues	Operating Revenues												Operating Revenues
Customer revenues	$	891.0		$	855.8		$	3,694.7		$	3,555.1		$	1,525.9		$	1,834.5
Other revenues	40.5			39.2			117.0			97.7			79.6			35.3
Total Operating Revenues	931.5			895.0			3,811.7			3,652.8			1,605.5			1,869.8
Operating Expenses
Cost of sales (excluding depreciation and amortization)	196.7			222.0			1,130.5			1,259.7			462.4			680.3
Operation and maintenance	393.9			780.8			995.5			1,548.5			444.6			552.4
Depreciation and amortization	182.2			148.5			535.2			437.8			184.3			175.1
Loss (Gain) on sale of assets and impairments, net	(0.2		)	0.7			(0.1		)	0.4
Loss on classification as held for sale													280.2			—
Loss (gain) on sale of fixed assets and impairments, net													(0.1		)	0.2
Other taxes	67.9			58.9			221.9			203.3			85.9			87.6
Total Operating Expenses	840.5			1,210.9			2,883.0			3,449.7			1,457.3			1,495.6
Operating Income (Loss)	91.0			(315.9		)	928.7			203.1
Operating Income													148.2			374.2
Other Income (Deductions)
Interest expense, net	(95.9		)	(83.4		)	(285.6		)	(265.2		)	(92.9		)	(95.6		)
Other, net	1.3			(1.7		)	0.3			42.4			5.4			(0.7		)
Loss on early extinguishment of long-term debt	—			(33.0		)	—			(45.5		)
Total Other Deductions, Net	(94.6		)	(118.1		)	(285.3		)	(268.3		)	(87.5		)	(96.3		)
Income (Loss) before Income Taxes	(3.6		)	(434.0		)	643.4			(65.2		)
Income before Income Taxes													60.7			277.9
Income Taxes	(10.2		)	(94.5		)	121.0			(26.3		)	(14.9		)	59.0
Net Income (Loss)	6.6			(339.5		)	522.4			(38.9		)
Net Income													75.6			218.9
Preferred dividends	(13.8		)	(5.6		)	(41.4		)	(6.9		)	(13.8		)	(13.8		)
Net Income (Loss) Available to Common Shareholders	(7.2		)	(345.1		)	481.0			(45.8		)
Earnings (Loss) Per Share
Basic Earnings (Loss) Per Share	$	(0.02	)	$	(0.95	)	$	1.29		$	(0.13	)
Diluted Earnings (Loss) Per Share	$	(0.02	)	$	(0.95	)	$	1.28		$	(0.13	)
Net Income Available to Common Shareholders													61.8			205.1
Earnings Per Share
Basic Earnings Per Share													$	0.16		$	0.55
Diluted Earnings Per Share													$	0.16		$	0.55
Basic Average Common Shares Outstanding	374.1			363.9			373.8			352.1			383.1			373.4
Diluted Average Common Shares	374.1			363.9			375.2			352.1			384.1			374.7

The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Condensed Statements of Consolidated Comprehensive Income (Loss) (unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions, net of taxes)	2019			2018			2019			2018			2020			2019
Net Income (Loss)	$	6.6		$	(339.5	)	$	522.4		$	(38.9	)
Net Income													$	75.6		$	218.9
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities⁽¹⁾	0.7			0.1			5.6			(2.3		)
Net unrealized gain (loss) on available-for-sale debt securities⁽¹⁾													(5.4		)	2.8
Net unrealized gain (loss) on cash flow hedges⁽²⁾	(50.6		)	22.5			(100.4		)	56.5			(133.3		)	(19.3		)
Unrecognized pension and OPEB benefit⁽³⁾	0.4			0.8			1.7			1.2			0.7			0.9
Total other comprehensive income (loss)	(49.5		)	23.4			(93.1		)	55.4			(138.0		)	(15.6		)
Comprehensive Income (Loss)	$	(42.9	)	$	(316.1	)	$	429.3		$	16.5		$	(62.4	)	$	203.3

⁽¹⁾ Net unrealized gain (loss) on available-for-sale debt securities, net of ~~$0.1~~$1.4 million tax benefit and 0$0.7 million tax expense in the ~~third~~first quarter of ~~2019~~2020 and ~~2018, respectively, and $1.4 million tax expense and $0.6 million tax benefit for the nine months ended~~ 2019, ~~and 2018,~~ respectively.

⁽²⁾Net unrealized gain (loss) on cash flow hedges, net of ~~$16.7~~$44.1 million and $6.5 million tax benefit ~~and $7.5 million tax expense~~ in the ~~third~~first quarter of ~~2019~~2020 and ~~2018, respectively, and $33.2 million tax benefit and $18.7 million tax expense for the nine months ended~~ 2019, ~~and 2018,~~ respectively.

⁽³⁾Unrecognized pension and OPEB benefit, net of ~~$0.1~~$0.3 million tax benefit and 0$0.4 million tax expense in the ~~third~~first quarter of ~~2019~~2020 and ~~2018, and $0.6 million and $0.2 million tax expense for the nine months ended~~ 2019, ~~and 2018,~~ respectively.

The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc. Condensed Consolidated Balance Sheets (unaudited)	NiSource Inc. Condensed Consolidated Balance Sheets (unaudited)						NiSource Inc. Condensed Consolidated Balance Sheets (unaudited)

(in millions)	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
ASSETS
Property, Plant and Equipment
Utility plant	$	24,026.1		$	22,780.8		$	22,862.3		$	24,502.6
Accumulated depreciation and amortization	(7,563.2		)	(7,257.9		)	(7,293.7		)	(7,609.3		)
Net utility plant	16,462.9			15,522.9			15,568.6			16,893.3
Other property, at cost, less accumulated depreciation	18.0			19.6			18.6			18.9
Net Property, Plant and Equipment	16,480.9			15,542.5			15,587.2			16,912.2
Investments and Other Assets
Unconsolidated affiliates	2.2			2.1			1.3			1.3
Available-for-sale debt securities (amortized cost of $148.4 and $150.1, allowance for credit losses of $1.2 and $0, respectively)							144.6			154.2
Other investments	217.5			204.0			66.1			74.7
Total Investments and Other Assets	219.7			206.1			212.0			230.2
Current Assets
Cash and cash equivalents	28.0			112.8			203.8			139.3
Restricted cash	9.0			8.3			9.2			9.1
Accounts receivable (less reserve of $15.1 and $21.1, respectively)	539.3			1,058.5
Accounts receivable							736.8			876.1
Allowance for credit losses							(20.3		)	(19.2		)
Accounts receivable, net							716.5			856.9
Gas inventory	294.9			286.8			59.9			250.9
Materials and supplies, at average cost	115.1			101.0			130.9			120.2
Electric production fuel, at average cost	38.7			34.7			63.2			53.6
Exchange gas receivable	30.3			88.4			39.0			48.5
Assets held for sale							1,655.8			—
Regulatory assets	237.6			235.4			164.3			225.7
Prepayments and other	85.4			129.5			182.8			149.7
Total Current Assets	1,378.3			2,055.4			3,225.4			1,853.9
Other Assets
Regulatory assets	1,993.2			2,002.1			1,922.0			2,013.9
Goodwill	1,690.7			1,690.7			1,485.9			1,485.9
Intangible assets, net	212.5			220.7
Deferred charges and other	157.0			86.5			160.2			163.7
Total Other Assets	4,053.4			4,000.0			3,568.1			3,663.5
Total Assets	$	22,132.3		$	21,804.0		$	22,592.7		$	22,659.8

The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc. Condensed Consolidated Balance Sheets (unaudited) (continued)	NiSource Inc. Condensed Consolidated Balance Sheets (unaudited) (continued)						NiSource Inc. Condensed Consolidated Balance Sheets (unaudited) (continued)

(in millions, except share amounts)	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
CAPITALIZATION AND LIABILITIES
Capitalization
Stockholders’ Equity
Common stock - $0.01 par value, 600,000,000 shares authorized; 373,446,862 and 372,363,656 shares outstanding, respectively	$	3.8		$	3.8
Preferred stock - $0.01 par value, 20,000,000 shares authorized; 440,000 and 420,000 shares outstanding, respectively	880.0			880.0
Common stock - $0.01 par value, 600,000,000 shares authorized; 382,694,308 and 382,135,680 shares outstanding, respectively							$	3.8		$	3.8
Preferred stock - $0.01 par value, 20,000,000 shares authorized; 440,000 shares outstanding							880.0			880.0
Treasury stock	(99.9		)	(99.9		)	(99.9		)	(99.9		)
Additional paid-in capital	6,426.5			6,403.5			6,671.5			6,666.2
Retained deficit	(1,231.6		)	(1,399.3		)	(1,483.4		)	(1,370.8		)
Accumulated other comprehensive loss	(130.3		)	(37.2		)	(230.6		)	(92.6		)
Total Stockholders’ Equity	5,848.5			5,750.9			5,741.4			5,986.7
Long-term debt, excluding amounts due within one year	7,853.8			7,105.4			7,817.9			7,856.2
Total Capitalization	13,702.3			12,856.3			13,559.3			13,842.9
Current Liabilities
Current portion of long-term debt	10.9			50.0			7.9			13.4
Short-term borrowings	1,615.1			1,977.2			2,046.4			1,773.2
Accounts payable	494.9			883.8			505.6			666.0
Dividends payable - common stock	74.7			—			80.4			—
Dividends payable - preferred stock	19.4			—			19.4			—
Customer deposits and credits	242.8			238.9			163.2			256.4
Taxes accrued	157.8			222.7			223.8			231.6
Interest accrued	95.6			90.7			95.1			99.4
Exchange gas payable	54.8			85.5			18.5			59.7
Regulatory liabilities	103.0			140.9			177.9			160.2
Liabilities held for sale							470.9			—
Legal and environmental	20.0			18.9			17.5			20.1
Accrued compensation and employee benefits	145.7			149.7			129.4			156.3
Claims accrued	184.3			114.7			24.9			165.4
Other accruals	120.7			63.8			180.9			144.1
Total Current Liabilities	3,339.7			4,036.8			4,161.8			3,745.8
Other Liabilities
Risk management liabilities	125.0			46.7			312.1			134.0
Deferred income taxes	1,466.6			1,330.5			1,451.3			1,485.3
Deferred investment tax credits	10.1			11.2			9.4			9.7
Accrued insurance liabilities	85.3			84.4			82.4			81.5
Accrued liability for postretirement and postemployment benefits	365.5			389.1			359.4			373.2
Regulatory liabilities	2,440.0			2,519.1			2,033.8			2,352.0
Asset retirement obligations	373.1			352.0			435.9			416.9
Other noncurrent liabilities	224.7			177.9			187.3			218.5
Total Other Liabilities	5,090.3			4,910.9			4,871.6			5,071.1
Commitments and Contingencies (Refer to Note 16, "Other Commitments and Contingencies")	—			—
Commitments and Contingencies (Refer to Note 18, "Other Commitments and Contingencies")							—			—
Total Capitalization and Liabilities	$	22,132.3		$	21,804.0		$	22,592.7		$	22,659.8

The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc. Condensed Statements of Consolidated Cash Flows (unaudited)	NiSource Inc. Condensed Statements of Consolidated Cash Flows (unaudited)						NiSource Inc. Condensed Statements of Consolidated Cash Flows (unaudited)

Nine Months Ended September 30, (in millions)	2019			2018
Three Months Ended March 31, (in millions)							2020			2019
Operating Activities
Net Income (Loss)	$	522.4		$	(38.9	)
Adjustments to Reconcile Net Income (Loss) to Net Cash from Operating Activities:
Loss on early extinguishment of debt	—			45.5
Net Income							$	75.6		$	218.9
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation and amortization	535.2			437.8			184.3			175.1
Deferred income taxes and investment tax credits	120.4			(26.4		)	(19.9		)	51.6
Loss on classification as held for sale							280.2			—
Other adjustments	18.8			15.6			7.9			6.5
Changes in Assets and Liabilities:
Components of working capital	146.8			442.9			(147.1		)	(27.2		)
Regulatory assets/liabilities	(70.0		)	61.3			12.9			0.4
Deferred charges and other noncurrent assets	(76.4		)	0.8			(12.1		)	(58.3		)
Other noncurrent liabilities	34.6			(11.4		)	(11.9		)	32.1
Net Cash Flows from Operating Activities	1,231.8			927.2			369.9			399.1
Investing Activities
Capital expenditures	(1,310.0		)	(1,296.6		)	(452.1		)	(353.7		)
Cost of removal	(84.5		)	(72.6		)	(34.5		)	(25.3		)
Purchases of available-for-sale securities	(104.0		)	(71.4		)	(43.5		)	(25.7		)
Sales of available-for-sale securities	104.1			58.5			45.4			29.3
Other investing activities	0.6			5.6			0.1			—
Net Cash Flows used for Investing Activities	(1,393.8		)	(1,376.5		)	(484.6		)	(375.4		)
Financing Activities
Issuance of long-term debt	750.0			350.0
Repayments of long-term debt and finance lease obligations	(48.5		)	(1,044.0		)	(4.1		)	(2.3		)
Premiums and other debt related costs	(11.9		)	(46.1		)
Issuance of short-term debt (maturity > 90 days)	600.0			600.0			500.0			—
Repayment of short-term debt (maturity > 90 days)	(550.0		)	—			—			(350.0		)
Change in short-term borrowings, net (maturity ≤ 90 days)	(412.1		)	(194.6		)	(226.8		)	452.8
Issuance of common stock, net of issuance costs	10.9			611.6			3.7			3.1
Issuance of preferred stock, net of issuance costs	—			394.3
Acquisition of treasury stock	—			(4.0		)
Equity costs, premiums and other debt related costs							(5.1		)	(4.0		)
Dividends paid - common stock	(223.8		)	(202.5		)	(80.3		)	(74.5		)
Dividends paid - preferred stock	(36.7		)	—			(8.1		)	(9.1		)
Net Cash Flows from Financing Activities	77.9			464.7			179.3			16.0
Change in cash, cash equivalents and restricted cash	(84.1		)	15.4			64.6			39.7
Cash, cash equivalents and restricted cash at beginning of period	121.1			38.4			148.4			121.1
Cash, Cash Equivalents and Restricted Cash at End of Period	$	37.0		$	53.8		$	213.0		$	160.8

Supplemental Disclosures of Cash Flow Information


Nine Months Ended September 30, (in millions)	2019		2018
Three Months Ended March 31, (in millions)					2020		2019
Non-cash transactions:
Capital expenditures included in current liabilities	$	187.1	$	167.5	$	150.5	$	123.7
Dividends declared but not paid	94.1		82.4		99.8		94.0
Reclassification of other property to regulatory assets	—		245.3
Assets recorded for asset retirement obligations	$	12.8	$	74.7	$	69.8	$	4.8

The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Condensed Statements of Consolidated Equity (unaudited)


(in millions)	Common Stock		Preferred Stock⁽¹⁾		Treasury Stock			Additional Paid-In Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total			Common Stock		Preferred Stock⁽¹⁾		Treasury Stock			Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total
Balance as of July 1, 2019	$	3.8	$	880.0	$	(99.9	)	$	6,417.1	$	(1,144.0	)	$	(80.8	)	$	5,976.2
Comprehensive Loss:
Balance as of January 1, 2020																			$	3.8	$	880.0	$	(99.9	)	$	6,666.2		$	(1,370.8	)	$	(92.6	)	$	5,986.7
Comprehensive Income:
Net income	—		—		—			—		6.6			—			6.6			—		—		—			—			75.6			—			75.6
Other comprehensive loss, net of tax	—		—		—			—		—			(49.5		)	(49.5		)	—		—		—			—			—			(138.0		)	(138.0		)
Dividends:
Common stock ($0.20 per share)	—		—		—			—		(74.8		)	—			(74.8		)
Common stock ($0.42 per share)																			—		—		—			—			(160.7		)	—			(160.7		)
Preferred stock (See Note 5)	—		—		—			—		(19.4		)	—			(19.4		)	—		—		—			—			(27.5		)	—			(27.5		)
Stock issuances:
Employee stock purchase plan	—		—		—			1.5		—			—			1.5			—		—		—			1.3			—			—			1.3
Long-term incentive plan	—		—		—			3.6		—			—			3.6			—		—		—			(0.5		)	—			—			(0.5		)
401(k) and profit sharing	—		—		—			4.3		—			—			4.3			—		—		—			4.5			—			—			4.5
Balance as of September 30, 2019	$	3.8	$	880.0	$	(99.9	)	$	6,426.5	$	(1,231.6	)	$	(130.3	)	$	5,848.5
Balance as of March 31, 2020																			$	3.8	$	880.0	$	(99.9	)	$	6,671.5		$	(1,483.4	)	$	(230.6	)	$	5,741.4
⁽¹⁾Series A and Series B shares have an aggregate liquidation preference of $400M and $500M, respectively. See Note 5, "Equity" for additional information.	⁽¹⁾Series A and Series B shares have an aggregate liquidation preference of $400M and $500M, respectively. See Note 5, "Equity" for additional information.																		⁽¹⁾Series A and Series B shares have an aggregate liquidation preference of $400M and $500M, respectively. See Note 5, "Equity" for additional information.

(in millions)	Common Stock		Preferred Stock⁽¹⁾		Treasury Stock			Additional Paid-In Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total			Common Stock		Preferred Stock⁽¹⁾		Treasury Stock			Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Total
Balance as of January 1, 2019	$	3.8	$	880.0	$	(99.9	)	$	6,403.5	$	(1,399.3	)	$	(37.2	)	$	5,750.9		$	3.8	$	880.0	$	(99.9	)	$	6,403.5		$	(1,399.3	)	$	(37.2	)	$	5,750.9
Comprehensive Income:
Net income	—		—		—			—		522.4			—			522.4			—		—		—			—			218.9			—			218.9
Other comprehensive loss, net of tax	—		—		—			—		—			(93.1		)	(93.1		)	—		—		—			—			—			(15.6		)	(15.6		)
Dividends:
Common stock ($0.80 per share)	—		—		—			—		(298.6		)	—			(298.6		)
Common stock ($0.40 per share)																			—		—		—			—			(149.1		)	—			(149.1		)
Preferred stock (See Note 5)	—		—		—			—		(56.1		)	—			(56.1		)	—		—		—			—			(28.5		)	—			(28.5		)
Stock issuances:
Employee stock purchase plan	—		—		—			4.2		—			—			4.2			—		—		—			1.3			—			—			1.3
Long-term incentive plan	—		—		—			5.7		—			—			5.7			—		—		—			(2.7		)	—			—			(2.7		)
401(k) and profit sharing	—		—		—			13.1		—			—			13.1			—		—		—			4.4			—			—			4.4
Balance as of September 30, 2019	$	3.8	$	880.0	$	(99.9	)	$	6,426.5	$	(1,231.6	)	$	(130.3	)	$	5,848.5
Balance as of March 31, 2019																			$	3.8	$	880.0	$	(99.9	)	$	6,406.5		$	(1,358.0	)	$	(52.8	)	$	5,779.6

⁽¹⁾Series A and Series B shares have an aggregate liquidation preference of $400M and $500M, respectively. See Note 5, "Equity" for additional information.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Condensed Statements of Consolidated Equity (unaudited) (continued)



	Preferred	Common
Shares (in thousands)	Shares	Shares	Treasury		Outstanding
Balance as of January 1, 2020	440	386,099	(3,963	)	382,136
Issued:
Employee stock purchase plan	—	46	—		46
Long-term incentive plan	—	347	—		347
401(k) and profit sharing	—	165	—		165
Balance as of March 31, 2020	440	386,657	(3,963	)	382,694

	Preferred	Common
Shares (in thousands)	Shares	Shares	Treasury		Outstanding
Balance as of January 1, 2019	420	376,326	(3,963	)	372,363
Issued:
Preferred stock	20	—	—		—
Employee stock purchase plan	—	50	—		50
Long-term incentive plan	—	426	—		426
401(k) and profit sharing	—	164	—		164
Balance as of March 31, 2019	440	376,966	(3,963	)	373,003

(in millions) Common
Stock
Preferred Stock⁽¹⁾
Treasury
Stock Additional
Paid-In
Capital Retained
Deficit Accumulated
Other
Comprehensive
Income (Loss) Total
Balance as of July 1, 2018 $ 3.7
$ 394.4
$ (99.9 ) $ 6,151.2
$ (965.5 ) $ (20.9 ) $ 5,463.0
Comprehensive loss:
Net loss —
—
—
—
(339.5 ) —
(339.5 )
Other comprehensive income, net of tax —
—
—
—
—
23.4
23.4
Dividends:
Common stock ($0.195 per share) —
—
—
—
(70.9 ) —
(70.9 )
Preferred stock (See Note 5) —
—
—
—
(11.6 ) —
(11.6 )
Stock issuances:
Preferred stock —
(0.5 ) —
—
—
—
(0.5 )
Employee stock purchase plan —
—
—
1.5
—
—
1.5
Long-term incentive plan —
—
—
3.3
—
—
3.3
401(k) and profit sharing —
—
—
5.0
—
—
5.0
Balance as of September 30, 2018 $ 3.7
$ 393.9
$ (99.9 ) $ 6,161.0
$ (1,387.5 ) $ 2.5
$ 5,073.7
⁽¹⁾Series A shares have an aggregate liquidation preference of $400M. See Note 5, "Equity" for additional information.

(in millions)
Common
Stock

Preferred Stock⁽¹⁾

Treasury
Stock

Additional
Paid-In
Capital

Retained
Deficit

Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance as of January 1, 2018 $ 3.4
$ —
$ (95.9 ) $ 5,529.1
$ (1,073.1 ) $ (43.4 ) $ 4,320.1
Comprehensive income:
Net loss —
—
—
—
(38.9 ) —
(38.9 )
Other comprehensive income, net of tax —
—
—
—
—
55.4
55.4
Dividends:
Common stock ($0.78 per share) —
—
—
—
(273.4 ) —
(273.4 )
Preferred stock (See Note 5) —
—
—
—
(11.6 ) —
(11.6 )
Treasury stock acquired —
—
(4.0 ) —
—
—
(4.0 )
Cumulative effect of change in accounting principle —
—
—
—
9.5
(9.5 ) —
Stock issuances:
Common stock - private placement 0.3
—
—
599.3
—
—
599.6
Preferred stock —
393.9
—
—
—
—
393.9
Employee stock purchase plan —
—
—
4.2
—
—
4.2
Long-term incentive plan —
—
—
11.5
—
—
11.5
401(k) and profit sharing —
—
—
16.9
—
—
16.9
Balance as of September 30, 2018 $ 3.7
$ 393.9
$ (99.9 ) $ 6,161.0
$ (1,387.5 ) $ 2.5
$ 5,073.7

⁽¹⁾~~Series A shares have an aggregate liquidation preference of $400M. See Note 5, "Equity" for additional information.~~

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Condensed Statements of Consolidated Equity (unaudited) (continued)~~

Preferred Common
Shares (in thousands)
Shares Shares Treasury Outstanding
Balance as of July 1, 2019 440
377,212
(3,963 ) 373,249
Issued:
Employee stock purchase plan —
51
—
51
Long-term incentive plan —
1
—
1
401(k) and profit sharing —
146
—
146
Balance as of September 30, 2019 440
377,410
(3,963 ) 373,447

Preferred Common
Shares (in thousands)
Shares Shares Treasury Outstanding
Balance as of January 1, 2019 420
376,326
(3,963 ) 372,363
Issued:
Preferred stock 20
—
—
—
Employee stock purchase plan —
153
—
153
Long-term incentive plan —
465
—
465
401(k) and profit sharing —
466
—
466
Balance as of September 30, 2019 440
377,410
(3,963 ) 373,447

Preferred Common
Shares (in thousands)
Shares Shares Treasury Outstanding
Balance as of July 1, 2018 400
366,878
(3,963 ) 362,915
Issued:
Employee stock purchase plan —
55
—
55
Long-term incentive plan —
5
—
5
401(k) and profit sharing —
192
—
192
Balance as of September 30, 2018 400
367,130
(3,963 ) 363,167

Preferred Common
Shares (in thousands)
Shares Shares Treasury Outstanding
Balance as of January 1, 2018 —
340,813
(3,797 ) 337,016
Treasury Stock acquired —
—
(166 ) (166 )
Issued:
Common stock private placement —
24,964
—
24,964
Preferred stock 400
—
—
—
Employee stock purchase plan —
166
—
166
Long-term incentive plan —
499
—
499
401(k) and profit sharing —
688
—
688
Balance as of September 30, 2018 400
367,130
(3,963 ) 363,167

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

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Accounting Presentation

Our accompanying Condensed Consolidated Financial Statements (unaudited) reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with GAAP in the United States of America. The accompanying financial statements contain our accounts and that of our majority-owned or controlled subsidiaries.

The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019. Income for interim periods may not be indicative of results for the calendar year due to weather variations and other factors.

