Item 6. SELECTED FINANCIAL DATA

NIS****OURCE INC.

The selected data presented below as of and for the five years ended December 31, 2019, are derived from our Consolidated Financial Statements. The data should be read together with the Consolidated Financial Statements including the related notes thereto included in Item 8 of this Form 10-K.

Year Ended December 31, (in millions except per share data)	2019				2018				2017				2016				2015
Statement of Income Data:
Total Operating Revenues	$	5,208.9			$	5,114.5			$	4,874.6			$	4,492.5			$	4,651.8
Net Income (Loss) Available to Common Shareholders	328.0				(65.6		)		128.5				331.5				198.6
Balance Sheet Data:
Total Assets	22,659.8				21,804.0				19,961.7				18,691.9				17,492.5
Capitalization
Stockholders’ equity	5,986.7				5,750.9				4,320.1				4,071.2				3,843.5
Long-term debt, excluding amounts due within one year	7,856.2				7,105.4				7,512.2				6,058.2				5,948.5
Total Capitalization	$	13,842.9			$	12,856.3			$	11,832.3			$	10,129.4			$	9,792.0
Per Share Data:
Basic Earnings (Loss) Per Share ($)	$	0.88			$	(0.18	)		$	0.39			$	1.02			$	0.63
Diluted Earnings (Loss) Per Share ($)	$	0.87			$	(0.18	)		$	0.39			$	1.01			$	0.63
Other Data:
Dividends declared per common share ($)	$	0.80			$	0.78			$	0.70			$	0.64			$	0.83
Common shares outstanding at the end of the year (in thousands)	382,136				372,363				337,016				323,160				319,110
Number of common stockholders	18,725				19,889				21,009				22,272				30,190
Dividends declared per Series A preferred share ($)	$	56.50			$	28.88			$	—			$	—			$	—
Dividends declared per Series B preferred share ($)	$	1,674.65			$	—			$	—			$	—			$	—
Capital expenditures	$	1,867.8			$	1,814.6			$	1,753.8			$	1,490.4			$	1,367.5
Number of employees	8,363				8,087				8,175				8,007				7,596

•

During 2019, we recorded a loss of approximately $284 million for third-party claims and approximately $154 million for other incident-related expenses in connection with the Greater Lawrence Incident. Columbia of Massachusetts recorded $665 million for insurance recoveries through December 31, 2019. For additional information, see Note 19-C, "Legal Proceedings," and E, "Other Matters" in the Notes to Consolidated Financial Statements.

•	During the fourth quarter of 2019, we recorded an impairment charge of $204.8 million for goodwill and an impairment charge of $209.7 million for franchise rights, in each case related to Columbia of Massachusetts. For additional information, see Note 6, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements.

•	During the third quarter of 2019, we closed our placement of $750.0 million of 2.95% senior unsecured notes maturing in 2029.

•

During the second quarter of 2018, we completed the sale of 24,964,163 shares of $0.01 par value common stock at a price of $24.28 per share in a private placement to selected institutional and accredited investors and issued 400,000 shares of Series A preferred stock resulting in $400.0 million of gross proceeds or $393.9 million of net proceeds, after deducting commissions and sales expenses. Additionally, in the fourth quarter of 2018, we issued 20,000 shares of Series B preferred stock resulting in $500.0 million of gross proceeds or $486.1 million of net proceeds, after deducting commissions and sales expenses.

•

During 2018, we recorded a loss of approximately $757 million for third-party claims and approximately $266 million for other incident-related expenses in connection with the Greater Lawrence Incident. Columbia of Massachusetts recorded $135 million for insurance recoveries through December 31, 2018. For additional information, see Note 19-C, "Legal Proceedings," and E, Other Matters." in the Notes to Consolidated Financial Statements.

•

During the second quarter of 2018, we executed a tender offer for $209.0 million of outstanding notes consisting of a combination of our 6.80% notes due 2019, 5.45% notes due 2020 and 6.125% notes due 2022. During the third quarter of 2018, we redeemed $551.1 million of outstanding notes representing the remainder of our 6.80% notes due 2019, 5.45% notes due 2020 and 6.125% notes due 2022. In conjunction with our debt retired, we recorded a $45.5 million loss on early extinguishment of long-term debt primarily attributable to early redemption premiums.

ITEM 6. SELECTED FINANCIAL DATA

NIS****OURCE INC.

•	The decrease in net income during 2017 was due primarily to increased tax expense as a result of the impact of adopting the provisions of the TCJA and a loss on early extinguishment of long-term debt, as discussed below.

•	During the second quarter of 2017, we executed a tender offer for $990.7 million of outstanding notes consisting of a combination of our 6.40% notes due 2018, 6.80% notes due 2019, 5.45% notes due 2020, and 6.125% notes due 2022. In conjunction with the debt retired, we recorded a $111.5 million loss on early extinguishment of long-term debt, primarily attributable to early redemption premiums.

