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What changed in NiSource's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NiSource's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+390 added−423 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in NiSource's 2023 10-K

390 paragraphs added · 423 removed · 295 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

90 edited+22 added−33 removed22 unchanged
Biggest changeThe following is a list of our Executive Officers, including their names, ages, offices held and other recent business experience. Name Age Office(s) Held in Past 5 Years Lloyd M. Yates 62 President and Chief Executive Officer Executive Vice President, Customer and Delivery Operations, and President, Carolinas Region, of Duke Energy Corporation from 2014 to 2019. Donald E.
Biggest changeThese communications emphasize the importance of our values and culture in the workplace. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS N I S OURCE I NC . The following is a list of our Executive Officers, including their names, ages, offices held and other recent business experience. Name Age Office(s) Held in Past 5 Years Lloyd M.
Even if our business plan and growth strategy are executed, there is still risk of, among other things, human error in maintenance, installation or operations, shortages or delays in obtaining equipment, including as a result of transportation delays and availability, labor availability and performance below expected levels (in addition to the other risks discussed in this section).
Even if our business plan and/or growth strategy are executed, there is still risk of, among other things, human error in maintenance, installation or operations, shortages or delays in obtaining equipment, including as a result of transportation delays and availability, labor availability and performance below expected levels (in addition to the other risks discussed in this section).
In addition, we depend on electric transmission lines, natural gas pipelines, and other transportation facilities owned and operated by third parties to deliver the electricity and natural gas we sell to wholesale markets, supply natural gas to our gas storage and electric generation facilities, and provide retail energy services to our customers.
In addition, we depend on electric transmission lines, natural gas pipelines, and other transportation and storage facilities owned and operated by third parties to deliver the electricity and natural gas we sell to wholesale markets, supply natural gas to our gas storage and electric generation facilities, and provide retail energy services to our customers.
In order to execute on our sustainable growth strategy and enhance our culture of ongoing continuous improvement, we must effectively manage the complexity and frequency of new initiatives and organizational changes. The organizational changes from our transformation initiatives have put short-term pressure on employees due to the volume and pace of change and, in some cases, loss of personnel.
In order to execute on our sustainable growth strategy and enhance our culture of ongoing continuous improvement, we must effectively manage the complexity and frequency of new initiatives and organizational changes. The organizational changes from our transformation initiatives have put short-term pressure on employees due to the volume and pace of change and, in some cases, the loss of personnel.
We are reliant on technology to run our business, which is dependent upon financial and operational technology systems to process critical information necessary to conduct various elements of our business, including the generation, transmission and distribution of electricity; operation of our gas pipeline facilities; and the recording and reporting of commercial and financial transactions to regulators, investors and other stakeholders.
We are reliant on technology to run our business, which is dependent upon technology systems to process critical information necessary to conduct various elements of our business, including the generation, transmission and distribution of electricity; operation of our gas pipeline facilities; and the recording and reporting of commercial and financial transactions to regulators, investors and other stakeholders.
Our Enterprise Transformation Roadmap initiatives are designed to identify long-term sustainable capability enhancements, cost optimization improvements, technology investments and work process optimization, has increased the volume and pace of change and may not be effective as it continues. Our customer and regulatory initiatives may not achieve planned results.
Our enterprise-wide transformation roadmap initiatives are designed to identify long-term sustainable capability enhancements, cost optimization improvements, technology investments and work process optimization, has increased the volume and pace of change and may not be effective as it continues. Our customer and regulatory initiatives may not achieve planned results.
However, while we have historically been successful in the recovery of costs related to such commodity prices, there can be no assurance that such costs will be fully recovered through rates in a timely manner.
While we have historically been successful in the recovery of costs related to such commodity prices, there can be no assurance that such costs will be fully recovered through rates in a timely manner.
To instill and reinforce our values and culture, we require our employees to participate in regular trainings on ethics and compliance topics each year, including raising concerns, treating others with respect, preventing discrimination in the workplace, anti-bribery and corruption, data protection, unconscious biases, harassment, conflicts of interest, and how to use the anonymous ethics and compliance hotline.
To instill and reinforce our values and culture, we require our employees to participate in regular training on ethics and compliance topics each year, including raising concerns, treating others with respect, preventing discrimination in the workplace, anti-bribery and corruption, data protection, unconscious biases, harassment, conflicts of interest, and how to use the anonymous ethics and compliance hotline.
We are monitoring risks related to increasing order and delivery lead times for construction and other materials, increasing risk associated with the unavailability of materials due to global shortages in raw materials and issues with transportation logistics, and risk of decreased construction labor productivity in the event of disruptions in the availability of materials critical to our gas and electric operations.