The Condensed Consolidated Financial Statements (unaudited) have been prepared pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made in this Quarterly Report on Form 10-Q are adequate to make the information herein not misleading.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

2. Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

We are currently evaluating the impact of certain ASUs on our Condensed Consolidated Financial Statements (unaudited) and Notes to Condensed Consolidated Financial Statements (unaudited), which are described below:



Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU ~~2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~	The pronouncement clarifies and improves certain areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. Topics 1, 2, and 5 of this update amends ASU 2016-13 as it relates to accrued interest, transfers between investment classifications, expected recoveries and reinsurance recoverables. Topic 3 improves guidance related to fair value hedges. Topic 4 of this update relates to codification improvements to ASU 2016-01.	~~Annual periods beginning after December 15, 2019, including interim periods therein. Early adoption is permitted.~~	We maintain investments in U.S. Treasury, corporate and mortgage-backed debt securities, which are pledged as collateral for trust accounts related to our wholly-owned insurance company. These debt securities are classified as available for sale ("AFS"). We are working with our external investment manager to enhance our current impairment model for AFS debt securities to comply with the standard. Upon adoption of ASC 326, we will recognize impairment for AFS debt securities by implementing an allowance approach instead of an 'other than temporary' impairment model. In addition, we have recorded balances for trade receivables that also fall within the scope of the standard. Based on shared risk characteristics, we segregated our trade receivables into 'residential customer receivables' and 'non-residential customer receivables'. We intend to apply separate models to calculate reserves for uncollectible receivables. While we continue to assess and enhance our processes of recording reserves for uncollectible receivables to comply with the current expected credit loss model, we do not expect any significant modifications to our current policy of calculating uncollectible reserves for our 'residential customer receivables' balances. ASC 326 also prescribes additional presentation and disclosure requirements. We are currently reviewing the impact of these requirements on our disclosures related to credit in our Notes to Condensed Consolidated Financial Statements (unaudited). We are unable to reasonably estimate the quantitative impact of adoption on our Condensed Consolidated Financial Statements (unaudited). We expect to adopt this ASU on its effective date.
~~ASU 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326)~~	The pronouncement changes the impairment model for most financial assets, replacing the current "incurred loss" model. ASU 2016-13 will require the use of an "expected loss" model for instruments measured at amortized cost. It will also require entities to record allowances for available-for-sale securities rather than impair the carrying amount of the securities. Subsequent improvements to the estimated credit losses of available-for-sale securities will be recognized immediately in earnings instead of over time as they are under historic guidance.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~



~~Standard~~	~~Description~~	~~Effective Date~~	~~Effect on the financial statements or other significant matters~~
~~ASU~~ 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	~~The~~This pronouncement modifies the disclosure requirements for defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. The modifications affect annual period disclosures and must be applied on a retrospective basis to all periods presented.	Annual periods ending after December 15, 2020. Early adoption is permitted.	We are currently ~~evaluating~~in discussions with our third-party specialist to evaluate the effects of this pronouncement on our Notes to Condensed Consolidated Financial Statements (unaudited). We expect to adopt this ASU on its effective date.
ASU 2019-12, IncomeTaxes (Topic 740): Simplifying the Accounting for Income Taxes	This pronouncement simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, income taxes. It also improves consistency of application for other areas of the guidance by clarifying and amending existing guidance.	Annual periods beginning after December 15, 2020 Early adoption is permitted.	We are currently evaluating the effects of this pronouncement on our Condensed Consolidated Financial Statements (unaudited) and Notes to Condensed Consolidated Financial Statements (unaudited). The most relevant amendment requires that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax. For NiSource, these taxes may include franchise taxes based on gross receipts, commercial activity taxes and utilities receipts taxes. We expect to adopt this ASU on its effective date.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Statements	This pronouncement provides temporary optional expedients and exceptions for applying GAAP principles to contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates.	Upon issuance on March 12, 2020, and will apply though December 31, 2022.	We are currently evaluating the temporary expedients and options available under this guidance, and the effects of this pronouncement on our Condensed Consolidated Financial Statements (unaudited) and Notes to Condensed Consolidated Financial Statements (unaudited). As of March 31, 2020, we have not applied any expedients and options available under this ASU.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Recently Adopted Accounting Pronouncements



Standard	Adoption
ASU ~~2019-01,~~2019-04, ~~Leases (Topic 842):~~ Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments	In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASC 326). ASC 326 revised the GAAP guidance on the impairment of most financial assets and certain other instruments that are not measured at fair value through net income. ASC 326 introduces the current expected credit loss (CECL) model that is based on expected losses for instruments measured at amortized cost rather than incurred losses. It also requires entities to record an allowance for available-for-sale debt securities rather than impair the carrying amount of the securities. Subsequent improvements to the estimated credit losses of available-for-sale debt securities will be recognized immediately in earnings, instead of over-time as they would under historic guidance. In 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivative and Hedging, and Topic 825, Financial Instruments. This pronouncement clarified and improved certain areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. We adopted ASC 326 effective January 1, 2020, using a modified retrospective method. Adoption of this standard did not have material impact on our Condensed Consolidated Financial Statements (unaudited). No adjustments were made to the January 1, 2020 opening balances as a result of this adoption. As required under the modified retrospective method of adoption, results for the reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts are not adjusted. See Note ~~15, "Leases,~~3, "Revenue Recognition," and Note 11, "Fair Value," for our discussion of the ~~effects of~~ implementing these standards.
~~ASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~
ASU ~~2018-01,~~2016-13, ~~Leases~~Financial Instruments-Credit Losses (Topic ~~842): Land Easement Practical Expedient for Transition to Topic 842~~
~~ASU 2016-02,~~ ~~Leases (Topic 842)~~326)

3. Revenue Recognition

Revenue Disaggregation and Reconciliation. We disaggregate revenue from contracts with customers based upon reportable segment as well as by customer class. As our revenues are primarily earned over a period of time and we do not earn a material amount of revenues at a point in time, revenues are not disaggregated as such below. The Gas Distribution Operations segment provides natural gas service and transportation for residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, Indiana and Massachusetts. The Electric Operations segment provides electric service in 20 counties in the northern part of Indiana.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

The tables below reconcile revenue disaggregation by customer class to segment revenue as well as to revenues reflected on the Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018:~~March 31, 2019:


Three Months Ended September 30, 2019 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Three Months Ended March 31, 2020 (in millions)									Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Customer Revenues⁽¹⁾
Residential	$	288.3	$	148.7	$	—	$	437.0	$	796.5	$	119.2	$	—	$	915.7
Commercial	90.9		136.3		—		227.2		269.4		120.2		—		389.6
Industrial	45.3		151.5		—		196.8		74.2		109.1		—		183.3
Off-system	16.9		—		—		16.9		18.7		—		—		18.7
Miscellaneous	9.8		3.1		0.2		13.1		12.5		5.9		0.2		18.6
Total Customer Revenues	$	451.2	$	439.6	$	0.2	$	891.0	$	1,171.3	$	354.4	$	0.2	$	1,525.9
Other Revenues	12.4		28.1		—		40.5		56.7		22.9		—		79.6
Total Operating Revenues	$	463.6	$	467.7	$	0.2	$	931.5	$	1,228.0	$	377.3	$	0.2	$	1,605.5

⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note ~~19,~~21, "Business Segment Information," for discussion of intersegment revenues.

Three Months Ended September 30, 2018
(in millions)
Gas Distribution Operations Electric Operations Corporate and Other Total
Customer Revenues⁽¹⁾

Residential $ 257.0
$ 154.7
$ —
$ 411.7
Commercial 80.9
140.7
—
221.6
Industrial 39.0
153.6
—
192.6
Off-system 20.4
—
—
20.4
Miscellaneous 9.2
0.1
0.2
9.5
Total Customer Revenues $ 406.5
$ 449.1
$ 0.2
$ 855.8
Other Revenues 12.1
27.1
—
39.2
Total Operating Revenues $ 418.6
$ 476.2
$ 0.2
$ 895.0
⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note 19, "Business Segment Information," for discussion of intersegment revenues.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)


Nine Months Ended September 30, 2019 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Three Months Ended March 31, 2019 (in millions)									Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Customer Revenues⁽¹⁾
Residential	$	1,638.6	$	373.4	$	—	$	2,012.0	$	975.3	$	118.8	$	—	$	1,094.1
Commercial	543.2		370.7		—		913.9		330.5		119.3		—		449.8
Industrial	181.1		470.6		—		651.7		82.9		163.3		—		246.2
Off-system	60.4		—		—		60.4		20.1		—		—		20.1
Miscellaneous	39.4		16.7		0.6		56.7		17.2		6.9		0.2		24.3
Total Customer Revenues	$	2,462.7	$	1,231.4	$	0.6	$	3,694.7	$	1,426.0	$	408.3	$	0.2	$	1,834.5
Other Revenues	43.5		73.5		—		117.0		12.8		22.5		—		35.3
Total Operating Revenues	$	2,506.2	$	1,304.9	$	0.6	$	3,811.7	$	1,438.8	$	430.8	$	0.2	$	1,869.8
⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note 19, "Business Segment Information," for discussion of intersegment revenues.

Nine Months Ended September 30, 2018 (in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Customer Revenues⁽¹⁾
Residential	$	1,540.3	$	382.3	$	—	$	1,922.6
Commercial	516.2		374.2		—		890.4
Industrial	161.3		468.1		—		629.4
Off-system	63.6		—		—		63.6
Miscellaneous	36.2		12.3		0.6		49.1
Total Customer Revenues	$	2,317.6	$	1,236.9	$	0.6	$	3,555.1
Other Revenues	30.2		67.5		—		97.7
Total Operating Revenues	$	2,347.8	$	1,304.4	$	0.6	$	3,652.8
⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note 19, "Business Segment Information," for discussion of intersegment revenues.
⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note 21, "Business Segment Information," for discussion of intersegment revenues.									⁽¹⁾ Customer revenue amounts exclude intersegment revenues. See Note 21, "Business Segment Information," for discussion of intersegment revenues.

Customer Accounts Receivable. Accounts receivable on our Condensed Consolidated Balance Sheets (unaudited) includes both billed and unbilled amounts, as well as certain amounts that are not related to customer revenues. Unbilled amounts of accounts receivable relate to a portion of a customer’s consumption of gas or electricity from the date of the last cycle billing through the last day of the month (balance sheet date). Factors taken into consideration when estimating unbilled revenue include historical usage, customer rates and weather. The opening and closing balances of customer receivables for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are presented in the table below. We had no significant contract assets or liabilities during the period. Additionally, we have not incurred any significant costs to obtain or fulfill contracts.

(in millions) Customer Accounts Receivable, Billed (less reserve) Customer Accounts Receivable, Unbilled (less reserve)
Balance as of December 31, 2018 $ 540.5
$ 349.1
Balance as of September 30, 2019 297.1
193.3
Increase (Decrease) $ (243.4 ) $ (155.8 )



(in millions)	Customer Accounts Receivable, Billed (less reserve)			Customer Accounts Receivable, Unbilled (less reserve)
Balance as of December 31, 2019	$	466.6		$	346.6
Balance as of March 31, 2020	449.9			233.5
Decrease	$	(16.7	)	$	(113.1	)

Utility revenues are billed to customers monthly on a cycle basis. We generally expect that substantially all customer accounts receivable will be collected within the month following customer billing, as this revenue consists primarily of monthly, tariff-based billings for service and usage. We maintain common utility credit risk mitigation practices, including requiring deposits and actively pursuing collection of past due amounts. In addition, our regulated operations utilize certain regulatory mechanisms that facilitate recovery of bad debt costs within tariff-based rates, which provides further evidence of collectibility. It is probable that substantially all of the consideration to which we are entitled from customers will be collected upon satisfaction of performance obligations.

Allowance for Credit Losses. We adopted ASC 326 effective January 1, 2020. See "Recently Adopted Accounting Pronouncements" in Note 2, "Recent Accounting Pronouncements," for more information about ASC 326.

Each of our business segments pool their customer accounts receivables based on similar risk characteristics, such as customer type, geography, payment terms, and related macro-economic risks. Expected credit loss exposure is evaluated separately for each of our accounts receivable pools. Expected credit losses are established using a model that considers historical collections experience, current information, and reasonable and supportable forecasts. Relevant and reliable internal and external inputs used in the model include, but are not limited to, gas consumption trends, revenue projections, actual charge-offs data, recoveries data, shut-off orders executed data, and final bill data. We continuously evaluate available reasonable and supportable information relevant to assessing collectability of current and future receivables. We evaluate creditworthiness of specific customers periodically or when required by changes in facts and circumstances. When we become aware of a specific customer's inability to pay, an allowance for expected credit losses is recorded for the relevant amount. We also monitor other circumstances that could affect our overall expected credit losses; these include, but are not limited to, creditworthiness of overall population in service territories, adverse conditions impacting an industry sector, and general economic conditions. At each reporting period, we record expected credit losses using an allowance for credit losses account. When deemed to be uncollectible, customer accounts are written-off.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

A rollforward of our allowance for credit losses for the three months ended March 31, 2020 are presented in the table below:



Three Months Ended March 31, 2020 (in millions)	Gas Distribution Operations			Electric Operations			Corporate and Other		Total
Beginning balance⁽¹⁾	$	9.1		$	3.1		$	0.8	$	13.0
Current period provisions	9.1			1.5			—		10.6
Write-offs charged against allowance	(6.9		)	(1.0		)	—		(7.9		)
Recoveries of amounts previously written off	4.6			—			—		4.6
Ending balance of the allowance for credit losses	$	15.9		$	3.6		$	0.8	$	20.3
⁽¹⁾Total beginning balance differs from that presented in the Condensed Statements of Consolidated Balance Sheet (unaudited) as it excludes Columbia of Massachusetts. Columbia of Massachusetts' customer receivables and related allowance for credit losses are classified as held for sale at March 31, 2020.

In response to the COVID-19 pandemic, we have suspended shut-offs for nonpayment. This suspension applies to residential, commercial and industrial customers and will remain in effect until further notice. In addition, we are offering flexible payment plans to customers impacted or experiencing hardship as a result of COVID-19. For the three months ended March 31, 2020, we did not experience a material increase in our allowance for credit losses as a result of COVID-19. The adverse impact that COVID-19 will have on our customers' ability to pay is unknown and difficult to predict; however, we are monitoring changing circumstances and will adjust our allowance for credit losses as additional information becomes available.

4. Earnings Per Share

Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding for the period. The weighted-average shares outstanding for diluted EPS includes the incremental effects of the various long-term incentive compensation plans and forward agreements when the impact would be dilutive (See Note 5 "Equity"). The computation of diluted average common shares for the three months ended September 30, 2019 and the three and nine months ended September 30, 2018 is not presented since we had a net loss on the Condensed Statements of Consolidated Income (Loss) (unaudited) during the periods, and any incremental shares would have had an anti-dilutive impact on EPS. The computation of diluted average common shares for the nine months ended September 30, 2019 is as follows:



		~~Nine Months Ended~~
		~~September 30,~~
~~(in thousands)~~		~~2019~~
~~Denominator~~
~~Basic average common shares outstanding~~		~~373,796~~
~~Dilutive potential common shares:~~
~~Shares contingently issuable under employee stock plans~~		~~919~~
~~Shares restricted under employee stock plans~~		~~141~~
~~Forward Agreements~~		~~339~~
~~Diluted Average Common Shares~~		~~375,195~~



	Three Months Ended
	March 31,
(in thousands)	2020	2019
Denominator
Basic average common shares outstanding	383,062	373,356
Dilutive potential common shares:
Shares contingently issuable under employee stock plans	845	1,062
Shares restricted under employee stock plans	207	133
Forward Agreements	—	105
Diluted Average Common Shares	384,114	374,656

5. Equity

Common Stock. As of ~~September 30, 2019,~~March 31, 2020, we had 600,000,000 shares of common stock authorized for issuance, of which ~~373,446,862~~382,694,308 shares were outstanding.

ATM Program and Forward Sale Agreements. On ~~August~~November 1, ~~2019,~~2018, we ~~amended 4~~entered into five separate equity distribution agreements ~~originally entered into on November 1, 2018,~~ pursuant to which we were able to sell up to an aggregate of $500.0 million of our common stock. Four of these agreements were then amended on August 1, 2019, and one was terminated. Pursuant to the four agreements, as amended, we may sell, from time to time, up to an aggregate ~~value~~ of ~~$434.4~~$434.4 million of our common stock. ~~The agreements expire on December~~

As of March 31, ~~2020.~~

~~On December 6, 2018, under~~2020, the ATM program we executed a forward agreement, which allows us to issue a fixed number of shares at a price to be settled in the future. From December 6, 2018 to December 10, 2018, 4,708,098 shares were borrowed from third parties and sold by the dealer at a weighted average price of $26.55 per share. We may settle this agreement in shares, cash, or net shares by December 6, 2019. Had we settled all the shares under the forward agreement at September 30, 2019, we would have receivedhad approximately ~~$123.3 million, based on a net price of $26.19 per share.~~

On August 12, 2019, under the ATM program, we executed a separate forward agreement similar to that discussed above. From August 12, 2019 to September 13, 2019, 3,714,400 shares were borrowed from third parties and sold by the dealer at a weighted average price of $29.26 per share. We may settle this agreement in shares, cash, or net shares by December 31, 2019. Had we settled all the shares under the forward agreement at September 30, 2019, we would have received approximately $107.6 million, based on a net price of $28.98 per share.

~~As of September 30, 2019, the ATM program (including impacts of the forward sale agreements discussed above) had~~ $200.7 million of equity available for issuance. The program expires on December 31, 2020. We did not have any activity under the ATM program for the three months ended March 31, 2020.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Preferred Stock. As of ~~September 30, 2019,~~March 31, 2020, we had 20,000,000 shares of preferred stock authorized for issuance, of which 440,000 shares of preferred stock in the aggregate for all series were outstanding. The following table displays preferred dividends declared for the period by outstanding series of shares:


				Three Months Ended September 30,				Nine Months Ended September 30,				September 30,		December 31,
				2019		2018		2019		2018		2019		2018					Quarter Ended March 31, 2020		Quarter Ended March 31, 2019	March 31, 2020		December 31, 2019
(in millions except shares and per share amounts)	Liquidation Preference Per Share		Shares	Dividends Declared Per Share								Outstanding				Liquidation Preference Per Share		Shares	Dividends Declared Per Share			Outstanding
5.650% Series A	$	1,000.00	400,000	$	28.25	$	28.88	$	56.50	$	28.88	$	393.9	$	393.9	$	1,000.00	400,000	$	28.25	28.25	$	393.9	$	393.9
6.500% Series B	$	25,000.00	20,000	$	406.25	$	—	$	1,674.65	$	—	$	486.1	$	486.1	$	25,000.00	20,000	$	812.50	862.15	$	486.1	$	486.1

In addition, 20,000 shares of Series B–1 Preferred Stock, par value $0.01 per share, were ~~issued~~outstanding as ~~a distribution with respect to the Series B Preferred Stock in order to enhance the voting rights~~ of ~~the Series B Preferred Stock to comply with the New York Stock Exchange’s minimum voting rights policy.~~March 31, 2020. Holders of Series B–1 Preferred Stock are not entitled to receive dividend payments and have no conversion rights. The Series B–1 Preferred Stock is paired with the Series B Preferred Stock and may not be transferred, redeemed or repurchased except in connection with the simultaneous transfer, redemption or repurchase of the underlying Series B Preferred Stock.

As of March 31, 2020, Series A Preferred Stock had $6.7 million of cumulative preferred dividends in arrears, or $16.63 per share, and Series B Preferred Stock had $1.4 million of cumulative preferred dividends in arrears, or $72.23 per share.

6. Gas in Storage

We use both the LIFO inventory methodology and the weighted-average cost methodology to value natural gas in storage. Gas Distribution Operations prices natural gas storage injections at the average of the costs of natural gas supply purchased during the year. For interim periods, the difference between current projected replacement cost and the LIFO cost for quantities of gas temporarily withdrawn from storage is recorded as a temporary LIFO liquidation credit or debit within the Condensed Consolidated Balance Sheets (unaudited). Due to seasonality requirements, we expect interim variances in LIFO layers to be replenished by year end. We had a temporary LIFO liquidation debit of $29.9 million and 0 as of March 31, 2020 and December 31, 2019, respectively, for certain gas distribution companies recorded within “Prepayments and other,” on the Condensed Consolidated Balance Sheets (unaudited).

7. Assets and Liabilities Held For Sale

On February 26, 2020, NiSource and Columbia of Massachusetts entered into an Asset Purchase Agreement with Eversource. Upon the terms and subject to the conditions set forth in the Asset Purchase Agreement, NiSource and Columbia of Massachusetts agreed to sell to Eversource, with certain additions and exceptions: (1) substantially all of the assets of Columbia of Massachusetts and (2) all of the assets held by any of Columbia of Massachusetts’ affiliates that primarily relate to the Massachusetts Business, and Eversource agreed to assume certain liabilities of Columbia of Massachusetts and its affiliates. The liabilities assumed by Eversource under the Asset Purchase Agreement do not include, among others, any liabilities arising out of the Greater Lawrence Incident or liabilities of Columbia of Massachusetts or its affiliates pursuant to civil claims for injury of persons or damage to property to the extent such injury or damage occurs prior to the closing in connection with the Massachusetts Business. The Asset Purchase Agreement provides for a purchase price of $1,100 million in cash, subject to adjustment based on Columbia of Massachusetts’ net working capital as of the closing. The closing of the transactions contemplated by the Asset Purchase Agreement is subject to various conditions, including the receipt of the approval of the Massachusetts DPU and resolution of proceedings before certain governmental bodies. As of March 31, 2020, the Massachusetts Business met the requirements under GAAP to be classified as held for sale, and the assets and liabilities of the Massachusetts Business are measured at fair value, less costs to sell. Our estimated total pre-tax loss as of the quarter ended March 31, 2020 is $280.2 million, based on March 31, 2020 asset and liability balances, estimated net working capital and estimated transaction costs. This estimated pre-tax loss is presented as Loss on Classification as Held for Sale on the Condensed Statements of Consolidated Income (unaudited) and is subject to change based on estimated transaction costs, the net working capital adjustment, and asset and liability balances at each measurement date leading up to the closing date. The final pre-tax loss on the transaction will be determined as of the closing date. The sale is expected to close by September 30, 2020, subject to closing conditions.

The Massachusetts Business had a pretax loss of $236.2 million and $80.7 million for the three months ended March 31, 2020 and 2019, respectively. The pretax loss amounts exclude allocated executive compensation expense and interest expense for intercompany and external debt that will not be assumed by Eversource or required to be repaid at closing. The pretax loss amounts

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

for the three months ended March 31, 2020 and 2019 include costs directly related to the Greater Lawrence Incident. In addition, the pretax loss amount for March 31, 2020 includes the Loss on Classification as Held for Sale. The major classes of assets and liabilities classified as held for sale on the Condensed Consolidated Balance Sheets (unaudited) at March 31, 2020 were:



(in millions)
Assets Held for Sale	Net Property, Plant and Equipment	Total Current Assets	Total Other Assets	Loss on Classification as Held for Sale⁽¹⁾		Total Assets Held for Sale
Gas Distribution Operations	1,641.2	200.4	88.7	(274.5	)	1,655.8
Liabilities Held for Sale	Long-term Debt, Excluding Amounts Due Within One Year		Total Current Liabilities	Total Other Liabilities		Total Liabilities Held for Sale
Gas Distribution Operations	42.4		78.9	349.6		470.9

⁽¹⁾ Amount differs from that presented in the Condensed Statements of Consolidated Income (unaudited) due to cash already paid for certain transaction costs.

6.8. Asset Retirement Obligations

In the first quarter of 2020, we made revisions to the estimated costs associated with refining the CCR compliance plan. The CCR rule requires the continued collection of data over time to determine the specific compliance solution. The change in estimated costs resulted in an increase to the asset retirement obligation liability of $69.8 million that was recorded in March 2020. See Note 18-C, "Environmental Matters," for additional information on CCRs.

9. Regulatory Matters

Cost Recovery and Trackers

Comparability of our line item operating results is impacted by regulatory trackers that allow for the recovery in rates of certain costs such as those described below. Increases in the expenses that are the subject of trackers generally result in a corresponding increase in operating revenues and, therefore, have essentially no impact on total operating income results.

Certain costs of our operating companies are significant, recurring in nature and generally outside the control of the operating companies. Some states allow the recovery of such costs through cost tracking mechanisms. Such tracking mechanisms allow for abbreviated regulatory proceedings in order for the operating companies to implement charges and recover appropriate costs. Tracking mechanisms allow for more timely recovery of such costs as compared with more traditional cost recovery mechanisms. Examples of such mechanisms include GCR adjustment mechanisms, tax riders, bad debt recovery mechanisms, electric energy efficiency programs, MISO non-fuel costs and revenues, resource capacity charges, ~~federally-mandated~~federally mandated costs and environmental-related costs.

A portion of the Gas Distribution revenue is related to the recovery of gas costs, the review and recovery of which occurs through standard regulatory proceedings. All states in our operating area require periodic review of actual gas procurement activity to determine prudence and to permit the recovery of prudently incurred costs related to the supply of gas for customers. Our distribution companies have historically been found prudent in the procurement of gas supplies to serve customers.

A portion of the Electric Operations revenue is related to the recovery of fuel costs to generate power and the fuel costs related to purchased power. These costs are recovered through a FAC, a quarterly regulatory proceeding in Indiana.

Infrastructure Replacement and Federally-Mandated Compliance Programs

All of our operating utility companies have completed rate proceedings involving infrastructure replacement or enhancement, and have embarked upon initiatives to replace significant portions of their operating systems that are nearing the end of their useful lives. Each company's approach to cost recovery is unique, given the different laws, regulations and precedent that exist in each jurisdiction.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The following table describes the most recent vintage of our regulatory programs to recover infrastructure replacement and other federally-mandated compliance investments currently in rates and those pending commission approval:



(in millions)
Company	Program	Incremental Revenue		Incremental Capital Investment	Investment Period	Filed	Status	Rates Effective
Columbia of Ohio	IRP - 2020	32.9		234.4	1/19-12/19	February 28, 2020	Approved April 22, 2020	May 2020
Columbia of Ohio	CEP - 2019	15.0		121.7	1/18-12/18	February 28, 2019	Approved August 28, 2019	September 2019
Columbia of Ohio	CEP - 2020	18.1		185.1	1/19-12/19	February 28, 2020	Order Expected August 2020	September 2020
NIPSCO - Gas	TDSIC 10⁽¹⁾	1.6		12.4	7/18-4/19	June 25, 2019	Approved October 16, 2019	November 2019
NIPSCO - Gas	TDSIC 11⁽²⁾	(1.7	)	38.7	5/19-12/19	February 25, 2020	Order Expected June 2020	July 2020
NIPSCO - Gas	FMCA 3⁽³⁾	0.3		43.0	4/19-9/19	November 26, 2019	Approved March 31, 2020	April 2020
Columbia of Massachusetts	GSEP - 2020⁽³⁾⁽⁴⁾	0.9		37.5	1/20-12/20	October 31, 2019	Approved April 30, 2020	May 2020
Columbia of Virginia	SAVE - 2020	3.8		50.0	1/20-12/20	August 15, 2019	Approved December 6, 2019	January 2020
Columbia of Kentucky	SMRP - 2020	4.2		40.4	1/20-12/20	October 15, 2019	Approved December 20, 2019	January 2020
Columbia of Maryland	STRIDE - 2020	1.3		15.0	1/20-12/20	January 29, 2020	Approved February 19, 2020	February 2020
NIPSCO - Electric	TDSIC - 6	28.1		131.1	12/18-6/19	August 21, 2019	Approved December 18, 2019	January 2020
NIPSCO - Electric	FMCA - 12⁽³⁾	1.6		4.7	3/19-8/19	October 18, 2019	Approved January 29, 2020	February 2020
NIPSCO - Electric	FMCA - 13⁽³⁾⁽⁵⁾	(1.2	)	—	9/19-2/20	April 15, 2020	Order Expected July 2020	August 2020
Columbia of Pennsylvania	DSIC 2020	0.9		28.2	12/19-2/20	April 27, 2020	Approved May 4, 2020	May 2020

(in millions)
Company Program Incremental Revenue Incremental Capital Investment Investment Period Filed Status
Rates
Effective
Columbia of Ohio
IRP - 2019⁽¹⁾
18.2
199.6
1/18-12/18 February 28, 2019 Approved
April 24, 2019 May 2019
Columbia of Ohio CEP - 2018 74.5
659.9
1/11-12/17 December 1, 2017 Approved
November 28, 2018 December 2018
Columbia of Ohio CEP - 2019 15.0
121.7
1/18-12/18 February 28, 2019 Approved
August 28, 2019 September 2019
NIPSCO - Gas
TDSIC 9⁽¹⁾⁽²⁾
(10.6 ) 54.4
1/18-6/18 August 28, 2018 Approved
December 27, 2018 January 2019
NIPSCO - Gas
TDSIC 10⁽³⁾
1.6
12.4
7/18-4/19 June 25, 2019 Approved
October 16, 2019 November 2019
NIPSCO - Gas
FMCA 1⁽⁴⁾
9.9
1.5
11/17-9/18 November 30, 2018 Approved
March 27, 2019 April 2019
NIPSCO - Gas
FMCA 2⁽⁴⁾
(3.5 ) 1.8
10/18-3/19 May 29, 2019 Approved September 25, 2019 October 2019
Columbia of Massachusetts
GSEP - 2019⁽⁵⁾
10.7
64.0
1/19-12/19 October 31, 2018 Approved
April 30, 2019 May 2019
Columbia of Virginia SAVE - 2019 2.4
36.0
1/19-12/19 August 17, 2018 Approved
October 26, 2018 January 2019
Columbia of Virginia SAVE - 2020 3.8
48.3
1/20-12/20 August 15, 2019 Order Expected Q4 2019 January 2020
Columbia of Kentucky AMRP - 2019 3.6
30.1
1/19-12/19 October 15, 2018 Approved
December 5, 2018 January 2019
Columbia of Kentucky AMRP - 2020 4.2
40.4
1/20-12/20 October 15, 2019 Order Expected
Q4 2019 January 2020
Columbia of Maryland STRIDE - 2019 1.2
15.9
1/19-12/19 November 1, 2018 Approved
December 12, 2018 January 2019
NIPSCO - Electric
TDSIC - 5⁽¹⁾
15.9
58.8
6/18-11/18 January 29, 2019 Approved
June 12, 2019 June 2019
NIPSCO - Electric TDSIC - 6 28.1
131.1
12/18-6/19 August 21, 2019 Order Expected Q4 2019 January 2020
NIPSCO - Electric
FMCA - 11⁽⁴⁾
0.9
22.4
9/18-2/19 April 17, 2019 Approved
July 29, 2019 August 2019
NIPSCO - Electric
FMCA - 12⁽⁴⁾
1.6
4.7
3/19-8/19 October 18, 2019 Order Expected January 2020 February 2020

⁽¹⁾~~Incremental revenue is net of amounts due back to customers as a result of the TCJA.~~

⁽²⁾~~Incremental revenue is net of $5.2 million of adjustments in the TDSIC-9 settlement.~~

⁽³⁾Incremental capital and revenue are net of amounts included in the step 2 ~~base rate implementation.~~rates.