•

Prior to the Separation, CPG closed the placement of $2,750.0 million in aggregate principal amount of senior notes. Using the proceeds from this offering, CPG made cash payments to us representing the settlement of inter-company borrowings and the payment of a one-time special dividend. In May 2015, using proceeds from the cash payments from CPG, we settled two bank term loans in the amount of $1,075.0 million and executed a tender offer for $750.0 million consisting of a combination of its 5.25% notes due 2017, 6.40% notes due 2018 and 4.45% notes due 2021. In conjunction with the debt retired, we recorded a $97.2 million loss on early extinguishment of long-term debt, primarily attributable to early redemption premiums.

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

NIS****OURCE INC.

Index	Page
Executive Summary	27
Summary of Consolidated Financial Results	29
Results and Discussion of Segment Operations	31
Gas Distribution Operations	32
Electric Operations	36
Liquidity and Capital Resources	40
Off Balance Sheet Arrangements	44
Market Risk Disclosures	44
Other Information	45

EXECUTIVE SUMMARY

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

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

We are an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving customers in 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 under Item 1 of this annual report and Note 23, "Segments of Business," in the Notes to Consolidated Financial Statements for further discussion of our regulated utility business segments.

Our goal is to develop strategies that benefit all stakeholders as we address changing customer conservation patterns, develops more contemporary pricing structures and embarks on long-term infrastructure investment and safety programs. These strategies are intended to improve reliability and safety, enhance customer services 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 Segment discussion for additional information on our long term electric generation strategy.

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 capital cost of the pipeline replacement described below and as set forth in Note 19, "Other Commitments and Contingencies - E. Other Matters - Greater Lawrence Pipeline Replacement," in the Notes to Consolidated Financial Statements.

	Year Ended				Year Ended
(in millions)	December 31, 2018				December 31, 2019			Incident to Date
Third-party claims and government fines, penalties and settlements	$	757			$	284		$	1,041
Other incident-related costs	266				154			420
Total	1,023				438			1,461
Insurance recoveries recorded	(135		)		(665		)	(800		)
Loss (benefit) to income before income taxes	$	888			$	(227	)	$	661

Inclusive of the $1,041 million of third-party claims and fines, penalties and settlements associated with government investigations recorded incident to date, we estimate that total costs related to third-party claims and fines, penalties and settlements associated

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

NIS****OURCE INC.

with government investigations as set forth in Note 19, "Other Commitments and Contingencies - C. Legal Proceedings," will range from $1,041 million to $1,065 million, depending on the number, nature, final outcome and value of third-party 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 $450 million to $460 million in other incident-related costs, inclusive of the $420 million recorded incident to date, as set forth in Note 19, "Other Commitments and Contingencies - E. Other Matters - Greater Lawrence Incident Restoration."

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 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 as of December 31, 2019. Expenses related to the incident have exceeded the total amount of insurance coverage available under our policies. The following table presents activity related to our Greater Lawrence Incident insurance recovery.

(in millions)	Insurance receivable(1)
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	$	—
Insurance recoveries recorded in the fourth quarter of 2019	130
Cash collected from insurance recoveries in the fourth quarter of 2019	(130		)
Balance, December 31, 2019	$	—

(1)$5 million of insurance recoveries were collected during 2018.

Since the Greater Lawrence Incident and through December 31, 2019, we have invested approximately $258 million of capital spend for the pipeline replacement; this work was completed in 2019. We maintain property insurance for gas pipelines and other applicable property. Columbia of Massachusetts has filed a proof of loss with its property insurer for the full cost of the pipeline replacement. In January 2020, we filed a lawsuit against the property insurer, seeking payment of our property claim. We are currently unable to predict the timing or amount of any insurance recovery under the property policy. The recovery of any capital investment not reimbursed through insurance will be addressed in a future regulatory proceeding; a future regulatory proceeding is dependent on the outcome of the sale of the Massachusetts Business. The outcome of such a proceeding (if any) is uncertain. In accordance with ASC 980-360, if it becomes probable that a portion of the 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 of the probable disallowance and record an associated charge to earnings. This could result in a material adverse effect on our financial condition, results of operations and cash flows. Additionally, if a rate order is received allowing recovery of the investment with no or reduced return on investment, a loss on disallowance may be required.

Refer to Note 19, "Other Commitments and Contingencies - C. Legal Proceedings" and " - E. Other Matters," in the Notes to Consolidated Financial Statements, "Summary of Consolidated Financial Results," "Results and Discussion of Segment Operation - Gas Distribution Operations," and "Liquidity and Capital Resources" in this Management's Discussion for additional information related to the Greater Lawrence Incident.

