NiSource 10-Q 2023-03-31

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 March 31, 2023

or

☐ 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,			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			NYSE
Depositary Shares, each representing a 1/1,000th ownership interest in a share of 6.50% Series B 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			NYSE
Series A Corporate Units			NIMC			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: 413,063,219 shares outstanding at April 25, 2023.

NISOURCE INC.

FORM 10-Q QUARTERLY REPORT

FOR THE QUARTER ENDED MARCH 31, 2023

Table of Contents

									Page
			Defined Terms						3
PART I			FINANCIAL INFORMATION
			Item 1.			Financial Statements - unaudited
						Condensed Statements of Consolidated Income (unaudited)			7
						Condensed Statements of Consolidated Comprehensive Income (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)			14
			Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
			Item 3.			Quantitative and Qualitative Disclosures About Market Risk			52
			Item 4.			Controls and Procedures			52
PART II			OTHER INFORMATION
			Item 1.			Legal Proceedings			53
			Item 1A.			Risk Factors			53
			Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			53
			Item 3.			Defaults Upon Senior Securities			53
			Item 4.			Mine Safety Disclosures			53
			Item 5.			Other Information			53
			Item 6.			Exhibits			54
			Signature						55

DEFINED TERMS
The following is a list of frequently used abbreviations or acronyms that are found in this report:
NiSource Subsidiaries and Affiliates
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.
Rosewater			Rosewater Wind Generation LLC and its wholly owned subsidiary, Rosewater Wind Farm LLC
Indiana Crossroads Wind			Indiana Crossroads Wind Generation LLC and its wholly owned subsidiary, Indiana Crossroads Wind Farm LLC
Abbreviations and Other
AFUDC			Allowance for funds used during construction
AOCI			Accumulated Other Comprehensive Income (Loss)
ASU			Accounting Standards Update
ATM			At-the-market
BTA			Build-transfer agreement
CCRs			Coal Combustion Residuals
CEP			Capital Expenditure Program
CERCLA			Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund)
Corporate Units			Series A Corporate Units
COVID-19 ("the COVID-19 pandemic" or "the pandemic")			Novel Coronavirus 2019 and its variants, including the Delta and Omicron variants, and any other variant that may emerge
DPU			Department of Public Utilities
DSIC			Distribution System Improvement Charge
EPA			United States Environmental Protection Agency
EPS			Earnings per share
Equity Units			Series A Equity Units
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
GHG			Greenhouse gases
GWh			Gigawatt hours
IRA			Inflation Reduction Act
IRP			Infrastructure Replacement Program
IURC			Indiana Utility Regulatory Commission
JV			Joint Venture

DEFINED TERMS
LIBOR			London InterBank Offered Rate
LIFO			Last In, First Out
LIHEAP			Low Income Heating Energy Assistance Programs
Massachusetts Business			All of the assets sold to, and liabilities assumed by, Eversource pursuant to the Asset Purchase Agreement
MGP			Manufactured Gas Plant
MISO			Midcontinent Independent System Operator
MMDth			Million dekatherms
MW			Megawatts
MWh			Megawatt hours
NYMEX			New York Mercantile Exchange
OPEB			Other Postemployment Benefits
PHMSA			Pipeline and Hazardous Materials Safety Administration
PPA			Power Purchase Agreement
PUCO			Public Utilities Commission of Ohio
RNG			Renewable Natural Gas
SAVE			Steps to Advance Virginia's Energy Plan
Scope 1 GHG Emissions			Direct emissions from sources owned or controlled by us (e.g., emissions from our combustion of fuel, vehicles, and process emissions and fugitive emissions)
Scope 2 GHG Emissions			Indirect emissions from sources owned or controlled by us
SEC			Securities and Exchange Commission
Section 201 Tariffs			Tariffs imposed by Executive Order from the President of the U.S. on certain imported solar cells and modules at a rate of 15%, which were recently extended to 2026
SMRP			Safety Modification and Replacement Program
SMS			Safety Management System
SOFR			Secured Overnight Financing Rate
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
U.S. Attorney's Office			U.S. Attorney's Office for the District of Massachusetts
VIE			Variable Interest Entity