⁽⁴⁾⁽²⁾Incremental revenue is net of amounts included in the step 2 rates and reflects a more typical 6-month filing period.

⁽³⁾Incremental revenue is inclusive of tracker eligible operations and maintenance expense.

⁽⁵⁾⁽⁴⁾Incremental revenue reflects a 50% decrease in projected 2020 capital investments due to the October 3, 2019 order from the Massachusetts DPU that imposed work restrictions on Columbia of Massachusetts and the Massachusetts DPU's ongoing investigations.

⁽⁵⁾No eligible capital investments were made during the investment ~~anticipated to be lower than $64.0 million for 2019.~~period.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Rate Case Actions

The following table describes current rate case actions as applicable in each of our jurisdictions net of tracker impacts:

(in millions)
Company Requested Incremental Revenue Approved or Settled Incremental Revenue Filed Status
Rates
Effective
NIPSCO - Gas⁽¹⁾
$ 138.1
$ 107.3
September 27, 2017 Approved
September 19, 2018 October 2018
Columbia of Virginia⁽²⁾
$ 14.2
$ 1.3
August 28, 2018 Approved
June 12, 2019 February 2019
NIPSCO - Electric⁽³⁾
$ 21.4
$ (45.0 ) October 31, 2018 Partial settlement filed
April 26, 2019,
Order expected
Q4 2019 First quarter of 2020
Columbia of Maryland $ 2.5
In Process
May 22, 2019 Order Expected
Q4 2019 January 2020



(in millions)
Company	Requested Incremental Revenue		Approved or Settled Incremental Revenue			Filed	Status	Rates Effective
NIPSCO - Electric⁽¹⁾	$	21.4	$	(53.5	)	October 31, 2018	Approved December 4, 2019	January 2020
Columbia of Pennsylvania	$	100.4	in process			April 24, 2020	Order Expected January 2021	January 2021

⁽¹⁾Rates ~~will be~~were implemented in ~~three~~two steps, with implementation of step 1 rates effective ~~October 1, 2018. Step~~on January 2, 2020 and step 2 rates ~~were~~ effective on March ~~1, 2019, and step 3 rates will be effective on January 1,~~2, 2020. ~~The IURC’s order also dismissed NIPSCO from phase 2 of the IURC’s TCJA investigation.~~

⁽²⁾~~Rates as originally filed were implemented in February 2019 on an interim basis, subject to refund. The final approved rates, which replaced interim rates, were implemented in July 2019.~~

⁽³⁾An order on the partial settlement agreement, including the resolution of outstanding TCJA impacts to rates is currently pending before the IURC. The as-filed request and partial settlement agreement also includes $83.6 million and $85.3 million, respectively, of reductions to the fuel component of base rates related to a proposed change in service structure.

~~Additional Regulatory Matters~~

~~NIPSCO Electric.~~ On March 29, 2018, WCE, which is currently owned by BP p.l.c ("BP") and BP Products North America, which operates the BP Refinery, filed a petition at the IURC asking that the combined operations of WCE and BP be treated as a single premise, and the WCE generation be dedicated primarily to BP Refinery operations beginning in May 2019 as WCE has self-certified as a qualifying facility at FERC. BP Refinery planned to continue to purchase electric service from NIPSCO at a reduced demand level beginning in May 2019; however, a settlement agreement was filed on November 2, 2018 agreeing that BP and WCE would not move forward with construction of a private transmission line to serve BP until conclusion of NIPSCO’s pending electric rate case. The IURC approved the settlement agreement as filed on February 20, 2019.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

10. Risk Management Activities

We are exposed to certain risks relating to our ongoing business operations, namely commodity price risk and interest rate risk. We recognize that the prudent and selective use of derivatives may help to lower our cost of debt capital, manage our interest rate exposure and limit volatility in the price of natural gas.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Risk management assets and liabilities on our derivatives are presented on the Condensed Consolidated Balance Sheets (unaudited) as shown below:


(in millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Risk Management Assets - Current⁽¹⁾
Interest rate risk programs	$	—	$	—	$	—	$	—
Commodity price risk programs	1.0		1.1		17.3		0.6
Total	$	1.0	$	1.1	$	17.3	$	0.6
Risk Management Assets - Noncurrent⁽²⁾
Interest rate risk programs	$	—	$	18.5	$	—	$	—
Commodity price risk programs	4.3		4.4		10.9		3.8
Total	$	4.3	$	22.9	$	10.9	$	3.8
Risk Management Liabilities - Current⁽³⁾
Interest rate risk programs	$	46.4	$	—	$	—	$	—
Commodity price risk programs	10.7		5.0		14.5		12.6
Total	$	57.1	$	5.0	$	14.5	$	12.6
Risk Management Liabilities - Noncurrent
Interest rate risk programs	$	78.1	$	9.5	$	253.7	$	76.2
Commodity price risk programs	46.9		37.2		58.4		57.8
Total	$	125.0	$	46.7	$	312.1	$	134.0

⁽¹⁾Presented in "Prepayments and other" on the Condensed Consolidated Balance Sheets (unaudited).

⁽²⁾Presented in "Deferred charges and other" on the Condensed Consolidated Balance Sheets (unaudited).

⁽³⁾Presented in "Other accruals" on the Condensed Consolidated Balance Sheets (unaudited).

Commodity Price Risk Management

We, along with our utility customers, are exposed to variability in cash flows associated with natural gas purchases and volatility in natural gas prices. We purchase natural gas for sale and delivery to our retail, commercial and industrial customers, and for most customers the variability in the market price of gas is passed through in their rates. Some of our utility subsidiaries offer programs whereby variability in the market price of gas is assumed by the respective utility. The objective of our commodity price risk programs is to mitigate the gas cost variability, for us or on behalf of our customers, associated with natural gas purchases or sales by economically hedging the various gas cost components using a combination of futures, options, forwards or other derivative contracts.

NIPSCO received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments. The term of these instruments may range from five to ten years and is limited to 20 percent of NIPSCO’s average annual GCA purchase volume. Gains and losses on these derivative contracts are deferred as regulatory liabilities or assets and are remitted to or collected from customers through NIPSCO’s quarterly GCA mechanism. These instruments are not designated as accounting hedges.

Interest Rate Risk Management

As of ~~September 30, 2019,~~March 31, 2020, we have forward-starting interest rate swaps with an aggregate notional value totaling $500.0 million to hedge the variability in cash flows attributable to changes in the benchmark interest rate during the periods from the effective dates of the swaps to the anticipated dates of forecasted debt issuances, which are expected to take place by 2024. These interest rate swaps are designated as cash flow hedges. The gains and losses related to these swaps are recorded to AOCI and are recognized in "Interest expense, net" concurrently with the recognition of interest expense on the associated debt, once issued. If it becomes probable that a hedged forecasted transaction will no longer occur, the accumulated gains or losses on the derivative will be recognized currently in "Other, net" in the Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited).

~~There were 0 amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at September 30, 2019 and December 31, 2018.~~

~~Our derivative instruments measured at fair value as of September 30, 2019 and December 31, 2018 do not contain any credit-risk-related contingent features.~~

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

8.There were 0 amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at March 31, 2020 and December 31, 2019.

Our derivative instruments measured at fair value as of March 31, 2020 and December 31, 2019 do not contain any credit-risk-related contingent features.

11. Fair Value

A. Fair Value Measurements

Recurring Fair Value ~~Measurements.~~Measurements

The following tables present financial assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets (unaudited) on a recurring basis and their level within the fair value hierarchy as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


Recurring Fair Value Measurements September 30, 2019 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2019
Recurring Fair Value Measurements March 31, 2020 (in millions)									Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2020
Assets
Risk management assets	$	—	$	5.3	$	—	$	5.3	$	—	$	28.2	$	—	$	28.2
Available-for-sale securities	—		145.7		—		145.7
Available-for-sale debt securities									—		144.6		—		144.6
Total	$	—	$	151.0	$	—	$	151.0	$	—	$	172.8	$	—	$	172.8
Liabilities
Risk management liabilities	$	—	$	182.1	$	—	$	182.1	$	—	$	326.6	$	—	$	326.6
Total	$	—	$	182.1	$	—	$	182.1	$	—	$	326.6	$	—	$	326.6


Recurring Fair Value Measurements December 31, 2018 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2018
Recurring Fair Value Measurements December 31, 2019 (in millions)									Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2019
Assets
Risk management assets	$	—	$	24.0	$	—	$	24.0	$	—	$	4.4	$	—	$	4.4
Available-for-sale securities	—		138.3		—		138.3
Available-for-sale debt securities									—		154.2		—		154.2
Total	$	—	$	162.3	$	—	$	162.3	$	—	$	158.6	$	—	$	158.6
Liabilities
Risk management liabilities	$	—	$	51.7	$	—	$	51.7	$	—	$	146.6	$	—	$	146.6
Total	$	—	$	51.7	$	—	$	51.7	$	—	$	146.6	$	—	$	146.6

Risk Management Assets and Liabilities.Risk management assets and liabilities include interest rate swaps, exchange-traded NYMEX futures and NYMEX options and non-exchange-based forward purchase contracts. When utilized, exchange-traded derivative contracts are based on unadjusted quoted prices in active markets and are classified within Level 1. These financial assets and liabilities are secured with cash on deposit with the exchange; therefore, nonperformance risk has not been incorporated into these valuations. Certain non-exchange-traded derivatives are valued using broker or over-the-counter, on-line exchanges. In such cases, these non-exchange-traded derivatives are classified within Level 2. Non-exchange-based derivative instruments include swaps, forwards, and options. In certain instances, these instruments may utilize models to measure fair value. We use a similar model to value similar instruments. Valuation models utilize various inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and market-corroborated inputs, (i.e., inputs derived principally from or corroborated by observable market data by correlation or other means). Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized within Level 2. Certain derivatives trade in less active markets with a lower availability of

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

pricing information and models may be utilized in the valuation. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized within Level 3. Credit risk is considered in the fair value calculation of derivative instruments that are not exchange-traded. Credit exposures are adjusted to reflect collateral agreements which reduce exposures. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, there were 0 material transfers between fair value hierarchies. Additionally, there were no changes in the method or significant assumptions used to estimate the fair value of our financial instruments.

We have entered into forward-starting interest rate swaps to hedge the interest rate risk on coupon payments of forecasted issuances of long-term debt. These derivatives are designated as cash flow hedges. Credit risk is considered in the fair value calculation of each agreement. As they are based on observable data and valuations of similar instruments, the hedges are categorized within

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Level 2 of the fair value hierarchy. There was no exchange of premium at the initial date of the swaps, and we can settle the contracts at any time. For additional information, see Note 7,10, "Risk Management Activities."

NIPSCO has entered into long-term forward natural gas purchase instruments that range from five to ten years to lock in a fixed price for its natural gas customers. We value these contracts using a pricing model that incorporates market-based information when available, as these instruments trade less frequently and are classified within Level 2 of the fair value hierarchy. For additional information, see Note 7,10, “Risk Management Activities.”

Available-for-Sale Debt Securities. Available-for-sale debt securities are investments pledged as collateral for trust accounts related to our wholly-owned insurance company. ~~Available-for-sale securities are included within “Other investments” in the Condensed Consolidated Balance Sheets (unaudited).~~ We value U.S. Treasury, corporate debt and mortgage-backed securities using a matrix pricing model that incorporates market-based information. These securities trade less frequently and are classified within Level 2. ~~Total~~

We adopted ASC 326 effective January 1, 2020. See "Recently Adopted Accounting Pronouncements" in Note 2, "Recent Accounting Pronouncements," for more information about ASC 326. Upon adoption of ASC 326, our available-for-sale debt securities impairments are recognized periodically using an allowance approach instead of an 'other than temporary' impairment model. At each reporting date, we utilize a quantitative and qualitative review process to assess the impairment of available-for-sale debt securities at the individual security level. For securities in a loss position, we evaluate our intent to sell or whether it is more-likely-than-not that we will be required to sell the security prior to the recovery of its amortized cost. If either criteria is met, the loss is recognized in earnings immediately, with the offsetting entry to the carrying value of the security. If both criteria are not met, we perform an analysis to determine whether the unrealized ~~gains~~loss is related to credit factors. The analysis focuses on a variety of factors that include, but are not limited to, downgrade on ratings of the security, defaults in the current reporting period or projected defaults in the future, the security's yield spread over treasuries, and ~~losses from available-for-sale securities are~~other relevant market data. If the unrealized loss is not related to credit factors, it is included in other comprehensive income. If the unrealized loss is related to credit factors, the loss is recognized as credit loss expense in earnings during the period, with an offsetting entry to the allowance for credit losses. The amount of the credit loss recorded to the allowance account is limited by the amount at which security's fair value is less than its amortized cost basis. If the credit losses in the allowance for credit losses are deemed uncollectible, the allowance on the uncollectible portion will be charged off, with an offsetting entry to the carrying value of the security. Subsequent improvements to the estimated credit losses of available-for-sale debt securities will be recognized immediately in earnings instead of over-time as they would under historic guidance. During the three months ended March 31, 2020, we recorded $1.2 million as an allowance for credit losses on available-for-sale debt securities as a result of the analysis described above. Continuous credit monitoring and portfolio credit balancing mitigates our risk of credit losses on our available-for-sale debt securities.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of available-for-sale securities at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were:


September 30, 2019 (in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities
March 31, 2020 (in millions)										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses⁽¹⁾			Allowance for Credit Losses			Fair Value
Available-for-sale debt securities
U.S. Treasury debt securities	$	31.1	$	0.2	$	(0.1	)	$	31.2	$	26.7	$	0.7	$	—		$	—		$	27.4
Corporate/Other debt securities	110.6		4.1		(0.2		)	114.5		121.7		2.2		(5.5		)	(1.2		)	117.2
Total	$	141.7	$	4.3	$	(0.3	)	$	145.7	$	148.4	$	2.9	$	(5.5	)	$	(1.2	)	$	144.6

December 31, 2018 (in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities
December 31, 2019 (in millions)										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses⁽²⁾			Allowance for Credit Losses			Fair Value
Available-for-sale debt securities
U.S. Treasury debt securities	$	23.6	$	0.1	$	(0.1	)	$	23.6	$	31.4	$	0.1	$	(0.1	)	$	—		$	31.4
Corporate/Other debt securities	117.7		0.4		(3.4		)	114.7		118.7		4.2		(0.1		)	—			122.8
Total	$	141.3	$	0.5	$	(3.5	)	$	138.3	$	150.1	$	4.3	$	(0.2	)	$	—		$	154.2

⁽¹⁾Fair value of U.S. Treasury debt securities and Corporate/Other debt securities in an unrealized loss position without an allowance for credit losses is $0 and $54 million, respectively, at March 31, 2020.

⁽²⁾Fair value of U.S. Treasury debt securities and Corporate/Other debt securities in an unrealized loss position without an allowance for credit losses is $17.2 million and $12.2 million, respectively, at December 31, 2019.

Realized gains and losses on available-for-sale securities were immaterial for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

The cost of maturities sold is based upon specific identification. At ~~September 30, 2019,~~March 31, 2020, approximately ~~$6.8~~$4.7 million of U.S. Treasury debt securities and approximately ~~$4.5~~$6.3 million of Corporate/Other debt securities have maturities of less than a year.

There are 0 material items in the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Non-recurring Fair Value ~~Measurements.~~Measurements ~~There were 0 significant non-recurring~~

We measure the fair value ~~measurements~~of certain assets on a non-recurring basis, typically annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include goodwill.

At March 31, 2020, we recorded ~~during~~a loss on classification as held for sale of $280.2 million in connection with measuring the ~~three~~assets and ~~nine months ended September 30, 2019.~~liabilities of the Massachusetts Business at fair value, less the costs to sell. For additional information, see Note 7, "Assets and Liabilities Held for Sale."

B. Other Fair Value Disclosures for Financial Instruments. The carrying amount of cash and cash equivalents, restricted cash, customer deposits and short-term borrowings is a reasonable estimate of fair value due to their liquid or short-term nature. Our long-term borrowings are recorded at historical amounts.

The following method and assumptions were used to estimate the fair value of each class of financial instruments.

Long-term Debt. The fair value of outstanding long-term debt is estimated based on the quoted market prices for the same or similar securities. Certain premium costs associated with the early settlement of long-term debt are not taken into consideration in determining fair value. These fair value measurements are classified within Level 2 of the fair value hierarchy. For the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020, there was no change in the method or significant assumptions used to estimate the fair value of long-term debt.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The carrying amount and estimated fair values of these financial instruments were as follows:


(in millions)	Carrying Amount as of September 30, 2019		Estimated Fair Value as of September 30, 2019		Carrying Amount as of Dec. 31, 2018		Estimated Fair Value as of Dec. 31, 2018		Carrying Amount as of March 31, 2020		Estimated Fair Value as of March 31, 2020		Carrying Amount as of Dec. 31, 2019		Estimated Fair Value as of Dec. 31, 2019
Long-term debt (including current portion)	$	7,864.7	$	8,865.2	$	7,155.4	$	7,228.3	$	7,825.8	$	8,381.1	$	7,869.6	$	8,764.4

9.12. Transfers of Financial Assets

Columbia of Ohio, NIPSCO and Columbia of Pennsylvania each maintain a receivables agreement whereby they transfer their customer accounts receivables to third-party financial institutions through wholly-owned and consolidated special purpose entities. The 3 agreements expire between ~~May~~August 2020 and ~~October 2020~~May 2021 and may be further extended if mutually agreed to by the parties thereto.

All receivables transferred to third parties are valued at face value, which approximates fair value due to their short-term nature. The amount of the undivided percentage ownership interest in the accounts receivables transferred is determined in part by required loss reserves under the agreements.

Transfers of accounts receivable are accounted for as secured borrowings resulting in the recognition of short-term borrowings on the Condensed Consolidated Balance Sheets (unaudited). As of ~~September 30, 2019,~~March 31, 2020, the maximum amount of debt that could be recognized related to our accounts receivable programs is ~~$270.0~~$540.0 million.

The following table reflects the gross receivables balance and net receivables transferred, as well as short-term borrowings related to the securitization transactions as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(in millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Gross Receivables	$	375.1	$	694.4	$	593.2	$	569.1
Less: Receivables not transferred	115.0		295.2		133.8		215.9
Net receivables transferred	$	260.1	$	399.2	$	459.4	$	353.2
Short-term debt due to asset securitization	$	260.1	$	399.2	$	459.4	$	353.2

For the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, $139.1~~$106.2 million and ~~$71.7~~$100.8 million, respectively, was recorded as cash flows ~~used for~~from financing activities related to the change in short-term borrowings due to securitization transactions. Fees associated with the securitization transactions were ~~$0.6~~$0.7 million and ~~$0.4~~$0.8 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, respectively. Columbia of Ohio, NIPSCO and ~~2018, respectively, and $2.0 million and $1.9 million for the nine months ended September 30, 2019 and 2018, respectively. We~~Columbia of Pennsylvania remain responsible for collecting on the receivables securitized, and the receivables cannot be transferred to another party.

~~10.~~13. Goodwill

The following presents our goodwill balance allocated by segment as of ~~September 30, 2019:~~March 31, 2020:


(in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total		Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Goodwill	$	1,690.7	$	—	$	—	$	1,690.7	$	1,485.9	$	—	$	—	$	1,485.9

For our annual goodwill impairment analysis most recently performed as of May 1, 2019, we completed a qualitative "step 0" analysis for all reporting units other than our Columbia of Massachusetts reporting unit. InThe results of the step 0 analysis, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the applicable reporting units as compared to their baseline May 1, 2016 "step 1" fair value measurement. The results of this assessment indicated that it was not more likely than not that the fair values of these reporting units were less than their respective carrying values, accordingly, no "step 1" analysis was required.

The results of our Columbia of Massachusetts reporting unit were negatively impacted by the Greater Lawrence Incident (see Note ~~16, "Other Commitments and Contingencies"~~18-B, "Legal Proceedings"). As a result, we completed a quantitative "step 1" analysis for the May 1, 2019 goodwill analysis for this reporting unit. The step 1 analysis performed indicated that the fair value of the Columbia of Massachusetts reporting unit substantially exceeds its carrying value. As a result, no impairment charge was recorded as of the May 1, 2019 test date.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

During the fourth quarter of 2019, in connection with the preparation of the year-end financial statements, we assessed the matters related to Columbia of Massachusetts and determined a new impairment analysis was required for our Columbia of Massachusetts reporting unit. The December 31, 2019 impairment analysis indicated that the fair value of the Columbia of Massachusetts reporting unit ~~substantially exceeds~~was below its carrying value. As a result, 0we reduced the Columbia of Massachusetts reporting unit goodwill balance to zero and recognized a goodwill impairment charge ~~was recorded as~~totaling $204.8 million in 2019.

While our annual goodwill impairment test is performed during the second quarter, with a valuation date of ~~the~~ May 1, ~~2019 test date. This analysis incorporated~~we continuously monitor changes in circumstances that may indicate that it is more likely than not that the latest available cash flow projections reflecting the estimated ongoing impacts of the Greater Lawrence Incident on Columbia of Massachusetts' operations. We also incorporated other significant inputs to our fair value ~~calculation (e.g. discount rate, market multiples)~~of our reporting units is less than the reporting unit carrying value. During the first quarter of 2020, we assessed events and circumstances related to ~~reflect current market conditions. We will continue to monitor the impacts of the incident for events that could trigger a new impairment analysis~~COVID-19, including, but not limited to, ~~unfavorable~~general economic conditions, access to capital, developments in the equity and credit markets, the impact on NiSource's share price, the availability and cost of materials and labor, the impact on revenue and cash flow, and regulatory ~~outcomes~~ and ~~regulator fines~~political activity. The result of this assessment indicated that it was not more likely than not that the fair values of our reporting units were less than their respective carrying values at March 31, 2020.

We have begun our May 1, 2020 annual goodwill impairment analysis. We are assessing various assumptions, events and ~~penalties. As~~circumstances that will affect the estimated fair value of ~~September 30, 2019,~~our reporting units, including an on-going evaluation of the impact of COVID-19. Our annual goodwill ~~at Columbia~~analysis will be completed by the end of ~~Massachusetts totaled $204.8 million.~~the second quarter.

~~11.~~14. Income Taxes

Our interim effective tax rates reflect the estimated annual effective tax rates for ~~2019~~2020 and ~~2018,~~2019, adjusted for tax expense associated with certain discrete items. The effective tax rates for the three months ended ~~September 30,~~March 31, 2020 and 2019 were (24.5)% and ~~2018 were 283.3% and 21.8%, respectively. The effective tax rates for the nine months ended September 30, 2019 and 2018 were 18.8% and 40.3%~~21.2%, respectively. These effective tax rates differ from the federal statutory tax rate of 21% primarily due to increased amortization of excess deferred federal income tax liabilities, as specified in the ~~effects of~~TCJA, tax credits, state income taxes and other permanent book-to-tax differences.

The decrease in the three month effective tax rate of 45.7% in 2020 compared to 2019 is primarily attributable to increased amortization of excess deferred federal income tax liabilities, as specified in the TCJA, and ~~in utility ratemaking proceedings, and other permanent book-to-tax differences. These adjustments have~~ a ~~relative impact on the effective tax rate proportionally to pretax income or loss.~~

~~The increase in the three month effective tax rate of 261.5% in 2019 versus the same period in 2018 is primarily due~~discrete item related to the ~~relative impact~~pre–tax book loss recorded for the classification as held for sale of ~~permanent differences on lower pre-tax loss.~~the Massachusetts Business tax effected at statutory tax rates.

~~The decrease in the nine month effective tax rate of 21.5% in 2019 versus the same period in 2018 is primarily due to the relative impact of permanent differences on higher pre-tax book income.~~

There were 0 material changes recorded in ~~2019~~2020 to our uncertain tax positions recorded as of December 31, ~~2018, however it~~2019.

The CARES Act was enacted on March 27, 2020 in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017. Future guidance to clarify provisions in the CARES Act (as well as under the TCJA) remains forthcoming, and such guidance could ultimately increase or lessen their impact on our business and financial condition. It is ~~reasonably~~also possible that Congress and other agencies will enact additional legislation or policies in connection with COVID-19, and we will continue to assess the ~~total amount~~potential impacts of these developments on our ~~unrecognized~~financial position and results of operations. There are no material income tax ~~benefits related to state tax positions will significantly change within~~impacts on our consolidated financial position, results of operations, and cash flows during the ~~next 12 months. We cannot reasonably estimate the range of this potential change at this time.~~three months ended March 31, 2020.

~~12.~~15. Pension and Other Postretirement Benefits

We provide defined contribution plans and noncontributory defined benefit retirement plans that cover certain of our employees. Benefits under the defined benefit retirement plans reflect the employees’ compensation, years of service and age at retirement. Additionally, we provide health care and life insurance benefits for certain retired employees. The majority of employees may become eligible for these benefits if they reach retirement age while working for us. The expected cost of such benefits is accrued during the employees’ years of service. For most plans, cash contributions are remitted to grantor trusts.

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we contributed ~~$2.1~~$0.8 million to our pension plans and ~~$17.8~~$6.3 million to our other postretirement benefit plans.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The following table provides the components of the plans’ actuarially determined net periodic benefit cost for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~

2019:


	Pension Benefits						Other Postretirement Benefits						Pension Benefits						Other Postretirement Benefits
Three Months Ended September 30, (in millions)	2019			2018			2019			2018
Three Months Ended March 31, (in millions)													2020			2019			2020			2019
Components of Net Periodic Benefit Cost⁽¹⁾
Service cost	$	7.3		$	7.8		$	1.3		$	1.3		$	8.0		$	7.3		$	1.6		$	1.3
Interest cost	18.1			16.8			4.8			4.4			13.5			18.2			3.9			4.8
Expected return on assets	(27.2		)	(35.4		)	(3.3		)	(3.7		)	(28.4		)	(27.2		)	(3.6		)	(3.3		)
Amortization of prior service credit	—			(0.1		)	(0.8		)	(1.0		)	0.2			—			(0.5		)	(0.8		)
Recognized actuarial loss	11.3			10.2			0.5			0.9			8.7			11.4			1.3			0.5
Settlement loss	1.9			8.3			—			—
Total Net Periodic Benefit Cost	$	11.4		$	7.6		$	2.5		$	1.9		$	2.0		$	9.7		$	2.7		$	2.5

⁽¹⁾The service cost component and all non-service cost components of net periodic benefit cost are presented in "Operation and maintenance" and "Other, net", respectively, on the Condensed Statements of Consolidated Income (unaudited).

Pension Benefits
Other Postretirement
Benefits
Nine Months Ended September 30, (in millions)
2019 2018 2019 2018
Components of Net Periodic Benefit Cost⁽¹⁾

Service cost $ 21.9
$ 23.6
$ 3.9
$ 3.9
Interest cost 54.5
50.0
14.4
13.2
Expected return on assets (81.6 ) (107.9 ) (9.9 ) (11.1 )
Amortization of prior service credit —
(0.3 ) (2.4 ) (3.0 )
Recognized actuarial loss 34.1
30.6
1.5
2.7
Settlement loss 1.9
11.8
—
—
Total Net Periodic Benefit Cost $ 30.8
$ 7.8
$ 7.5
$ 5.7

⁽¹⁾The service cost component, and all non-service cost components, of net periodic benefit cost are presented in "Operation and maintenance" and "Other, net", respectively, on the Condensed Statements of Consolidated Income (unaudited).

As of August 31, 2019, two of our qualified pension plans met the requirement for settlement accounting. A settlement charge of $1.9 million was recorded during the third quarter of 2019. As a result of the settlement, these pension plans were remeasured. The remeasurements led to a decrease to the pension benefit obligation, net of plan assets, of $2.2 million, a net decrease to regulatory assets of $4.0 million, and a net credit to accumulated other comprehensive loss of $0.1 million. Net periodic pension benefit cost for 2019 decreased by $0.7 million as a result of the interim remeasurement.