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

NIS****OURCE INC.

Additionally, as discussed in Note 6, "Goodwill and Other Intangible Assets," in the Notes to Consolidated Financial Statements, we assessed the totality of several factors that developed during the fourth quarter related to the Greater Lawrence Incident and concluded that it was more likely than not that the fair value of the Columbia of Massachusetts reporting unit was below its carrying value. As a result, a new impairment analysis was required for our Columbia of Massachusetts reporting unit. The year-end impairment analysis indicated that the fair value of the Columbia of Massachusetts reporting unit was below its carrying value. As a result, we reduced the Columbia of Massachusetts reporting unit goodwill balance to zero and recognized a goodwill impairment charge totaling $204.8 million, which is non-deductible for tax purposes. We assessed the same fourth quarter circumstances in reviewing the Columbia of Massachusetts franchise rights intangible assets. These factors led us to conclude that it was more likely than not that the fair value of the franchise rights was below its carrying amount. As a result, we performed a year-end impairment test and determined that the fair value of the franchise rights was zero. Therefore, we wrote off the entire franchise rights book value, which resulted in an impairment charge totaling $209.7 million.

Columbia of Massachusetts Asset Sale: On February 26, 2020, NiSource and Columbia of Massachusetts entered into the 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 the Massachusetts Business for a purchase price of $1,100 million, subject to adjustment. For additional information, see Note 26, “Subsequent Event,” in the Notes to Consolidated Financial Statements.

Summary of Consolidated Financial Results

Our operations are affected by the cost of sales. Cost of sales 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 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 are tracked costs that are passed through directly to the customer resulting in an equal and offsetting amount reflected in operating revenues. As a result, we believe net revenues, a non-GAAP financial measure defined as operating revenues less cost of sales (excluding depreciation and amortization), provides management and investors a useful measure 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 is not necessarily comparable to similarly titled measures reported by other companies.

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

NIS****OURCE INC.

For the years ended December 31, 2019, 2018 and 2017, operating income and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income, was as follows:

Year Ended December 31*, (in millions)*	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Operating Income	$	890.7			$	124.7			$	921.2			$	766.0			$	(796.5	)

Year Ended December 31*, (in millions, except per share amounts)*	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Operating Revenues	$	5,208.9			$	5,114.5			$	4,874.6			$	94.4			$	239.9
Cost of sales (excluding depreciation and amortization)	1,534.8				1,761.3				1,518.7				(226.5		)		242.6
Total Net Revenues	3,674.1				3,353.2				3,355.9				320.9				(2.7		)
Other Operating Expenses	2,783.4				3,228.5				2,434.7				(445.1		)		793.8
Operating Income	890.7				124.7				921.2				766.0				(796.5		)
Total Other Deductions, Net	(384.1		)		(355.3		)		(478.2		)		(28.8		)		122.9
Income Taxes	123.5				(180.0		)		314.5				303.5				(494.5		)
Net Income (Loss)	383.1				(50.6		)		128.5				433.7				(179.1		)
Preferred dividends	(55.1		)		(15.0		)		—				(40.1		)		(15.0		)
Net Income (Loss) Available to Common Shareholders	328.0				(65.6		)		128.5				393.6				(194.1		)
Basic Earnings (Loss) Per Share	$	0.88			$	(0.18	)		$	0.39			$	1.06			$	(0.57	)
Basic Average Common Shares Outstanding	374.6				356.5				329.4				18.1				27.1

On a consolidated basis, we reported net income available to common shareholders of $328.0 million or $0.88 per basic share for the twelve months ended December 31, 2019 compared to a loss to common shareholders of $65.6 million or $0.18 per basic share for the same period in 2018. The increase in net income available to common shareholders during 2019 was primarily due to lower operating expenses related to the Greater Lawrence Incident, insurance recoveries recorded related to the Greater Lawrence Incident, and new rates from base rate proceedings and infrastructure replacement programs. These increases were partially offset by non-cash impairments of goodwill and other intangible assets in 2019 related to Columbia of Massachusetts (see Note 6, "Goodwill and Other Intangible Assets," in the Notes to Consolidated Financial Statements for additional information), higher income taxes (see "Income Taxes" below), higher depreciation expense due to regulatory outcomes at NIPSCO and Columbia of Ohio, and additional dilution in 2019 resulting from preferred stock dividend commitments.

