Item 1. FINANCIAL STATEMENTS (continued)

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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		Noncontrolling Interest in Consolidated Subsidiaries		Total
Balance as of July 1, 2023	$	4.2	$	1,152.6	$	(99.9)	$	7,383.1	$	(1,173.8)	$	(35.8)	$	341.0	$	7,571.4
Comprehensive Income:
Net income	—		—		—		—		85.1		—		13.3		98.4
Other comprehensive loss, net of tax	—		—		—		—		—		(1.1)		—		(1.1)
Dividends:
Common stock ($0.25 per share)	—		—		—		—		(103.8)		—		—		(103.8)
Preferred stock (See Note 5)	—		—		—		—		(8.1)		—		—		(8.1)


Contributions from noncontrolling interest(2)	—		—		—		—		—		—		204.6		204.6
Distributions to noncontrolling interests	—		—		—		—		—		—		(2.0)		(2.0)

Stock issuances:


Employee stock purchase plan	—		—		—		1.5		—		—		—		1.5
Long-term incentive plan	—		—		—		6.0		—		—		—		6.0
401(k) and profit sharing	—		—		—		2.4		—		—		—		2.4

Balance as of September 30, 2023	$	4.2	$	1,152.6	$	(99.9)	$	7,393.0	$	(1,200.6)	$	(36.9)	$	556.9	$	7,769.3
(1) See Note 5, "Equity," for additional information. (2) Contributions from noncontrolling interest is net of commitment and consulting fees and other legal costs related to the substantial completion closing of Dunns Bridge I of $0.2 million and Indiana Crossroads Solar of $1.1 million.

(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	—		—		—		—		476.9		—		5.6		482.5
Other comprehensive income, net of tax	—		—		—		—		—		0.2		—		0.2
Dividends:
Common stock ($1.00 per share)	—		—		—		—		(413.9)		—		—		(413.9)
Preferred stock (See Note 5)	—		—		—		—		(43.8)		—		—		(43.8)
Preferred stock redemption	—		(393.9)		—		—		—		—		—		(393.9)
Preferred stock redemption premium	—		—		—		—		(6.2)		—		—		(6.2)
Contributions from noncontrolling interest(2)	—		—		—		—		—		—		236.9		236.9
Distributions to noncontrolling interests	—		—		—		—		—		—		(12.0)		(12.0)


Stock issuances:


Employee stock purchase plan	—		—		—		4.3		—		—		—		4.3
Long-term incentive plan	—		—		—		5.9		—		—		—		5.9
401(k) and profit sharing	—		—		—		7.5		—		—		—		7.5

Balance as of September 30, 2023	$	4.2	$	1,152.6	$	(99.9)	$	7,393.0	$	(1,200.6)	$	(36.9)	$	556.9	$	7,769.3
(1) See Note 5, "Equity," for additional information. (2) Contributions from noncontrolling interest is net of commitment and consulting fees and other legal costs related to the mechanical completion closing of Dunns Bridge I of $2.7 million. Contributions from noncontrolling interest is net of commitment and consulting fees and other legal costs related to the substantial completion closing of Dunns Bridge I of $0.2 million and Indiana Crossroads Solar of $1.1 million.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)


(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 July 1, 2022	$	4.1	$	1,546.5	$	(99.9)	$	7,218.6	$	(1,408.9)	$	(35.8)	$	315.8	$	7,540.4
Comprehensive Income:
Net income (loss)	—		—		—		—		65.8		—		(2.3)		63.5
Other comprehensive income, net of tax	—		—		—		—		—		12.3		—		12.3
Dividends:
Common stock ($0.24 per share)	—		—		—		—		(95.6)		—		—		(95.6)
Preferred stock (See Note 5)	—		—		—		—		(19.4)		—		—		(19.4)
Distributions to noncontrolling interest	—		—		—		—		—		—		(1.7)		(1.7)
Stock issuances:


Employee stock purchase plan	—		—		—		1.3		—		—		—		1.3
Long-term incentive plan	—		—		—		2.6		—		—		—		2.6
401(k) and profit sharing	—		—		—		2.4		—		—		—		2.4
ATM program	—		—		—		(0.1)		—		—		—		(0.1)
Balance as of September 30, 2022	$	4.1	$	1,546.5	$	(99.9)	$	7,224.8	$	(1,458.1)	$	(23.5)	$	311.8	$	7,505.7
(1) 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		Noncontrolling Interest in Consolidated Subsidiaries		Total
Balance as of January 1, 2022	$	4.1	$	1,546.5	$	(99.9)	$	7,204.3	$	(1,580.9)	$	(126.8)	$	325.6	$	7,272.9
Comprehensive Income:
Net income (loss)	—		—		—		—		559.6		—		(9.0)		550.6
Other comprehensive income, net of tax	—		—		—		—		—		103.3		—		103.3
Dividends:
Common stock ($0.94 per share)	—		—		—		—		(381.7)		—		—		(381.7)
Preferred stock (See Note 5)	—		—		—		—		(55.1)		—		—		(55.1)


Distributions to noncontrolling interest	—		—		—		—		—		—		(4.8)		(4.8)
Stock issuances:


Employee stock purchase plan	—		—		—		3.8		—		—		—		3.8
Long-term incentive plan	—		—		—		9.5		—		—		—		9.5
401(k) and profit sharing	—		—		—		7.3		—		—		—		7.3
ATM program	—		—		—		(0.1)		—		—				(0.1)
Balance as of September 30, 2022	$	4.1	$	1,546.5	$	(99.9)	$	7,224.8	$	(1,458.1)	$	(23.5)	$	311.8	$	7,505.7
(1) 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, 2023	903	417,112	(3,963)	413,149
Issued:


Employee stock purchase plan	—	54	—	54
Long-term incentive plan	—	33	—	33
401(k) and profit sharing	—	89	—	89

Redeemed:
Preferred Stock	—	—	—	—
Balance as of September 30, 2023	903	417,288	(3,963)	413,325

	Preferred	Common
Shares (in thousands)	Shares	Shares	Treasury	Outstanding
Balance as of January 1, 2023	1,303	416,106	(3,963)	412,143
Issued:


Employee stock purchase plan	—	155	—	155
Long-term incentive plan	—	754	—	754
401(k) and profit sharing	—	273	—	273

Redeemed:
Preferred Stock	(400)	—	—	—
Balance as of September 30, 2023	903	417,288	(3,963)	413,325

	Preferred	Common
Shares (in thousands)	Shares	Shares	Treasury	Outstanding
Balance as of July 1, 2022	1,303	409,841	(3,963)	405,878
Issued:


Employee stock purchase plan	—	46	—	46
Long-term incentive plan	—	45	—	45
401(k) and profit sharing	—	81	—	81

Balance as of September 30, 2022	1,303	410,013	(3,963)	406,050

	Preferred	Common
Shares (in thousands)	Shares	Shares	Treasury	Outstanding
Balance as of January 1, 2022	1,303	409,266	(3,963)	405,303
Issued:


Employee stock purchase plan	—	129	—	129
Long-term incentive plan	—	373	—	373
401(k) and profit sharing	—	245	—	245

Balance as of September 30, 2022	1,303	410,013	(3,963)	406,050

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

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ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

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 include the accounts of us, our majority-owned subsidiaries, and VIEs of which we are the primary beneficiary after the elimination of all intercompany accounts and transactions.

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, 2022. 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.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2023, the FASB issued ASU 2023-05*, Business Combinations- Joint Venture Formations.* This pronouncement codifies ASU 805-60 to provide guidance for the recognition and initial measurement of joint venture formations. This guidance requires that the initial assets contributed and liabilities assumed be recognized and measured at fair value, with additional disclosure requirements during the period a joint venture is formed. The pronouncement is effective for joint ventures formed on or after January 1, 2025. We are currently evaluating the impact of this pronouncement on the formation of future joint ventures.

3. Revenue Recognition

Revenue Disaggregation and Reconciliation. We disaggregate revenue from contracts with customers based upon reportable segment, as well as by customer class. The Gas Distribution Operations segment provides natural gas service and transportation for residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, and Indiana. The Electric Operations segment provides electric service in 20 counties in the northern part of Indiana.

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 (unaudited):


Three Months Ended September 30, 2023 (in millions)	Gas Distribution Operations(2)		Electric Operations(3)		Corporate and Other		Total
Customer Revenues(1)
Residential	$	351.7	$	176.0	$	—	$	527.7
Commercial	108.5		156.6		—		265.1
Industrial	46.3		115.9		—		162.2
Off-system	9.8		—		—		9.8
Miscellaneous	8.6		29.2		—		37.8
Total Customer Revenues	$	524.9	$	477.7	$	—	$	1,002.6
Other Revenues	3.6		21.0		0.2		24.8
Total Operating Revenues	$	528.5	$	498.7	$	0.2	$	1,027.4

(1)Customer revenue amounts exclude intersegment revenues. See Note 17, "Business Segment Information," for discussion of intersegment revenues.