The following table provides the key assumptions that were used to calculate the pension benefit obligation and the net periodic benefit cost for the plans that triggered settlement accounting at the measurement date of August 31, 2019:



	~~August 31, 2019~~
~~Weighted-average Assumption to Determine Benefit Obligation~~
~~Discount rate~~	~~2.80~~	%
~~Weighted-average Assumptions to Determine Net Periodic Benefit Costs for the period ended~~
~~Discount rate - service cost~~	~~4.49~~	%
~~Discount rate - interest cost~~	~~3.84~~	%
~~Expected return on assets~~	~~5.70~~	%

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

16. Long-Term Debt

~~13. Long-Term Debt~~

On April ~~1, 2019, NIPSCO repaid $41.0 million~~13, 2020, we completed our issuance and sale of ~~5.85% pollution control bonds at maturity.~~

~~On August 12, 2019, we closed our placement~~$1.0 billion of ~~$750.0 million of 2.95%~~3.60% senior unsecured notes maturing in ~~2029~~2030 which resulted in approximately ~~$742.4~~$987.8 million of net proceeds after deducting commissions and expenses.

~~14.~~17. Short-Term Borrowings

We generate short-term borrowings from our revolving credit facility, commercial paper program, accounts receivable transfer programs and term loan borrowings. Each of these borrowing sources is described further below.

We maintain a revolving credit facility to fund ongoing working capital requirements, including the provision of liquidity support for our commercial paper program, provide for issuance of letters of credit and also for general corporate purposes. Our revolving credit facility has a program limit of $1.85 billion and is comprised of a syndicate of banks led by Barclays. ~~On February 20, 2019, we extended the termination date~~We had $500.0 million of ~~our revolving credit~~outstanding borrowings under this facility ~~to February 20, 2024. At September 30, 2019~~as of March 31, 2020 and ~~December 31, 2018, we had~~ 0 outstanding borrowings under this ~~facility.~~facility as of December 31, 2019.

Our commercial paper program has a program limit of up to $1.5 billion with a dealer group comprised of Barclays, Citigroup, Credit Suisse and Wells Fargo. We had ~~$505.0~~$237.0 million and ~~$978.0~~$570.0 million of commercial paper outstanding as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

Transfers of accounts receivable are accounted for as secured borrowings resulting in the recognition of short-term borrowings on the Condensed Consolidated Balance Sheets (unaudited). We had ~~$260.1~~$459.4 million in transfers as of ~~September 30, 2019~~March 31, 2020 and ~~$399.2~~$353.2 million in transfers as of December 31, ~~2018.~~2019. Refer to Note 9,12, "Transfers of Financial Assets," for additional information.

Short-term borrowings were as follows:



(in millions)	March 31, 2020		December 31, 2019
Revolving credit facility interest rate of 2.13% at March 31, 2020	$	500.0	$	—
Commercial paper weighted-average interest rate of 2.02% and 2.03% at March 31, 2020 and December 31, 2019, respectively	237.0		570.0
Accounts receivable securitization facility	459.4		353.2
Term loan interest rate of 3.25% and 2.40% at March 31, 2020 and December 31, 2019, respectively	850.0		850.0
Total Short-Term Borrowings	$	2,046.4	$	1,773.2

Other than for the term loan, revolving credit facility and certain commercial paper borrowings, cash flows related to the borrowings and repayments of the items listed above are presented net in the Condensed Statements of Consolidated Cash Flows (unaudited) as their maturities are less than 90 days.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

On April ~~17, 2019,~~1, 2020, we ~~amended~~terminated and repaid in full our existing $850.0 million term loan agreement with a syndicate of banks ~~with~~led by MUFG Bank, Ltd. ~~as the Administrative Agent, Sole Lead Arranger~~ and ~~Sole Bookrunner. The amendment increased the amount of our~~entered into a new $850.0 million term loan ~~from~~ ~~$600.0 million~~ ~~to $850.0 million~~agreement with a syndicate of banks led by KeyBank National Association. The term loan matures March 31, 2021, at which point any and ~~extended~~all outstanding borrowings under the ~~maturity date to April 16, 2020.~~agreement are due. Interest charged on borrowings depends on the variable rate structure we elect at the time of each borrowing. The available variable rate structures from which we may choose are defined in the term loan agreement. Under the agreement, we borrowed $850.0 million on April ~~17, 2019~~1, 2020 with an interest rate of LIBOR plus 6075 basis points.

~~Short-term borrowings were as follows:~~

(in millions) September 30,
2019 December 31,
2018
Commercial paper weighted-average interest rate of 2.74% and 2.96% at September 30, 2019 and December 31, 2018, respectively $ 505.0
$ 978.0
Accounts receivable securitization facility borrowings 260.1
399.2
Term loan weighted-average interest rate of 2.65% and 3.07% at September 30, 2019 and December 31, 2018, respectively 850.0
600.0
Total Short-Term Borrowings $ 1,615.1
$ 1,977.2

Other than for the term loan and certain commercial paper borrowings, cash flows related to the borrowings and repayments of the items listed above are presented net in the Condensed Statements of Consolidated Cash Flows (unaudited) as their maturities are less than 90 days.

~~15. Leases~~

~~ASC 842 Adoption.~~ In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842). ASU 2016-02 introduces a lessee model that brings most leases onto the balance sheet. The standard requires that lessees recognize the following for all leases (with the exception of short-term leases, as that term is defined in the standard) at the lease commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. In 2018, the FASB issued ASU 2018-01, Leases (ASC 842): Land Easement Practical Expedient for Transition to ASC 842, which allows us to not evaluate existing land easements under ASC 842, and ASU 2018-11, Leases (ASC 842): Targeted Improvements, which allows calendar year entities to initially apply ASC 842 prospectively from January 1, 2019.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

We adopted the provisions of ASC 842 beginning on January 1, 2019, using the transition method provided in ASU 2018-11, which was applied to all existing leases at that date. As such, results for reporting periods beginning after January 1, 2019 will be presented under ASC 842, while prior period amounts will continue to be reported in accordance with ASC 840. We elected a number of practical expedients, including the "practical expedient package" described in ASC 842-10-65-1 and the provisions of ASU 2018-01, which allows us to not evaluate existing land easements under ASC 842. Further, ASC 842 provides lessees the option of electing an accounting policy, by class of underlying asset, in which the lessee may choose not to separate nonlease components from lease components. We elected this practical expedient for our leases of fleet vehicles, IT assets and railcars. We elected to use a practical expedient that allows the use of hindsight in determining lease terms when evaluating leases that existed at the implementation date. We also elected the short-term lease recognition exemption, allowing us to not recognize ROU assets or lease liabilities for all leases that qualify.

Adoption of the new standard resulted in the recording of additional lease liabilities and corresponding ROU assets of $57.0 million on our Condensed Consolidated Balance Sheets (unaudited) as of January 1, 2019. The standard had no material impact on our Condensed Statements of Consolidated Income (Loss) (unaudited) or our Condensed Statements of Consolidated Cash Flows (unaudited).

~~Lease Descriptions.~~ We are the lessee for substantially all of our leasing activity, which includes operating and finance leases for corporate and field offices, railcars, fleet vehicles and certain IT assets. Our corporate and field office leases have remaining lease terms between 1 and 25 years with options to renew the leases for up to 25 years. We lease railcars to transport coal to and from our electric generation facilities in Indiana. Our railcars are specifically identified in the lease agreements and have lease terms between 1 and 3 years with options to renew for 1 year. Our fleet vehicles include trucks, trailers and equipment that have been customized specifically for use in the utility industry. We lease fleet vehicles on 1 year terms, after which we have the option to extend on a month-to-month basis or terminate with written notice. ROU assets and liabilities on our Condensed Consolidated Balance Sheets (unaudited) do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so.

We lease the majority of our IT assets under 4 year lease terms. Ownership of leased IT assets is transferred to us at the end of the lease term. We have not provided material residual value guarantees for our leases, nor do our leases contain material restrictions or covenants. Lease contracts containing renewal and termination options are mostly exercisable at our sole discretion. Certain of our real estate and railcar leases include renewal periods in the measurement of the lease obligation if we have deemed the renewals reasonably certain to be exercised.

With respect to service contracts involving the use of assets, if we have the right to direct the use of the asset and obtain substantially all economic benefits from the use of an asset, we account for the service contract as a lease. Unless specifically provided to us by the lessor, we utilize NiSource's collateralized incremental borrowing rate commensurate to the lease term as the discount rate for all of our leases.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Lease costs for the three and nine months ended September 30, 2019 are presented in the table below. These costs include both amounts recognized in expense and amounts capitalized as part of the cost of another asset. Income statement presentation for these costs (when ultimately recognized on the income statement) is also included:

Three Months Ended
September 30, Nine Months Ended
September 30,
(in millions) Income Statement Classification 2019 2019
Finance lease cost
Amortization of right-of-use assets Depreciation and amortization $ 3.6
$ 11.3
Interest on lease liabilities Interest expense, net 3.1
8.5
Total finance lease cost 6.7
19.8
Operating lease cost Operation and maintenance 5.3
12.3
Short-term lease cost Operation and maintenance 0.1
0.9
Total lease cost $ 12.1
$ 33.0

~~Our right-of-use assets and liabilities are presented in the following lines on the Condensed Consolidated Balance Sheets (unaudited):~~

(in millions) Balance Sheet Classification September 30, 2019
Assets
Finance leases Net Property, Plant and Equipment $ 176.5
Operating leases Deferred charges and other 60.9
Total leased assets 237.4
Liabilities
Current
Finance leases Current portion of long-term debt 10.7
Operating leases Other accruals 10.5
Noncurrent
Finance leases Long-term debt, excluding amounts due within one year 187.2
Operating leases Other noncurrent liabilities 50.5
Total lease liabilities $ 258.9

~~Other pertinent information related to leases was as follows:~~

Nine Months Ended September 30, (in millions)
2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases $ 8.4
Operating cash flows used for operating leases 11.8
Financing cash flows used for finance leases 7.7
Right-of-use assets obtained in exchange for lease obligations
Finance leases 11.0
Operating leases $ 3.7



	~~September 30, 2019~~
~~Weighted-average remaining lease term (years)~~
~~Finance leases~~	~~15.5~~
~~Operating leases~~	~~9.7~~
~~Weighted-average discount rate~~
~~Finance leases~~	~~6.0~~	%
~~Operating leases~~	~~4.4~~	%

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

~~Maturities of our lease liabilities presented on a rolling 12-month basis were as follows:~~

As of September 30, 2019, (in millions)
Total Finance Leases Operating Leases
Year 1 $ 37.7
$ 24.5
$ 13.2
Year 2 33.9
24.6
9.3
Year 3 32.8
24.6
8.2
Year 4 29.3
21.6
7.7
Year 5 27.6
20.6
7.0
Thereafter 247.8
214.8
33.0
Total lease payments 409.1
330.7
78.4
Less: Imputed interest (121.6 ) (107.0 ) (14.6 )
Less: Leases not yet commenced⁽¹⁾
(28.6 ) (25.8 ) (2.8 )
Total 258.9
197.9
61.0
Reported as of September 30, 2019
Short-term lease liabilities 21.2
10.7
10.5
Long-term lease liabilities 237.7
187.2
50.5
Total lease liabilities $ 258.9
$ 197.9
$ 61.0

⁽¹⁾ Expected payments include obligations for leases not yet commenced of approximately $28.6 million for interconnection facilities and corporate and field offices. The facilities will have lease terms between 8 years and 20 years, with estimated commencements in the fourth quarter of 2019 and in the third quarter of 2020.

~~Disclosures Related to Periods Prior to Adoption of ASC 842.~~

~~As of December 31, 2018, total contractual obligations for capital and operating leases were as follows:~~

As of December 31, 2018, (in millions)
Total
Capital Leases⁽¹⁾
Operating Leases⁽²⁾
2019 $ 34.0
$ 23.0
$ 11.0
2020 29.8
22.5
7.3
2021 28.7
22.6
6.1
2022 26.3
22.1
4.2
2023 22.6
19.8
2.8
Thereafter 226.9
212.4
14.5
Total lease payments $ 368.3
$ 322.4
$ 45.9

⁽¹⁾~~Capital lease payments shown above are inclusive of interest totaling $114.6 million.~~

⁽²⁾Operating lease balances do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so. Expected payments are $26.7 million in 2019, $22.4 million in 2020, $16.6 million in 2021, $12.3 million in 2022, $9.3 million in 2023 and $8.8 million thereafter.

~~16.~~18. Other Commitments and Contingencies

A. Guarantees and Indemnities. We and certain of our subsidiaries enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries as a part of normal business. Such agreements include guarantees and stand-by letters of credit. These agreements are entered into primarily to support or enhance the creditworthiness otherwise attributed to a subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish the subsidiaries’ intended commercial purposes. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had issued stand-by letters of credit of $10.2 million.

We have provided a guaranty related to our future performance under a BTA for our renewable generation projects. At March 31, 2020, this guarantee totaled $8.5 million.

B. Legal Proceedings. On September 13, 2018, a series of fires and explosions occurred in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by Columbia of Massachusetts (the "Greater Lawrence Incident"). The Greater Lawrence Incident resulted in one fatality and a number of injuries, damaged multiple homes and businesses, and caused the temporary evacuation of significant portions of each municipality. The Massachusetts Governor’s Office declared a state of emergency, authorizing the Massachusetts DPU to order another utility company to coordinate the restoration of utility services in Lawrence, Andover and North Andover. The incident resulted in the interruption of gas ~~service~~ for approximately 7,500 gas meters, the majority of which served residences and approximately 700 of which served businesses, and the interruption of

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

other utility service more broadly in the area. Columbia of Massachusetts has replaced the cast iron and bare steel gas pipeline system in the affected area and restored service to nearly all of the gas meters. See ~~“ -~~“- D. Other Matters - Greater Lawrence Pipeline Replacement” below for more information.

We are subject to inquiries and investigations by ~~federal and state~~ government authorities and regulatory agencies regarding the Greater Lawrence ~~Incident. The NTSB has concluded its investigation. The U.S Attorney’s office,~~Incident, including the ~~SEC,~~Massachusetts DPU and the Massachusetts ~~DPU have pending investigations related~~Attorney General's Office, as described below. We are cooperating with all inquiries and investigations. In addition, on February 26, 2020, the Company and Columbia of Massachusetts entered into agreements with the U.S. Attorney’s Office for the District of Massachusetts to resolve the U.S. Attorney’s Office’s investigation relating to the Greater Lawrence Incident, as described below. We are also subject to inquiries by the Massachusetts Attorney General’s Office. We are cooperating with all inquiries and investigations. The outcomes and impacts of the current investigations and any future investigations that may be commenced related to such inquiries are uncertain at this time.

NTSB ~~Investigation.~~Investigation The NTSB investigated the Greater Lawrence Incident as described below. The parties to the investigation included the PHMSA, the Massachusetts DPU, Columbia of Massachusetts, and the Massachusetts State Police. We cooperated with. As previously disclosed, the NTSB ~~and provided information to assist in~~concluded its investigation into ~~relevant facts related to the event, the probable cause, and its development of safety recommendations.~~

According to the preliminary public report that the NTSB issued on October 11, 2018, an over-pressurization of a low-pressure gas distribution system occurred that was related to work being done on behalf of Columbia of Massachusetts on a pipeline replacement project in Lawrence. According to the report, sensing lines detected a drop in pressure in a portion of mainline that was being abandoned, causing a regulator to open up and increase pressure in the system to a level that exceeded the maximum allowable operating pressure of the distribution system.

~~On November 14, 2018, the NTSB issued an urgent safety recommendationreport regarding natural gas distribution system project development and review. In its report, the NTSB identified certain factors that it believes contributed to~~ the Greater Lawrence Incident, and ~~made safety recommendations. The NTSB recommended that~~we are implementing the Commonwealth of Massachusetts eliminate the professional engineer licensure exemption for public utility work and require a professional engineer’s seal on public utility engineering drawings, which is now law in Massachusetts. The NTSB also made recommendations to us related to engineering plan and constructability review processes, records and documentation, management of change processes, and control procedures during modifications to gas mains. We implemented these recommendations. As of September 24, 2019, each of these recommendations has been closed by the NTSB based on acceptable action.

Since the Greater Lawrence Incident, we have identified and proceeded with additional steps to enhance system safety and reliability and to safeguard against future over-pressurization events. Some of these measures have already been completed and others are in process. These Company-wide safety measures include enhanced measures as called for in the NTSB’s recommendations. For example, we have committed to a program to install over-pressurization protection devices on all of our low-pressure systems, which is described in “- D. Other Matters.”

On September 24, 2019, the NTSB held a public board meeting regarding the probable cause of the Greater Lawrence Incident. The NTSB issued an abstract of its final report following the meeting, and its final report on October 24, 2019. The NTSB stated that it had determined that the probable cause of the over-pressurization of the natural gas distribution system and the resulting fires and explosions was Columbia of Massachusetts’ weak engineering management that did not adequately plan, review, sequence, and oversee the construction project that led to the abandonment of a cast iron main without first relocating regulator sensing lines to the new polyethylene main. The NTSB also stated that contributing to the incident was a low-pressure natural gas distribution system designed and operated without adequate overpressure protection. The NTSB issued its findings in connection with its investigation of the incident and new safety recommendations to PHMSA, certain other states, the Commonwealth of Massachusetts Executive Office of Public Safety and Security, and the Company. The one ~~new~~remaining safety recommendation ~~that was directed to~~resulting from the ~~Company requires the Company to review its protocols and training for responding to large-scale emergency events.~~investigation.

Massachusetts ~~Regulatory Matters.~~Investigations. Under Massachusetts law, the DPU is authorized to investigate potential violations of pipeline safety regulations and to assess a civil penalty of up to $218,647 for a violation of federal pipeline safety regulations. A separate violation occurs for each day of violation up to $2.2 million for a related series of violations. The Massachusetts DPU also is authorized to investigate potential violations of the Columbia of Massachusetts emergency response plan and to assess penalties of up to $250,000 per violation per day, or up to ~~$20~~$20.0 million per related series of violations. Further, as a result of the declaration of emergency by the Governor, the DPU is authorized to investigate potential violations of the DPU's operational directives during the restoration efforts and assess penalties of up to $1$1.0 million per violation. Pursuant to these authorities, the DPU is investigating ~~the Greater Lawrence Incident.~~Columbia of Massachusetts as described below. Columbia of Massachusetts will likely be subject to potential compliance actions related to the Greater Lawrence Incident and the restoration work following the incident, the timing and outcomes of which are uncertain at this time.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

After the Greater Lawrence Incident, the Massachusetts DPU retained an independent evaluator to conduct a statewide examination of the safety of the natural gas distribution system and the operational and maintenance functions of natural gas companies in the Commonwealth of Massachusetts. Through authority granted by the Massachusetts Governor under the state of emergency, the Chair of the Massachusetts DPU has directed all natural gas distribution companies operating in the Commonwealth to fund the statewide examination. The statewide examination is ~~underway and we have responded to the evaluator’s information requests.~~complete. The Phase I report, which was issued onin May ~~15,~~ 2019, included a program level assessment and evaluation of natural gas distribution companies. The Phase I report's conclusions were statewide and contained no specific conclusions about Columbia of Massachusetts. ~~The evaluation remains in~~ Phase II, which iswas focused on field assessments of each ~~individual~~Massachusetts gas company, concluded in December 2019. The Phase II report made several observations about and ~~is expected~~

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to ~~conclude later this year.~~Condensed Consolidated Financial Statements (unaudited) (continued)

~~On November 30, 2018,~~

recommendations to Massachusetts gas companies, including Columbia of Massachusetts, ~~entered into a consent order~~ with ~~the Massachusetts DPU in connection with a notice of probable violation~~regard to safety culture and assets. The final report was issued in ~~March 2018, stemming from~~late January 2020, and the DPU directed each natural gas distribution company operating in Massachusetts to submit a ~~2016 report. The Division found that~~plan in response to the report no later than February 28, 2020. Columbia of Massachusetts violated certain pipeline safety regulations related to pressure limiting and regulating stations in Taunton, Massachusetts. As part of the consent order, Columbia of Massachusetts was fined $75,000 and entered into a compliance agreement under which it agreed to take several actions related tosubmitted its pressure regulator stations within various timeframes, including the adoption of a Pipeline Safety Management System ("SMS"), the American Petroleum Institute’s (API) Recommended Practice 1173. Columbia of Massachusetts is complying with the order.plan on February 28, 2020.

On December 17, 2018, the Massachusetts DPU issued an order requiring Columbia of Massachusetts to enter into an agreement with a Massachusetts-based engineering firm to monitor Columbia of Massachusetts’ remaining restoration and recovery work in Lawrence, Andover and North Andover, Massachusetts. The order requires Columbia of Massachusetts to take measures to ensure that adequate heat and hot water and gas appliances are provided to all affected properties, repave all affected streets, roadways, sidewalks and other areas in accordance with applicable DPU standards and precedents, consult with the affected communities and discuss plans for restoring affected hard or soft surfaces, and replace all gas boilers and furnaces and other gas-fired equipment at affected residences. Under the order, all restoration work beginning in 2019 was required to be completed no later than October 31, 2019, unless an earlier or later date is agreed to with any of the affected communities. We previously agreed to complete the gas appliance replacement work by September 15, 2019, and completed the work ahead of schedule as announced on August 15, 2019. We reached an agreement with the affected communities with regard to the timing and scope of hard and soft surface repairs, which is discussed in "Private Actions" below. On June 11, 2019, the Massachusetts DPU issued an order requiring Columbia of Massachusetts to comply with the terms of the agreement reached with the affected communities for the restoration of hard and soft surfaces. Also, under both the December 17, 2018 and June 11, 2019 orders, Columbia of Massachusetts is required to maintain quantitative measures, which must be verified by officials of the affected communities, to track its progress in completing all of the remaining work. Estimates for the cost of this work are included in the estimated ranges of loss noted below, which is discussed in “- D. Other Matters - Greater Lawrence Incident Restoration" and " - Greater Lawrence Pipeline Replacement” below. Our failure to adhere to any of the requirements in the order may result in penalties of up to $1 million per violation.

In the third quarter of 2019, the Massachusetts DPU initiated several new investigations into Columbia of Massachusetts related to the restoration and other work following the Greater Lawrence Incident, as described below. Under Massachusetts law, the Massachusetts DPU is authorized to conduct investigations and assess fines and penalties as described above. The matters described below are pursuant to such authorization and are subject to the assessment of fines and penalties.

In August 2019, the Massachusetts DPU initiated an investigation regarding pressure monitoring and potential violations of pipeline safety regulations in connection with the installation of a slam shut device and the operating procedures used to install such devices. The DPU also initiated an investigation regarding instances of possible violations of internal guidelines and state and/or federal pipeline safety regulations in connection with Columbia of Massachusetts’ project after the Greater Lawrence Incident to validate regulator station drawings and verify control line location and installation.

In September 2019, the Massachusetts DPU initiated an investigation into potential violations of state and/or federal pipeline safety regulations in connection with abandoned service lines. The Chair of the Massachusetts DPU issued an emergency order directing Columbia of Massachusetts to take several specific actions to address concerns related to service lines abandoned during the restoration work following the Greater Lawrence Incident and to furnish certain information and periodic reports to the DPU. Estimates for the cost of this work are included in the estimated ranges of loss noted below, which is discussed in “- D. Other Matters - Greater Lawrence Incident Restoration" below. In addition, the Massachusetts DPU issued a Hearing Officer’s Memorandum directing Columbia of Massachusetts to file a detailed report concerning its emergency response to the Greater Lawrence Incident and subsequent restoration of service.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

On September 27, 2019, the City of Lawrence inadvertently closed a gas valve that had been incorrectly marked as a water valve, which severed a new pipeline main that Columbia of Massachusetts had installed during the restoration work following the Greater Lawrence Incident, resulting in the release of gas into sewer lines, other underground conduits and homes in the area. Approximately 150 homes and businesses were evacuated and electric power was turned off by the power company as a safety precaution to approximately 1,400 customers. The Massachusetts DPU is investigating whether, during the restoration efforts following the Greater Lawrence Incident, Columbia Gas failed to follow required procedures for the abandonment of valve boxes.

On October 1, 2019, the Massachusetts DPU issued four orders to Columbia of Massachusetts in connection with the service lines abandoned during the Greater Lawrence Incident restoration, which require: (1) the submission of a detailed work plan to the DPU, (2) the completion of quality control work on certain abandoned services, (3) the payment for a third-party independent audit, to be contracted through the DPU, of all gas pipeline work completed as part of the incident restoration effort, and (4) prompt and full response to any requests for information by the third-party auditor. The Massachusetts DPU retained an independent evaluator to conduct this audit, ~~will evaluate~~and that third party is currently evaluating compliance with Massachusetts and federal law, as well as any other operational or safety risks that may be posed by the pipeline work. The audit ~~will investigate~~scope also includes Columbia of Massachusetts' operations in the Lawrence Division and other service territories as appropriate, either independently or as part of the statewide gas safety assessment already underway. Estimates for the cost of this work are included in the estimated ranges of loss noted below, which is discussed in “- D. Other Matters - Greater Lawrence Incident Restoration" below. appropriate.

Also in October 2019, the Massachusetts DPU issued three additional orders requiring: (1) daily leak surveillance and reporting in areas where abandoned services are located, (2) completion by November 15, 2019 of the work plan previously submitted describing how Columbia of Massachusetts ~~will~~would address the estimated 2,200 locations at which an inside meter set was moved outside the property as part of the abandoned service work completed during the Greater Lawrence Incident restoration, and (3) submission of a report by December 2, 2019 showing any patterns, trends or correlations among the ~~noncompliant~~non-compliant work related to the abandonment of service lines, gate boxes and curb boxes during the incident restoration.

On October 3, 2019, the Massachusetts DPU notified Columbia of Massachusetts that, absent DPU approval, it is currently allowed to perform only emergency work on its gas distribution system throughout its service territories in Massachusetts. The restrictions do not apply to Columbia of Massachusetts’ ~~ongoing~~ work to address the previously identified issues with abandoned service lines and valve boxes in the Greater Lawrence, Massachusetts area. Columbia of Massachusetts is subject to daily monitoring by the DPU on any work that Columbia of Massachusetts conducts in Massachusetts. Such restrictions on work remain in place until modified by the DPU.

On October 25, 2019, the Massachusetts DPU issued two orders opening public investigations into Columbia of ~~Massachusetts.~~Massachusetts with respect to the Greater Lawrence Incident. The Massachusetts DPU opened the first ~~proceeding~~investigation under its authority to determine compliance with federal and state pipeline safety laws and regulations, and ~~will~~to investigate Columbia of Massachusetts’ responsibility for and response to the Greater Lawrence Incident and its restoration efforts following the incident. The Massachusetts DPU opened the second ~~proceeding~~investigation under its authority to determine whether a gas distribution company has violated established standards regarding acceptable performance for emergency preparedness and restoration of service ~~and will~~to investigate efforts by Columbia of Massachusetts to prepare for and restore service following the Greater Lawrence Incident. Separate penalties are applicable under each exercise of authority.

~~Columbia~~On December 23, 2019, the Massachusetts DPU issued an order defining the scope of ~~Massachusetts is cooperating with~~its investigation into the ~~investigations set forth above, the outcomes of which are uncertain at this time.~~

~~Massachusetts Legislative Matters.~~ ~~In December 2018, the President~~response of Columbia of Massachusetts testified before a joint state legislative committee on telecommunications, utilities and energy with other industry officials about gas system safety in Massachusetts and regulatory oversight. Increased scrutiny related to these matters, including additional legislative oversight hearings and new legislative proposals, is expected to continue during the current two-year legislative session.

On December 31, 2018, the Massachusetts Governor signed into law legislation requiring a certified professional engineer to review and approve gas pipeline work that could pose a “material risk” to public safety, consistent with the NTSB’s recommendation. The Massachusetts DPU has issued interim guidelines and the existing moratorium has been lifted. The DPU issued an Order Opening Inquiry (Notice of Inquiry) on March 18, 2019, and Columbia of Massachusetts has submitted comments.