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 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. Expressions of future goals and expectations and similar expressions, including "may," "will," "should," "could," "would," "aims," "seeks," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," "forecast," and "continue," reflecting something other than historical fact are intended to identify forward-looking statements. 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 ability to execute our business plan or growth strategy, including utility infrastructure investments; potential incidents and other operating risks associated with our business; our ability to adapt to, and manage costs related to, advances in, or failures of, technology; impacts related to our aging infrastructure; our ability to obtain sufficient insurance coverage and whether such coverage will protect us against significant losses; the success of our electric generation strategy; construction risks and natural gas costs and supply risks; fluctuations in demand from residential and commercial customers; fluctuations in the price of energy commodities and related transportation costs or an inability to obtain an adequate, reliable and cost-effective fuel supply to meet customer demands; the attraction and retention of a qualified, diverse workforce and ability to maintain good labor relations; our ability to manage new initiatives and organizational changes; the actions of activist stockholders; the performance of third-party suppliers and service providers; potential cybersecurity attacks; increased requirements and costs related to cybersecurity; any damage to our reputation; any remaining liabilities or impact related to the sale of the Massachusetts Business; the impacts of natural disasters, potential terrorist attacks or other catastrophic events; the physical impacts of climate change and the transition to a lower carbon future; our ability to manage the financial and operational risks related to achieving our carbon emission reduction goals, including our Net-Zero Goal (as defined below); our debt obligations; any changes to our credit rating or the credit rating of certain of our subsidiaries; any adverse effects related to our equity units; adverse economic and capital market conditions or increases in interest rates; inflation; recessions; economic regulation and the impact of regulatory rate reviews; our ability to obtain expected financial or regulatory outcomes; continuing and potential future impacts from the COVID-19 pandemic; economic conditions in certain industries; the reliability of customers and suppliers to fulfill their payment and contractual obligations; the ability of our subsidiaries to generate cash; pension funding obligations; potential impairments of goodwill; the outcome of legal and regulatory proceedings, investigations, incidents, claims and litigation; potential remaining liabilities related to the Greater Lawrence Incident; compliance with applicable laws, regulations and tariffs; compliance with environmental laws and the costs of associated liabilities; changes in taxation; other matters in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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 (unaudited)			7
Condensed Statements of Consolidated Comprehensive Income (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)			14
1. Basis of Accounting Presentation			14
2. Recent Accounting Pronouncements			14
3. Revenue Recognition			14
4. Earnings Per Share			16
5. Equity			18
6. Gas in Storage			19
7. Regulatory Matters			20
8. Risk Management Activities			20
9. Fair Value			22
10. Income Taxes			25
11. Pension and Other Postretirement Benefits			25
12. Variable Interest Entities			25
13. Long-Term Debt			26
14. Short-Term Borrowings			26
15. Other Commitments and Contingencies			27
16. Accumulated Other Comprehensive Loss			29
17. Other, Net			29
18. Business Segment Information			30

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

NiSource Inc.

Condensed Statements of Consolidated Income (unaudited)

			Three Months Ended March 31,
(in millions, except per share amounts)			2023						2022
Operating Revenues
Customer revenues			$	1,896.1					$	1,840.3
Other revenues			69.9						33.0
Total Operating Revenues			1,966.0						1,873.3
Operating Expenses
Cost of energy			765.1						706.7
Operation and maintenance			391.2						394.3
Depreciation and amortization			206.9						192.7
Gain on sale of assets, net			—						(105.0)
Other taxes			71.8						84.3
Total Operating Expenses			1,435.0						1,273.0
Operating Income			531.0						600.3
Other Income (Deductions)
Interest expense, net			(108.9)						(83.7)
Other, net			1.5						10.9
Total Other Deductions, Net			(107.4)						(72.8)
Income before Income Taxes			423.6						527.5
Income Taxes			85.8						96.2
Net Income			337.8						431.3
Net income attributable to noncontrolling interest			4.8						4.5
Net Income Attributable to NiSource			333.0						426.8
Preferred dividends			(13.8)						(13.8)
Net Income Available to Common Shareholders			319.2						413.0
Earnings Per Share
Basic Earnings Per Share			$	0.77					$	1.02
Diluted Earnings Per Share			$	0.71					$	0.94
Basic Average Common Shares Outstanding			412.8						406.0
Diluted Average Common Shares			447.1						441.4