(2)Amounts included in Gas Distributions Operations Other revenues primarily relate to weather normalization adjustment mechanisms.

(3)Amounts included in Electric Operations Other revenues primarily relate to MISO multi-value projects and revenue from non-jurisdictional transmission assets.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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


Three Months Ended September 30, 2022 (in millions)	Gas Distribution Operations(2)		Electric Operations(3)		Corporate and Other(4)		Total
Customer Revenues(1)
Residential	$	330.1	$	178.8	$	—	$	508.9
Commercial	114.6		158.9		—		273.5
Industrial	42.6		151.9		—		194.5
Off-system	72.7		—		—		72.7
Miscellaneous	7.3		1.3		—		8.6
Total Customer Revenues	$	567.3	$	490.9	$	—	$	1,058.2
Other Revenues	5.1		25.4		0.8		31.3
Total Operating Revenues	$	572.4	$	516.3	$	0.8	$	1,089.5

(1)Customer revenue amounts exclude intersegment revenues. See Note 17, "Business Segment Information," for discussion of intersegment revenues.

(2)Amounts included in Gas Distributions Operations Other revenues primarily relate to weather normalization adjustment mechanisms.

(3)Amounts included in Electric Operations Other revenues primarily relate to MISO multi-value projects and revenue from non-jurisdictional transmission assets.

(4)Amounts associated with Corporate and Other revenues primarily relate to the Transition Services Agreement entered into in connection with the sale of the Massachusetts Business.


Nine months ended September 30, 2023 (in millions)	Gas Distribution Operations(2)		Electric Operations(3)		Corporate and Other		Total
Customer Revenues(1)
Residential	$	1,789.3	$	449.2	$	—	$	2,238.5
Commercial	621.2		437.6		—		1,058.8
Industrial	169.3		362.7		—		532.0
Off-system	49.9		—		—		49.9
Miscellaneous	38.7		48.0		—		86.7
Total Customer Revenues	$	2,668.4	$	1,297.5	$	—	$	3,965.9
Other Revenues	54.2		62.7		0.6		117.5
Total Operating Revenues	$	2,722.6	$	1,360.2	$	0.6	$	4,083.4
(1)Customer revenue amounts exclude intersegment revenues. See Note 17, "Business Segment Information," for discussion of intersegment revenues. (2)Amounts included in Gas Distributions Operations Other revenues primarily relate to weather normalization adjustment mechanisms. (3)Amounts included in Electric Operations Other revenues primarily relate to MISO multi-value projects and revenue from non-jurisdictional transmission assets.

Nine months ended September 30, 2022 (in millions)	Gas Distribution Operations(2)		Electric Operations(3)		Corporate and Other(4)		Total
Customer Revenues(1)
Residential	$	1,772.0	$	454.3	$	—	$	2,226.3
Commercial	631.7		428.1		—		1,059.8
Industrial	158.5		420.4		—		578.9
Off-system	150.5		—		—		150.5
Miscellaneous	29.9		9.6		—		39.5
Total Customer Revenues	$	2,742.6	$	1,312.4	$	—	$	4,055
Other Revenues	7.6		71.1		12.3		91.0
Total Operating Revenues	$	2,750.2	$	1,383.5	$	12.3	$	4,146.0
(1)Customer revenue amounts exclude intersegment revenues. See Note 17, "Business Segment Information," for discussion of intersegment revenues. (2)Amounts included in Gas Distributions Operations Other revenues primarily relate to weather normalization adjustment mechanisms. (3)Amounts included in Electric Operations Other revenues primarily relate to MISO multi-value projects and revenue from non-jurisdictional transmission assets. (4)Amounts associated with Corporate and Other revenues primarily relate to the Transition Services Agreement entered into in connection with the sale of the Massachusetts Business.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

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. A significant portion of our operations are subject to seasonal fluctuations in sales. During the heating season, primarily from November through March, revenues and receivables from gas sales are more significant than in other months. The opening and closing balances of customer receivables for the nine months ended September 30, 2023 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, 2022	$	560.5	$	453.0
Balance as of September 30, 2023	336.6		198.3

Utility revenues are billed to customers monthly on a cycle basis. We expect that substantially all customer accounts receivable will be collected following customer billing, as this revenue consists primarily of periodic, 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. Our regulated operations also 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. To evaluate for expected credit losses, customer account receivables are pooled based on similar risk characteristics, such as customer type, geography, payment terms, and related macro-economic risks. Expected credit losses are established using a model that considers historical collections experience, current information, and reasonable and supportable forecasts. Internal and external inputs are used in our credit model including, but not limited to, energy consumption trends, revenue projections, actual charge-offs data, recoveries data, shut-offs, customer delinquencies, final bill data, and inflation. We continuously evaluate available information relevant to assessing collectability of current and future receivables. We evaluate creditworthiness of specific customers periodically or following changes in facts and circumstances. When we become aware of a specific commercial or industrial 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 including, but not limited to, creditworthiness of overall population in service territories, adverse conditions impacting an industry sector, and current economic conditions.

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ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

At each reporting period, we record expected credit losses to an allowance for credit losses account. When deemed to be uncollectible, customer accounts are written-off. A rollforward of our allowance for credit losses as of September 30, 2023 and December 31, 2022 are presented in the table below:


(in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Balance as of January 1, 2023	$	17.2	$	5.9	$	0.8	$	23.9
Current period provisions	22.4		4.7		—		27.1
Write-offs charged against allowance	(43.9)		(4.3)		—		(48.2)
Recoveries of amounts previously written off	12.5		0.3		—		12.8
Balance as of September 30, 2023	$	8.2	$	6.6	$	0.8	$	15.6


(in millions)	Gas Distribution Operations		Electric Operations		Corporate and Other		Total
Balance as of January 1, 2022	$	18.9	$	3.8	$	0.8	$	23.5
Current period provisions	29.1		6.9		—		36.0
Write-offs charged against allowance	(52.1)		(5.3)		—		(57.4)
Recoveries of amounts previously written off	21.3		0.5		—		21.8
Balance as of December 31, 2022	$	17.2	$	5.9	$	0.8	$	23.9

4. Earnings Per Share

The calculations of basic and diluted EPS are based on the weighted average number of shares of common stock and potential common stock outstanding during the period. For the purposes of determining diluted EPS, the shares underlying the purchase contracts included within the Equity Units were included in the calculation of potential common stock outstanding for the three and nine months ended September 30, 2023 and 2022 using the if-converted method under US GAAP. For the purchase contracts, the number of shares of our common stock that would be issuable at the end of each reporting period will be reflected in the denominator of our diluted EPS calculation. If the stock price falls below the initial reference price of $24.51, subject to anti-dilution adjustments, the number of shares of our common stock used in calculating diluted EPS will be the maximum number of shares per the contract as described in Note 5, "Equity." Conversely, if the stock price is above the initial reference price of $24.51, subject to anti-dilution adjustments, a variable number of shares of our common stock will be used in calculating diluted EPS. A numerator adjustment is reflected in the calculation of diluted EPS for interest expense incurred for the three and nine months ended September 30, 2023 and 2022 net of tax, related to the purchase contracts.

We adopted ASU 2020-06 on January 1, 2022, which requires us to assume share settlement of the remaining purchase contract payment balance from our Equity Units based on the average share price during the period.

The shares underlying the Series C Mandatory Convertible Preferred Stock included within the Equity Units are contingently convertible as the conversion is contingent on a successful remarketing as described in Note 5, "Equity." Contingently convertible shares where conversion is not tied to a market price trigger are excluded from the calculation of diluted EPS until such time as the contingency has been resolved under the if-converted method. As of September 30, 2023 and 2022, the contingency was not resolved and thus no shares were reflected in the denominator in the calculation of diluted EPS for the three and nine months ended September 30, 2023 and 2022.

Diluted EPS also includes the incremental effects of the various long-term incentive compensation plans and the open ATM forward agreements during the period under the treasury stock method when the impact would be dilutive.

We began using the two-class method of computing earnings per share in 2023 because we have participating securities in the form of non-vested restricted stock units with a non-forfeitable right to dividend equivalents, for which vesting is predicated solely on the passage of time. The calculation of earnings per share using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

During 2022, we had no outstanding securities other than common and preferred stock, which required holders’ participation in dividends and earnings; therefore, we were not required to calculate EPS under the two-class method. Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by giving effect to all potential shares of common stock, to the extent they are dilutive.