Legislative hearings in Massachusetts related to proposed legislation on natural gas matters are expected to take place during the fourth quarter of 2019. In addition, the Joint Committee on Telecommunications, Utilities and Energy is expected to conduct a hearing on natural gas safety in November 2019.

~~U.S. Department of Justice Investigation.~~ ~~The Company and Columbia of Massachusetts are subject to a criminal investigation~~ related to the Greater Lawrence ~~Incident that is being conducted under the supervision of the U.S. Attorney's Office for the District of Massachusetts.~~Incident. The ~~initial grand jurysubpoenas were served on the Company and~~DPU identified three distinct time frames in which Columbia of Massachusetts handled emergency response and restoration directly: (1) September 13-14, 2018, (2) September 21 through December 16, 2018 (the Phase I restoration), and (3) September 27, 2019 through completion of restoration of outages resulting from the gas release event in Lawrence, Massachusetts that occurred on September ~~24, 2018.~~27, 2019. The ~~Company~~DPU determined that it is appropriate to investigate separately, for each time period described above, the areas of response, recovery and restoration for which Columbia of Massachusetts ~~are cooperating with~~was responsible. The DPU noted that it also may investigate the ~~investigation. We are unable~~continued restoration and related repair work that took place after December 16, 2018 and, depending on the outcome of that investigation, may deem it appropriate to ~~estimate~~consider that period of restoration as an additional separate time period.

The DPU also noted that its investigation into all of the above described time periods is ongoing and that if the DPU determines, based on its investigation, that it is appropriate to treat the separate time frames as separate emergency events, it may impose up to the maximum statutory penalty for each event, pursuant to Mass. G.L. c. 164 Section 1J. This provision authorizes the DPU to investigate potential violations of the Columbia of Massachusetts emergency response plan and to assess penalties of up to $250,000 per violation per day, or up to $20 million per related series of violations. The DPU noted that at this preliminary stage of the investigation, it does not have the factual basis to make those determinations.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

~~amount (or range of amounts) of reasonably possible losses associated~~In connection with ~~any civil or criminal penalties that could be imposed~~its investigation related to the Greater Lawrence Incident, on February 4, 2020, the Massachusetts Attorney General's Office issued a request for documents primarily focused on the ~~Company or~~ restoration work following the incident.

Columbia of Massachusetts is cooperating with the investigations set forth above as ~~a result~~well as other inquiries and investigations resulting from an increased amount of enforcement activity, for all of which the outcomes are uncertain at this ~~investigation.~~time.

Massachusetts Legislative Matters. Increased scrutiny related to gas system safety and regulatory oversight in Massachusetts, including new legislative proposals, is expected to continue during the current two year legislative session that ends in December 2020. To date, the Joint Committee on Telecommunications, Utilities and Energy has advanced two separate bills related to gas system safety to the House and Senate Ways and Means Committees for consideration.

U.S. ~~Congressional Activity.~~Department of Justice Investigation. ~~In November 2018, executives of~~On February 26, 2020, the Company and Columbia of Massachusetts ~~testified at~~entered into agreements with the U.S. Attorney’s Office to resolve the U.S. Attorney’s Office’s investigation relating to the Greater Lawrence Incident. Columbia of Massachusetts agreed to plead guilty in the United States District Court for the District of Massachusetts (the “Court”) to violating the Natural Gas Pipeline Safety Act (the “Plea Agreement”), and the Company entered into a Deferred Prosecution Agreement (the "DPA").

Under the Plea Agreement, which must be approved by the Court, Columbia of Massachusetts will be subject to the following terms, among others: (i) a criminal fine in the amount of $53,030,116 paid within 30 days of sentencing; (ii) a three year probationary period that will early terminate upon a sale of Columbia of Massachusetts or a sale of its gas distribution business to a qualified third-party buyer consistent with certain requirements; (iii) compliance with each of the NTSB recommendations stemming from the Greater Lawrence Incident; and (iv) employment of an in-house monitor during the term of the probationary period.

On March 9, 2020, Columbia of Massachusetts entered its guilty plea pursuant to the Plea Agreement, and the Court accepted the plea. Sentencing of Columbia of Massachusetts is scheduled to occur on June 8, 2020.

Under the DPA, the U.S. ~~Senate hearing regarding~~Attorney’s Office agreed to defer prosecution of the Company in connection with the Greater Lawrence Incident for a three-year period (which three-year period may be extended for twelve (12) months upon the U.S. Attorney’s Office’s determination of a breach of the DPA) subject to certain obligations of the Company, including, but not limited to, the following: (i) the Company will use reasonable best efforts to sell Columbia of Massachusetts or Columbia of Massachusetts’ gas distribution business to a qualified third-party buyer consistent with certain requirements, and, ~~natural~~upon the completion of any such sale, the Company will cease and desist any and all gas pipeline ~~safety.~~and distribution activities in the District of Massachusetts; (ii) the Company will forfeit and pay, within 30 days of the later of the sale becoming final or the date on which post-closing adjustments to the purchase price are finally determined in accordance with the agreement to sell Columbia of Massachusetts or its gas distribution business, a fine equal to the total amount of the profit or gain, if any, from any sale of Columbia of Massachusetts or its gas distribution business, with the amount of profit or gain determined as provided in the DPA; and (iii) the Company agrees as to each of the Company’s subsidiaries involved in the distribution of gas through pipeline facilities in Massachusetts, Indiana, Ohio, Pennsylvania, Maryland, Kentucky and Virginia to implement and adhere to each of the recommendations from the NTSB stemming from the Greater Lawrence Incident. Pursuant to the DPA, if the Company complies with all of its obligations under the DPA, including, but not limited to those identified above, the U.S. Attorney’s Office will not file any criminal charges against the Company related to the Greater Lawrence Incident. If Columbia of Massachusetts withdraws its plea for any reason, if the Court rejects any aspect of the Plea Agreement, or if Columbia of Massachusetts should fail to perform an obligation under the Plea Agreement prior to the sale of Columbia of Massachusetts or its gas distribution business, the U.S. Attorney's Office may, at its sole option, render the DPA null and void.

U.S. Congressional Activity. On September 30, 2019, the U.S. Pipeline Safety Act expired. There is no effect on PHMSA's authority. Action on past re-authorization bills has extended past the expiration ~~date.~~date and action on this re-authorization is expected to continue well into 2020. Pipeline safety jurisdiction resides with the U.S. Senate Commerce Committee and is divided between two committees in the U.S. House of Representatives (Energy and Commerce, and Transportation and Infrastructure). Legislative proposals are currently in various stages of committee development and the timing of further action is uncertain. Certain legislative proposals, if enacted into law, may increase costs for natural gas industry companies, including the Company and Columbia of Massachusetts.

~~SEC Investigation.~~ On February 11, 2019, the SEC notified the Company that it is conducting an investigation of the Company related to disclosures made prior to the Greater Lawrence Incident. We are cooperating with the investigation.

Private Actions. Various lawsuits, including several purported class action lawsuits, have been filed by various affected residents or businesses in Massachusetts state courts against the Company and/or Columbia of Massachusetts in connection with the Greater Lawrence Incident. A special judge has been appointed to hear all pending and future cases and the class actions have been consolidated into one class action. On January 14, 2019, the special judge granted the parties’ joint motion to stay all cases until

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

April 30, 2019 to allow mediation, and the parties subsequently agreed to extend the stay until July 25, 2019. The class action lawsuits allege varying causes of action, including those for strict liability for ultra-hazardous activity, negligence, private nuisance, public nuisance, premises liability, trespass, breach of warranty, breach of contract, failure to warn, unjust enrichment, consumer protection act claims, negligent, reckless and intentional infliction of emotional distress and gross negligence, and seek actual compensatory damages, plus treble damages, and punitive damages.

On July 26, 2019, the Company, Columbia of Massachusetts and NiSource Corporate Services Company, a subsidiary of the Company, entered into a term sheet with the class action plaintiffs under which they agreed to settle the class action claims in connection with the Greater Lawrence Incident. Columbia of Massachusetts agreed to pay $143 million into a settlement fund to compensate the settlement class and the settlement class agreed to release Columbia of Massachusetts and affiliates from all claims arising out of or related to the Greater Lawrence Incident. The following claims are not covered under the proposed settlement because they are not part of the consolidated class action: (1) physical bodily injury and wrongful death; (2) insurance subrogation, whether equitable, contractual or otherwise; and (3) claims arising out of appliances that are subject to the Massachusetts DPU orders. Emotional distress and similar claims are covered under the proposed settlement unless they are secondary to a physical bodily injury. The settlement class is defined under the term sheet as all persons and businesses in the three municipalities of Lawrence, Andover and North Andover, Massachusetts, subject to certain limited exceptions. The motion for preliminary approval and the settlement documents were filed on September 25, 2019. The preliminary approval court hearing was held on October 7, 2019 and the court issued an order granting preliminary approval of the settlement on October 11, 2019. The ~~proposed~~Court granted final approval of the settlement ~~is subject~~on March 12, 2020.

With respect to ~~final court approval, and a hearing is scheduled for February 27, 2020.~~

~~Many residents and business owners have submitted individual damage~~ claims ~~to Columbia~~not included in the consolidated class action, many of ~~Massachusetts. We also have received notice from three parties indicating an intent to assert~~the asserted wrongful death ~~claims. In Massachusetts, punitive damages are available in a wrongful death action upon proof of gross negligence or willful or reckless conduct causing the death.~~and bodily injury claims have settled, and we continue to discuss potential settlements with remaining claimants. In addition, the Commonwealth of Massachusetts is seeking reimbursement from Columbia of Massachusetts for its expenses incurred in connection with the Greater Lawrence Incident. The outcomes and impacts of such private actions are uncertain at this ~~time except as set forth below.~~time.

~~We are discussing potential settlements with plaintiffs asserting certain bodily injury and wrongful death claims.~~Shareholder Derivative Lawsuit. On April ~~25, 2019, we entered into~~28, 2020, a ~~settlement agreement with~~shareholder derivative lawsuit was filed by the City of Detroit Police and Fire Retirement System in the United States District Court for the District of Delaware against certain of ~~these plaintiffs involving bodily injury claims, subject~~the Company’s current and former directors, alleging breaches of fiduciary duty with respect to ~~certain conditions, including court approval. On July 3, 2019, we entered into a settlement with one~~the pipeline safety management systems relating to the distribution of ~~the parties that indicated an intent~~natural gas prior to ~~assert a wrongful death claim. On September 25, 2019, we entered into another settlement with a party that indicated an intent to assert a wrongful death claim.~~

On May 7, 2019, Columbia of Massachusetts and the municipalities of Lawrence, Andover and North Andover jointly announced that they reached a settlement for expenses incurred by the municipalities in connection with the Greater Lawrence Incident and also including claims related to the Company’s proxy statement disclosures regarding its safety systems. The remedies sought include damages for ~~compensating~~ the ~~municipalities~~alleged breaches of fiduciary duty, corporate governance reforms, and restitution of any unjust enrichment. Because of the preliminary nature of this lawsuit, the Company is not able to ~~repave affected streets, roadways and sidewalks.~~

~~Table~~estimate a loss or range of ~~Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

loss, if any, that may be incurred in connection with this matter at this time.

Financial Impact. Since the Greater Lawrence Incident, we have recorded expenses of approximately $1,041 million for third-party claims and fines, penalties and settlements associated with government investigations. We estimate that total costs related to third-party claims and fines, penalties and settlements associated with government investigations resulting from the incident will range from ~~$995~~$1,041 million to ~~$1,020~~$1,055 million, depending on the number, nature, final outcome ~~of ongoing reviews and the number, nature,~~ and value of third-party ~~claims. These~~claims and the final outcome of government investigations. With regard to third-party claims, these costs include, but are not limited to, personal injury and property damage claims, damage to infrastructure, business interruption claims, and mutual aid payments to other utilities assisting with the restoration effort. These costs ~~related to third-party claims~~ do not include costs of certain third-party claims and fines, penalties or settlements associated with government investigations that we are not able to estimate, nor do they include non-claims related and government investigation-related legal expenses resulting from the incident and the ~~estimated~~ capital cost of the pipeline replacement, which are set forth in " - D. Other Matters - Greater Lawrence Incident Restoration" and "- Greater Lawrence Incident Pipeline Replacement," respectively, below.

The process for estimating costs associated with third-party claims and fines, penalties, and settlements associated with government investigations relating to the Greater Lawrence Incident requires management to exercise significant judgment based on a number of assumptions and subjective factors. As more information becomes known, including additional information regarding ongoing investigations, management’s estimates and assumptions regarding the financial impact of the Greater Lawrence Incident may change. The increase in estimated total costs related to third-party claims from those disclosed in our Form 10-K for the year ended December 31, 2018 resulted primarily from receiving additional information regarding legal claims and the required scope of the restoration work inside the affected homes.

It is not possible at this time to reasonably estimate the total amount of any expenses associated with government investigations and fines, penalties or settlements with certain governmental authorities, including the Massachusetts DPU and other regulators, that we may incur in connection with the Greater Lawrence Incident. Therefore, the foregoing amounts do not include estimates of the total amount that we may incur for any such fines, penalties or settlements.

The aggregate amount of third-party liability insurance coverage available for losses arising from the Greater Lawrence Incident is $800 million. We have collected the entire $800 million. Total expenses related to the incident have exceeded the total amount of insurance coverage available under our policies. While a substantial amount of expenses related to the Greater Lawrence Incident has already been recovered from insurance carriers, a few insurers providing liability insurance to the Company or Columbia of Massachusetts continue to review our claim under the terms and conditions of the respective insurance policies. We are not able to estimate the amount of expenses that will not be covered by insurance, but these amounts are material to our financial statements. Certain types of damages, expenses or claimed costs, such as fines or penalties, may be excluded under the policies.

Refer to "- D. Other Matters - Greater Lawrence Incident Restoration," below for a summary of third-party claims-related expense activity and associated insurance recoveries recorded since the Greater Lawrence Incident.

~~In addition, we~~

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

We are also party to certain other claims, regulatory and legal proceedings arising in the ordinary course of business in each state in which we have operations, none of which ~~is deemed~~we believe to be individually material at this time.

Due to the inherent uncertainty of litigation, there can be no assurance that the outcome or resolution of any particular claim, proceeding or ~~proceeding~~investigation related to the Greater Lawrence Incident or otherwise would not have a material adverse effect on our results of operations, financial position or liquidity. Certain matters in connection with the Greater Lawrence Incident have had or may have a material impact as described above. If one or more of such additional or other matters were decided against us, the effects could be material to our results of operations in the period in which we would be required to record or adjust the related liability and could also be material to our cash flows in the periods that we would be required to pay such liability.

C. Environmental Matters. Our operations are subject to environmental statutes and regulations related to air quality, water quality, hazardous waste and solid waste. We believe that we are in substantial compliance with the environmental regulations currently applicable to our operations.

It is management's continued intent to address environmental issues in cooperation with regulatory authorities in such a manner as to achieve mutually acceptable compliance plans. However, there can be no assurance that fines and penalties will not be incurred. Management expects a significant portion of environmental assessment and remediation costs to be recoverable through rates for certain of our companies.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had recorded a liability of ~~$107.5~~$91.4 million and ~~$101.2~~$104.4 million, respectively, to cover environmental remediation at various sites. The current portion of this liability is included in "Legal and environmental" in the Condensed Consolidated Balance Sheets (unaudited). The noncurrent portion is included in "Other noncurrent ~~liabilities".~~liabilities." We recognize costs associated with environmental remediation obligations when the incurrence of such costs is probable and the amounts can be reasonably estimated. The original estimates for remediation activities may differ materially from the amount ultimately expended. The actual future expenditures depend on many factors, including currently enacted laws and regulations, the nature and extent of impact and the method of remediation. These expenditures are not currently estimable at some sites. We periodically adjust our liability as information is collected and estimates become more refined.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Electric Operations' compliance estimates disclosed below are reflective of NIPSCO's Integrated Resource Plan submitted to the IURC on October 31, 2018. See section D, "Other Matters NIPSCO 2018 Integrated Resource Plan," below for additional information.

Air

Future legislative and regulatory programs could significantly limit allowed GHG emissions or impose a cost or tax on GHG emissions. Additionally, rules that ~~increase methane leak detection,~~ require ~~emission~~further GHG reductions or impose additional requirements for natural gas facilities could ~~restrict GHG emissions and~~ impose additional costs. WeNiSource will carefully monitor all GHG reduction proposals and regulations.

~~CPP and~~ ACE ~~Rules.~~Rule. On July 8, 2019, the EPA published the final ACE rule, ~~and repealed the CPP. The ACE rule~~which establishes emission guidelines for states to use when developing plans to limit carbon dioxide at coal-fired electric generating units based on heat rate improvement measures. The coal-fired units at NIPSCO’s R.M. Schahfer Generating Station and Michigan City Generating Station are potentially affected sources, and compliance requirements for these units which NIPSCO plans to retire by 2023 and 2028, respectively, will be determined by future Indiana rulemaking. The ACE rule notes that states have “broad flexibility in setting standards of performance for designated facilities” and that a state may set a “business as usual” standard for sources that have a remaining useful life “so short that imposing any costs on the electric generating unit is unreasonable.” State plans are due by 2022, and the EPA will have six months to determine completeness and then one additional year to determine whether to approve the submitted plan. States have the discretion to determine the compliance period for each source. As a result, NIPSCO will continue to monitor this matter and cannot estimate its impact at this time.

Waste

CERCLA. Our subsidiaries are potentially responsible parties at waste disposal sites under the CERCLA (commonly known as Superfund) and similar state laws. Under CERCLA, each potentially responsible party can be held jointly, severally and strictly liable for the remediation costs as the EPA, or state, can allow the parties to pay for remedial action or perform remedial action themselves and request reimbursement from the potentially responsible parties. Our affiliates have retained CERCLA environmental liabilities, including remediation liabilities, associated with certain current and former operations. These liabilities are not material to the Condensed Consolidated Financial Statements (unaudited).

MGP. A program has been instituted to identify and investigate former MGP sites where Gas Distribution Operations subsidiaries or predecessors may have liability. The program has identified 63 such sites where liability is probable. Remedial actions at many

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

of these sites are being overseen by state or federal environmental agencies through consent agreements or voluntary remediation agreements.

We utilize a probabilistic model to estimate our future remediation costs related to MGP sites. The model was prepared with the assistance of a third party and incorporates our experience and general industry experience with remediating MGP sites. We complete an annual refresh of the model in the second quarter of each fiscal year. No material changes to the estimated future remediation costs were noted as a result of the refresh completed as of June 30, 2019. Our total estimated liability related to the facilities subject to remediation was ~~$103.9~~$86.8 million and ~~$97.5~~$102.2 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The liability represents our best estimate of the probable cost to remediate the facilities. We believe that it is reasonably possible that remediation costs could vary by as much as $20 million in addition to the costs noted above. Remediation costs are estimated based on the best available information, applicable remediation standards at the balance sheet date and experience with similar facilities.

CCRs. On April 17, 2015, the EPA issued a final rule for regulation of CCRs. The rule regulates CCRs under the RCRA Subtitle D, which determines them to be nonhazardous. The rule is implemented in phases and requires increased groundwater monitoring, reporting, recordkeeping and posting of related information to the Internet. The rule also establishes requirements related to CCR management and disposal. The rule allows NIPSCO to continue its byproduct beneficial use program.

To comply with the rule, NIPSCO ~~incurred~~completed capital expenditures to modify its infrastructure and manage ~~CCRs.~~CCRs during 2019. The CCR rule also resulted in revisions to previously recorded legal obligations associated with the retirement of certain NIPSCO facilities. The actual asset retirement costs related to the CCR rule may vary substantially from the estimates used to record the increased asset retirement obligation due to the uncertainty about the requirements that will be established by environmental authorities, compliance strategies that will be used, and the preliminary nature of available data used to estimate costs. As allowed by the ~~EPA,~~rule, NIPSCO will continue to collect data over time to determine the specific compliance solutions and associated costs and, as a result, the actual costs may vary. NIPSCO has filed initial CCR closure plans for R.M. Schahfer Generating Station and Michigan City Generating Station with the Indiana Department of Environmental Management.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

Water

ELG. On November 3, 2015, the EPA issued a final rule to amend the ELG and standards for the Steam Electric Power Generating category. ~~The final rule became effective January 4, 2016.~~ Based upon a ~~preliminary~~ study performed in 2016 of the ~~November 3, 2015~~ final rule, capital compliance costs were expected to be approximately $170 million. The EPA ~~is expected~~has proposed revisions to ~~release a draft ELG reconsideration rule in 2019. However,~~the final rule. NIPSCO does not anticipate material ELG compliance costs based on the preferred option announced as part of NIPSCO's 2018 Integrated Resource Plan (discussed below).

D. Other Matters.

NIPSCO 2018 Integrated Resource Plan. Multiple factors, but primarily economic ones, including low natural gas prices, advancing cost effective renewable technology and increasing capital and operating costs associated with existing coal plants, have led NIPSCO to conclude in its October 2018 Integrated Resource Plan submission that NIPSCO’s current fleet of coal generation facilities will be retired earlier than previous Integrated Resource Plan’s had indicated.

The Integrated Resource Plan evaluated demand-side and supply-side resource alternatives to reliably and cost effectively meet NIPSCO customers' future energy requirements over the ensuing 20 years. The preferred option within the Integrated Resource Plan retires R.M. Schahfer Generating Station (Units 14, 15, 17, and 18) by 2023 and Michigan City Generating Station (Unit 12) by 2028. These units represent 2,080 MW of generating capacity, equal to 72% of NIPSCO’s remaining generating capacity ~~(and~~and 100% of NIPSCO's remaining coal-fired generating ~~capacity) after the retirement of Bailly Units 7 and 8 on May 31, 2018.~~capacity.

In January 2019, NIPSCO executed ~~two~~a 20 year ~~PPAs~~PPA, referred to as the Jordan Creek PPA, to purchase 100% of the output from renewable generation facilities at a fixed price per MW. The facilities supplying the energy will have a combined nameplate capacity of approximately 700 MW. NIPSCO's purchase requirement under the PPAs is dependent on satisfactory approval of the PPAs by the IURC.MWh. NIPSCO submitted the ~~PPAs~~Jordan Creek PPA to the IURC for approval in February 2019 and the IURC approved the ~~PPAs~~Jordan Creek PPA on June 5, 2019. Payments under the ~~PPAs~~Jordan Creek PPA will not begin until the associated generation ~~facilities are~~facility is constructed by the owner / seller, which is currently scheduled to be complete by the end of ~~2020 for one facility and by~~2020. NIPSCO is monitoring any possible impact COVID-19 may have on the ~~end~~expected completion date of ~~2021 for the other facility.~~this project.

Also in January 2019, NIPSCO executed a BTA, referred to as the Rosewater BTA, with a developer to construct a renewable generation facility with a nameplate capacity of approximately 100 MW. Once complete, ownership of the facility would be transferred to a ~~partnership owned by~~joint venture whose members include NIPSCO, the developer and an unrelated tax equity partner. The aforementioned ~~partnership structure will result in full~~joint venture is expected to be fully owned by NIPSCO ~~ownership~~ after the ~~PTC~~wind PTCs are monetized from the project ~~(approximately~~

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

(approximately 10 years after the facility goes into service). NIPSCO's purchase requirement under the Rosewater BTA is dependent on satisfactory approval of the Rosewater BTA by the IURC, successful execution of an agreement with a tax equity partner and timely completion of construction. NIPSCO submitted the Rosewater BTA to the IURC for approval in February 2019 and the IURC approved the Rosewater BTA on August 7, 2019. ~~Required~~The required FERC ~~filings occurred after receiving~~approvals for the ~~IURC order.~~project were received in December 2019. Construction of the facility is ~~expected~~scheduled to be completed by the end of ~~2020.~~2020; however, this project could experience a construction delay due to COVID-19. NIPSCO is continuing to monitor the impact of COVID-19.

On October 1, 2019, NIPSCO announced the opening of its next round of RFP to consider potential resources to meet the future electric needs of its customers. The RFP closed on November 20, 2019, and NIPSCO continues to evaluate the results. NIPSCO is considering all sources in the RFP process ~~which closes on November 20, 2019.~~and is expecting to obtain adequate resources to facilitate the retirement of the R.M. Schahfer Generation Station in 2023. The planned replacement in 2023 of approximately 1,600 MW from this coal-fired generation station will provide incremental capital investment opportunities for 2022 and 2023. Currently, half of the capacity in the replacement plan is targeted to be owned by joint ventures that will include NIPSCO and unrelated financial investors as the members. The remaining new capacity is expected to be primarily in the form of PPAs. NIPSCO expects to begin the appropriate regulatory compliance filings related to the new capacity as agreements are finalized with counterparties in 2020 and 2021.

In October 2019, NIPSCO executed a BTA, referred to as the Indiana Crossroads BTA, with a developer to construct an additional renewable generation facility with a nameplate capacity of approximately 300 MW. Once complete, ownership of the facility would be transferred to a joint venture whose members include NIPSCO, the developer and an unrelated tax equity partner. The aforementioned joint venture is expected to be fully owned by NIPSCO after the wind PTCs are monetized from the project (approximately 10 years after the facility goes into service). NIPSCO's purchase requirement under the Indiana Crossroads BTA is dependent on satisfactory approval of the Indiana Crossroads BTA by the IURC, successful execution of an agreement with a tax equity partner, and timely completion of construction. NIPSCO submitted the Indiana Crossroads BTA to the IURC for approval on October 22, ~~2019. In this submission, NIPSCO requested~~2019, and the ~~issuance of an order from~~IURC approved the ~~IURC~~Indiana Crossroads BTA on February 19, 2020. Required FERC filings are expected to be filed by the end of ~~February~~June 2020. Construction of ~~this~~the facility is expected to be completed by the end of ~~2021.The ownership structure~~2021.

On May 1, 2020, President Donald Trump issued an executive order (the “EO”) prohibiting any transaction initiated after that day that (i) involves bulk-power system equipment designed, developed, manufactured or supplied by persons owned by, controlled by or subject to the jurisdiction or direction of a foreign adversary and ~~preconditions for NIPSCO's purchase requirement are similar~~(ii) poses an unacceptable risk to ~~that~~national security. The EO directs the U.S. Secretary of Energy to issue implementing regulations by September 28, 2020. The EO also requires the U.S. Secretary of Energy to review the risk of existing bulk-power system equipment sourced from foreign adversaries and to establish a task force to review and recommend federal procurement policies and procedures consistent with the considerations identified in the EO. In the future certain bulk-power system equipment owned or operated by NiSource could possibly be considered to be sourced from a foreign adversary within the meaning of the ~~BTA executed in January of 2019 (discussed above).~~EO.

Greater Lawrence Incident Restoration. In addition to the amounts estimated for third-party claims and fines, penalties and settlements associated with government investigations described above, since the Greater Lawrence Incident, we have recorded expenses of approximately $429 million for other incident-related costs. We estimate ~~we will incur~~that total other incident-related costs ~~totaling between $430~~will range from $450 million and ~~$440~~$460 million, depending on the incurrence of ~~future restoration work.~~costs associated with resolving outstanding inquiries and investigations discuss above in " - B. Legal Proceedings." Such costs include certain consulting costs, legal costs, vendor costs, claims center costs, labor and related expenses incurred in connection with the incident, and insurance-related loss surcharges. The amounts set forth above do not include the ~~estimated~~ capital cost of the pipeline replacement, which is set forth below, or any estimates for fines and penalties, which are discussed above in " - ~~D. Other Matters -~~B. Legal Proceedings."