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 (unaudited)

			Three Months Ended March 31,
(in millions, net of taxes)			2023						2022
Net Income			$	337.8					$	431.3
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale debt securities(1)			2.0						(5.7)
Reclassification adjustment for cash flow hedges(2)			0.1						47.0
Unrecognized pension and OPEB benefit(3)			0.3						0.1
Total other comprehensive income			2.4						41.4
Comprehensive Income			$	340.2					$	472.7

(1)Net unrealized gain (loss) on available-for-sale securities, net of $0.5 million tax expense and $1.5 million tax benefit in the first quarter of 2023 and 2022, respectively.

(2)Reclassification adjustment for cash flow hedges, net of $0.1 million tax benefit and $21.3 million tax expense in the first quarter of 2023 and 2022, respectively.

(3)Unrecognized pension and OPEB benefit, net of $0.1 million and zero tax expense in the first quarter of 2023 and 2022, 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)

(in millions)			March 31, 2023						December 31, 2022
ASSETS
Property, Plant and Equipment
Plant			$	28,065.6					$	27,551.3
Accumulated depreciation and amortization			(7,838.0)						(7,708.7)
Net Property, Plant and Equipment(1)			20,227.6						19,842.6
Investments and Other Assets
Unconsolidated affiliates			2.2						1.6
Available-for-sale debt securities (amortized cost of $162.8 and $166.7, allowance for credit losses of $0.8 and $0.9, respectively)			150.4						151.6
Other investments			74.3						71.0
Total Investments and Other Assets			226.9						224.2
Current Assets
Cash and cash equivalents			106.4						40.8
Restricted cash			41.9						34.6
Accounts receivable			954.2						1,065.8
Allowance for credit losses			(31.4)						(23.9)
Accounts receivable, net			922.8						1,041.9
Gas inventory			138.8						531.7
Materials and supplies, at average cost			172.6						151.4
Electric production fuel, at average cost			64.9						68.8
Exchange gas receivable			92.1						128.1
Regulatory assets			237.6						233.2
Deposits to renewable generation asset developer			281.2						143.8
Prepayments and other			278.2						210.0
Total Current Assets(1)			2,336.5						2,584.3
Other Assets
Regulatory assets			2,319.2						2,347.6
Goodwill			1,485.9						1,485.9
Deferred charges and other			257.6						252.0
Total Other Assets			4,062.7						4,085.5
Total Assets			$	26,853.7					$	26,736.6

(1)Includes $972.7 million and $978.5 million at March 31, 2023 and December 31, 2022, respectively, of net property, plant and equipment assets and $33.8 million and $25.7 million at March 31, 2023 and December 31, 2022, respectively, of current assets of consolidated VIEs that may be used only to settle obligations of the consolidated VIEs. Refer to Note 12, "Variable Interest Entities," for additional information.

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)

(in millions, except share amounts)			March 31, 2023						December 31, 2022
CAPITALIZATION AND LIABILITIES
Capitalization
Stockholders’ Equity
Common stock - $0.01 par value, 600,000,000 shares authorized; 412,982,639 and 412,142,602 shares outstanding, respectively			$	4.2					$	4.2
Preferred stock - $0.01 par value, 20,000,000 shares authorized; 1,302,500 and 1,302,500 shares outstanding, respectively			1,546.5						1,546.5
Treasury stock			(99.9)						(99.9)
Additional paid-in capital			7,372.9						7,375.3
Retained deficit			(1,114.8)						(1,213.6)
Accumulated other comprehensive loss			(34.7)						(37.1)
Total NiSource Stockholders’ Equity			7,674.2						7,575.4
Noncontrolling interest in consolidated subsidiaries			329.5						326.4
Total Equity			8,003.7						7,901.8
Long-term debt, excluding amounts due within one year			10,264.7						9,523.6
Total Capitalization			18,268.4						17,425.4
Current Liabilities
Current portion of long-term debt			30.3						30.0
Short-term borrowings			1,281.6						1,761.9
Accounts payable			642.2						899.5
Dividends payable - common stock			103.4						—
Dividends payable - preferred stock			19.4						—
Customer deposits and credits			225.5						324.7
Taxes accrued			268.7						246.2
Interest accrued			139.2						138.4
Exchange gas payable			19.6						147.6
Regulatory liabilities			359.1						236.8
Asset retirement obligations			48.1						35.5
Accrued compensation and employee benefits			124.5						167.5
Obligations to renewable generation asset developer			347.2						347.2
Other accruals			298.1						325.2
Total Current Liabilities(1)			3,906.9						4,660.5
Other Liabilities
Deferred income taxes			1,950.1						1,854.5
Accrued liability for postretirement and postemployment benefits			239.6						245.5
Regulatory liabilities			1,725.5						1,775.8
Asset retirement obligations			464.7						478.1
Other noncurrent liabilities and deferred credits			298.5						296.8
Total Other Liabilities(1)			4,678.4						4,650.7
Commitments and Contingencies (Refer to Note 15, "Other Commitments and Contingencies")
Total Capitalization and Liabilities			$	26,853.7					$	26,736.6