The following table presents the calculation of our basic and diluted EPS:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per share amounts)	2023		2022		2023		2022
Numerator:
Net Income Available to Common Shareholders	$	77.0	$	52.0	$	436.1	$	518.2
Less: Income allocated to participating securities	0.1		—		0.3		—
Net Income Available to Common Shareholders - Basic	76.9		52.0		435.8		518.2
Add: Dilutive effect of Equity Units	0.4		0.5		1.2		1.5
Net Income Available to Common Shareholders - Diluted	$	77.3	$	52.5	$	437.0	$	519.7
Denominator:
Average common shares outstanding - Basic	413.5		406.5		413.2		406.3
Dilutive potential common shares:
Equity Units purchase contracts	33.1		31.3		31.9		29.4
Equity Units purchase contract payment balance	0.6		3.0		1.2		3.4
Shares contingently issuable under employee stock plans	0.7		0.9		0.7		1.0
Shares restricted under employee stock plans	0.4		0.6		0.4		0.5
ATM forward agreements	—		1.1		—		1.1
Average Common Shares - Diluted	448.3		443.4		447.4		441.7
Earnings per common share:
Basic	$	0.19	$	0.13	$	1.05	$	1.28
Diluted	$	0.17	$	0.12	$	0.98	$	1.18

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

5. Equity

ATM Program. On February 22, 2021, we entered into six separate equity distribution agreements pursuant to which we are able to sell up to an aggregate of $750.0 million of our common stock. As of September 30, 2023, the ATM program had approximately $300.0 million of equity available for issuance. The program expires on December 31, 2023. There are no outstanding forward agreements as of September 30, 2023.

Preferred Stock. As of September 30, 2023, we had 20,000,000 shares of preferred stock authorized for issuance, of which 902,500 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,
				2023	2022	2023	2022	2023		2022
(in millions except shares and per share amounts)	Liquidation Preference Per Share		Shares	Dividends Declared Per Share(2)				Outstanding
5.650% Series A	$	1,000.00	—	—	28.25	28.25	56.50	$	—	$	393.9
6.500% Series B	$	25,000.00	20,000	406.25	406.25	1,625.00	1,625.00	$	486.1	$	486.1
Series C(1)	$	1,000.00	862,500	—	—	—	—	$	666.5	$	666.5

(1)The Series C Mandatory Convertible Preferred Stock initially will not bear any dividends. We recorded the initial present value of the purchase contract payments as a liability with a corresponding reduction to preferred stock.

(2)Dividend declared per share for the nine months ended September 30, 2023 reflects the dividend declared on the Series A Preferred Stock on March 14, 2023. The dividend was paid on June 15, 2023.

In addition, 20,000 shares of Series B–1 Preferred Stock, par value $0.01 per share, were outstanding as of September 30, 2023. 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 September 30, 2023 and 2022, Series B Preferred Stock had $1.4 million of cumulative preferred dividends in arrears, or $72.23 per share.

As of September 30, 2022, Series A Preferred Stock had $6.7 million of cumulative preferred dividends in arrears, or $16.63 per share. On June 15, 2023, we redeemed all 400,000 outstanding shares of Series A Preferred Stock for a redemption price of $1,000 per share or $400.0 million in total. Following the redemption, dividends ceased to accrue on such shares of Series A Preferred Stock, the shares of Series A Preferred Stock are no longer deemed outstanding and all rights of the holders of the shares of Series A Preferred Stock were terminated. In conjunction with the redemption, we recorded a $6.2 million preferred stock redemption premium, calculated as the difference between the carrying value on the redemption date of the Series A Preferred Stock and the total amount of consideration paid to redeem, which was recorded as a reduction to retained earnings during the second quarter of 2023. Since we are obligated to issue common stock under the Equity Units purchase contracts upon successful remarketing by the end of 2023, we did not recognize an excise tax liability, under the IRA, in connection with this redemption.

In June 2023, we filed a certificate of elimination to our Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to eliminate from the Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designations with respect to the Series A Preferred Stock. As a result, the 400,000 shares that were previously designated as Series A Preferred Stock were returned to the status of authorized but unissued shares of preferred stock, par value $0.01 per share, without designation as to series. The certificate of elimination does not change the total number of authorized shares of capital stock of NiSource or the total number of authorized shares of preferred stock.

Equity Units. On April 19, 2021, we completed the sale of 8.625 million Equity Units, initially consisting of Corporate Units, each with a stated amount of $100. The offering generated net proceeds of $835.5 million, after underwriting and issuance expenses. Each Corporate Unit consists of a forward contract to purchase shares of our common stock in the future and a 1/10th, or 10%, undivided beneficial ownership interest in one share of Series C Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share.

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ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

Selected information about the Equity Units at the issuance date is presented below:


(in millions except contract rate)			Issuance Date			Units Issued			Total Net Proceeds(1)			Purchase Contract Annual Rate			Purchase Contract Liability
Equity Units			April 19, 2021			8.625			$	835.5		7.75		%	$	168.8

(1)Issuance costs of $27.0 million were recorded on a relative fair value basis as a reduction to preferred stock of $22.5 million and a reduction to the purchase contract liability of $4.5 million.

The purchase contract obligates holders to purchase shares of our common stock on December 1, 2023, subject to early settlement in certain situations. The purchase price paid under the purchase contract is $100 and the number of shares to be purchased will be determined under a settlement rate formula based on the volume-weighted average share price of our common stock near the settlement date, subject to a maximum settlement rate. The Series C Mandatory Convertible Preferred Stock were pledged upon issuance as collateral to secure the purchase of common stock under the related purchase contracts.

The Series C Mandatory Convertible Preferred Stock is required to be remarketed prior to December 1, 2023, and each share, unless previously converted, will automatically convert to common stock based on a conversion rate on the mandatory conversion date, which is expected to be on or about March 1, 2024. The conversion rate will be determined based on the volume-weighted average share price of our common stock near the conversion date, subject to a minimum and maximum conversion rate. Prior to December 1, 2023, the Series C Mandatory Convertible Preferred Stock will not bear any dividends and the liquidation preference will not accrete. Following a successful remarketing, dividends may become payable on the Series C Mandatory Convertible Preferred Stock and/or the minimum conversion rate of the Series C Mandatory Convertible Preferred Stock may be increased. If no successful remarketing of the Series C Mandatory Convertible Preferred Stock has previously occurred, effective as of December 1, 2023, the conversion rate will be zero, no shares of our common stock will be delivered upon automatic conversion and each share of Series C Mandatory Convertible Preferred Stock will be automatically transferred to us on the mandatory conversion date without any payment of cash or shares of our common stock thereon. In the event of such a remarketing failure, any shares of Series C Mandatory Convertible Preferred Stock held as part of Corporate Units will be automatically delivered to us on December 1, 2023 in full satisfaction of the relevant holder's obligation under the related purchase contracts.

We pay quarterly contract adjustment payments at the rate of 7.75% per year on the stated amount of $100 per Equity Unit. The contract adjustment payments are payable in cash, shares of our common stock or a combination thereof, at our election. The payment of contract adjustment payments may also be deferred until the purchase contract settlement date, December 1, 2023, at our election. If we exercise our option to defer the payment of contract adjustment payments, then until the deferred contract adjustment payments have been paid, we will not declare or pay any dividends on, or make any distributions on, or redeem, purchase or acquire, or make a liquidation payment with respect to, any shares of our capital stock; make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of our debt securities that rank on parity with, or junior to, the contract adjustment payments; or make any guarantee payments under any guarantee by us of securities of any of our subsidiaries if our guarantee ranks on parity with, or junior to, the contract adjustment payments. As of September 30, 2023, no contract adjustment payments have been deferred with quarterly cash payments being remitted to the holders. As of September 30, 2023 and December 31, 2022 the purchase contract liability, net of issuance costs, was $16.4 million and $65.0 million, respectively. Purchase contract payments are recorded against this liability. Accretion of the purchase contract liability is recorded as interest expense. Cash payments of $50.1 million were made during both nine month periods ended September 30, 2023 and 2022.

The Series C Mandatory Convertible Preferred Stock and forward purchase contracts are legally detachable and separately exercisable, however, due to the economic linkage between the forward purchase contract and the Series C Mandatory Convertible Preferred Stock, we have concluded that the ability to separate the Corporate Units is non-substantive. Accordingly, we are accounting for the Corporate Units as a single unit of account. We recorded the initial present value of the purchase contract payments as a liability with a corresponding reduction to preferred stock. This liability is included in "Other accruals" on the Condensed Consolidated Balance Sheets (unaudited).

Refer to Note 4, "Earnings Per Share," for additional information regarding our treatment of the Equity Units for diluted EPS. Under the terms of the Equity Units, assuming no anti-dilution or other adjustments such as a fundamental change, the maximum number of shares of common stock we will issue under the purchase contracts is 35.2 million and maximum number of shares of common stock we will issue under the Series C Mandatory Convertible Preferred Stock is 35.2 million. Had we settled the remaining purchase contract payment balance in shares at September 30, 2023, we would have issued approximately 0.6 million shares.