As discussed in "- B. Legal Proceedings," the aggregate amount of third-party liability insurance coverage available for losses arising from the Greater Lawrence ~~Pipeline Replacement." The increase in estimated~~Incident is $800 million. We have collected the entire $800 million. Expenses related to the incident have exceeded the total ~~incident-related expenses from those disclosed in~~amount of insurance coverage available under our Form 10-K for the year ended December 31, 2018 resulted primarily from receiving additional information regarding the restoration work required to be completed and the extended period of time over which the restoration work would take place, higher than anticipated costs from vendors, expenses associated with government investigations, the incurrence of insurance-related loss surcharges and increased estimates for consultants and claim center costs.policies.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

As discussed in - B. Legal Proceedings, the aggregate amount of third-party liability insurance coverage available for losses arising from the Greater Lawrence Incident is $800 million. Expenses related to the incident have exceeded the total amount of insurance coverage available under our policies. While a substantial amount of expenses related to the Greater Lawrence Incident has already been recovered from insurance, a few insurers providing liability insurance to the Company or Columbia of Massachusetts continue to review our claim under the terms and conditions of the respective insurance policies. We are not able to estimate the amount of expenses that will not be covered by insurance, but these amounts are material to our financial statements. Certain types of damages, expenses or claimed costs, such as fines or penalties, may be excluded under the policies.

The following table summarizes expenses incurred and insurance recoveries recorded since the Greater Lawrence Incident. This activity is presented within "Operation and maintenance" and "Other, net' in our Condensed Statements of Consolidated Income ~~(Loss)~~ (unaudited).


	Year Ended			Three Months Ended		Nine Months Ended						Total Costs Incurred through			Costs Incurred during the Three Months Ended
(in millions)	December 31, 2018			September 30, 2019					Incident to Date			December 31, 2019			March 31, 2020		Incident to Date
Third-party claims	$	757		$	1	$	238		$	995		$	1,041		$	—	$	1,041
Other incident-related costs	266			20		122			388			420			9		429
Total	1,023			21		360			1,383			1,461			9		1,470
Insurance recoveries recorded	(135		)	—		(535		)	(670		)	(800		)	—		(800		)
Impact to operation and maintenance expense	$	888		$	21	$	(175	)	$	713
Total costs incurred												$	661		$	9	$	670

The following table presents activity related to our Greater Lawrence Incident insurance receivable. These balances are presented within "Accounts receivable" in our Condensed Consolidated Balance Sheets (unaudited):

(in millions) Insurance receivable
Balance, December 31, 2018 $ 130
Insurance recoveries recorded in first quarter of 2019 100
Cash collected from insurance recoveries in the first quarter of 2019 (108 )
Balance, March 31, 2019 122
Insurance recoveries recorded in the second quarter of 2019 435
Cash collected from insurance recoveries in the second quarter of 2019 (297 )
Balance, June 30, 2019 $ 260
Insurance recoveries recorded in third quarter of 2019 —
Cash collected from insurance recoveries in the third quarter of 2019 (260 )
Balance, September 30, 2019 $ —

~~We are currently unable to predict the timing or amount of future insurance recoveries in excess of the recoveries recorded as of September 30, 2019.~~

Greater Lawrence Pipeline Replacement. In connection with the Greater Lawrence Incident, Columbia of Massachusetts, in cooperation with the Massachusetts Governor’s office, replaced the entire affected 45-mile cast iron and bare steel pipeline system that delivers gas to approximately 7,500 gas meters, the majority of which serve residences and approximately 700 of which serve businesses impacted in the Greater Lawrence Incident. This system was replaced with plastic distribution mains and service lines, as well as enhanced safety features such as pressure regulation and excess flow valves at each premise. At the request of the Massachusetts DPU, which was instructed by the Massachusetts Governor through his executive authority under a state of emergency, Columbia of Massachusetts hired an outside contractor to serve as the Chief Recovery Officer for the Greater Lawrence Incident, responsible for command, control and communications. Columbia of Massachusetts restored gas service to nearly all homes and workplaces in December 2018. With the restoration and recovery efforts substantially complete and the service of the Chief Recovery Officer completed, the next phase of the effort, Phase II, was managed by Columbia of Massachusetts under the

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

third party oversight of a Massachusetts-based engineering firm. Columbia of Massachusetts announced that Phase II was substantially complete on August 15, 2019. See “- B. Legal Proceedings” for additional information.

~~Since the Greater Lawrence Incident and through September 30, 2019, we~~We have invested approximately ~~$255~~$258 million of capital spend for the pipeline ~~replacement. We estimate~~replacement; this ~~replacement~~ work ~~will ultimately cost between $255 million and $260 million.~~was completed in 2019. We maintain property insurance for gas pipelines and other applicable ~~property in the approximate amount of $300 million.~~property. Columbia of Massachusetts has filed a proof of loss with its property insurer for the full cost of the pipeline replacement. ~~The recovery~~In January 2020, we filed a lawsuit against the property insurer, seeking payment of our property claim. We are currently unable to predict the timing or amount of any ~~capital investment not reimbursed through~~ insurance ~~will be addressed in a future regulatory proceeding. The outcome of such a proceeding is uncertain. In accordance with ASC 980-360, if it becomes probable that a portion of~~recovery under the property policy. This pipeline replacement cost ~~will not be recoverable through customer rates and an amount can be reasonably estimated, we will reduce our regulated plant balance for the amount~~is part of the ~~probable disallowance~~Massachusetts Business that is classified as held for sale at March 31, 2020. The assets and ~~record~~liabilities of the Massachusetts Business have been recorded at fair value, less costs to sell, which has resulted in a loss being recorded as of March 31, 2020. See Note 7, "Assets and Liabilities Held for Sale," for additional information.

State Income Taxes Related to Greater Lawrence Incident Expenses. As of December 31, 2018, expenses related to the Greater Lawrence Incident were $1,023 million. In the fourth quarter of 2019, we filed an ~~associated charge~~application for Alternative Apportionment with the MA DOR to ~~earnings. This could~~request an allocable approach to these expenses for purposes of Massachusetts state income taxes, which, if approved, would result in a ~~material adverse effect to our financial condition, results~~state deferred tax asset of ~~operations~~approximately$50 million, net. The MA DOR issued a denial during the first quarter of 2020. We are filing an application for abatement in the second quarter of 2020 and ~~cash flows. Additionally, if a rate order~~believe it is ~~received allowing recovery of~~reasonably possible that the ~~investment with no or reduced return on investment, a loss on disallowance may be required.~~

In addition, we have committed to a capital investment program to install over-pressurization protection devices on all of our low-pressure systems as described above in “-B. Legal Proceedings.” These devices operate like circuit-breakers, so that if operating pressure is too high or too low, regardless of the cause, they are designed to immediately shut down the supply of gas to the system. The program also includes installing remote monitoring devices on all low-pressure systems, enabling gas control centers to continuously monitor pressure at regulator stations. In addition, we have conducted a field survey of all regulator stations and initiated an engineering review of those regulator stations; we are verifying and enhancing our maps and records of low-pressure regulator stations; and we initiated a process so that our personnelapplication will be ~~present whenever excavation work is being done in close proximity to a regulator station.~~accepted, or an alternative method proposed.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

~~17.~~19. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The following tables display the components of Accumulated Other Comprehensive ~~Income (Loss):~~Loss:

Three Months Ended September 30, 2019 (in millions)
Gains and Losses on Securities⁽¹⁾

Gains and Losses on Cash Flow Hedges⁽¹⁾

Pension and OPEB Items⁽¹⁾

Accumulated
Other
Comprehensive
Loss⁽¹⁾
Balance as of July 1, 2019 $ 2.5
$ (62.8 ) $ (20.5 ) $ (80.8 )
Other comprehensive income (loss) before reclassifications 0.9
(50.7 ) 0.2
(49.6 )
Amounts reclassified from accumulated other comprehensive income (loss) (0.2 ) 0.1
0.2
0.1
Net current-period other comprehensive income (loss) 0.7
(50.6 ) 0.4
(49.5 )
Balance as of September 30, 2019 $ 3.2
$ (113.4 ) $ (20.1 ) $ (130.3 )
⁽¹⁾All amounts are net of tax. Amounts in parentheses indicate debits.

Nine Months Ended September 30, 2019 (in millions)
Gains and Losses on Securities⁽¹⁾

Gains and Losses on Cash Flow Hedges⁽¹⁾

Pension and OPEB Items⁽¹⁾

Accumulated
Other
Comprehensive
Loss⁽¹⁾
Balance as of January 1, 2019 $ (2.4 ) $ (13.0 ) $ (21.8 ) $ (37.2 )
Other comprehensive income (loss) before reclassifications 5.9
(100.5 ) 0.7
(93.9 )
Amounts reclassified from accumulated other comprehensive income (loss) (0.3 ) 0.1
1.0
0.8
Net current-period other comprehensive income (loss) 5.6
(100.4 ) 1.7
(93.1 )
Balance as of September 30, 2019 $ 3.2
$ (113.4 ) $ (20.1 ) $ (130.3 )



(in millions)	Gains and Losses on Securities⁽¹⁾			Gains and Losses on Cash Flow Hedges⁽¹⁾			Pension and OPEB Items⁽¹⁾			Accumulated Other Comprehensive Loss⁽¹⁾
Balance as of January 1, 2020	$	3.3		$	(77.2	)	$	(18.7	)	$	(92.6	)
Other comprehensive income (loss) before reclassifications	(5.2		)	(133.3		)	0.4			(138.1		)
Amounts reclassified from accumulated other comprehensive income (loss)	(0.2		)	—			0.3			0.1
Net current-period other comprehensive income (loss)	(5.4		)	(133.3		)	0.7			(138.0		)
Balance as of March 31, 2020	$	(2.1	)	$	(210.5	)	$	(18.0	)	$	(230.6	)

⁽¹⁾All amounts are net of tax. Amounts in parentheses indicate debits.

Three Months Ended September 30, 2018 (in millions)
Gains and Losses on Securities⁽¹⁾

Gains and Losses on Cash Flow Hedges⁽¹⁾

Pension and OPEB Items⁽¹⁾

Accumulated
Other
Comprehensive
Income (Loss)⁽¹⁾
Balance as of July 1, 2018 $ (2.2 ) $ (1.7 ) $ (17.0 ) $ (20.9 )
Other comprehensive income before reclassifications —
21.6
1.0
22.6
Amounts reclassified from accumulated other comprehensive income 0.1
0.9
(0.2 ) 0.8
Net current-period other comprehensive income 0.1
22.5
0.8
23.4
Balance as of September 30, 2018 $ (2.1 ) $ 20.8
$ (16.2 ) $ 2.5
⁽¹⁾All amounts are net of tax. Amounts in parentheses indicate debits.

Nine Months Ended September 30, 2018 (in millions)
Gains and Losses on Securities⁽¹⁾

Gains and Losses on Cash Flow Hedges⁽¹⁾

Pension and OPEB Items⁽¹⁾

Accumulated
Other
Comprehensive
Income (Loss)⁽¹⁾
Balance as of January 1, 2018 $ 0.2
$ (29.4 ) $ (14.2 ) $ (43.4 )
Other comprehensive income (loss) before reclassifications (2.5 ) 70.8
1.0
69.3
Amounts reclassified from accumulated other comprehensive income (loss) 0.2
(14.3 ) 0.2
(13.9 )
Net current-period other comprehensive income (loss) (2.3 ) 56.5
1.2
55.4
Reclassification due to adoption of ASU 2018-02 —
(6.3 ) (3.2 ) (9.5 )
Balance as of September 30, 2018 $ (2.1 ) $ 20.8
$ (16.2 ) $ 2.5



(in millions)	Gains and Losses on Securities⁽¹⁾			Gains and Losses on Cash Flow Hedges⁽¹⁾			Pension and OPEB Items⁽¹⁾			Accumulated Other Comprehensive Loss⁽¹⁾
Balance as of January 1, 2019	$	(2.4	)	$	(13.0	)	$	(21.8	)	$	(37.2	)
Other comprehensive income (loss) before reclassifications	2.7			(19.3		)	0.5			(16.1		)
Amounts reclassified from accumulated other comprehensive income	0.1			—			0.4			0.5
Net current-period other comprehensive income (loss)	2.8			(19.3		)	0.9			(15.6		)
Balance as of March 31, 2019	$	0.4		$	(32.3	)	$	(20.9	)	$	(52.8	)

⁽¹⁾All amounts are net of tax. Amounts in parentheses indicate debits.

~~Table of Contents~~

~~ITEM 1. FINANCIAL STATEMENTS (continued)~~

~~NiSource Inc.~~

~~Notes to Condensed Consolidated Financial Statements (unaudited) (continued)~~

~~18.~~20. Other, Net


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2019			2018			2019			2018
Three Months Ended March 31, (in millions)													2020			2019
Interest income	$	2.1		$	1.4		$	5.4		$	4.2		$	1.7		$	2.1
AFUDC equity	2.9			5.0			7.1			12.6			1.7			1.7
Charitable contributions	(1.1		)	(11.1		)	(4.0		)	(13.9		)
Pension and other postretirement non-service cost	(2.8		)	2.4			(8.7		)	14.7			2.7			(2.8		)
Interest rate swap settlement gain	—			—			—			21.2
Miscellaneous	0.2			0.6			0.5			3.6			(0.7		)	(1.7		)
Total Other, net	$	1.3		$	(1.7	)	$	0.3		$	42.4		$	5.4		$	(0.7	)

~~19.~~21. Business Segment Information

At ~~September 30, 2019,~~March 31, 2020, our operations are divided into 2 primary reportable segments. The Gas Distribution Operations segment provides natural gas service and transportation for residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, Indiana and Massachusetts. The Electric Operations segment provides electric service in 20 counties in the northern part of Indiana.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The following table provides information about our business segments. We use operating income as our primary measurement for each of the reported segments and make decisions on finance, dividends and taxes at the corporate level on a consolidated basis. Segment revenues include intersegment sales to affiliated subsidiaries, which are eliminated in consolidation. Affiliated sales are recognized on the basis of prevailing market, regulated prices or at levels provided for under contractual agreements. Operating income is derived from revenues and expenses directly associated with each segment.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2019			2018			2019			2018			2020			2019
Operating Revenues
Gas Distribution Operations
Unaffiliated	$	463.6		$	418.6		$	2,506.2		$	2,347.8		$	1,228.0		$	1,438.8
Intersegment	3.3			3.3			9.9			9.8			3.0			3.3
Total	466.9			421.9			2,516.1			2,357.6			1,231.0			1,442.1
Electric Operations
Unaffiliated	467.7			476.2			1,304.9			1,304.4			377.3			430.8
Intersegment	0.2			0.2			0.6			0.6			0.2			0.2
Total	467.9			476.4			1,305.5			1,305.0			377.5			431.0
Corporate and Other
Unaffiliated	0.2			0.2			0.6			0.6			0.2			0.2
Intersegment	116.9			116.4			342.2			346.6			106.7			111.1
Total	117.1			116.6			342.8			347.2			106.9			111.3
Eliminations	(120.4		)	(119.9		)	(352.7		)	(357.0		)	(109.9		)	(114.6		)
Consolidated Operating Revenues	$	931.5		$	895.0		$	3,811.7		$	3,652.8		$	1,605.5		$	1,869.8
Operating Income (Loss)
Gas Distribution Operations	$	(48.6	)	$	(455.2	)	$	605.8		$	(94.4	)	$	78.5		$	275.4
Electric Operations	140.7			134.9			321.4			300.4			78.5			95.0
Corporate and Other	(1.1		)	4.4			1.5			(2.9		)	(8.8		)	3.8
Consolidated Operating Income (Loss)	$	91.0		$	(315.9	)	$	928.7		$	203.1
Consolidated Operating Income													$	148.2		$	374.2

Table of Contents

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

NiSource Inc.



Index	Page
Executive Summary	4639
Summary of Consolidated Financial Results	4742
Results and Discussion of Segment Operations	4944
Gas Distribution Operations	5045
Electric Operations	5348
Liquidity and Capital Resources	5751
Off Balance Sheet Arrangements~~Arrangements~~	5953
Market Risk Disclosures	5953
Other Information	6053

Table of Contents

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

NiSource Inc.

EXECUTIVE SUMMARY

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

Management’s Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

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

Refer to the “Business” section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 for further discussion of our regulated utility business segments.

Our goal is to develop strategies that benefit all stakeholders as we address changing customer conservation patterns, develop more contemporary pricing structures and embark on long-term investment programs. These strategies are intended to improve reliability and safety, enhance customer service and reduce emissions while generating sustainable returns. Additionally, we continue to pursue regulatory and legislative initiatives that will allow residential customers not currently on our system to obtain gas service in a cost effective manner. Refer also to the discussion of Electric Supply within our Electric Operations discussion for additional information on our long term electric generation strategy.

Novel Coronavirus: During the first quarter of 2020, the United States and countries around the globe were impacted by the outbreak of the novel coronavirus (COVID-19). On March 11, 2020, the World Health Organization (WHO) declared the outbreak of COVID-19 to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have begun to have a significant adverse impact upon many sectors of the economy.

NiSource provides essential natural gas and electric services. The safety of our employees and customers, while providing these essential services during the COVID-19 pandemic, is paramount. We are taking a proactive, coordinated approach intended to prevent, mitigate and respond to COVID-19 by activating our Incident Command System (ICS), which includes members of our executive council, a medical review professional, and members of functional teams from across our company. The ICS monitors state-by-state conditions and determines steps to conduct our operations safely for employees and customers. This includes, without limitation, assessing COVID-19 cases, conditions and mandates by location, implementing employee and customer health and mitigation plans, rolling out technology to maximize work-from-home capabilities, securing appropriate personal protective equipment and cleaning facilities, coordinating customer, employee and stakeholder messaging and monitoring impacts to supply chain and contractor networks. We are also monitoring guidance from the Centers for Disease Control (CDC), as well as local, state and federal agencies.

We have implemented procedures designed to protect our employees who work in the field and who continue to work in operational and corporate facilities, including temperature checks, more frequent cleaning of equipment and facilities, and sequestration of employees who support critical functions. We have implemented social distancing practices, including work-from-home policies. We are temporarily suspending all non-essential work that requires an employee to enter a customer premise and limiting company vehicle occupancy to one person. We continue to employ physical and cyber-security measures to ensure that our operational and support systems remain functional.

We have suspended shutoffs for nonpayment in response to the COVID-19 pandemic. This suspension applies to residential, commercial and industrial customers and will remain in effect until further notice. In addition, we are offering more flexible payment plans to customers impacted or experiencing hardship as a result of COVID-19, and we have suspended late payment charges. The CARES Act was enacted on March 27, 2020 and provides monetary-relief and financial aid to individuals, business, nonprofits, states and municipalities. We are continuing to promote multiple resources available to customers including benefits

Table of Contents

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

NiSource Inc.

from the CARES Act, such as additional funding for both the Low-Income Home Energy Assistance Program and the Community Services Block Grant to help support income-qualified customers. We are sharing energy efficiency tips to help customers save energy at home and promoting our budget plan program, which allows customers to pay about the same amount each month.

We have had interactions with the utility regulators for each of our operating companies regarding COVID-19. Those interactions have primarily focused on steps we are taking to safely maintain essential services, including pursuing waivers of certain regulatory requirements, where needed, to allow for continued safe operations. We are also engaging regulators to address the short-term and long-term economic impact COVID-19 has, and may continue to have, on our customers and our operations. In April 2020, the Public Service Commission of Maryland and the Virginia State Corporation Commission issued orders allowing utilities in their jurisdictions to record a regulatory asset to capture and track COVID-19-related incremental costs, and we are currently evaluating the impact of these orders.

COVID-19 has resulted in new federal and state laws. We are considering relief under the provisions of the CARES Act for employer payroll tax credits and deferred payroll tax payments. We believe the deferral of payroll tax payments could provide a cash flow benefit by delaying about $30.0 million of 2020 payroll tax payments, of which 50% would be due at the end of 2021 and the remaining 50% would be due at the end of 2022. Given the recent enactment of the CARES Act, we are currently evaluating the impact of the employer payroll tax credits and other potentially applicable provisions. For information on the impact of the CARES Act on Income Taxes, see Note 14, "Income Taxes," in the Notes to Condensed Consolidated Financial Statements (unaudited).

COVID-19 did not materially impact our operating results in the first quarter of 2020. We are actively managing the materials, supplies, and contract services for our generation, transmission, distribution, and customer services functions. There are currently no significant issues in the supply chain for our electric and gas operations. At this time, there are no significant delays in our capital construction programs or our renewable generation projects, except for the Rosewater renewable generation project, which could experience a delay due to COVID-19, and a $100 million reduction in expected 2020 capital investments to conserve cash. In addition, we have not experienced a material adverse change in liquidity as a result of COVID-19. With the refinancing of our $850 million term loan on April 1, the issuance of $1.0 billion notes on April 13, 2020, the anticipated cash proceeds from the sale of the Massachusetts Business that we expect to close by the end of the third quarter of 2020, the available capacity under our short-term revolving credit facility and accounts receivable securitization facilities and our ability to access capital markets, we believe we have sufficient liquidity for the next 12 to 24 months. However, we are continuously evaluating and monitoring the impact COVID-19 could have on our future operating results and liquidity. Such impact of COVID-19 includes, but is not limited to:

A potential reduction in labor availability and productivity due to the health impact COVID-19 could have on our employees and contractors.

A decline in revenue and cash flow that will result from a decrease in commercial and industrial gas and electric demand as businesses comply with shelter-in-place requirements and as businesses experience negative economic impact from COVID-19, potentially offset by higher residential demand. We have begun to see a decline in commercial and industrial gas and electric demand. A 1% annual decrease in gas and electric commercial and industrial sales volumes would decrease operating income by approximately $10.0 million in 2020.

An anticipated increase in bad debt and a decrease in cash flows resulting from the suspension of shutoffs and the potential inability of our customers to pay for their gas and electric service due to job loss or other factors, partially offset by any potential regulatory recovery.

An expected decline in revenue due to higher customer attrition rates, as well as lower revenue growth if customer additions slow due to a prolonged economic downturn.

An anticipated decline in revenue due to the suspension of late payment charges. The impact of suspending late payment charges was not material in the first quarter.

An anticipated delay in cash flows as customers utilize the more flexible payment plans.

A potential increase in cost of materials, supplies and contract services. The incremental costs related to the safety measures described above were not material in the first quarter. While we continue to incur costs for those safety measures, the impact of these costs is dependent upon the extent and duration of the pandemic.

An anticipated increase in internal labor costs from sequestrations and higher future overtime costs.

A potential increase in future pension expense and pension funding requirements due to the degradation of interest rates and capital market conditions. Any increase in pension expense would not be determined until the year-end remeasurement or at an interim remeasurement if triggered by higher than expected lump sum payments.

Table of Contents

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

NiSource Inc.

A sustained deterioration in market conditions that could reduce our reporting units' fair values below their carrying values, resulting in future goodwill impairment charges.

Potential delays in capital construction projects, including the impact on our renewable generation projects and the related federal tax credits.

A delay in cash flows in the event that the sale of the Massachusetts Business does not close by the end of the third quarter, which could impact our liquidity.

Future volatility in the capital and credit markets that could impact our liquidity by limiting our access to capital or increasing the cost of capital.

The potential for delayed state regulatory filings, regulatory approvals and recovery of invested capital.

The impact of the employer payroll tax credit and payroll tax payment deferral under the CARES Act. As discussed above, we believe the deferral of payroll tax payments could provide a cash flow benefit by delaying about $30.0 million of payroll tax payments. We are currently evaluating the impact of the employer payroll tax credits.

The impact of newly enacted and proposed state regulatory actions and federal laws.

This is a rapidly evolving situation, and we cannot predict the extent or duration of the outbreak, or the total effects on the global, national or local economy, or our operations or financial results. We will continue to monitor developments affecting our workforce, customers, suppliers and operations and take additional measures as needed in an effort to help mitigate the impacts of the COVID-19 pandemic on our company and in our communities.

Greater Lawrence Incident: The Greater Lawrence Incident occurred on September 13, 2018. The following table summarizes expenses incurred and insurance recoveries recorded since the Greater Lawrence Incident. The amounts set forth in the table below do not include the estimated capital cost of the pipeline replacement described below and as set forth in Note ~~16-~~18- D, "Other Matters - Greater Lawrence Pipeline Replacement," in the Notes to Condensed Consolidated Financial Statements (unaudited).


	Year Ended			Three Months Ended		Nine Months Ended						Total Costs Incurred through			Costs Incurred during the Three Months Ended
(in millions)	December 31, 2018			September 30, 2019					Incident to Date			December 31, 2019			March 31, 2020		Incident to Date
Third-party claims	$	757		$	1	$	238		$	995		$	1,041		$	—	$	1,041
Other incident-related costs	266			20		122			388			420			9		429
Total	1,023			21		360			1,383			1,461			9		1,470
Insurance recoveries recorded	(135		)	—		(535		)	(670		)	(800		)	—		(800		)
Total	$	888		$	21	$	(175	)	$	713
Total costs incurred												$	661		$	9	$	670

~~Including~~Inclusive of the ~~$757~~$1,041 million of third-party claims and fines, penalties and settlements associated with government investigations recorded ~~during 2018,~~incident to date, we estimate that total costs related to third-party claims and fines, penalties and settlements associated with government investigations as set forth in Note ~~16,~~18, "Other Commitments and Contingencies - B. Legal Proceedings," will range from ~~$995~~$1,041 million to ~~$1,020~~$1,055 million, depending on the number, nature, final outcome ~~of ongoing reviews and the number, nature~~ and value of third-party ~~claims.~~claims and the final outcome of government investigations. These costs do not include costs of certain third-party claims and fines, penalties or settlements with government investigations that we are not able to estimate. We expect to incur a total of ~~$430~~$450 million to ~~$440~~$460 million in other incident-related costs, inclusive of the ~~$266~~$429 million recorded ~~during 2018~~for the incident to date, as set forth in Note ~~16,~~18, "Other Commitments and Contingencies - D. Other Matters .- Greater Lawrence Incident Restoration."

~~We also expect to incur other expenses, including expenses~~The process for estimating costs associated with third-party claims and fines, penalties and settlements associated with government investigations ~~and fines, penalties or settlements with governmental authorities in connection with~~relating to the Greater Lawrence Incident requires management to exercise significant judgment based on a number of assumptions and subjective factors. As more information becomes known, including additional information regarding ongoing investigations, management's estimates and assumptions regarding the ~~amounts, timing and tax deductibility~~financial impact of ~~which cannot be estimated at this time.~~the Greater Lawrence Incident may change.

The aggregate amount of third-party liability insurance coverage available for losses arising from the Greater Lawrence Incident is $800 million. We have collected the entire $800 million.

Table of Contents

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

NiSource Inc.

(in millions) Insurance receivable
Balance, December 31, 2018 $ 130
Insurance recoveries recorded in first quarter of 2019 100
Cash collected from insurance recoveries in the first quarter of 2019 (108 )
Balance, March 31, 2019 122
Insurance recoveries recorded in the second quarter of 2019 435
Cash collected from insurance recoveries in the second quarter of 2019 (297 )
Balance, June 30, 2019 260
Insurance recoveries recorded in the third quarter of 2019 —
Cash collected from insurance recoveries in the third quarter of 2019 (260 )
Balance, September 30, 2019 $ —

We ~~are currently unable to predict the timing or amount of future insurance recoveries in excess of the recoveries recorded as of September 30, 2019.~~

~~Since the Greater Lawrence Incident and through September 30, 2019, we~~ have invested approximately ~~$255~~$258 million of capital spend for the pipeline ~~replacement. We estimate~~replacement; this ~~replacement~~ work ~~will ultimately cost between $255 million and $260 million.~~was completed in 2019. We maintain property insurance for gas pipelines and other applicable ~~property in the approximate amount of $300 million.~~property. Columbia of Massachusetts has filed a proof of loss with its property insurer for the full cost of the pipeline replacement. ~~The recovery~~In January 2020, we filed a lawsuit against the property insurer, seeking payment of our property claim. We are currently unable to predict the timing or amount of any ~~capital investment not reimbursed through~~ insurance ~~will be addressed~~recovery under the property policy. This pipeline replacement cost is part of the Massachusetts Business that is classified as held for sale at March 31, 2020. The assets and liabilities of the Massachusetts Business have been recorded at fair value, less costs to sell, which has resulted in a ~~future regulatory proceeding. The outcome~~loss being recorded as of such a proceeding is uncertain. If at any point Columbia of Massachusetts concludes it is probable that any portion of this capital investment is not recoverable through customer rates, that portion ofMarch 31, 2020. See Note 7, "Assets and Liabilities Held for Sale," in the ~~capital investment, if estimable, would be immediately charged~~Notes to ~~earnings.~~Condensed Consolidated Financial Statements (unaudited) for additional information.