Operating Income

For the twelve months ended December 31, 2019, we reported operating income of $890.7 million compared to $124.7 million for the same period in 2018. The increased operating income was primarily due to decreased operating expenses related to the Greater Lawrence Incident, insurance recoveries recorded related to the Greater Lawrence Incident, and new rates from base rate proceedings and infrastructure replacement programs. These increases were partially offset by non-cash impairments of goodwill and other intangible assets in 2019 related to Columbia of Massachusetts (see Note 6, "Goodwill and Other Intangible Asset," in the Notes to Consolidated Financial Statements for additional information), and increased depreciation due to the regulatory outcome of NIPSCO's gas rate case and an increase in amortization of depreciation previously deferred as a regulatory asset resulting from Columbia of Ohio's CEP.

Other Deductions, Net

Other deductions, net reduced income by $384.1 million in 2019 compared to a reduction in income of $355.3 million in 2018. This change is primarily due to lower actuarial investment returns on pension and other postretirement benefit assets of $34.6 million, and an increase in interest expense of $25.6 million driven by decreased regulatory deferrals from Columbia of Ohio's CEP. These unfavorable variances were partially offset by charitable contributions of $20.7 million in 2018 related to the Greater Lawrence Incident.

Income Taxes

The increase in income tax expense from 2018 to 2019 is primarily attributable to higher pre-tax income resulting from the items discussed above in "Operating Income" and "Other Deductions, Net," true-ups to tax expense in 2018 to reflect regulatory outcomes associated with excess deferred income taxes, and higher income tax expense in 2019 related to the non-deductible, non-cash impairment of goodwill, fines and penalties.

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

NIS****OURCE INC.

Refer to “Liquidity and Capital Resources” below and Note 10, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information on income taxes and the change in the effective tax rate.

Capital Investment

In 2019, we invested approximately $1.9 billion in capital expenditures across the gas and electric utilities. These expenditures were primarily aimed at furthering the safety and reliability of our gas distribution system, 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 approximately $1.8 to $1.9 billion in capital during 2020 as we continue to focus on growth, safety and modernization projects across our operating area.

Liquidity

A primary focus of ours is to ensure the availability of adequate financing to fund our ongoing safety and 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. During 2020, we plan to pursue alternatives to cover this shortfall, including long-term financing and potential proceeds from the sale of the Massachusetts Business. For additional information, see Note 26, "Subsequent Event," in the Notes to Consolidated Financial Statements.

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, our ability to access the capital markets and the potential sale of the Massachusetts Business, we believe there is adequate capital available to fund our operating activities and capital expenditures and the effects of the Greater Lawrence Incident in 2020 and beyond. At December 31, 2019 and 2018, we had approximately $1,409.1 million and $974.6 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.”

Regulatory Developments

In 2019, 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 8, “Regulatory Matters” and Note 19-E, "Other Matters," in the Notes to Consolidated Financial Statements for a complete discussion of key regulatory developments that transpired during 2019.

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.

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

NIS****OURCE INC.

Gas Distribution Operations

For the years ended December 31, 2019, 2018 and 2017, operating income (loss) and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income (loss), was as follows:

Year Ended December 31*, (in millions)*	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Operating Income (Loss)	$	675.4			$	(254.1	)		$	550.1			$	929.5			$	(804.2	)

Year Ended December 31, (in millions)	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Net Revenues
Operating revenues	$	3,522.8			$	3,419.5			$	3,102.1			$	103.3			$	317.4
Less: Cost of sales (excluding depreciation and amortization)	1,067.6				1,259.3				1,005.0				(191.7		)		254.3
Net Revenues	2,455.2				2,160.2				2,097.1				295.0				63.1
Operating Expenses
Operation and maintenance	935.7				1,908.1				1,090.8				(972.4		)		817.3
Depreciation and amortization	403.2				301.0				269.3				102.2				31.7
Impairment of other intangible assets	209.7				—				—				209.7				—
Loss on sale of fixed assets and impairments, net	0.1				0.2				2.8				(0.1		)		(2.6		)
Other taxes	231.1				205.0				184.1				26.1				20.9
Total Operating Expenses	1,779.8				2,414.3				1,547.0				(634.5		)		867.3
Operating Income (Loss)	$	675.4			$	(254.1	)		$	550.1			$	929.5			$	(804.2	)
Revenues
Residential	$	2,317.2			$	2,248.3			$	2,029.4			$	68.9			$	218.9
Commercial	775.1				753.7				669.4				21.4				84.3
Industrial	245.8				228.6				217.5				17.2				11.1
Off-System	77.7				92.4				111.8				(14.7		)		(19.4		)
Other	107.0				96.5				74.0				10.5				22.5
Total	$	3,522.8			$	3,419.5			$	3,102.1			$	103.3			$	317.4
Sales and Transportation (MMDth)
Residential	274.9				280.3				247.1				(5.4		)		33.2
Commercial	189.6				187.6				169.3				2.0				18.3
Industrial	542.5				555.7				517.5				(13.2		)		38.2
Off-System	32.9				30.0				39.0				2.9				(9.0		)
Other	0.3				—				0.3				0.3				(0.3		)
Total	1,040.2				1,053.6				973.2				(13.4		)		80.4
Heating Degree Days	5,375				5,562				4,927				(187		)		635
Normal Heating Degree Days	5,452				5,610				5,610				(158		)		—
% Warmer than Normal	(1		)%		(1		)%		(12		)%
Gas Distribution Customers
Residential	3,221,178				3,194,662				3,168,516				26,516				26,146
Commercial	282,778				281,517				280,362				1,261				1,155
Industrial	5,982				5,833				6,228				149				(395		)
Other	3				3				4				—				(1		)
Total	3,509,941				3,482,015				3,455,110				27,926				26,905