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ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

6. Regulatory Matters

NIPSCO change in accounting estimate

As part of the NIPSCO Gas Settlement and Stipulation Agreement filed on March 2, 2022, NIPSCO Gas agreed to change the depreciation methodology for its calculation of depreciation rates, which reduces depreciation expense and subsequent revenues and cash flows. An order was received on July 27, 2022 approving the settlement and rates were effective as of September 1, 2022. As part of the NIPSCO Electric base rate case and the Stipulation and Settlement Agreement filed on March 10, 2023, NIPSCO Electric agreed to change the depreciation methodology for its calculation of depreciation rates, which will reduce depreciation expense and subsequent revenues and cash flows. An order was received on August 2, 2023 approving the settlement, and rates were effective as of August 4, 2023. On October 11, 2023, the IURC issued an order clarifying how the rate increase should have been implemented, holding that the new rates should have only applied to electric usage on or after August 4, 2023, and not for electric usage prior to that date for bills yet to be rendered. NIPSCO was ordered to make a filing reflecting the calculation of the refund to customers by November 10, 2023. The refund amount was reserved for an estimated $12.4 million plus accrued interest.

Columbia of Ohio regulatory filing update

Columbia of Ohio's base rate case was filed on June 30, 2021, requesting a net rate increase of approximately 21.3% or $221.4 million increase in revenue per year. The case was filed in conjunction with applications for an alternative rate plan, approval of certain deferral authority, and updates to certain riders. On October 31, 2022, Columbia of Ohio filed a joint stipulation and recommendation with certain parties to settle the base rate case. On January 26, 2023, the PUCO modified and approved the joint stipulation and recommendation, and Columbia of Ohio placed rates into effect on March 1, 2023. Applications for Rehearing were filed by the three parties who opposed certain rate design and energy efficiency assistance components of the joint stipulation and recommendation, which was granted for further consideration by the PUCO on March 22, 2023.

Regulatory deferral related to renewable energy investments

In accordance with the accounting principles of ASC 980, we recognize a regulatory liability or asset for amounts representing the timing difference between the profit earned from the JVs and the amount included in regulated rates to recover our approved investments in consolidated JVs. The amounts recorded in income will ultimately reflect the amount allowed in regulated rates to recover our investments over the useful life of the projects. The offset to the regulatory liability or asset associated with our renewable investments included in regulated rates is recorded in "Depreciation and amortization" on the Condensed Statements of Consolidated Income (unaudited). NiSource recorded a decrease to depreciation expense of $19.0 million and $9.7 million for the three and nine months ended September 30, 2023. We recorded a decrease to depreciation expense of $2.2 million and an increase to depreciation expense of $4.5 million respectively, for the three and nine months ended September 30, 2022. Following the implementation of the electric base rate case, we began recognizing amounts to recover our investments of projects that have been placed in service. Refer to Note 11, "Variable Interest Entities," for additional information.

7. 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.

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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:


	September 30, 2023				December 31, 2022
(in millions)	Assets		Liabilities		Assets		Liabilities
Current(1)

Derivatives not designated as hedging instruments	$	3.7	$	1.8	$	18.8	$	1.1
Total	$	3.7	$	1.8	$	18.8	$	1.1
Noncurrent(2)

Derivatives not designated as hedging instruments	$	34.7	$	1.4	$	66.0	$	1.9
Total	$	34.7	$	1.4	$	66.0	$	1.9

(1)Current assets and liabilities are presented in "Prepayments and other" and "Other accruals", respectively, on the Condensed Consolidated Balance Sheets (unaudited).

(2)Noncurrent assets and liabilities are presented in "Deferred charges and other" and "Other noncurrent liabilities and deferred credits", respectively, on the Condensed Consolidated Balance Sheets (unaudited).

Our derivative instruments are subject to enforceable master netting arrangements or similar agreements. No collateral was either received or posted related to our outstanding derivative positions at September 30, 2023. If the above gross asset and liability positions were presented net of amounts owed or receivable from counterparties, we would report a net asset position of $35.2 million and $81.8 million at September 30, 2023 and December 31, 2022, respectively.

All gains and losses on derivative contracts are deferred as regulatory liabilities or assets and are remitted to or collected from customers through NIPSCO’s quarterly GCA mechanism.

Derivatives Not Designated as Hedging Instruments

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 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. At September 30, 2023 and December 31, 2022, we had 85.2 MMDth and 99.0 MMDth, respectively, of net energy derivative volumes outstanding related to our natural gas hedges.

NIPSCO has received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments and is limited to 20% of NIPSCO's average annual GCA purchase volume. As of September 30, 2023, the remaining terms of these instruments range from one to four years.

The following table summarizes the gains and losses associated with the commodity price risk programs deferred as regulatory assets and liabilities:


(in millions)	September 30, 2023		December 31, 2022
Regulatory Assets
Losses on commodity price risk programs	$	15.6	$	10.0
Regulatory Liabilities
Gains on commodity price risk programs	39.0		90.0

Our derivative instruments measured at fair value as of September 30, 2023 and December 31, 2022 do not contain any credit-risk-related contingent features.

The net gain related to multiple of our settled interest rate swaps is recorded in AOCI. We amortize the net gain over the life of the debt associated with these swaps as we recognize interest expense. These amounts are immaterial for the three and nine months ended September 30, 2023 and 2022 and are recorded in "Interest expense, net" on the Condensed Statements of Consolidated Income (unaudited). Amounts expected to be reclassified to earnings during the next twelve months are

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ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

immaterial. Amortization will continue for 344 months. See Note 15, "Accumulated Other Comprehensive Loss," for additional information.

8. Fair Value

A. Fair Value Measurements

Recurring Fair Value 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, 2023 and December 31, 2022:


Recurring Fair Value Measurements September 30, 2023 (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, 2023
Assets

Risk management assets	$	—	$	38.4	$	—	$	38.4

Available-for-sale debt securities	—		161.9		—		161.9
Total	$	—	$	200.3	$	—	$	200.3
Liabilities

Risk management liabilities	$	—	$	3.2	$	—	$	3.2
Total	$	—	$	3.2	$	—	$	3.2


Recurring Fair Value Measurements December 31, 2022 (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, 2022
Assets


Risk management assets	$	—	$	84.8	$	—	$	84.8


Available-for-sale debt securities	—		151.6		—		151.6
Total	$	—	$	236.4	$	—	$	236.4
Liabilities

Risk management liabilities	$	—	$	3.0	$	—	$	3.0
Total	$	—	$	3.0	$	—	$	3.0

Risk Management Assets and Liabilities. Risk management assets and liabilities include exchange-traded NYMEX futures and NYMEX options and non-exchange-based forward purchase contracts.

Level 1- 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. These financial assets and liabilities are deemed to be cleared and settled daily by NYMEX as the related cash collateral is posted with the exchange. As a result of this exchange rule, NYMEX derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes, and are presented in Level 1 net of posted cash; however, the derivatives remain outstanding and are subject to future commodity price fluctuations until they are settled in accordance with their contractual terms.

Level 2- 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

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

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.

Level 3- Certain derivatives trade in less active markets with a lower availability of 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 that reduce exposures. As of September 30, 2023 and December 31, 2022, there were no 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.

NIPSCO has entered into long-term forward natural gas purchase instruments 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, "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. 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.

Our available-for-sale debt securities impairments are recognized periodically using an allowance approach. 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 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 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 the security's fair value is less than its amortized cost basis. If certain amounts recorded 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. As of September 30, 2023 and December 31, 2022, we have $0.9 million and $0.9 million, respectively, recorded 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.

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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, 2023 and December 31, 2022 were:


September 30, 2023 (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	$	69.0	$	—	$	(5.0)	$	—	$	64.0
Corporate/Other debt securities	109.2		—		(10.4)		(0.9)		97.9
Total	$	178.2	$	—	$	(15.4)	$	(0.9)	$	161.9

December 31, 2022 (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	$	67.7	$	—	$	(4.5)	$	—	$	63.2
Corporate/Other debt securities	99.0		—		(9.7)		(0.9)		88.4
Total	$	166.7	$	—	$	(14.2)	$	(0.9)	$	151.6

(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 $59.2 million and $92.3 million, respectively, at September 30, 2023.

(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 $61.0 million and $85.5 million, respectively, at December 31, 2022.

The cost of maturities sold is based upon specific identification. Realized gains and losses on available-for-sale securities were $0.6 million at September 30, 2023. Realized gains and losses on available-for-sale securities were immaterial at December 31, 2022.

At September 30, 2023, approximately $11.9 million of U.S. Treasury debt securities and approximately $3.1 million of Corporate/Other debt securities have maturities of less than a year.

Non-recurring Fair Value Measurements

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

Purchase Contract Liability. At April 19, 2021, we recorded the purchase contract liability at fair value using a discounted cash flow method and observable, market-corroborated inputs. This estimate was made at April 19, 2021, and will not be remeasured at each subsequent balance sheet date. It has been categorized within Level 2 of the fair value hierarchy. Refer to Note 5, "Equity," for additional information.

B. Other Fair Value Disclosures for Financial Instruments. The carrying amount of cash and cash equivalents, restricted cash, notes receivable, 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. As of September 30, 2023, there was no change in the method or significant assumptions used to estimate the fair value of long-term debt.