Refer to Note ~~16-B~~18-B and D, "Legal Proceedings" and "Other Matters," in the Notes to Condensed Consolidated Financial Statements (unaudited), "Summary of Consolidated Financial Results," "Results and Discussion of Segment Operation - Gas Distribution Operations," and "Liquidity and Capital Resources" in this Management's Discussion for additional information related to the Greater Lawrence Incident.

Columbia of Massachusetts Asset Sale: On February 26, 2020, NiSource and Columbia of Massachusetts entered into an Asset Purchase Agreement with Eversource. Upon the terms and subject to the conditions set forth in the Asset Purchase Agreement, we have agreed to sell the Massachusetts Business to Eversource for a purchase price of $1,100 million in cash, subject to adjustment. For additional information, see Note 7, "Assets and Liabilities Held for Sale," in the Notes to Condensed Consolidated Financial Statements (unaudited).

Summary of Consolidated Financial Results

A summary of our consolidated financial results for the three months ended March 31, 2020 and 2019 are presented below:



	Three Months Ended March 31,
(in millions, except per share amounts)	2020			2019			2020 vs. 2019
Operating Revenues	$	1,605.5		$	1,869.8		$	(264.3	)
Operating Expenses
Cost of sales (excluding depreciation and amortization)	462.4			680.3			(217.9		)
Other Operating Expenses	994.9			815.3			179.6
Total Operating Expenses	1,457.3			1,495.6			(38.3		)
Operating Income	148.2			374.2			(226.0		)
Total Other Deductions, net	(87.5		)	(96.3		)	8.8
Income Taxes	(14.9		)	59.0			(73.9		)
Net Income	75.6			218.9			(143.3		)
Preferred dividends	(13.8		)	(13.8		)	—
Net Income Available to Common Shareholders	61.8			205.1			(143.3		)
Basic Earnings Per Share	$	0.16		$	0.55		$	(0.39	)
Basic Average Common Shares Outstanding	383.1			373.4			9.7

Our operations are affected by the cost of sales. Cost of sales (excluding depreciation and amortization) for the Gas Distribution Operations segment is principally comprised of the cost of natural gas used while providing transportation and distribution services to customers. Cost of sales (excluding depreciation and amortization) for the Electric Operations segment is comprised of the cost of coal, related handling costs, natural gas purchased for the internal generation of electricity at NIPSCO and the cost of power purchased from third-party generators of electricity.

The majority of the cost of sales (excluding depreciation and amortization) are tracked costs that are passed through directly to the customer, resulting in an equal and offsetting amount reflected in operating revenues. As

On a ~~result,~~consolidated basis, we ~~believe~~reported net ~~revenues,~~income available to common shareholders of $61.8 million, or $0.16 per basic share for the three months ended March 31, 2020, compared to net income available to common shareholders of $205.1 million, or $0.55 per basic share for the same period in 2019. The decrease in income available to common shareholders during 2020 was primarily due to a ~~non-GAAP financial measure defined as~~decrease in operating revenues ~~less cost~~resulting from lower industrial revenue and the effects of ~~sales (excluding depreciation~~warmer weather in 2020, partially offset by new rates from base rate proceedings. In addition, operating expenses were higher in the current period due to the loss recorded for the classification as held for sale of the Massachusetts Business (see Note 7, "Assets and ~~amortization), provides management and investors a useful measure~~Liabilities Held for Sale," in the Notes to analyze profitability. The presentation of net revenues herein is intended to provide supplemental information for investors regarding operating performance. Net revenues do not intend to represent operating income, the ~~most comparable GAAP measure, as an indicator of operating performance and are not necessarily comparable to similarly titled measures reported by other companies.~~Cond

Table of Contents

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

NiSource Inc.

~~For the three and nine months ended September 30, 2019 and 2018, operating income and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income, was as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
Operating Income (Loss) $ 91.0
$ (315.9 ) $ 406.9
$ 928.7
$ 203.1
$ 725.6

Three Months Ended September 30, Nine Months Ended September 30,
(in millions, except per share amounts) 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
Operating Revenues $ 931.5
$ 895.0
$ 36.5
$ 3,811.7
$ 3,652.8
$ 158.9
Cost of Sales (excluding depreciation and amortization) 196.7
222.0
(25.3 ) 1,130.5
1,259.7
(129.2 )
Total Net Revenues $ 734.8
$ 673.0
$ 61.8
$ 2,681.2
$ 2,393.1
$ 288.1
Other Operating Expenses 643.8
988.9
(345.1 ) 1,752.5
2,190.0
(437.5 )
Operating Income (Loss) 91.0
(315.9 ) 406.9
928.7
203.1
725.6
Total Other Deductions, net (94.6 ) (118.1 ) 23.5
(285.3 ) (268.3 ) (17.0 )
Income Taxes (10.2 ) (94.5 ) 84.3
121.0
(26.3 ) 147.3
Net Income (Loss) 6.6
(339.5 ) 346.1
522.4
(38.9 ) 561.3
Preferred dividends (13.8 ) (5.6 ) (8.2 ) (41.4 ) (6.9 ) (34.5 )
Net Income (Loss) Available to Common Shareholders (7.2 ) (345.1 ) 337.9
481.0
(45.8 ) 526.8
Basic Earnings (Loss) Per Share $ (0.02 ) $ (0.95 ) $ 0.93
$ 1.29
$ (0.13 ) $ 1.42
Basic Average Common Shares Outstanding 374.1
363.9
10.2
373.8
352.1
21.7

~~On a consolidated basis, we reported a net loss to common shareholders of $7.2 million, or $0.02 per basic share~~ensed Consolidated Financial Statements (unaudited) for the three months ended September 30, 2019, compared to net loss to common shareholders of $345.1 million, or $0.95 per basic share for the same period in 2018. The decrease in loss to common shareholders during 2019 was primarily due toadditional information), partially offset by lower ~~current period operating~~ expenses related to the Greater Lawrence Incident, ~~an increase~~net of insurance recoveries. Income taxes were also lower in ~~revenue due to new rates from base rate proceedings and infrastructure replacement programs and a loss on early extinguishment of long-term debt in 2018.~~

~~For~~ the nine months ended September 30, 2019, we reported net income available to common shareholders of $481.0 million, or $1.29 per basic share compared to net loss to common shareholders of $45.8 million, or $0.13 per basic share for the same period in 2018. Similar to the quarter-to-date period, the increase in income available to common shareholders during 2019 was primarily due to lower current period operating expenses related to the Greater Lawrence Incident, insurance recoveries recorded related to the Greater Lawrence Incident, new rates from base rate proceedings and infrastructure replacement programs and a loss on early extinguishment of long-term debt in 2018. These increases were partially offset by an interest rate swap settlement gain in 2018 and additional dilution in 2019 resulting from preferred stock dividend commitments.(see "Income Taxes" below).

Operating Income

For the three months ended ~~September 30, 2019,~~March 31, 2020, we reported operating income of ~~$91.0~~$148.2 million compared to an operating ~~loss~~income of ~~$315.9~~$374.2 million for the same period in ~~2018. As noted above, the increase~~2019. The decrease in operating income was primarily due to lower industrial revenue and the effects of warmer weather in 2020, as well as higher current period operating expenses related to the loss recorded for the classification as held for sale of the Massachusetts Business, partially offset by lower expenses related to the Greater Lawrence Incident, net of insurance recoveries, and new rates from base rate proceedings and infrastructure replacement programs. These increases were partially offset by increased depreciation due to the regulatory outcome of NIPSCO's gas rate case, an increase in amortization of depreciation previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as capital expenditures being placed into service.

For the nine months ended September 30, 2019, we reported operating income of $928.7 million compared to operating income of $203.1 million for the same period in 2018. In addition to the drivers described for the quarter-to-date period, operating income for the current year was aided by insurance recoveries recorded related to the Greater Lawrence Incident.

~~Table of Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~NiSource Inc.~~

proceedings.

Other Deductions, net

Other deductions, net reduced income by ~~$94.6~~$87.5 million in the ~~third~~first quarter of ~~2019~~2020 compared to a reduction in income of ~~$118.1~~$96.3 million in the prior year. This change is primarily due to ~~loss on early extinguishment of long-term debt of $33.0 million which was recorded~~lower non-service pension costs driven by a decrease in the ~~third quarter of 2018, partially offset by higher interest expense of $12.4 million driven by decreased regulatory deferrals from Columbia of Ohio's CEP.~~

Other deductions, net reduced income by $285.3 million during the nine months ended September 30, 2019 compared to a reduction in income of $268.3 million in the prior year. The change is primarily due to lower actuarial investment returns on pension ~~and other postretirement~~ benefit assets of $23.4 million, an increase in interest expense of $20.4 million driven by decreased regulatory deferrals from Columbia of Ohio's CEP and an interest rate swap settlement gain of $21.2 million recognized in the first quarter of 2018. These variances were partially offset by a loss of early extinguishment of long-term debt of $45.5 million in 2018.obligations.

Income Taxes

For the three months ended ~~September 30, 2019,~~March 31, 2020, the decrease in income tax ~~benefit~~expense from ~~2018~~2019 to ~~2019~~2020 of $73.9 million is primarily attributable to ~~the decreased loss before~~increased amortization of excess deferred federal income ~~taxes~~tax liabilities, as specified in the ~~third quarter of 2019, as well as~~TCJA, and a ~~higher effective tax rate in 2019 due~~discrete item related to the ~~relative impact~~pre–tax book loss recorded for the classification as held for sale of ~~permanent differences on lower pre-tax loss in 2019 compared to 2018.~~

~~For~~ the ~~nine months ended September 30, 2019, the increase in income~~Massachusetts Business tax ~~expense from 2018 to 2019 is primarily attributable to the increased income before income taxes, as well as a lower effective~~effected at statutory tax ~~rate in 2019 due to the relative impact of permanent differences on higher pre-tax income in 2019 compared to 2018.~~rates.

Refer to Note ~~11,~~14, "Income Taxes," in the Notes to Condensed Consolidated Financial Statements (unaudited) for information on income taxes and the change in the effective tax rate.

Capital Investment

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we invested ~~$1.3 billion~~$452.1 million in capital expenditures across our gas and electric utilities. These expenditures were primarily aimed at furthering the safety and reliability of our gas distribution system, system modernization projects and maintaining our existing electric generation fleet.

We continue to execute on an estimated $30 billion in total projected long-term regulated utility infrastructure investments and expect to invest a total of approximately $1.7 to $1.8 billion in capital during ~~2019 to~~2020 as we continue to ~~modernize~~focus on growth, safety and ~~improve~~modernization projects across our ~~system across all seven states.~~operating area.

Liquidity

~~The enactment~~A primary focus of ours is to ensure the ~~TCJA has~~availability of adequate financing to fund our ongoing safety and ~~will continue to have an unfavorable impact on our liquidity in 2019.~~infrastructure investment programs which typically involves the issuance of debt and/or equity. In addition, expenses related to the Greater Lawrence Incident have exceeded the total amount of insurance coverage available under our ~~policies which has unfavorably impacted~~policies. During 2020, we took certain actions to enhance our liquidity. ~~However, through~~On April 1, 2020, we terminated and repaid in full our existing $850.0 million term loan agreement and entered into a new $850.0 million term loan agreement that matures March 31, 2021. Also, on April 13, 2020, we completed the issuance and sale of $1.0 billion of senior unsecured notes resulting in approximately $987.8 million of net proceeds.

Through income generated from operating activities, amounts available under our short-term revolving credit facility, commercial paper program, accounts receivable securitization facilities, term loan borrowings, long-term debt agreements, ~~and~~ our ability to access the capital markets, and the expected proceeds from the potential sale of the Massachusetts Business (see Note 7, "Assets and Liabilities Held for Sale," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for additional information), we believe ~~there is~~we have adequate capital available to fund our operating activities, capital expenditures, ~~and~~ the effects of the Greater Lawrence Incident ~~in 2019~~ and ~~beyond.~~the effects of COVID-19 for the next 12 to 24 months. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had ~~$1,362.8~~$1,306.6 million and ~~$974.6~~$1,409.1 million, respectively, of net liquidity available, consisting of cash and available capacity under credit facilities.

These factors and other impacts to the financial results are discussed in more detail within the following discussions of “Results and Discussion of Segment Operations” and “Liquidity and Capital Resources.” See the Novel Coronavirus discussion in the introduction to the "Executive Summary" for discussion regarding the liquidity impact from COVID-19.

Table of Contents

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

NiSource Inc.

Regulatory Developments

During the quarter ended ~~September 30, 2019,~~March 31, 2020, we continued to move forward on core infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all seven states of our operating area. Refer to Note 6,9, "Regulatory Matters" and Note ~~16-D~~18-D "Other Matters," in the Notes to Condensed Consolidated Financial Statements (unaudited) for a complete discussion of key regulatory developments that have transpired during ~~2019.~~2020.

RESULTS AND DISCUSSION OF SEGMENT OPERATIONS

Presentation of Segment Information

Our operations are divided into two primary reportable segments: Gas Distribution Operations and Electric Operations.

Table of Contents

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

NiSource Inc.

Gas Distribution Operations

~~For~~Financial and operational data for the Gas Distribution Operations segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018, operating income and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income, was as follows:~~are presented below:


	Three Months Ended September 30,								Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2019			2018			2019 vs. 2018		2019		2018		2019 vs. 2018		2020			2019			2020 vs. 2019
Operating Income (Loss)	$	(48.6	)	$	(455.2	)	$	406.6	$	605.8	(94.4	)	$	700.2
Operating Revenues															$	1,231.0		$	1,442.1		$	(211.1	)
Operating Expenses
Cost of sales (excluding depreciation and amortization)															377.4			550.1			(172.7		)
Operation and maintenance															330.1			451.3			(121.2		)
Depreciation and amortization															96.5			97.4			(0.9		)
Loss on classification as held for sale															280.2			—			280.2
Other taxes															68.3			67.9			0.4
Total Operating Expenses															1,152.5			1,166.7			(14.2		)
Operating Income															$	78.5		$	275.4		$	(196.9	)
Revenues
Residential															$	823.3		$	976.0		$	(152.7	)
Commercial															274.0			331.6			(57.6		)
Industrial															74.5			83.0			(8.5		)
Off-System															18.7			20.1			(1.4		)
Other															40.5			31.4			9.1
Total															$	1,231.0		$	1,442.1		$	(211.1	)
Sales and Transportation (MMDth)
Residential															118.5			140.7			(22.2		)
Commercial															73.7			86.0			(12.3		)
Industrial															146.8			148.1			(1.3		)
Off-System															11.2			7.2			4.0
Other															0.2			0.2			—
Total															350.4			382.2			(31.8		)
Heating Degree Days															2,440			2,897			(457		)
Normal Heating Degree Days															2,897			2,864			33
% Colder (Warmer) than Normal															(16		)%	1		%
Gas Distribution Customers
Residential															3,233,222			3,206,016			27,206
Commercial															283,579			282,616			963
Industrial															6,002			6,035			(33		)
Other															3			3			—
Total															3,522,806			3,494,670			28,136

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
Net Revenues
Operating Revenues $ 466.9
$ 421.9
$ 45.0
$ 2,516.1
$ 2,357.6
$ 158.5
Less: Cost of sales (excluding depreciation and amortization) 73.0
85.7
(12.7 ) 759.8
875.1
(115.3 )
Net Revenues 393.9
336.2
57.7
1,756.3
1,482.5
273.8
Operating Expenses

Operation and maintenance 289.9
678.5
(388.6 ) 680.9
1,214.2
(533.3 )
Depreciation and amortization 102.6
72.5
30.1
299.4
215.0
84.4
Gain on sale of assets —
—
—
(0.1 ) —
(0.1 )
Other taxes 50.0
40.4
9.6
170.3
147.7
22.6
Total Operating Expenses 442.5
791.4
(348.9 ) 1,150.5
1,576.9
(426.4 )
Operating Income (Loss) $ (48.6 ) $ (455.2 ) $ 406.6
$ 605.8
$ (94.4 ) $ 700.2
Revenues

Residential $ 289.7
$ 260.2
$ 29.5
$ 1,645.3
$ 1,540.8
$ 104.5
Commercial 91.6
81.8
9.8
545.9
517.6
28.3
Industrial 45.5
39.2
6.3
181.5
161.7
19.8
Off-System 16.9
22.0
(5.1 ) 60.4
65.2
(4.8 )
Other 23.2
18.7
4.5
83.0
72.3
10.7
Total $ 466.9
$ 421.9
$ 45.0
$ 2,516.1
$ 2,357.6
$ 158.5
Sales and Transportation (MMDth)

Residential 13.6
13.8
(0.2 ) 186.5
187.9
(1.4 )
Commercial 17.4
17.5
(0.1 ) 131.8
129.7
2.1
Industrial 133.0
132.1
0.9
406.5
417.7
(11.2 )
Off-System 8.5
7.5
1.0
24.6
21.9
2.7
Other —
—
—
0.3
0.3
—
Total 172.5
170.9
1.6
749.7
757.5
(7.8 )
Heating Degree Days 13
51
(38 ) 3,409
3,498
(89 )
Normal Heating Degree Days 71
85
(14 ) 3,498
3,576
(78 )
% Warmer than Normal (82 )% (40 )%

(3 )% (2 )%
Gas Distribution Customers
Residential 3,167,742
3,140,942
26,800
Commercial 277,701
276,786
915
Industrial 5,974
5,969
5
Other 3
5
(2 )
Total 3,451,420
3,423,702
27,718
Cost of sales (excluding depreciation and amortization) for the Gas Distribution Operations segment is principally comprised of the cost of natural gas used while providing transportation and distribution services to customers. The cost of sales (excluding depreciation and amortization) are tracked costs that are passed through directly to the customer resulting in an equal and offsetting amount reflected in operating revenue. In addition, comparability of operation and maintenance expenses, depreciation and amortization, and other taxes may be impacted by regulatory, depreciation and tax trackers that allow for the recovery in rates of certain costs. Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income.

Table of Contents

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

NiSource Inc.

Gas Distribution Operations

Comparability of line item operating results may be impacted by regulatory, tax and depreciation trackers (other than those for cost of sales) that allow for the recovery in rates of certain costs. Therefore, increases in these tracked operating expenses are generally offset by increases in net revenues and have essentially no impact on net income.

Three Months Ended ~~September 30,~~March 31, 2020 vs. March 31, 2019 ~~vs. September 30, 2018~~ Operating Income ~~(Loss)~~

For the three months ended ~~September 30, 2019,~~March 31, 2020, Gas Distribution Operations reported an operating ~~loss~~income of ~~$48.6~~$78.5 million, a decrease of ~~$406.6~~$196.9 million from the comparable ~~2018~~2019 period.

~~Net~~Operating revenues for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~$393.9~~$1,231.0 million, ~~an increase~~a decrease of ~~$57.7~~$211.1 million from the same period in ~~2018.~~2019. The change in ~~net~~operating revenues was primarily driven by

Lower cost of sales (excluding depreciation and amortization) billed to customers, which is offset in operating expense, of $172.7 million.

Lower revenues from the effects of warmer weather in 2020 of $36.1 million.

Lower regulatory, tax and depreciation trackers, which are offset in operating expense, of $13.9 million.

Favorable adjustments in 2019 to the revenue reserve for the probable future refund of certain collections from customers as a result of the lower income tax rate from TCJA of $6.1 million.

Partially Offset by:

New rates from base rate proceedings and infrastructure replacement programs of ~~$52.1~~$14.7 million.

~~Higher~~The effects of customer growth and increased usage of $6.3 million.

Operating expenses were $14.2 million lower for the three months ended March 31, 2020 compared to the same period in 2019. This change was primarily driven by:

Lower cost of sales (excluding depreciation and amortization) billed to customers, which is offset in operating revenue, of $172.7 million.

Decreased expenses related to third-party claims and other costs, net of insurance recoveries, for the Greater Lawrence Incident of $127.3 million.

Lower regulatory, tax and depreciation trackers, which are offset in operating ~~expense,~~revenues, of ~~$5.8~~$13.9 million.

~~Operating expenses were $348.9 million lower for the three months ended September 30, 2019 compared to the same period in 2018. This change was primarily driven by:~~

~~Lower third-party claims and other expenses related to the Greater Lawrence Incident of $429.9 million.~~

Partially offset by:

~~Increased depreciation of $30.1 million due~~Loss on classification as held for sale related to the ~~regulatory outcome~~Massachusetts Business of NIPSCO's gas rate case, an increase in amortization of depreciation previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as higher capital expenditures placed in service.$280.2 million.

Higher employee and administrative expenses of ~~$18.8~~$11.7 million.

~~Increased outside services of $10.4 million primarily due to increased line location work.~~

Higher property taxes of $8.3 million primarily due to increased amortization of property taxes previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as higher capital expenditures placed in service.

~~Increased regulatory, tax and depreciation trackers, which are offset in net revenues, of $5.8 million.~~

~~Nine Months Ended September 30, 2019 vs. September 30, 2018 Operating Income (Loss)~~

~~For the nine months ended September 30, 2019, Gas Distribution Operations reported operating income of $605.8 million, an increase of $700.2 million from the comparable 2018 period.~~

~~Net revenues for the nine months ended September 30, 2019 were $1,756.3 million, an increase of $273.8 million from the same period in 2018. The change in net revenues was primarily driven by:~~

~~New rates from base rate proceedings and infrastructure replacement programs of $219.2 million.~~

~~Higher regulatory, tax and depreciation trackers, which are offset in operating expense, of $38.2 million.~~

~~Increased residential and commercial customer growth of $10.1 million.~~

Higher revenues of $8.9 million resulting from an update in the weather-related normal heating degree day methodology (see further detail below), partially offset by a $5.0 million revenue decrease from the effects of warmer weather in 2019.

~~Operating expenses were $426.4 million lower for the nine months ended September 30, 2019 compared to the same period in 2018. This change was primarily driven by:~~

~~Insurance recoveries recorded, net of third-party claims and other expenses recorded, related to the Greater Lawrence Incident of $626.4 million.~~

~~Partially offset by:~~

Increased depreciation of $84.4 million due to the regulatory outcome of NIPSCO's gas rate case, an increase in amortization of depreciation previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as higher capital expenditures placed in service.

~~Higher regulatory, tax and depreciation trackers, which are offset in net revenues, of $38.2 million.~~

~~Increased employee and administrative expenses of $26.9 million.~~

Higher property taxes of $18.3 million primarily due to increased amortization of property taxes previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP, as well as higher capital expenditures placed in service.

~~Table of Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~NiSource Inc.~~

~~Gas Distribution Operations~~

~~Increased outside services of $11.2 million primarily due to increased line location work.~~

~~Higher insurance expense of $4.9 million primarily driven by increased premiums.~~

Weather

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

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

Weather in the Gas Distribution Operations service territories for the ~~third~~first quarter of ~~2019~~2020 was about ~~82%~~16% warmer than normal and about ~~75%~~16% warmer than ~~2018,~~2019, leading to decreased ~~net~~operating revenues of ~~$1.0~~$36.1 million for the quarter ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018.~~

Weather in the Gas Distribution Operations service territories for the nine months ended September 30, 2019 was approximately 3% warmer than normal and 3% warmer than 2018; however, due to the aforementioned change in methodology, the change in net revenues attributed to weather resulted in an increase of $3.9 million for the nine months ended September 30, 2019 compared to the same period in 2018. This variance is detailed further below:

~~An update in the weather-related normal heating degree day methodology resulting in a favorable variance attributed to weather of $8.9 million, as discussed above.~~

~~Offset by:~~

~~The effects of warmer weather in 2019 of $5.0 million.~~

2019.

Throughput

Total volumes sold and transported for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~172.5~~350.4 MMDth, compared to ~~170.9~~382.2 MMDth for the same period in ~~2018.~~

~~Total volumes sold and transported for the nine months ended September 30, 2019 were 749.7 MMDth,~~2019. This decrease is primarily attributable to warmer weather in 2020 compared to ~~757.5 MMDth for the same period in 2018.~~2019.

Economic Conditions

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

Table of Contents

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

NiSource Inc.

Gas Distribution Operations

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

COVID-19 has impacted many sectors of the economy. While COVID-19 did not materially impact the operating results of the Gas Distribution Operations segment in the first quarter of 2020, we are monitoring developments affecting our workforce, customers, suppliers and operations and will take additional measures as needed in an effort to help mitigate the impacts of the COVID-19 pandemic on our company and in our communities. See the Novel Coronavirus discussion in the introduction to the "Executive Summary" for additional information.

Greater Lawrence Incident

Refer to Note 18-B, "Legal Proceedings," and D. "Other Matters," in the Notes to Condensed Consolidated Financial Statements (unaudited) and "Executive Summary" and "Liquidity and Capital Resources" in this Management's Discussion for additional information related to the Greater Lawrence Incident.

Columbia of Massachusetts Asset Sale

On February 26, 2020, we entered into an Asset Purchase Agreement with Eversource that provided for the sale of the Massachusetts Business to Eversource subject to terms and conditions set forth in the agreement. For additional information, see Note 7, "Assets and Liabilities Held for Sale," in the Notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

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

NiSource Inc.