(1)Includes $135.4 million and $128.2 million at March 31, 2023 and December 31, 2022, respectively, of current liabilities and $30.7 million and $30.6 million at March 31, 2023 and December 31, 2022, respectively, of other liabilities of consolidated VIEs that creditors do not have recourse to our general credit. Refer to Note 12, "Variable Interest Entities," for additional information.

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)

Three Months Ended March 31, (in millions)			2023						2022
Operating Activities
Net Income			$	337.8					$	431.3
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation and amortization			206.9						192.7
Deferred income taxes and investment tax credits			75.5						87.2
Gain on sale of assets			—						(105.0)
Other adjustments			1.1						8.0
Changes in Assets and Liabilities:
Components of working capital			71.1						(42.4)
Regulatory assets/liabilities			11.0						24.9
Deferred charges and other noncurrent assets			(12.0)						(7.4)
Other noncurrent liabilities and deferred credits			(8.0)						(9.5)
Net Cash Flows from Operating Activities			683.4						579.8
Investing Activities
Capital expenditures			(557.1)						(450.1)
Insurance recoveries			—						105.0
Payment to renewable generation asset developer			(137.3)						—
Other investing activities			(33.4)						(25.3)
Net Cash Flows used for Investing Activities			(727.8)						(370.4)
Financing Activities
Proceeds from Issuance of long-term debt			744.2						—
Repayments of finance lease obligations			(8.1)						(7.3)
Change in short-term borrowings, net (maturity ≤ 90 days)			(480.4)						(40.0)
Issuance of common stock, net of issuance costs			3.0						2.8
Equity costs, grant withholdings and debt related costs			(11.8)						(8.9)
Contributions from noncontrolling interest			3.6						—
Distributions to noncontrolling interest			(5.3)						(0.6)
Dividends paid - common stock			(103.2)						(95.3)
Dividends paid - preferred stock			(8.1)						(8.1)
Contract liability payment			(16.6)						(16.5)
Net Cash Flows from (used for) Financing Activities			117.3						(173.9)
Change in cash, cash equivalents and restricted cash			72.9						35.5
Cash, cash equivalents and restricted cash at beginning of period			75.4						94.9
Cash, Cash Equivalents and Restricted Cash at End of Period			$	148.3					$	130.4

Reconciliation to Balance Sheet

Three Months Ended March 31, (in millions)			2023
Cash and cash equivalents			106.4
Restricted Cash			41.9
Total Cash, Cash Equivalents and Restricted Cash			148.3

Supplemental Disclosures of Cash Flow Information

Three Months Ended March 31, (in millions)			2023						2022
Non-cash transactions:
Capital expenditures included in current liabilities			$	261.1					$	183.4
Dividends declared but not paid			122.8						114.7