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


(in millions)			Carrying Amount as of September 30, 2023						Estimated Fair Value as of September 30, 2023						Carrying Amount as of Dec. 31, 2022						Estimated Fair Value as of Dec. 31, 2022
Long-term debt (including current portion)			$	11,038.1					$	9,589.2					$	9,553.6					$	8,479.4

9. Income Taxes

Our interim effective tax rates reflect the estimated annual effective tax rates for 2023 and 2022 applied to year-to-date pretax income, adjusted for tax expense associated with certain discrete items. These adjustments have a relative impact on the effective tax rate proportionally to pretax income or loss. The effective tax rates for the three months ended September 30, 2023 and 2022 were 3.7% and 15.6%, respectively. The effective tax rates for the nine months ended September 30, 2023 and 2022 were 17.7% and 17.9%, respectively. These effective tax rates differ from the federal statutory tax rate of 21% primarily due to renewable partnership income, amortization of excess deferred federal income tax liabilities, as specified in the TCJA, tax credits, state flow through, and other permanent book-to-tax differences.

The decrease in the three month effective tax rate of 11.9% in 2023 compared to 2022 is primarily attributed to decreases in renewable partnership income, partially offset by lower amortization of excess deferred federal income tax liabilities.

The decrease in the nine month effective tax rate of 0.2% in 2023 compared to 2022 is primarily attributed to the jurisdictional mix of pre-tax book income.

As of September 30, 2023, there have been no material changes to our unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 11 to the Company’s Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of these unrecognized tax benefits.

10. Pension and Other Postemployment 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. We determined that, for certain rate-regulated subsidiaries, the future recovery of postretirement benefit costs is probable, and we record regulatory assets and liabilities for amounts that would otherwise have been recorded to expense or accumulated other comprehensive loss. Current rates of rate-regulated companies include postretirement benefit costs, including amortization of the regulatory assets and liabilities that arose prior to inclusion of these costs in rates. For most plans, cash contributions are remitted to grantor trusts.

For the nine months ended September 30, 2023, we contributed $2.6 million to our pension plans and $16.7 million to our OPEB plans.

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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, 2023 and 2022:


	Pension Benefits				OPEB
Three Months Ended September 30, (in millions)	2023		2022		2023		2022
Components of Net Periodic Benefit Cost(1)
Service cost	$	5.1	$	6.8	$	1.3	$	1.6
Interest cost	17.1		10.7		5.4		3.0
Expected return on assets	(23.6)		(22.6)		(3.8)		(4.0)
Amortization of prior service credit	—		—		(0.5)		(0.6)
Recognized actuarial loss	8.4		5.6		0.8		0.7
Settlement loss	7.4		3.0		—		—
Total Net Periodic Benefit Cost	$	14.4	$	3.5	$	3.2	$	0.7
(1)The service cost component and all non-service cost components of net periodic benefit (income) cost are presented in "Operation and maintenance" and "Other, net," respectively, on the Condensed Statements of Consolidated Income (unaudited).

	Pension Benefits				OPEB
Nine Months Ended September 30, (in millions)	2023		2022		2023		2022
Components of Net Periodic Benefit Cost(1)
Service cost	$	15.3	$	20.9	$	3.9	$	4.8
Interest cost	51.3		29.9		16.3		9.0
Expected return on assets	(70.8)		(68.3)		(11.4)		(12.0)
Amortization of prior service credit	—		—		(1.5)		(1.8)
Recognized actuarial loss	25.2		14.9		2.4		2.1
Settlement loss	7.5		9.3		—		—
Total Net Periodic Benefit Cost	$	28.5	$	6.7	$	9.7	$	2.1
(1)The service cost component and all non-service cost components of net periodic benefit (income) cost are presented in "Operation and maintenance" and "Other, net," respectively, on the Condensed Statements of Consolidated Income (unaudited).

During the third quarter of 2023, the requirements for settlement accounting were met for two of our pension plans, resulting in a settlement charge of $7.4 million for the three months ended September 30, 2023, and $7.5 million for the nine months ended September 30, 2023.

11. Variable Interest Entities

A VIE is an entity in which the controlling interest is determined through means other than a majority voting interest. NIPSCO owns and operates two wind facilities, Rosewater and Indiana Crossroads Wind, which have 102 MW and 302 MW of nameplate capacity, respectively. NIPSCO also owns two solar facilities, Indiana Crossroads Solar and Dunns Bridge I, which went into service in June 2023, with a combined 465 MW of nameplate capacity. During August 2023, NIPSCO and the tax equity partner made final cash contributions in accordance with the equity capital contribution agreement. In August 2023, Indiana Crossroads Solar and Dunns Bridge I reached substantial completion, resulting in NIPSCO making a combined $307.2 million in developer payments. We control decisions that are significant to these entities' ongoing operations and economic results. Therefore, we have concluded that NIPSCO is the primary beneficiary and have consolidated all four entities.

Members of each respective JV include NIPSCO (who is the managing member) and a tax equity partner. Earnings, tax attributes and cash flows are allocated to both NIPSCO and the tax equity partner in varying percentages by category and over the life of the partnership. NIPSCO and each tax equity partner contributed cash to each JV. For the two wind facilities, NIPSCO assumed an obligation to the developers of each facility, representing the remaining economic interest. NIPSCO resolved this obligation by acquiring the developers' economic interests in June 2023 for $389.2 million. Once the tax equity partner has earned their negotiated rate of return and have reached a stated contractual date, NIPSCO has the option to purchase

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

the remaining interest in the respective JV, at fair market value from the tax equity partner. NIPSCO has an obligation to purchase 100% of the electricity generated by our in service JVs.

We did not provide any financial or other support during the quarter that was not previously contractually required, nor do we expect to provide such support in the future.

Our Condensed Consolidated Balance Sheets (unaudited) included the following assets and liabilities associated with VIEs.


(in millions)	September 30, 2023		December 31, 2022
Net Property, Plant and Equipment	$	1,338.6	$	978.5
Current assets	65.5		25.7

Total assets(1)	1,404.1		1,004.2
Current liabilities	41.0		128.2
Asset retirement obligations	55.0		30.6

Total liabilities	$	96.0	$	158.8

(1)The assets of each VIE represent assets of a consolidated VIE that can be used only to settle obligations of the respective consolidated VIE. The creditors of the liabilities of the VIEs do not have recourse to the general credit of the primary beneficiary.

12. Long-Term Debt

On March 24, 2023, we completed the issuance and sale of $750.0 million of 5.25% senior unsecured notes maturing in 2028, which resulted in approximately $742.2 million of net proceeds after discount and debt issuance costs.

On June 8, 2023, we completed the issuance and sale of an additional $300.0 million of 5.25% senior unsecured notes maturing in 2028 (the "2028 Notes"). The terms of the 2028 Notes, other than the issue date and the price to the public, are identical to the terms of, and constitute as a reopening of, our 5.25% senior unsecured notes due 2028 issued on March 24, 2023. With the incremental issuance, we now have $1.05 billion of 5.25% senior unsecured notes maturing in 2028. On June 8, 2023, we also completed the issuance and sale of $450.0 million of 5.40% senior unsecured notes maturing in 2033. These issuances resulted in approximately $742.5 million of total net proceeds after discount and debt issuance costs.

13. Short-Term Borrowings

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

Revolving Credit Facility. 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. We had no outstanding borrowings under this facility as of September 30, 2023 and December 31, 2022.

Commercial Paper Program. Our commercial paper program has a program limit of up to $1.5 billion. We had $935.0 million and $415.0 million of commercial paper outstanding with weighted-average interest rates of 5.58% and 4.60% as of September 30, 2023 and December 31, 2022, respectively.

Accounts Receivable Transfer Programs. 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 three agreements expire between May 2024 and October 2024 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, 2023, the maximum amount of debt that could be borrowed related to our accounts receivable programs was $295.6 million.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

We had $285.0 million and $347.2 million of short-term borrowings related to the securitization transactions as of September 30, 2023 and December 31, 2022, respectively.

For the nine months ended September 30, 2023, $62.2 million was recorded as cash flows used for financing activities related to the change in short-term borrowings due to securitization transactions. For the nine months ended September 30, 2022, $318.2 million was recorded as cash flows from financing activities related to the change in short-term borrowings due to securitization transactions. Fees associated with the securitization transactions were $0.5 million and $0.7 million for the three months ended September 30, 2023 and 2022, respectively and $2.1 million and $1.7 million for the nine months ended September 30, 2023 and 2022, respectively. Columbia of Ohio, NIPSCO and Columbia of Pennsylvania remain responsible for collecting on the receivables securitized, and the receivables cannot be transferred to another party.