We are monitoring risks related to increasing delivery lead times for certain construction and other materials, increasing risk associated with the unavailability of materials due to global shortages in raw materials and issues with transportation logistics, and risk of decreased construction labor productivity in the event of disruptions in the availability of materials critical to our gas and electric operations.
Supply chain issues related to shortages of materials and transportation logistics may lead to delays in the maintenance and replacement of aging infrastructure, which could increase the probability and/or impact of a public safety incident. We lack diversity in suppliers of some gas materials.
Supply chain issues related to shortages of materials, labor and transportation logistics may lead to delays in the maintenance and replacement of aging or damaged infrastructure, which could increase the probability and/or impact of a public safety incident. We lack diversity in suppliers of some gas materials.
In addition to general information and cyber risks that all large corporations face (e.g., ransomware, malware, unauthorized access attempts, phishing attacks, malicious intent by insiders, third-party software vulnerabilities and inadvertent disclosure of sensitive information), the utility industry faces evolving and increasingly complex cybersecurity risks associated with protecting sensitive and confidential customer and employee information, electric grid infrastructure, and natural gas infrastructure.
In addition to general information and cybersecurity risks that all large corporations face (e.g., ransomware, malware, unauthorized access attempts, phishing attacks, malicious intent by insiders, third-party software vulnerabilities and inadvertent disclosure of sensitive information), the utility industry faces evolving and increasingly complex cybersecurity risks associated with protecting electric grid and natural gas infrastructure as well as sensitive and confidential customer and employee information.
Our strategic plan includes enhanced technology and transmission and distribution investments and a reduction in reliance on coal-fired generation. As part of our strategic plan, we will need to attract and retain personnel that are qualified to implement our strategy and may need to retrain or re-skill certain employees to support our long-term objectives.
Further, as part of our strategic plan, which includes enhanced technology, transmission and distribution investments, and a reduction in reliance on coal-fired generation, we will need to attract and retain personnel that are qualified to implement such a strategy and may need to retrain or re-skill certain employees to support our long-term objectives.
In addition to delays and unavailability at times, outsourcing of services to third parties could expose us to inferior service quality or substandard deliverables, which may result in non-compliance (including with applicable legal requirements and industry standards), interruption of service or accidents or reputational harm, which could negatively impact our results of operations.
In addition to delays and unavailability, at times, outsourcing of services to third parties could expose us to inferior service quality or substandard deliverables, which may result in non-compliance (including with applicable legal requirements and industry standards), interruption of service, accidents, or reputational harm, which could negatively impact our business, financial condition and results of operations.
The risk of a disruption or breach of our operational technology, or the compromise of the data processed in connection with our operations, through cybersecurity breach or ransomware attack has increased as attempted attacks have advanced in sophistication and number around the world.
The risk of a disruption or breach of our operational technology, or the compromise of the data processed in connection with our operations, through cybersecurity breach or ransomware attack has increased as attempted cyber-attacks or security breaches have advanced in sophistication and number around the world.
Forecasts of energy sales are based on “normal” weather, which represents a long-term historical average. Significant variations from normal weather resulting from climate change or other factors could have, and have had, a material impact on energy sales.
Energy sales are sensitive to variations in weather. Forecasts of energy sales are based on “normal” weather, which represents a long-term historical average. Significant variations from normal weather resulting from climate change or other factors could have, and have had, a material impact on energy sales.
Schahfer by the end of 2025 and the remaining coal-fired generation by the end of 2028, to be replaced by lower-cost, reliable and cleaner options.
Schahfer Generating Station by the end of 2025 and the remaining coal-fired generation by the end of 2028, to be replaced by lower-cost, reliable and cleaner options.
Our current electric generating fleet is dependent on coal and natural gas for fuel, and our gas distribution operations purchase and resell a portion of the natural gas we deliver to our customers. These energy commodities are subject to price fluctuations and fluctuations in associated transportation costs.
Our current electric generating fleet has dependencies on coal and natural gas for fuel, and our gas distribution operations purchase and resell a portion of the natural gas we deliver to our customers. These energy commodities are subject to price fluctuations and fluctuations in associated transportation costs.
A failure by us to effectively adapt to changes in technology and manage the related costs could harm the ability of our products and services to remain competitive in the marketplace and could have a material adverse impact on our results of operations and financial condition.
A failure by us to effectively adapt to changes in technology, successfully implement such changes, and manage the related costs could harm the ability of our products and services to remain competitive in the marketplace and could have a material adverse impact on our business, results of operations and financial condition.
Our efforts to enhance our resiliency to supply chain shortages may not be effective. We are also seeing increasing prices associated with certain materials, equipment and products, which impacts our ability to complete major capital projects at the cost that was planned and approved.
Our efforts to enhance our resiliency to supply chain shortages may not be effective. We continue to see increasing prices associated with certain materials, equipment and products, which impacts our ability to complete major capital projects at the cost that was planned and approved.