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

Table of Contents

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						Noncontrolling Interest in Consolidated Subsidiaries						Total
Balance as of January 1, 2023			$	4.2					$	1,546.5					$	(99.9)					$	7,375.3					$	(1,213.6)					$	(37.1)					$	326.4					$	7,901.8
Comprehensive Income:
Net income			—						—						—						—						333.0						—						4.8						337.8
Other comprehensive income, net of tax			—						—						—						—						—						2.4						—						2.4
Dividends:
Common stock ($0.50 per share)			—						—						—						—						(206.7)						—						—						(206.7)
Preferred stock (See Note 5)			—						—						—						—						(27.5)						—						—						(27.5)
Contributions from noncontrolling interest			—						—						—						—						—						—						3.6						3.6
Distributions to noncontrolling interests			—						—						—						—						—						—						(5.3)						(5.3)
Stock issuances:
Employee stock purchase plan			—						—						—						1.3						—						—						—						1.3
Long-term incentive plan			—						—						—						(6.3)						—						—						—						(6.3)
401(k) and profit sharing			—						—						—						2.6						—						—						—						2.6
Balance as of March 31, 2023			$	4.2					$	1,546.5					$	(99.9)					$	7,372.9					$	(1,114.8)					$	(34.7)					$	329.5					$	8,003.7
(1)Series A, Series B, and Series C shares have an aggregate liquidation preference of $400M, $500M, and $863M, respectively. See Note 5, "Equity," for additional information.

(in millions)			Common Stock

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NiSource Inc.

Summary of Consolidated Financial Results

A summary of our consolidated financial results for the three months ended March 31, 2023 and 2022 are presented below:

			Three Months Ended March 31,
(in millions, except per share amounts)			2023						2022						Favorable (Unfavorable)
Operating Revenues			$	1,966.0					$	1,873.3					$	92.7
Operating Expenses
Cost of energy			765.1						706.7						(58.4)
Other Operating Expenses			669.9						566.3						(103.6)
Total Operating Expenses			1,435.0						1,273.0						(162.0)
Operating Income			531.0						600.3						(69.3)
Total Other Deductions, Net			(107.4)						(72.8)						(34.6)
Income Taxes			85.8						96.2						10.4
Net Income			337.8						431.3						(93.5)
Net income attributable to noncontrolling interest			4.8						4.5						(0.3)
Net Income Attributable to NiSource			333.0						426.8						(93.8)
Preferred dividends			(13.8)						(13.8)						—
Net Income Available to Common Shareholders			319.2						413.0						(93.8)
Earnings Per Share
Basic Earnings Per Share			$	0.77					$	1.02					$	(0.25)
Diluted Earnings Per Share			$	0.71					$	0.94					$	(0.23)

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

The decrease in net income available to common shareholders during the three months ended March 31, 2023 was primarily due to an insurance settlement related to the Greater Lawrence Incident received in 2022, decreased revenue related to weather and increased other deductions, partially offset by higher revenues from outcomes of gas base rate proceedings and regulatory capital programs.

For additional information on operating income variance drivers see "Results and Discussion of Segment Operations" for Gas and Electric Operations in this Management's Discussion.

Other Deductions, net

The change in Other deductions, net for the three months ended March 31, 2023 compared to the same period in 2022 is primarily driven by higher long-term and short-term debt interest in 2023 and higher non-service pension costs. See Note 13, "Long-Term Debt," Note 14, "Short-Term Borrowings," and Note 11, "Pension and Other Postemployment Benefits," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for additional information.

Income Taxes

Refer to Note 10, "Income Taxes," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for information on income taxes and the change in the effective tax rate.

Changes in tax laws, as well as the potential tax effects of business decisions, could negatively impact our business, results of operations (including our expected project returns from our planned renewable energy projects), financial condition and cash flows. We continue to monitor the implementation of any final and proposed tax legislation and regulations related to the IRA which introduces a new corporation minimum tax, excise tax on stock buy-backs, and an extension of a technology neutral investment tax credit and production tax credit regime beginning in 2023.

On April 14, 2023, the IRS issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve linear property and non-linear natural gas transmission and distribution property must be capitalized as improvements or are allowable as deductions. We are analyzing the provisions of the safe harbor method of accounting which we expect to adopt.

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

NiSource Inc.

RESULTS AND DISCUSSION OF SEGMENT OPERATIONS

Presentation of Segment Information

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

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

NiSource Inc.

Gas Distribution Operations

Financial and operational data for the Gas Distribution Operations segment for the three months ended March 31, 2023 and 2022 are presented below.

			Three Months Ended March 31,
(in millions)			2023						2022						Favorable (Unfavorable)

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