Term Credit Agreement. On December 20, 2022, we entered into a $1.0 billion term credit agreement with a syndicate of banks. On October 5, 2023, we entered into an amendment with the syndicate of banks to, among other things, extend the maturity date of the agreement from December 19, 2023 to March 15, 2024. With the amendment, we triggered extinguishment accounting and will record an immaterial loss on extinguishment of debt in the fourth quarter of 2023. Interest charged on the borrowings depends on the variable rate structure elected at the time of each borrowing. The available variable rate structures from which we can choose are defined in the agreement. Under the agreement, we borrowed $1.0 billion on December 20, 2022 with an interest rate of SOFR plus 105 basis points. We had $1.0 billion outstanding under this agreement with interest rates of 6.37% and 5.37% as of September 30, 2023 and December 31, 2022, respectively.

Items listed above, excluding the term credit agreement, are presented net in the Condensed Statements of Consolidated Cash Flows (unaudited) as their maturities are less than 90 days.

14. 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, 2023 and December 31, 2022, we had issued stand-by letters of credit of $9.9 million and $10.2 million, respectively, for the benefit of third parties.

We provide guarantees related to our future performance under BTAs for our renewable generation projects. At September 30, 2023 and December 31, 2022, our guarantees for multiple BTAs totaled $642.4 million and $841.6 million, respectively. The amount of each guaranty will fluctuate upon the completion of the various steps outlined in each BTA. See ''- D. Other Matters - Generation Transition,'' below for more information.

B. Legal Proceedings. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim, proceeding or investigation would not have a material adverse effect on our results of operations, financial position or liquidity. If one or more 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.

Private Actions. 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"). There continue to be asserted wrongful death and bodily injury claims as it relates to the Greater Lawrence Incident. We continue to discuss potential settlements with remaining claimants. The outcomes and impacts of such private actions are uncertain at this time.

FERC Investigation. In April 2022, NIPSCO was notified that the FERC Office of Enforcement (“OE”) is conducting an investigation of an industrial customer for allegedly manipulating the MISO Demand Response (“DR”) market. The customer and NIPSCO are cooperating with the investigation. It is probable that the OE will require the customer to repay certain DR revenues received from MISO, and will require NIPSCO to disgorge administrative fees and foregone margin charges that NIPSCO collected pursuant to its own IURC-approved tariff. The investigation remains ongoing. NIPSCO currently estimates the maximum amount of its disgorgement exposure to be $7.7 million which will be returned to customers. As of September 30, 2023, NIPSCO expects to recover more than 50% of that amount.

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

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

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 majority of environmental assessment and remediation costs and asset retirement costs, further described below, to be recoverable through rates.

As of September 30, 2023 and December 31, 2022, we had recorded a liability of $82.7 million and $86.5 million, respectively, to cover environmental remediation at various sites. This liability is included in "Other accruals" and "Other noncurrent liabilities and deferred credits" in the Condensed Consolidated Balance Sheets (unaudited). 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 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.

CERCLA. Our subsidiaries are potentially responsible parties at waste disposal sites under CERCLA 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. At this time, we cannot estimate the full cost of remediating properties that have not yet been investigated, but it is possible that the future costs could be material to the Condensed Consolidated Financial Statements (unaudited).

MGP. We maintain a program to identify and investigate former MGP sites where Gas Distribution Operations subsidiaries or predecessors may have liability. The program has identified 53 such sites where liability is probable. Remedial actions at many 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 completed an annual refresh of the model in the second quarter. No material changes to the estimated future remediation costs were noted as a result of an internal quarterly review of environmental reserves completed as of September 30, 2023. Our total estimated liability related to the facilities subject to remediation was $77.7 million and $81.0 million at September 30, 2023 and December 31, 2022, respectively. The liability represents our best estimate of the probable cost to remediate the MGP sites. Our model indicates that it is reasonably possible that remediation costs could vary by as much as $15.1 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. NIPSCO continues to meet the compliance requirements established by the EPA for the regulation of CCRs. The current CCR rule required 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 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.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

D. Other Matters. Generation Transition. NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh. Each facility supplying the energy will have an associated nameplate capacity, and payments under the PPAs will not begin until the associated generation facility is constructed by the owner/seller. NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. NIPSCO's purchase obligation under each respective BTA is dependent on satisfactory approval of the BTA by the IURC and timely completion of construction. NIPSCO and the tax equity partner, where applicable, for each respective BTA, are obligated to make cash contributions to acquire the project at the date construction is substantially complete. Certain BTA agreements require NIPSCO to make partial payments upon the developer's completion of significant construction milestones.

Proposed Sale of 19.9% Equity Interest in Northern Indiana Public Service Company LLC. On June 17, 2023, NiSource and our wholly-owned subsidiary, NIPSCO Holdings II LLC, a Delaware limited liability company (“NIPSCO Holdings II”), entered into a purchase and sale agreement (the “BIP Purchase Agreement”) with BIP BLUE BUYER L.L.C., an affiliate of BIP. NIPSCO Holdings II is the 100% owner of all issued and outstanding membership interests of NIPSCO. NIPSCO Holdings II is a wholly-owned subsidiary of NIPSCO Holdings I LLC (“NIPSCO Holdings I”), which is a wholly-owned subsidiary of NiSource. Under the terms of the BIP Purchase Agreement, BIP will acquire newly issued membership interests of NIPSCO Holdings II which will represent a 19.9% ownership in NIPSCO Holdings II at closing, for a purchase price of $2.150 billion in cash, subject to adjustment based on the timing of closing and the amount of NiSource capital contributions made prior to closing (the “NIPSCO Minority Equity Interest Sale”). At the closing of the NIPSCO Minority Equity Interest Sale, through their respective percentage ownership of NIPSCO Holdings II, NiSource will own an 80.1% controlling interest in NIPSCO, while BIP will own the remaining 19.9% non-controlling interest. The parties currently expect for the NIPSCO Minority Equity Interest Sale to close by the end of 2023. The closing of the NIPSCO Minority Equity Interest Sale is subject to the satisfaction of certain customary closing conditions described in the BIP Purchase Agreement, including receipt of authorization by FERC. FERC approval was received on October 19, 2023.

The BIP Purchase Agreement may be terminated: (i) by mutual written consent of the parties; (ii) by either party if the closing has not occurred on or before one year after the effective date of the BIP Purchase Agreement; (iii) by BIP or NiSource, as the case may be, prior to the closing upon certain material breaches or failures to perform any of the representations, warranties, covenants or agreements by the other party; or (iv) by either party prior to the closing in the event of a final and non-appealable law or order restraining, enjoining or otherwise prohibiting the closing in any competent jurisdiction.

The BIP Purchase Agreement prohibits NIPSCO and NIPSCO Holdings II from paying any dividends or similar distributions to NiSource prior to the closing of the NIPSCO Minority Equity Interest Sale.

Pursuant to the terms of the BIP Purchase Agreement, at closing of the NIPSCO Minority Equity Interest Sale, BIP, NIPSCO Holdings I, NIPSCO Holdings II and NiSource will enter into an Amended and Restated Limited Liability Company Operating Agreement (the “Holdings II LLC Agreement”). The Holdings II LLC Agreement, among other things, provides for ongoing governance, exit rights, additional capital contributions, distributions, and other arrangements for NIPSCO Holdings II from and after the closing of the NIPSCO Minority Equity Interest Sale. As part of the NIPSCO Minority Equity Interest Sale, BIP is committed to funding its pro rata share of ongoing capital requirements, which is supported by a $250 million equity commitment letter. Upon the closing of the NIPSCO Minority Equity Interest Sale, the board of directors of NIPSCO Holdings II (the “Holdings II Board”) will consist of seven directors. The Holdings II LLC Agreement will allow BIP to appoint at least two directors to the Holdings II Board so long as BIP holds at least a 17.5% Percentage Interest (as defined in the Holdings II LLC Agreement). The Holdings II LLC Agreement also contains certain investor protections, including, among other things, requiring BIP approval for NIPSCO Holdings II to take certain major actions. In addition, the Holdings II LLC Agreement will contain certain transfer restrictions and other transfer rights and obligations applicable to both BIP and NiSource.

NiSource intends to use the proceeds from the purchase price and future capital contributions by BIP to support NIPSCO’s capital expenditure plans for serving customers, reduce NiSource’s debt and fund ongoing capital needs associated with the renewable generation transition.

Table of Contents****`

ITEM 1. FINANCIAL STATEMENTS (continued)

NiSource Inc.