Actions of activist stockholders could negatively affect our business and stock price and cause us to incur significant expenses. We may be subject to actions or proposals from activist stockholders or others that may not be aligned with our long-term strategy or the interests of our other stockholders. We have had communications with an activist stockholder.
Actions of activist stockholders could negatively affect our business and stock price and cause us to incur significant expenses. We may be subject to actions or proposals from activist stockholders or others that may not be aligned with our long-term strategy or the interests of our other stockholders.
If we are unable to successfully attract and retain an appropriately qualified workforce and maintain satisfactory collective bargaining agreements, safety, service reliability, customer satisfaction and our results of operations could be adversely affected.
If we are unable to successfully attract and retain an appropriately qualified workforce and maintain satisfactory labor relations, safety, service reliability, customer satisfaction and our results of operations could be adversely affected.
Our expectation has been that solar energy sources would be one of the primary ways in which we will meet our electric generation capacity and reliability obligations to the MISO market and reliably serve our customers when we retire our coal generation capacity.
Our expectation has been that renewable or alternative energy sources would be some of the primary ways in which we will meet our electric generation capacity and reliability obligations to the MISO market and reliably serve our customers when we retire our coal generation capacity.
Alternative energy sources, new technologies or alternatives to natural gas space heating, including cold climate heat pumps and/or efficiency of other products, could reduce demand and increase customer attrition, which could impact our ability to recover on our investments in our gas distribution assets.
Alternative energy sources, new technologies or alternatives to natural gas space heating, including cold climate heat pumps and/or efficiency of other products, and potential competition supported by changes in laws or regulations could reduce demand and increase customer attrition, which could impact our ability to recover on our investments in our gas distribution assets.
We have experienced an increase in the number of attempts by external parties to access our networks or our company data without authorization. We have experienced, and expect to continue to experience, cyber intrusions and attacks to our information systems and our operational technology.
We have experienced an increase in the number of attempts by external parties to access our networks or our company data without authorization. We have experienced, and expect to continue to experience, cybersecurity intrusions and attacks or security breaches to our information systems.
In addition, these hazards and risks have resulted and may result in the future in serious injury or loss of life to employees and/or the general public, significant damage to property, environmental pollution, impairment of our operations, adverse regulatory rulings and reputational harm, which in turn could lead to substantial losses for NiSource and its stockholders.
These hazards and risks have resulted and may result in serious injury or loss of life to employees and/or the general public, significant damage to property, environmental pollution, impairment of our operations, adverse regulatory rulings and reputational harm, which in turn could lead to substantial business and financial losses.
Moreover, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. We outsource certain business functions to third-party suppliers and service providers, and substandard performance by those third parties could harm our business, reputation and results of operations.
Moreover, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. We outsource certain business functions to third-party suppliers and service providers, and may be impacted by substandard performance or quality by third parties.
Cuccia 39 Senior Vice President, General Counsel and Corporate Secretary Vice President General Counsel, Interim Corporate Secretary of NiSource from January 2022 to March 2022. Vice President and Deputy General Counsel, Regulatory, of NiSource Corporate Services Company, from January 2021 to December 2021.
Cuccia 40 Senior Vice President, General Counsel and Corporate Secretary of NiSource since April 2022 Vice President, Interim General Counsel and Corporate Secretary of NiSource from December 2021 to April 2022. Vice President and Deputy General Counsel, Regulatory, of NiSource Corporate Services Company, from January 2021 to December 2021.
Our 2021 Integrated Resource Plan (“2021 Plan”) validated the activities underway pursuant to our 2018 Plan and calls for the retirement of the Michigan City Generating Station, replacement of existing vintage gas peaking units at the R.M. Schahfer Generating Station and upgrades to the transmission system to enhance our electric generation transition.
Our 2021 Integrated Resource Plan (“2021 Plan”) validated the activities underway pursuant to our prior Integrated Resource Plans and calls for the retirement of the Michigan City Generating Station, replacement of existing vintage gas peaking facilities at the R.M. Schahfer Generating Station and upgrades to the electric transmission system.
As with the Greater Lawrence Incident, certain incidents have subjected and may in the future subject us to both civil and criminal litigation or administrative or other legal proceedings from time to time, which could result in substantial monetary judgments, fines, or penalties against us, be resolved on unfavorable terms, and require us to incur significant operational expenses.
Hazardous incidents have subjected and may subject us to both civil and criminal litigation or administrative or other legal proceedings from time to time, which could result in substantial monetary judgments, fines, or penalties against us, be resolved on unfavorable terms, and require us to incur significant operational expenses.
In addition, we consider acquisitions or dispositions of assets or businesses, JVs, including in connection with the NIPSCO Minority Interest Sale, and mergers from time to time as we execute on our business plan and growth strategy. Any of these circumstances could adversely affect our results of operations and growth prospects.