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

NIS****OURCE INC.

Gas Distribution Operations (continued)

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.

2019 vs. 2018 Operating Income

For 2019, Gas Distribution Operations reported operating income of $675.4 million, an increase in income of $929.5 million from the comparable 2018 period.

Net revenues for 2019 were $2,455.2 million, an increase of $295.0 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 $243.2 million.

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

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

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

Operating expenses were $634.5 million lower in 2019 compared to 2018. This change was primarily driven by:

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

Partially offset by:

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

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

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

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

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

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

•	Higher insurance expense of $9.1 million primarily driven by increased premiums.

2018 vs. 2017 Operating Income

For 2018, Gas Distribution Operations reported an operating loss of $254.1 million, a decrease in income of $804.2 million from the comparable 2017 period.

Net revenues for 2018 were $2,160.2 million, an increase of $63.1 million from the same period in 2017. The change in net revenues was primarily driven by:

•	New rates from infrastructure replacement programs and base rate proceedings of $99.6 million.

•	Higher revenues from the effects of colder weather in 2018 of $37.5 million.

•	The effects of customer growth and increased usage of $17.4 million.

•	Higher regulatory, tax and depreciation trackers, which are offset in operating expense, of $16.0 million.

Partially offset by:

•	A revenue reserve of $85.0 million in 2018 resulting from the probable future refund of certain collections from customers as a result of the lower income tax rate from the TCJA.

•	Decreased rates from implementation of regulatory outcomes related to the TCJA of $24.7 million.

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

NIS****OURCE INC.

Gas Distribution Operations (continued)

Operating expenses were $867.3 million higher in 2018 compared to 2017. This change was primarily driven by:

•	Expenses related to third-party claims and other costs for the Greater Lawrence Incident of $864.4 million, net of insurance recoveries recorded.

•	Increased depreciation of $29.6 million due to regulatory outcomes of NIPSCO's gas rate case and higher capital expenditures placed in service.

•	Higher regulatory, tax and depreciation trackers, which are offset in net revenues, of $16.0 million.

•	Increased property taxes of $11.0 million due to higher capital expenditures placed in service and the impact of regulatory-driven property tax deferrals.

Partially offset by:

•	Decreased outside services of $33.2 million primarily due to IT service provider transition and other strategic initiative costs in 2017, lower ongoing IT costs and a temporary shift of resources to the Greater Lawrence Incident restoration.

•	Lower employee and administrative expenses of $30.2 million driven by reduced incentive compensation and a temporary shift of resources to the Greater Lawrence Incident restoration.

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 to more closely align with the regulators' jurisdictional definitions of “normal” weather. Impacts of the change in methodology will be reflected prospectively and disclosed to the extent it results in notable year-over-year variances in net revenues.

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

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

Offset by:

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

Weather in the Gas Distribution Operations service territories for 2018 was about 1% warmer than normal and about 13% colder than 2017, increasing net revenues $37.5 million for the year ended December 31, 2018 compared to 2017.

Throughput

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

Total volumes sold and transported for the year ended December 31, 2018 were 1,053.6 MMDth, compared to 973.2 MMDth for 2017. This increase is primarily attributable to colder weather experienced in 2018 compared to 2017.

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 recorded in the period. The gas costs included in revenues are matched with the gas cost expense recorded in the period and the difference is recorded on the Consolidated Balance Sheets as under-recovered or over-recovered gas cost to be included in future customer billings.

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

NIS****OURCE INC.

Gas Distribution Operations (continued)

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

Greater Lawrence Incident

Refer to Note 19-C. "Legal Proceedings," and E. "Other Matters," in the Notes to Consolidated Financial Statements, "Summary of Consolidated Financial Results" and "Liquidity and Capital Resources" in this Management's Discussion, and Part I. Item 1A. "Risk Factors" for additional information related to the Greater Lawrence Incident.