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

15. Accumulated Other Comprehensive Loss

The following tables display the components of Accumulated Other Comprehensive Loss, net of tax:


(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, 2023	$	(10.4)	$	(12.7)	$	(12.7)	$	(35.8)
Other comprehensive loss before reclassifications	(1.7)		(0.4)		(0.1)		(2.2)
Amounts reclassified from accumulated other comprehensive loss	—		0.3		0.8		1.1
Net current-period other comprehensive income (loss)	(1.7)		(0.1)		0.7		(1.1)

Balance as of September 30, 2023	$	(12.1)	$	(12.8)	$	(12.0)	$	(36.9)
(1)All amounts are net of tax. Amounts in parentheses indicate debits.
(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, 2023	$	(11.2)	$	(12.6)	$	(13.3)	$	(37.1)
Other comprehensive income (loss) before reclassifications	(1.4)		(0.4)		0.2		(1.6)
Amounts reclassified from accumulated other comprehensive loss	0.5		0.2		1.1		1.8
Net current-period other comprehensive income (loss)	(0.9)		(0.2)		1.3		0.2

Balance as of September 30, 2023	$	(12.1)	$	(12.8)	$	(12.0)	$	(36.9)

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


(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, 2022	$	(7.5)	$	(19.5)	$	(8.8)	$	(35.8)
Other comprehensive income (loss) before reclassifications	(4.6)		16.2		—		11.6
Amounts reclassified from accumulated other comprehensive loss	0.1		—		0.6		0.7
Net current-period other comprehensive income (loss)	(4.5)		16.2		0.6		12.3

Balance as of September 30, 2022	$	(12.0)	$	(3.3)	$	(8.2)	$	(23.5)
(1)All amounts are net of tax. Amounts in parentheses indicate debits.
(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, 2022	$	2.1	$	(122.5)	$	(6.4)	$	(126.8)
Other comprehensive income (loss) before reclassifications	(14.4)		119.1		(3.3)		101.4
Amounts reclassified from accumulated other comprehensive loss	0.3		0.1		1.5		1.9
Net current-period other comprehensive income (loss)	(14.1)		119.2		(1.8)		103.3

Balance as of September 30, 2022	$	(12.0)	$	(3.3)	$	(8.2)	$	(23.5)

(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)

16. Other, Net

The following table displays the components of Other, Net included on the Condensed Statements of Consolidated Income (unaudited):


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Interest income	$	2.7	$	2.1	$	6.3	$	3.6
AFUDC equity	6.0		4.0		15.2		11.0

Pension and other postretirement non-service benefit (cost)	(9.8)		5.3		(18.2)		17.6

Miscellaneous	(0.5)		(1.3)		(1.4)		(2.2)
Total Other, net	$	(1.6)	$	10.1	$	1.9	$	30.0

17. Business 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" and primarily are comprised of interest expense on holding company debt, and unallocated corporate costs and activities. Refer to Note 3, "Revenue Recognition," for additional information on our segments and their sources of revenues. The following table provides information about our reportable 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,
(in millions)	2023		2022		2023		2022
Operating Revenues
Gas Distribution Operations
Unaffiliated	$	528.5	$	572.4	$	2,722.6	$	2,750.2
Intersegment	3.0		3.1		9.2		9.4
Total	531.5		575.5		2,731.8		2,759.6
Electric Operations
Unaffiliated	498.7		516.3		1,360.2		1,383.5
Intersegment	0.4		0.2		0.7		0.6
Total	499.1		516.5		1,360.9		1,384.1
Corporate and Other
Unaffiliated	0.2		0.8		0.6		12.3
Intersegment	121.7		115.3		361.2		349.5
Total	121.9		116.1		361.8		361.8
Eliminations	(125.1)		(118.6)		(371.1)		(359.5)
Consolidated Operating Revenues	$	1,027.4	$	1,089.5	$	4,083.4	$	4,146.0
Operating Income (Loss)
Gas Distribution Operations	$	52.2	$	33.4	$	614.5	$	624.8
Electric Operations	175.8		123.3		307.3		295.1
Corporate and Other	5.0		—		11.1		(19.6)
Consolidated Operating Income	$	233.0	$	156.7	$	932.9	$	900.3

Table of Contents

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

NiSource Inc.


Index			Page
Executive Summary			37
Summary of Consolidated Financial Results			39
Results and Discussion of Segment Operations			40
Gas Distribution Operations			41
Electric Operations			44
Liquidity and Capital Resources			48
Regulatory, Environmental and Safety Matters			53
Market Risk Disclosures			56
Other Information			57

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") 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, 2022.

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

Refer to the ''Business'' section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for further discussion of our regulated utility business segments.

Our goal is to develop strategies that benefit all stakeholders as we (i) focus on long-term infrastructure investment and safety programs to better serve our customers, (ii) align our tariff structures with our cost structure, and (iii) address changing customer conservation patterns. These strategies focus on improving safety and reliability, enhancing customer service, ensuring customer affordability and reducing emissions while generating sustainable returns. The safety of our customers, communities and employees remains our top priority. Serving as a guiding practice for our SMS, NiSource is certified in conformance to the American Petroleum Institute Recommended Practice 1173, which is the foundation to our journey towards operational excellence. 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.

Your Energy, Your Future: Our plan to replace our coal generation capacity by the end of 2028 with primarily renewable resources, initiated through our 2018 Integrated Resource Plan ("2018 Plan"), is well underway, and we are continually adjusting to the dynamic renewable energy landscape. We achieved in service status in June 2023 and substantial completion in August 2023 for our first two solar BTA's. We have also taken contractual actions on a number of our other renewable projects to address the timing of these projects as well as consider the broad market issues facing the industry. We remain on track to retire R.M Schahfer's remaining two coal units by the end of 2025. On January 1, 2023, the provisions of the IRA became effective. As a result of the IRA, we have made a filing with the IURC to fully-own two BTA projects in lieu of utilizing tax equity partnerships, and we are evaluating the impact of this legislation on our remaining projects, with potential to drive increased value to customers as part of our expansion of renewable projects and generation transition strategy. For additional information, see "Results and Discussion of Segment Operations - Electric Operations," in this Management's Discussion.

In 2021, we announced and filed with the IURC the Preferred Energy Resource Plan associated with our 2021 Integrated Resource Plan ("2021 Plan"). The 2021 Plan lays out a timeline to retire the Michigan City Generating Station by the end of 2028. The 2021 Plan calls for the replacement of the retiring units with a diverse portfolio of resources including demand side management resources, incremental solar, stand-alone energy storage and upgrades to existing facilities at the Sugar Creek Generating Station, among other steps. Additionally, the 2021 Plan calls for a new natural gas peaking unit to replace existing vintage gas peaking units at the R.M. Schahfer Generating Station to support system reliability and resiliency, as well as upgrades to the transmission system to enhance our electric generation transition. In September of 2023, we filed a request for issuance of a certificate of public convenience and necessity for an approximately 400 MW natural gas peaking generation unit with the IURC. The planned retirement of the two vintage gas peaking units at the R.M. Schahfer Generating Station is also expected to occur by the end of 2028. Final retirement dates for these units, as well as Michigan City, will be subject to MISO approval.

NIPSCO Minority Equity Interest Sale: On June 17, 2023, NiSource and our wholly-owned subsidiary, NIPSCO Holdings II, entered into the BIP Purchase Agreement with an affiliate of BIP, pursuant to which BIP will acquire an indirect 19.9 percent equity interest in NIPSCO. Refer to Note 14, "Other Commitments and Contingencies - D. Other Matters," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for more information on this transaction.

Table of Contents

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

NiSource Inc.

Transformation: Our enterprise-wide transformation roadmap focuses on operational excellence, safety, operation and maintenance management, and unlocking efficiencies. We are currently executing on several initiatives that will enable us to streamline work and improve logistics company-wide. These efforts will include investments in proven technologies backed with standardized processes that will change the way we plan, schedule, and execute work in the field and how we engage and provide service to our customers. Taken together, all the initiatives under the Enterprise-wide Transformation Roadmap will prioritize safety and continue to optimize our long-term growth profile.

Economic Environment: We continue to monitor risks related to increasing order and delivery lead times for construction and other materials, increasing risk of unavailability of materials due to global shortages in raw materials, and risk of decreased construction labor productivity in the event of disruptions in the availability of materials. We continue to see increasing prices associated with certain materials and supplies. To the extent that delays occur or our costs increase, our business operations, results of operations, cash flows, and financial condition could be materially adversely affected. For more information on supply chain impacts to our electric generation strategy, see "Results and Discussion of Segment Operations - Electric Operations," in this Management's Discussion. Additionally, for more information on global availability of materials for our renewable projects, see "Results and Discussion of Segment Operations - Electric Operations - Electric Supply and Generation Transition."

We are faced with increased competition for employee and contractor talent in the current labor market which has resulted in increased costs to attract and retain talent. We are ensuring that we use all internal human capital programs (development, leadership enablement programs, succession, performance management) to promote retention of our current employees along with having a competitive and attractive appeal for potential recruits. With a focus on workforce planning, we are evaluating our future talent footprint by creating flexible work arrangements where possible to ensure we have the right people, in the right role, and at the right time.

After decreasing for the first three months of 2023, the market price of natural gas has stabilized at low levels, compared to 2022 prices, with little volatility. Changes in gas prices do not have a material impact on our results of operations, however higher natural gas prices can impact our cash flows and liquidity. For more information on our commodity price impacts, see "Results and Discussion of Segment Operations - Gas Distribution Operations," and "Market Risk Disclosures."