Electric Operations

~~For~~Financial and operational data for the Electric Operations segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018, operating income and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income, was as follows:~~are presented below:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2019		2018		2019 vs. 2018		2019		2018		2019 vs. 2018		2020		2019		2020 vs. 2019
Operating Revenues													$	377.5	$	431.0	$	(53.5	)
Operating Expenses
Cost of sales (excluding depreciation and amortization)													85.0		130.1		(45.1		)
Operation and maintenance													120.9		121.7		(0.8		)
Depreciation and amortization													78.9		68.2		10.7
Other taxes													14.2		16.0		(1.8		)
Total Operating Expenses													299.0		336.0		(37.0		)
Operating Income	$	140.7	$	134.9	$	5.8	$	321.4	$	300.4	$	21.0	$	78.5	$	95.0	$	(16.5	)
Revenues
Residential													$	119.2	$	118.8	$	0.4
Commercial													120.2		119.3		0.9
Industrial													109.1		163.5		(54.4		)
Wholesale													3.2		2.7		0.5
Other													25.8		26.7		(0.9		)
Total													$	377.5	$	431.0	$	(53.5	)
Sales (Gigawatt Hours)
Residential													755.5		792.4		(36.9		)
Commercial													878.7		894.4		(15.7		)
Industrial													2,071.1		2,215.7		(144.6		)
Wholesale													71.4		6.5		64.9
Other													28.2		34.5		(6.3		)
Total													3,804.9		3,943.5		(138.6		)
Electric Customers
Residential													416,501		412,739		3,762
Commercial													57,150		56,703		447
Industrial													2,160		2,281		(121		)
Wholesale													725		732		(7		)
Other													2		2		—
Total													476,538		472,457		4,081

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
Net Revenues
Operating revenues $ 467.9
$ 476.4
$ (8.5 ) $ 1,305.5
$ 1,305.0
$ 0.5
Less: Cost of sales (excluding depreciation and amortization) 123.7
136.3
(12.6 ) 370.7
384.6
(13.9 )
Net Revenues 344.2
340.1
4.1
934.8
920.4
14.4
Operating Expenses

Operation and maintenance 118.4
123.4
(5.0 ) 363.9
377.9
(14.0 )
Depreciation and amortization 70.4
66.3
4.1
207.8
196.3
11.5
Other taxes 14.7
15.5
(0.8 ) 41.7
45.8
(4.1 )
Total Operating Expenses 203.5
205.2
(1.7 ) 613.4
620.0
(6.6 )
Operating Income $ 140.7
$ 134.9
$ 5.8
$ 321.4
$ 300.4
$ 21.0
Revenues

Residential $ 148.7
$ 154.7
$ (6.0 ) $ 373.4
$ 382.3
$ (8.9 )
Commercial 136.3
140.7
(4.4 ) 370.8
374.2
(3.4 )
Industrial 151.8
153.8
(2.0 ) 471.2
468.7
2.5
Wholesale 3.5
3.8
(0.3 ) 9.0
12.4
(3.4 )
Other 27.6
23.4
4.2
81.1
67.4
13.7
Total $ 467.9
$ 476.4
$ (8.5 ) $ 1,305.5
$ 1,305.0
$ 0.5
Sales (Gigawatt Hours)

Residential 1,103.2
1,121.5
(18.3 ) 2,628.7
2,754.6
(125.9 )
Commercial 1,077.3
1,079.6
(2.3 ) 2,862.7
2,929.0
(66.3 )
Industrial 2,145.5
2,223.3
(77.8 ) 6,525.7
6,785.8
(260.1 )
Wholesale 0.3
2.5
(2.2 ) 7.9
94.8
(86.9 )
Other 29.6
34.7
(5.1 ) 86.4
95.2
(8.8 )
Total 4,355.9
4,461.6
(105.7 ) 12,111.4
12,659.4
(548.0 )
Cooling Degree Days 720
739
(19 ) 940
1,131
(191 )
Normal Cooling Degree Days 556
570

795
799

% Warmer than Normal 29 % 30 %

18 % 42 %

Electric Customers
Residential 413,363
410,848
2,515
Commercial 56,906
56,426
480
Industrial 2,264
2,285
(21 )
Wholesale 729
736
(7 )
Other 2
2
—
Total 473,264
470,297
2,967

~~Table~~Cost of ~~Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~NiSource Inc.~~

sales (excluding depreciation and amortization) for the Electric Operations

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

~~Three Months Ended September 30, 2019 vs. September 30, 2018 Operating Income~~

~~For the three months ended September 30, 2019, Electric Operations reported operating income of $140.7 million, an increase of $5.8 million from the comparable 2018 period.~~

~~Net revenues for the three months ended September 30, 2019 were $344.2 million, an increase of $4.1 million from the same period in 2018. The change in net revenues was primarily driven by:~~

~~Increased residential and commercial usage of $4.7 million.~~

~~Increased rates due to incremental capital spend on infrastructure replacement programs and electric transmission projects of $2.9 million.~~

~~Higher regulatory and depreciation trackers, which are offset in operating expense, of $2.6 million.~~

~~Partially offset by:~~

~~Lower revenues from the effects of cooler weather in 2019 of $6.8 million.~~

~~Operating expenses were $1.7 million lower for the three months ended September 30, 2019 compared to the same period in 2018. This change was primarily driven by:~~

~~Decreased materials and supplies costs of $2.5 million driven by lower generation-related maintenance.~~

~~Lower outside service costs of $1.8 million.~~

~~Decreased employee and administrative costs of $1.1 million.~~

~~Partially offset by:~~

~~Higher regulatory and depreciation trackers, which are offset in net revenues, of $2.6 million.~~

~~Increased depreciation of $2.0 million due to higher capital expenditures placed in service.~~

~~Nine months ended September 30, 2019 vs. September 30, 2018 Operating Income~~

~~For the nine months ended September 30, 2019, Electric Operations reported operating income of $321.4 million, an increase of $21.0 million from the comparable 2018 period.~~

~~Net revenues for the nine months ended September 30, 2019 were $934.8 million, an increase of $14.4 million from the same period in 2018. The change in net revenues was primarily driven by:~~

~~Increased rates due to incremental capital spend on infrastructure replacement programs and electric transmission projects of $13.9 million.~~

~~Higher regulatory and depreciation trackers, which are offset in operating expense, of $8.3 million.~~

~~Decreased fuel handling costs of $7.3 million.~~

~~Increased commercial and residential customer growth of $3.1 million.~~

~~Partially offset by:~~

~~Decreased industrial and residential customer usage of $7.1 million.~~

~~Lower revenues from the effects of cooler weather in 2019 of $12.8 million.~~

~~Operating expenses were $6.6 million lower for the nine months ended September 30, 2019 compared to the same period in 2018. This change was primarily driven by:~~

~~Decreased employee and administrative costs of $6.7 million.~~

~~Lower outside service costs of $5.7 million.~~

Decreased materials and supplies costs and property tax expense of $5.8 million and $3.5 million, respectively, primarily related to the retirement of Bailly Generating Station Units 7 and 8 on May 31, 2018.

Table of Contents

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

NiSource Inc.

Electric Operations

~~Partially~~Three Months Ended March 31, 2020 vs. March 31, 2019 Operating Income

For the three months ended March 31, 2020, Electric Operations reported operating income of $78.5 million, a decrease of $16.5 million from the comparable 2019 period.

Operating revenues for the three months ended March 31, 2020 were $377.5 million, a decrease of $53.5 million from the same period in 2019. The change in operating revenues was primarily driven by:

Lower cost of sales (excluding depreciation and amortization) billed to customers, which is offset ~~by:~~in operating expense, of $45.1 million.

~~Higher~~Decreased industrial revenue of $12.5 million due to the new industrial service structure approved in the recent base rate proceeding, as well as lower industrial usage due to an increase in internal generation being utilized by large industrial customers.

Lower regulatory and depreciation trackers, which are offset in ~~net~~operating expense, of $7.3 million.

Partially offset by:

New residential and commercial rates from the recent base rate proceeding and electric transmission projects of $13.2 million.

Operating expenses were $37.0 million lower for the three months ended March 31, 2020 compared to the same period in 2019. This change was primarily driven by:

Lower cost of sales (excluding depreciation and amortization) billed to customers, which is offset in operating revenue, of ~~$8.3~~$45.1 million.

Lower regulatory and depreciation trackers, which are offset in operating revenues, of $7.3 million.

Lower outside services costs of $5.0 million primarily related to lower generation-related maintenance.

Partially offset by:

Increased depreciation of ~~$6.4~~$15.1 million ~~due~~primarily attributable to higher ~~capital expenditures placed~~depreciation rates from the recent rate case proceeding.

Higher employee and administrative costs of $3.2 million.

Higher environmental costs of $2.5 million related to revisions in ~~service.~~expected remediation costs.

Weather

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

Weather in the Electric Operations’ territories for the ~~third~~first quarter of ~~2019~~2020 was about ~~29%~~11% warmer than normal and about ~~3% cooler~~11% warmer than in ~~2018,~~2019, resulting in decreased ~~net~~operating revenues of ~~$6.8~~$1.1 million for the quarter ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018.~~

Weather in the Electric Operations’ territories for the nine months ended September 30, 2019 was about 18% warmer than normal and about 17% cooler than in 2018, resulting in decreased net revenues of $12.8 million for the nine months ended September 30, 2019 compared to the same period in 2018.2019.

Sales

Electric Operations sales for the ~~third~~first quarter of ~~2019~~2020 were ~~4,355.9~~3,804.9 GWh, a decrease of ~~105.7~~138.6 GWh compared to the same period in ~~2018.~~2019. This decrease was primarily attributable to ~~the effects of cooler weather on residential and commercial customers and~~ higher internal generation ~~from~~by large industrial customers during the ~~third~~first quarter of ~~2019,~~2020, partially offset by increased ~~weather normalized usage from residential and commercial~~sales to wholesale customers.

Electric Operations sales for the nine months ended September 30, 2019 were 12,111.4 GWh, a decrease of 548.0 GWh compared to the same period in 2018. This decrease was primarily attributable to the effects of cooler weather on residential customers and higher internal generation from large industrial customers during the third quarter of 2019.

~~BP Products North America~~. On March 29, 2018, WCE, which is currently owned by BP p.l.c ("BP") and BP Products North America, which operates the BP Refinery, filed a petition at the IURC asking that the combined operations of WCE and BP be treated as a single premise, and the WCE generation be dedicated primarily to BP Refinery operations beginning in May 2019 as WCE has self-certified as a qualifying facility at FERC. BP Refinery planned to continue to purchase electric service from NIPSCO at a reduced demand level beginning in May 2019; however, a settlement agreement was filed on November 2, 2018 agreeing that BP and WCE would not move forward with construction of a private transmission line to serve BP until conclusion of NIPSCO’s pending electric rate case. The IURC approved the settlement agreement as filed on February 20, 2019. Refer to Note 6, "Regulatory Matters," in the Notes to Condensed Consolidated Financial Statements (unaudited) for additional information.

Economic Conditions

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

Table of Contents

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

NiSource Inc.

Electric Operations

COVID-19 has impacted many sectors of the economy. While COVID-19 did not materially impact the operating results of the Electric Operations segment in the first quarter of 2020, we are monitoring developments affecting our workforce, customers, suppliers and operations and will take additional measures as needed in an effort to help mitigate the impacts of the COVID-19 pandemic on our company and in our communities. See the Novel Coronavirus discussion in the introduction to the "Executive Summary" for additional information.

Electric Supply

~~Table of Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~NiSource Inc.~~

~~Electric Operations~~

The Integrated Resource Plan evaluated demand-side and supply-side resource alternatives to reliably and cost effectively meet NIPSCO customers' future energy requirements over the ensuing 20 years. The preferred option within the Integrated Resource Plan retires R.M. Schahfer Generating Station (Units 14, 15, 17, and 18) by 2023 and Michigan City Generating Station (Unit 12) by 2028. These units represent 2,080 MW of generating capacity, equal to 72% of NIPSCO’s remaining capacity ~~after the retirement~~and 100% of ~~Bailly Units 7 and 8 in May of 2018.~~NIPSCO's remaining coal-fired generating capacity.

The current replacement plan includes ~~renewable sources of~~lower-cost, reliable, cleaner energy ~~including wind, solar, and battery storage~~resources to be obtained through a combination of NIPSCO ownership and ~~PPAs~~PPAs. Refer to Note ~~16-D,~~18-D, "Other Matters," in the Notes to Condensed Consolidated Financial Statements (unaudited) for additional information on the NIPSCO Integrated Resource Plan.

Table of Contents

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

NiSource Inc.

Liquidity and Capital Resources

Greater Lawrence Incident: As discussed in the "Executive Summary" and Note ~~16,~~18, “Other Commitments and Contingencies,” in the Notes to the Condensed Consolidated Financial Statements (unaudited) we have recorded ~~losses~~and paid costs associated with the Greater Lawrence Incident and have invested capital to replace the entire affected 45-mile cast iron and bare steel pipeline system that delivers gas to the impacted area. As discussed in the Executive Summary and Note 1618 referenced earlier in this paragraph, we ~~expect to~~may incur additional expenses and liabilities in excess of our recorded liabilities and estimated additional costs associated with the Greater Lawrence Incident. The timing and amount of future financing needs will depend on the ultimate timing and amount of payments made to third parties in connection with the Greater Lawrence Incident and the timing and amount of associated insurance recoveries. Since the Greater Lawrence Incident and through ~~September 30, 2019,~~March 31, 2020, we have collected ~~$670~~$800 million from insurance ~~providers which has aided liquidity. Total expenses~~providers; however, total costs related to the incident have exceeded the total amount of insurance coverage available under our policies. ~~As a result,~~To date, this excess has primarily been funded through short-term borrowings. We plan to use the expected proceeds from the sale of the Massachusetts Business to pay down these short-term borrowings. For additional ~~long term financing will likely be required~~information, see Note 7, "Assets and Liabilities Held for Sale," in the Notes to ~~cover this shortfall.~~

Operating Activities

Net cash from operating activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~$1,231.8~~$369.9 million, ~~an increase~~a decrease of ~~$304.6~~$29.2 million compared to the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. This ~~increase~~decrease was driven by ~~insurance recoveries related to the Greater Lawrence Incident, partially offset by related cash~~year over year increase in net payments ~~for claims and other expenses. For the nine months ended September 30, 2019, we received approximately $242 million of insurance recoveries, net of payments for expenses,~~ related to the Greater Lawrence Incident. ~~Refer~~During 2020, we paid approximately $150 million compared to ~~Note 16-D "Other Matters"~~$73 million, net of insurance recoveries, during 2019. This decrease was also a result of lower revenue due to warmer weather during 2020. Offsetting these cash outflows are higher accounts receivable collections in ~~the Notes~~2020 compared to Condensed Consolidated Financial Statements (unaudited) for further information. Also driving this increase was decreased compensation and employee benefit payments, as well as increased over collections of gas and fuel costs. These increases were partially offset by an interest rate swap settlement cash inflow recognized in the first quarter of 2018.2019.

Investing Activities

Net cash used for investing activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~$1,393.8~~$484.6 million, an increase of ~~$17.3~~$109.2 million compared to the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. This increase was mostly attributable to higher capital expenditures and higher cost of removal expenditures in ~~2019.~~2020.

Our capital expenditures for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 were ~~$1,310.0~~$452.1 million compared to ~~$1,296.6~~$353.7 million for the comparable period in ~~2018.~~2019. The increase was driven by ~~additional capital spending related to the Greater Lawrence Incident, partially offset by a decrease in capital spending at NIPSCO related to the conclusion of electric transmission~~customer growth and ~~CCR~~safety and system modernization projects. We project total ~~2019~~2020 capital expenditures to be approximately $1.7 to $1.8 billion.

Our cost of removal expenditures for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 were ~~$84.5~~$34.5 million compared to ~~$72.6~~$25.3 million for the comparable period in ~~2018.~~2019. The increase was driven by additional cost of removal projects completed ~~at our Michigan City generating station.~~by NIPSCO.

Financing Activities

Common Stock and Preferred Stock. Refer to Note 5, “Equity,” in the Notes to Condensed Consolidated Financial Statements (unaudited) for information on common and preferred stock activity.

Long-term Debt. Refer to Note ~~13,~~16, “Long-Term Debt,” in the Notes to Condensed Consolidated Financial Statements (unaudited) for information on long-term debt activity.

Short-term Debt. Refer to Note ~~14,~~17, “Short-Term Borrowings,” in the Notes to Condensed Consolidated Financial Statements (unaudited) for information on short-term debt activity.

Net Available Liquidity. As of ~~September 30, 2019,~~March 31, 2020, an aggregate of ~~$1,362.8~~$1,306.6 million of net liquidity was available, including cash and credit available under the revolving credit facility and accounts receivable securitization programs.

Table of Contents

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

NiSource Inc.

The following table displays our liquidity position as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(in millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Current Liquidity
Revolving Credit Facility	$	1,850.0	$	1,850.0	$	1,850.0	$	1,850.0
Accounts Receivable Program⁽¹⁾	260.1		399.2		459.4		353.2
Less:
Borrowings Outstanding Under Credit Facility					500.0		—
Commercial Paper	505.0		978.0		237.0		570.0
Accounts Receivable Program Utilized	260.1		399.2		459.4		353.2
Letters of Credit Outstanding Under Credit Facility	10.2		10.2		10.2		10.2
Add:
Cash and Cash Equivalents	28.0		112.8		203.8		139.3
Net Available Liquidity	$	1,362.8	$	974.6	$	1,306.6	$	1,409.1

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

Debt Covenants. We are subject to financial covenants under our revolving credit facility and term loan agreement, which require us to maintain a debt to capitalization ratio that does not exceed 70%. A similar covenant in a 2005 private placement note purchase agreement requires us to maintain a debt to capitalization ratio that does not exceed 75%. As of ~~September 30, 2019,~~March 31, 2020, the ratio was ~~61.8%~~63.2%.

Sale of Trade Accounts Receivables. Refer to Note 9,12, “Transfers of Financial Assets,” in the Notes to Condensed Consolidated Financial Statements (unaudited) for information on the sale of trade accounts receivable.

Credit Ratings. The credit rating agencies periodically review our ratings, taking into account factors such as our capital structure and earnings profile. The following table includes our and certain of our subsidiaries' credit ratings and ratings outlook as of ~~September 30, 2019.~~March 31, 2020. In February 2020, S&P changed our outlook from Negative to Stable. There were no other changes to the below credit ratings or outlooks since December 31, ~~2018.~~2019.

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



	S&P		Moody's		Fitch
	Rating	Outlook	Rating	Outlook	Rating	Outlook
NiSource	BBB+	~~Negative~~Stable	Baa2	Stable	BBB	Stable
NIPSCO	BBB+	~~Negative~~Stable	Baa1	Stable	BBB	Stable
Columbia of Massachusetts	BBB+	~~Negative~~Stable	Baa2	Stable	Not rated	Not rated
Commercial Paper	A-2	~~Negative~~Stable	P-2	Stable	F2	Stable

Certain of our subsidiaries have agreements that contain “ratings triggers” that require increased collateral if our credit rating or the credit ratings of certain of our subsidiaries are below investment grade. These agreements are primarily for insurance purposes and for the physical purchase or sale of power. As of ~~September 30, 2019,~~March 31, 2020, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately ~~$67.9~~$76.1 million. In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business.

Equity. Our authorized capital stock consists of 620,000,000 shares, $0.01 par value, of which 600,000,000 are common stock and 20,000,000 are preferred stock. As of ~~September 30, 2019, 373,446,862~~March 31, 2020, 382,694,308 shares of common stock and 440,000 shares of preferred stock were outstanding.

~~Contractual Obligations.~~ Aside from the previously referenced issuances and repayments of long-term debt and payments associated with the Greater Lawrence Incident, there were no material changes during the nine months ended September 30, 2019 to our contractual obligations as of December 31, 2018.

Table of Contents

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

NiSource Inc.

Contractual Obligations. Aside from the previously referenced issuances of long-term debt and payments associated with the Greater Lawrence Incident, there were no material changes during the three months ended March 31, 2020 to our contractual obligations as of December 31, 2019.

Guarantees and Indemnities. We and certain of our subsidiaries enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries as a part of normal business. Refer to Note 18, “Other Commitments and Contingencies,” in the Notes to the Condensed Consolidated Financial Statements (unaudited) for information on guarantees.

Off Balance Sheet Arrangements

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

Refer to Note ~~16,~~18, “Other Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements (unaudited) for additional information about such arrangements.

Market Risk Disclosures

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

Our Risk Management Committee has been actively engaged in monitoring the impact of COVID-19 on our business. See the Novel Coronavirus discussion in the introduction to the "Executive Summary" for risks that have been identified related to COVID-19.

Commodity Price Risk

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

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

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

Refer to Note 7,10, "Risk Management Activities," in the Notes to Condensed Consolidated Financial Statements (unaudited) for further information on our commodity price risk assets and liabilities as of ~~September 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019.

Interest Rate Risk

We are exposed to interest rate risk as a result of changes in interest rates on borrowings under our revolving credit agreement, commercial paper program, accounts receivable programs and term loan, which have interest rates that are indexed to short-term market interest rates. Based upon average borrowings and debt obligations subject to fluctuations in short-term market interest rates, an increase (or decrease) in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest expense by ~~$4.7~~$4.3 million and ~~$14.7~~$4.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019, ~~and $3.1 million and $9.1 million for three and nine months ended September 30, 2018,~~ respectively. We are also exposed to interest rate risk as a result of changes in benchmark rates that can influence the interest rates of future debt issuances.

Refer to Note 7,10, "Risk Management Activities," in the Notes to Condensed Consolidated Financial Statements (unaudited) for further information on our interest rate risk assets and liabilities as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

~~Table of Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~NiSource Inc.~~

Credit Risk

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

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

As a result of COVID-19, we anticipate an increase in customer bad debt resulting from the suspension of shutoffs and the potential inability of our customers to pay for their gas and electric service due to job loss or other factors. See the Novel Coronavirus discussion in the introduction to the "Executive Summary" for risks that have been identified related to COVID-19.

Other Information

Critical Accounting Estimates

Refer to Note ~~16,~~18, "Other Commitments and Contingencies," in the Notes to Condensed Consolidated Financial Statements (unaudited) for additional information about management judgment used in the development of estimates related to the Greater Lawrence Incident.

Recently Issued Accounting Pronouncements

Refer to Note 2, "Recent Accounting Pronouncements," in the Notes to Condensed Consolidated Financial Statements (unaudited) for additional information about recently issued and adopted accounting pronouncements.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NiSource Inc.

For a discussion regarding quantitative and qualitative disclosures about market risk see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk Disclosures.”

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our chief executive officer and our chief financial officer are responsible for evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that financial information was processed, recorded and reported accurately.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

NiSource Inc.

For a description of our legal proceedings, see Note ~~16-B,~~18-B, "Legal Proceedings," in the Notes to Condensed Consolidated Financial Statements (unaudited).

ITEM 1A. RISK FACTORS

~~Our operations and financial results are subject to various risks and uncertainties, including those disclosed~~The risk factors set forth in ~~our most recent~~Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018. There~~2019 are supplemented with the following risk factor, which should be read in conjunction with the risk factors set forth in the Annual Report on Form 10-K.

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

The continued spread of COVID-19 has resulted in widespread impacts on the global economy and financial markets and could lead to a prolonged reduction in economic activity, extended disruptions to supply chains and capital markets, and reduced labor availability and productivity. We are currently evaluating and monitoring the potential impacts the pandemic may have ~~been no material changes~~on our essential natural gas and electric businesses and on our future operating results and liquidity, including potential impacts related to ~~such risk factors.~~the health, safety and availability of our employees and contractors, suspended shutoffs of natural gas and electric services for nonpayment, more flexible payment plans for customers, an anticipated increase in bad debt, fluctuations in demand for commercial, industrial and residential gas and electric services, counterparty credit, costs and availability of supplies, capital construction and infrastructure operations and maintenance programs, financing plans, including the planned cash proceeds anticipated from the sale of the Massachusetts Business, pension valuations, market conditions that could result in future goodwill impairment charges, potential delays in capital construction projects, and legal and regulatory matters, including the potential for delayed state regulatory filings and recovery of invested capital, as well as newly enacted and proposed state regulatory actions and federal laws. For more information regarding the items above and additional items related to COVID-19 that we are evaluating and monitoring, please see our discussion of these topics in Part I., Item 2. "Management Discussion and Analysis of Financial Condition and Results of Operations - Executive Summary - Introduction - Novel Coronavirus" in this report and in our future filings with the Securities and Exchange Commission. To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition, liquidity or cash flows, it may also have the effect of heightening many of the other risks described in the ‘‘Risk Factors’’ section of our Annual Report on Form 10-K for the year ended December 31, 2019. The degree to which COVID-19 will impact us will depend in part on future developments, including the ultimate geographic spread, severity and duration of the outbreak, actions that may be taken by governmental authorities, and to what extent and when normal economic and operating conditions can resume.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

NiSource Inc.



~~(4.1)~~(2.1)	~~Form~~Asset Purchase Agreement, dated as of ~~2.950% Notes due 2029~~February 26, 2020, by and among NiSource Inc., Bay State Gas Company d/b/a Columbia Gas of Massachusetts and Eversource Energy (incorporated by reference toExhibit ~~4.1 to~~2.1 of the NiSource Inc. Form 8-K filed on ~~August~~February 28, 2020).***

(4.1)	Description of NiSource Inc.’s Securities Registered Under Section 12 ~~2019)~~of the Exchange Act (incorporated by reference to Exhibit 4.20 of the NiSource Form 10-K filed on February 28, 2020).

(4.2)	Form of 3.600% Notes due 2030 (incorporated by reference to Exhibit 4.1 of the NiSource Inc. Form 8-K filed on April 8, 2020).

(10.1)	Form of Performance Share Award Agreement (incorporated by reference to Exhibit 10.39 of the NiSource Form 10-K filed on February 28, 2020).**

(10.2)	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.40 of the NiSource Form 10-K filed on February 28, 2020).**

(10.3)	Form of Cash-Based Award Agreement (incorporated by reference to Exhibit 10.41 of the NiSource Form 10-K filed on February 28, 2020).**

(10.4)	Columbia Gas of Massachusetts Plea Agreement dated February 26, 2020 (incorporated by reference to Exhibit 10.2 of the NiSource Inc. Form 8-K filed on February 27, 2020).

(10.5)	NiSource Deferred Prosecution Agreement dated February 26, 2020 (incorporated by reference to Exhibit 10.1 of the NiSource Inc. Form 8-K filed on February 27, 2020).

(10.6)	Term Loan Agreement, dated as of April 1, 2020, among NiSource Inc., as Borrower, the lenders party thereto, and KeyBank National Association, as Administrative Agent, and KeyBank National Association, PNC Bank, National Association and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.1 of the NiSource Inc. 8-K filed on April 1, 2020).

(31.1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

(31.2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

(32.1)	Certification of Chief Executive Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).*

(32.2)	Certification of Chief Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).*

(101.INS)	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(101.SCH)	Inline XBRL Schema Document

(101.CAL)	Inline XBRL Calculation Linkbase Document

(101.LAB)	Inline XBRL Labels Linkbase Document

(101.PRE)	Inline XBRL Presentation Linkbase Document

(101.DEF)	Inline XBRL Definition Linkbase Document

(104)	Cover page Interactive Data File (formatted as inline XBRL, and contained in Exhibit 101.)

*	Exhibit filed herewith.

**	Management contract or compensatory plan or arrangement of NiSource Inc.

***	Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. NiSource agrees to furnish supplementally a copy of any omitted schedules or exhibits to the SEC upon request.

SIGNATURE

NiSource Inc.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			NiSource Inc.
			(Registrant)

Date:	~~October 30, 2019~~May 6, 2020	By:	/s/ ~~Joseph W. Mulpas~~Donald E. Brown
			~~Joseph W. Mulpas~~Donald E. Brown
			Executive Vice President and Chief ~~Accounting~~Financial Officer ~~and Controller~~ (Principal ~~Accounting~~Financial Officer)

6457



(in millions)	Balance Sheet Classification	September 30, 2019
Assets
Finance leases	Net Property, Plant and Equipment	$	176.5
Operating leases	Deferred charges and other	60.9
Total leased assets		237.4
Liabilities
Current
Finance leases	Current portion of long-term debt	10.7
Operating leases	Other accruals	10.5
Noncurrent
Finance leases	Long-term debt, excluding amounts due within one year	187.2
Operating leases	Other noncurrent liabilities	50.5
Total lease liabilities		$	258.9



Nine Months Ended September 30, (in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	$	8.4
Operating cash flows used for operating leases	11.8
Financing cash flows used for finance leases	7.7
Right-of-use assets obtained in exchange for lease obligations
Finance leases	11.0
Operating leases	$	3.7



As of September 30, 2019, (in millions)	Total			Finance Leases			Operating Leases
Year 1	$	37.7		$	24.5		$	13.2
Year 2	33.9			24.6			9.3
Year 3	32.8			24.6			8.2
Year 4	29.3			21.6			7.7
Year 5	27.6			20.6			7.0
Thereafter	247.8			214.8			33.0
Total lease payments	409.1			330.7			78.4
Less: Imputed interest	(121.6		)	(107.0		)	(14.6		)
Less: Leases not yet commenced⁽¹⁾	(28.6		)	(25.8		)	(2.8		)
Total	258.9			197.9			61.0
Reported as of September 30, 2019
Short-term lease liabilities	21.2			10.7			10.5
Long-term lease liabilities	237.7			187.2			50.5
Total lease liabilities	$	258.9		$	197.9		$	61.0



As of December 31, 2018, (in millions)	Total		Capital Leases⁽¹⁾		Operating Leases⁽²⁾
2019	$	34.0	$	23.0	$	11.0
2020	29.8		22.5		7.3
2021	28.7		22.6		6.1
2022	26.3		22.1		4.2
2023	22.6		19.8		2.8
Thereafter	226.9		212.4		14.5
Total lease payments	$	368.3	$	322.4	$	45.9



(in millions)	Insurance receivable
Balance, December 31, 2018	$	130
Insurance recoveries recorded in first quarter of 2019	100
Cash collected from insurance recoveries in the first quarter of 2019	(108		)
Balance, March 31, 2019	122
Insurance recoveries recorded in the second quarter of 2019	435
Cash collected from insurance recoveries in the second quarter of 2019	(297		)
Balance, June 30, 2019	$	260
Insurance recoveries recorded in third quarter of 2019	—
Cash collected from insurance recoveries in the third quarter of 2019	(260		)
Balance, September 30, 2019	$	—