Columbia of Massachusetts Asset Sale

On February 26, 2020, we entered into the Asset Purchase Agreement with Eversource providing for the sale of the Massachusetts Business to Eversource, subject to the terms and conditions set forth in the agreement. For additional information, see Note 26, “Subsequent Event,” in the Notes to Consolidated Financial Statements.

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

NIS****OURCE INC.

Electric Operations

For the years ended December 31, 2019, 2018 and 2017, operating income and a reconciliation of net revenues to the most directly comparable GAAP measure, operating income, was as follows:

Year Ended December 31*, (in millions)*	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Operating Income	$	406.8			$	386.1			$	367.4			$	20.7			$	18.7

Year Ended December 31, (in millions)	2019				2018				2017				2019 vs. 2018				2018 vs. 2017
Net Revenues
Operating revenues	$	1,699.2			$	1,708.2			$	1,786.5			$	(9.0	)		$	(78.3	)
Less: Cost of sales (excluding depreciation and amortization)	467.3				502.1				513.9				(34.8		)		(11.8		)
Net Revenues	1,231.9				1,206.1				1,272.6				25.8				(66.5		)
Operating Expenses
Operation and maintenance	495.0				500.0				565.6				(5.0		)		(65.6		)
Depreciation and amortization	277.3				262.9				277.8				14.4				(14.9		)
Loss (gain) on sale of fixed assets and impairments, net	(0.1		)		—				1.9				(0.1		)		(1.9		)
Other taxes	52.9				57.1				59.9				(4.2		)		(2.8		)
Total Operating Expenses	825.1				820.0				905.2				5.1				(85.2		)
Operating Income	$	406.8			$	386.1			$	367.4			$	20.7			$	18.7
Revenues
Residential	$	481.6			$	494.7			$	476.9			$	(13.1	)		$	17.8
Commercial	486.7				492.6				501.2				(5.9		)		(8.6		)
Industrial	608.4				614.4				698.1				(6.0		)		(83.7		)
Wholesale	11.7				15.7				11.6				(4.0		)		4.1
Other	110.8				90.8				98.7				20.0				(7.9		)
Total	$	1,699.2			$	1,708.2			$	1,786.5			$	(9.0	)		$	(78.3	)
Sales (Gigawatt Hours)
Residential	3,369.5				3,535.2				3,301.7				(165.7		)		233.5
Commercial	3,760.3				3,844.6				3,793.5				(84.3		)		51.1
Industrial	8,466.1				8,829.5				9,469.7				(363.4		)		(640.2		)
Wholesale	8.2				114.3				32.5				(106.1		)		81.8
Other	117.2				124.4				128.2				(7.2		)		(3.8		)
Total	15,721.3				16,448.0				16,725.6				(726.7		)		(277.6		)
Cooling Degree Days	962				1,180				837				(218		)		343
Normal Cooling Degree Days	803				806				806				(3		)		—
% Warmer than Normal	20		%		46		%		4		%
Electric Customers
Residential	415,534				412,267				409,401				3,267				2,866
Commercial	57,058				56,605				56,134				453				471
Industrial	2,256				2,284				2,305				(28		)		(21		)
Wholesale	726				735				739				(9		)		(4		)
Other	2				2				2				—				—
Total	475,576				471,893				468,581				3,683				3,312

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

NIS****OURCE INC.

Electric Operations (continued)

Comparability of line item operating results 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 revenues and have essentially no impact on net income.

2019 vs. 2018 Operating Income

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

Net revenues for 2019 were $1,231.9 million, an increase of $25.8 million from the same period in 2018. The change in net revenues was primarily driven by:

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

•	Decreased fuel handling costs of $11.0 million.

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

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

Partially offset by:

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

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

Operating expenses were $5.1 million higher in 2019 than 2018. This change was primarily driven by:

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

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

Partially offset by:

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

•	Decreased employee and administrative costs of $5.0 million.

2018 vs. 2017 Operating Income

For 2018, Electric Operations reported operating income of $386.1 million, an increase of $18.7 million from the comparable 2017 period.

Net revenues for 2018 were $1,206.1 million, a decrease of $66.5 million from the same period in 2017. The change in net revenues was primarily driven by:

•	Lower regulatory and depreciation trackers, which are offset in operating expense, of $35.6 million.

•	Decreased rates from implementation of regulatory outcomes related to the TCJA of $32.9 million.

•	Decreased industrial usage of $17.1 million.

•	A revenue reserve of $16.2 million in 2018 resulting from the probable future refund of certain collections from customers as a result of the lower income tax rate from the TCJA .

•	Increased fuel handling costs of $7.3 million.

Partially offset by:

•	The effects of warmer weather of $25.2 million.

•	Increased rates from infrastructure replacement programs of $18.6 million.

Operating expenses were $85.2 million lower in 2018 than 2017. This change was primarily driven by:

•	Lower regulatory and depreciation trackers, which are offset in net revenues, of $35.6 million.