Due to rising interest rates, we experienced higher interest expense for the three and nine months periods ended September 30, 2023 compared to the same periods in 2022 associated with short-term borrowings. We continue to evaluate our financing plan to manage interest expense and exposure to rates. For more information on interest rate risk, see "Market Risk Disclosures".

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

NiSource Inc.

Summary of Consolidated Financial Results

A summary of our consolidated financial results for the three and nine months ended September 30, 2023 and 2022 are presented below:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except per share amounts)	2023		2022		Favorable (Unfavorable)		2023		2022		Favorable (Unfavorable)
Operating Revenues	$	1,027.4	$	1,089.5	$	(62.1)	$	4,083.4	$	4,146.0	$	(62.6)
Operating Expenses
Cost of energy	181.3		330.8		149.5		1,198.3		1,421.2		222.9
Other Operating Expenses	613.1		602.0		(11.1)		1,952.2		1,824.5		(127.7)
Total Operating Expenses	794.4		932.8		138.4		3,150.5		3,245.7		95.2
Operating Income	233.0		156.7		76.3		932.9		900.3		32.6
Total Other Deductions, Net	(130.8)		(81.5)		(49.3)		(346.7)		(229.8)		(116.9)
Income Taxes	3.8		11.7		7.9		103.7		119.9		16.2


Net Income	98.4		63.5		34.9		482.5		550.6		(68.1)
Net income (loss) attributable to noncontrolling interest	13.3		(2.3)		(15.6)		5.6		(9.0)		(14.6)
Net Income Attributable to NiSource	85.1		65.8		19.3		476.9		559.6		(82.7)
Preferred dividends	(8.1)		(13.8)		5.7		(40.8)		(41.4)		0.6
Net Income Available to Common Shareholders	77.0		52.0		25.0		436.1		518.2		(82.1)
Earnings Per Share
Basic Earnings Per Share	$	0.19	$	0.13	$	0.06	1.05		$	1.28	$	(0.23)
Diluted Earnings Per Share	$	0.17	$	0.12	$	0.05	$	0.98	$	1.18	$	(0.20)

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 increase in net income available to common shareholders for the three months ended September 30, 2023 was primarily due to higher revenues, net of cost of energy, driven by rate increases from regulatory initiatives.

The decrease in net income available to common shareholders for the nine months ended September 30, 2023 is driven by the receipt of the insurance settlement related to the Greater Lawrence Incident received in 2022, as well as increased other deductions, partially offset by higher net revenues driven by rate increases from regulatory initiatives.

The decrease in preferred dividends for the three and nine months ended September 30, 2023 was due primarily to the redemption of Series A Preferred Stock in the second quarter 2023. See Note 5, "Equity," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for additional information.

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 and nine months ended September 30, 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 12, "Long-Term Debt," Note 13, "Short-Term Borrowings," and Note 10, "Pension and Other Postemployment Benefits," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for additional information.

Income Taxes

Refer to Note 9, "Income Taxes," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for information on income taxes and the change in the effective tax rates for the periods presented.

We continue to monitor risks related to the implementation of any final or proposed tax regulations related to the IRA.

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

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

NiSource Inc.

gas transmission and distribution property must be capitalized as improvements or are allowable as deductions. We continue to analyze the provisions of the safe harbor method of accounting which we expect to adopt.

RESULTS AND DISCUSSION OF SEGMENT OPERATIONS

Presentation of Segment Information

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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 and nine months ended September 30, 2023 and 2022 are presented below.


	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions)	2023			2022			Favorable (Unfavorable)		2023			2022			Favorable (Unfavorable)
Operating Revenues	$	531.5		$	575.5		$	(44.0)	$	2,731.8		$	2,759.6		$	(27.8)
Operating Expenses
Cost of energy	72.1			158.0			85.9		823.1			1,000.5			177.4
Operation and maintenance	241.0			237.0			(4.0)		789.5			774.1			(15.4)
Depreciation and amortization	118.1			104.3			(13.8)		343.8			307.2			(36.6)

Gain on sale of fixed assets and impairments, net	—			—			—		—			(105.0)			(105.0)
Other taxes	48.1			42.8			(5.3)		160.9			158.0			(2.9)
Total Operating Expenses	479.3			542.1			62.8		2,117.3			2,134.8			17.5
Operating Income	$	52.2		$	33.4		$	18.8	$	614.5		$	624.8		$	(10.3)
Revenues
Residential	$	352.7		$	332.3		$	20.4	$	1,828.7		$	1,772.7		$	56.0
Commercial	108.9			115.5			(6.6)		627.4			634.3			(6.9)
Industrial	46.4			42.9			3.5		169.6			159.3			10.3
Off-System	9.8			72.7			(62.9)		49.9			150.5			(100.6)
Other	13.7			12.1			1.6		56.2			42.8			13.4
Total	$	531.5		$	575.5		$	(44.0)	$	2,731.8		$	2,759.6		$	(27.8)
Sales and Transportation (MMDth)
Residential	12.4			13.6			(1.2)		145.6			169.8			(24.2)
Commercial	17.9			17.7			0.2		114.2			126.1			(11.9)
Industrial	126.2			115.6			10.6		384.2			365.6			18.6
Off-System	7.0			10.6			(3.6)		25.6			23.2			2.4
Other	—			—			—		0.2			0.2			—
Total	163.5			157.5			6.0		669.8			684.9			(15.1)
Heating Degree Days	41			87			(46)		2,898			3,493			(595)
Normal Heating Degree Days	60			60			—		3,428			3,428			—
% Colder (Warmer) than Normal	(32)		%	45		%			(15)		%	2		%
% Warmer than prior year	(53)		%						(17)		%
Gas Distribution Customers
Residential									2,980,246			2,952,458			27,788
Commercial									251,642			250,919			723
Industrial									4,794			4,860			(66)
Other									3			3			—
Total									3,236,685			3,208,240			28,445

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.

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

NiSource Inc.

Gas Distribution Operations

The underlying reasons for changes in our operating revenues for the three and nine months ended September 30, 2023 compared to the same periods in 2022 are presented below.


	Favorable (Unfavorable)
Changes in Operating Revenues (in millions)	Three Months Ended September 30, 2023 vs 2022		Nine Months Ended September 30, 2023 vs 2022
New rates from base rate proceedings and regulatory capital programs	$	42.3	$	185.4
Increased customer usage	1.0		1.5
The effects of customer growth	1.8		4.3

The effects of weather in 2023 compared to 2022	(2.6)		(41.3)

Other	1.3		10.0
Change in operating revenues (before cost of energy and other tracked items)	$	43.8	$	159.9
Operating revenues offset in operating expense
Lower cost of energy billed to customers	(85.9)		(177.4)
Lower tracker deferrals within operation and maintenance, depreciation, and tax	(3.1)		(1.9)
Increase (Reduction) in gross receipts tax, offset in operating expenses	1.2		(8.4)
Total change in operating revenues	$	(44.0)	$	(27.8)

Weather

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

Throughput

The increase in total volumes for the three months ended September 30, 2023, compared to the same period in 2022, is primarily attributable to increased industrial usage.

The decrease in total volumes for the nine months ended September 30, 2023 compared to the same period in 2022, is primarily attributable to the effects of warmer weather.

Commodity Price Impact

Cost of energy for the Gas Distribution Operations segment is principally comprised of the cost of natural gas used while providing transportation and distribution services to customers. All of our Gas Distribution Operations companies have state-approved recovery mechanisms that provide a means for full recovery of prudently incurred gas costs. These are tracked costs that are passed through directly to the customer, and the gas costs included in revenues are matched with the gas cost expense recorded in the period. 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. Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income.

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.

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

NiSource Inc.

Gas Distribution Operations

The underlying reasons for changes in our operating expenses for the three and nine months ended September 30, 2023 compared to the same periods in 2022 are presented below.


	Favorable (Unfavorable)
Changes in Operating Expenses (in millions)	Three Months Ended September 30, 2023 vs 2022		Nine Months Ended September 30, 2023 vs 2022
Higher employee and administrative related expenses	$	(8.2)	$	(11.5)
(Higher) lower materials and supplies expense	(3.1)		1.6

Property insurance settlement related to the Greater Lawrence Incident received in 2022	—		(105.0)
Higher depreciation and amortization expense	(14.1)		(38.5)
Higher property tax	(2.0)		(11.8)
Lower environmental expenses	—		5.4
Impacts from Columbia of Ohio's rate case	(4.2)		(9.3)

Lower outside services expenses	7.7		10.7

Other	(1.1)		(11.8)
Change in operating expenses (before cost of energy and other tracked items)	$	(25.0)	$	(170.2)
Operating expenses offset in operating revenue
Lower cost of energy billed to customers	85.9		177.4
(Reduction) Increase in gross receipts tax, offset in operating revenues	(1.2)		8.4
Lower tracker deferrals within operation and maintenance, depreciation, and tax	3.1		1.9
Total change in operating expense	$	62.8	$	17.5

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