•	Lower outside service costs of $32.1 million and lower material and supplies costs of $10.2 million primarily related to the retirement of Bailly Generating Station Units 7 and 8 on May 31, 2018.

•	Decreased employee and administrative costs of $18.4 million.

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

NIS****OURCE INC.

Electric Operations (continued)

Partially offset by:

•	Increased depreciation of $10.0 million due to higher capital expenditures placed in service.

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.

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

Weather in the Electric Operations’ territories for 2019 was 20% warmer than normal and 18% cooler than the same period in 2018, decreasing net revenues $15.1 million for the year ended December 31, 2019 compared to 2018.

Weather in the Electric Operations’ territories for 2018 was 46% warmer than normal and 41% warmer than the same period in 2017, increasing net revenues $25.2 million for the year ended December 31, 2018 compared to 2017.

Sales

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

Electric Operations sales were 16,448.0 GWh for 2018, a decrease of 277.6 GWh, or 1.7% compared to 2017. This decrease was primarily attributable to higher internal generation from large industrial customers in 2018, partially offset by increased volumes for residential and commercial customers resulting from warmer weather.

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 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. On December 4, 2019, the IURC issued an order in the electric rate case approving the implementation of a new industrial service structure. This resolved the issues included in BP’s original petition. Refer to Note 8, "Regulatory Matters," in the Notes to Consolidated Financial Statements 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 recorded in the period. The fuel costs included in revenues are matched with the fuel cost expense recorded in the period and the difference is recorded on the Consolidated Balance Sheets as under-recovered or over-recovered fuel cost to be included in future customer billings.

NIPSCO's performance remains closely linked to the performance of the steel industry. NIPSCO’s MWh sales to steel-related industries accounted for approximately 51.5% and 49.7% of the total industrial MWh sales for the years ended December 31, 2019 and 2018, respectively.

Electric Supply

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.

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

NIS****OURCE INC.

Electric Operations (continued)

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 of Bailly Units 7 and 8 in May of 2018.

The current replacement plan includes renewable sources of energy, including wind, solar, and battery storage to be obtained through a combination of NIPSCO ownership and PPAs. Refer to Note 19-E, "Other Matters," in the Notes to Consolidated Financial Statements for further discussion.

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

NIS****OURCE INC.

Liquidity and Capital Resources

Greater Lawrence Incident: As discussed in the "Executive Summary" and in Note 19, “Other Commitments and Contingencies” in the Notes to Consolidated Financial Statements, we have recorded 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," Note 19 referenced earlier in this paragraph, and Part I, Item 1A “Risk Factors,” we may incur additional expenses and liabilities in excess of our recorded liabilities and estimated additional costs associated with the Greater Lawrence Incident. Since the Greater Lawrence Incident and through December 31, 2019, we have collected $800 million from insurance providers; however, total costs related to the incident have exceeded the total amount of insurance coverage available under our policies. To date, this excess has primarily been funded through short-term borrowings. During 2020, we plan to pursue alternatives to these short-term borrowings, which include long-term financing and potential proceeds from the sale of the Massachusetts Business. For additional information, see Note 26, “Subsequent Event,” in the Notes to Consolidated Financial Statements.

Operating Activities

Net cash from operating activities for the year ended December 31, 2019 was $1,583.3 million, an increase of $1,043.2 million from 2018. This increase was driven primarily by the receipt of $795 million of insurance recoveries in 2019 related to the Greater Lawrence Incident and approximately $220 million lower cash spend for the Greater Lawrence Incident in 2019. Refer to Note 19, "Other Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further information related to the Greater Lawrence Incident.

Pension and Other Postretirement Plan Funding. In 2019, we contributed $2.9 million to our pension plans and $23.0 million to our other postretirement benefit plans. In 2018, we contributed $2.9 million to our pension plans and $21.0 million to our other postretirement benefit plans. Given the current funded status of the pension plans, and barring unforeseen market volatility that may negatively impact the valuation of our plan assets, we do not believe additional material contributions to our pension plans will be required for the foreseeable future.

Income Taxes. Rates for our regulated customers include provisions for the collection of U.S. federal income taxes. The reduction in the U.S. federal corporate income tax rate as a result of the TCJA led to a decrease in the amount billed to customers through rates, ultimately resulting in lower cash collections from operating activities. In addition, we are required to pass back to customers “excess deferred taxes” which represent amounts collected from customers in the past to cover deferred tax liabilities which, as a result of the passage of the TCJA, are now less than the originally billed amounts. Approximately $1.5 billion of excess deferred taxes was recorded as a regulatory liability as of December 31, 2017 as a result of implementing the TCJA. The majority of this balance related to temporary book-to-tax differences on utility property protected by IRS normalization rules; this portion of the excess deferred taxes balance will be passed back to customers over the remaining average useful life of the associated property as required by the TCJA. The remainder of the excess deferred tax balance is passed back over periods determined by our state utility commissions. The pass back of excess deferred taxes has been approved in all our jurisdictions. As of December 31, 2019, we have approximately $1.3 billion of remaining regulatory liabilities associated with excess deferred taxes.

As of December 31, 2019, we have a deferred tax asset of $657.1 million related to a federal NOL carryforward, of which $406.1 million relates to years prior to the implementation of the TCJA. As a result of being in an NOL position, we were not required to make any cash payments for federal income tax purposes during the three years ended December 31, 2019. The carryforward periods for pre-TCJA tax benefits expire in various tax years from 2028 to 2037; however, we expect to fully utilize the carryforward benefit prior to its expiration. According to the TCJA, utilization of NOL carryforwards generated after December 31, 2017 do not expire but are limited to 80% of current year taxable income. Accordingly, we may be required to make cash payments for federal income taxes in future years despite having NOL carryforwards in excess of current taxes payable.

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

NIS****OURCE INC.

Investing Activities

Our cash used for investing activities varies year over year primarily as a result of changes in the level of annual capital expenditures. The table below reflects capital expenditures and certain other investing activities by segment for 2019, 2018 and 2017.

(in millions)	2019				2018(3)				2017
Gas Distribution Operations
System Growth and Tracker	$	1,006.1			$	897.5			$	909.2
Maintenance	374.3				417.8				216.4
Total Gas Distribution Operations	1,380.3				1,315.3				1,125.6
Electric Operations
System Growth and Tracker	279.5				346.0				435.3
Maintenance	189.4				153.3				157.1
Total Electric Operations	468.9				499.3				592.4
Corporate and Other Operations - Maintenance(1)	18.6				—				35.8
Total(2)	$	1,867.8			$	1,814.6			$	1,753.8

(1) Corporate and Other capital expenditures were zero in 2018 as specific IT assets were leased in 2018. Certain IT and other maintenance related assets were purchased in 2017 and 2019.

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

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

For 2019, capital expenditures and certain other investing activities were $1,867.8 million, which was $53.2 million higher than the 2018 capital program. This increased spending is primarily due to growth, safety and system modernization projects.

For 2018, capital expenditures and certain other investing activities were $1,814.6 million, which was $60.8 million higher than the 2017 capital program. This increased spending is due in part to costs associated with the Greater Lawrence Incident pipeline replacement, gas transmission projects, environmental investments and system modernization projects across all seven states in our operating area.

For 2020, we project to invest approximately $1.8 to $1.9 billion in our capital program. This projected level of spend is consistent with 2019 spend levels and is expected to focus on growth, safety, and modernization projects across our operating area.

Financing Activities

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

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

Net Available Liquidity. As of December 31, 2019, an aggregate of $1,409.1 million of net liquidity was available, including cash and credit available under the revolving credit facility and accounts receivable securitization programs.

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

NIS****OURCE INC.

The following table displays NiSource's liquidity position as of December 31, 2019 and 2018:

Year Ended December 31, (in millions)	2019			2018
Current Liquidity
Revolving Credit Facility	$	1,850.0		$	1,850.0
Accounts Receivable Program(1)	353.2			399.2
Less:
Commercial Paper	570.0			978.0
Accounts Receivable Program Utilized	353.2			399.2
Letters of Credit Outstanding Under Credit Facility	10.2			10.2
Add:
Cash and Cash Equivalents	139.3			112.8
Net Available Liquidity	$	1,409.1		$	974.6

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

Debt Covenants**.** We are subject to a financial covenant under our revolving credit facility and term loan agreement, which requires 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 December 31, 2019, the ratio was 61.7%.

Sale of Trade Accounts Receivables**.** Refer to Note 18, “Transfers of Financial Assets,” in the Notes to Consolidated Financial Statements for information on the sale of trade accounts receivable.

Credit Ratings**.** The credit rating agencies periodically review 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 December 31, 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	Baa2	Stable	BBB	Stable
NIPSCO	BBB+	Negative	Baa1	Stable	BBB	Stable
Columbia of Massachusetts	BBB+	Negative	Baa2	Stable	Not rated	Not rated
Commercial Paper	A-2	Negative	P-2	Stable	F2	Stable

Certain of our subsidiaries have agreements that contain “ratings triggers” that require increased collateral if our credit ratings 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 December 31, 2019, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately $72.1 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 December 31, 2019, 382,135,680 shares of common stock and 440,000 shares of preferred stock were outstanding. For more information regarding our common and preferred stock, see Note 12, "Equity," in the Notes to Consolidated Financial Statements.