In addition, we consider acquisitions or dispositions of assets or businesses, JVs, and mergers from time to time as we execute on our business plan and growth strategy. Any of these circumstances could adversely affect our business, results of operations and growth prospects.
Additionally, residential usage, and to some degree commercial usage, is sensitive to fluctuations in commodity costs for gas and electricity, whereby usage declines with increased costs, thus affecting our financial results. Commodity prices have been and may continue to be volatile.
Additionally, residential usage, and to some degree commercial usage, is sensitive to fluctuations in commodity costs for gas and electricity, whereby usage declines with increased costs, thus affecting our financial results. Commodity prices have been and may continue to be volatile as described in more detail in the below risk factor.
Our gas distribution and transmission activities, as well as generation, transmission and distribution of electricity, involve a variety of inherent hazards and operating risks, including, but not limited to, gas leaks and over-pressurization, downed power lines, stray electrical voltage, excavation or vehicular damage to our infrastructure, outages, environmental spills, mechanical problems and other incidents, which could cause substantial financial losses, as demonstrated in part by the Greater Lawrence Incident.
Our gas distribution and transmission, electric generation, transmission and distribution activities, involve a variety of inherent hazards and operating risks, including, but not limited to, gas leaks and over-pressurization, downed power lines, stray electrical voltage, excavation or vehicular damage to our infrastructure, outages, environmental spills, mechanical problems and other incidents, which could cause substantial financial losses.
A cyber-attack on any of our or certain third-party technology systems upon which we rely may adversely affect our ability to operate and could lead to a loss or misuse of confidential and proprietary information or potential liability.
A cyber-attack or security breach on any of our or certain third-party technology systems, including but not limited to information systems, infrastructure, software and hardware, upon which we rely may adversely affect our ability to operate, could lead to a loss or misuse of confidential and proprietary information, or potential liability.
These programs include a paid wellness day, telemedicine services, an Employee Assistance Program, Integrated Health Management navigation services, employee paid sick/disability leave, parental leave, and paid illness in family days. We also offer competitive medical, dental, vision, life and long-term disability programs, including employee health savings account company contributions.
These programs include competitive medical, dental, vision, life and long-term disability programs, including employee HSA company contributions, telemedicine services, Employee Assistance Program, Integrated Health Management navigation services, and paid time off including a wellness day, sick/disability, parental leave, and illness in family day.
We may be unable to obtain insurance on acceptable terms or at all, and the insurance coverage we do obtain may not provide protection against all significant losses.
RISK FACTORS N I S OURCE I NC . We may be unable to obtain insurance on acceptable terms or at all, and the insurance coverage we do obtain may not provide protection against all significant losses.
These risks can be driven by threats such as, but not limited to, electrical faults, mechanical failure, internal corrosion, external corrosion, ground movement and stress corrosion and/or cracking.
We have risks associated with aging electric and gas infrastructure. These risks can be driven by threats such as, but not limited to, electrical faults, mechanical failure, internal corrosion, external corrosion, ground movement and stress corrosion and/or cracking.
Other construction risks include changes in the availability and costs of materials, equipment, commodities or labor (including changes to tariffs on materials), delays caused by construction incidents or injuries, work stoppages, shortages in qualified labor, poor initial cost estimates, unforeseen engineering issues, the ability to obtain necessary rights-of-way, easements and transmissions connections and general contractors and subcontractors not performing as required under their contracts.
Construction risks include, but are not limited to, changes in the availability or costs of materials, equipment, commodities or labor (including changes to tariffs on materials), delays caused by construction incidents or injuries, work stoppages, poor initial cost estimates, unforeseen engineering issues, and general contractors and subcontractors not performing as required under their contracts.
The occurrence of incidents has in certain instances adversely affected and could in the 16 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC . future adversely affect our reputation, cash flows, financial position and/or results of operations. We maintain insurance against some, but not all, of these risks and losses.
The occurrence of incidents has in certain instances adversely affected and could in the future adversely affect our reputation, cash flows, financial position and/or results of operations. We maintain insurance against some, but not all, of these risks and losses.
Recent developments, including macro supply chain issues and U.S. federal policy actions, have created significant uncertainty around the availability of key input material necessary to develop and place our renewable energy projects in service. In the U.S., solar industry supply chain issues include the pending U.S.
Macro supply chain issues and U.S. federal policy actions could create uncertainty around the availability of key input materials necessary to develop and place our renewable energy projects in service. In the U.S., solar industry supply chain issues include the U.S.
Our response to suggested actions, proposals, director nominations and contests for the election of directors by activist stockholders could disrupt our business and operations, divert the attention of our board of directors, management and employees and be costly and time‐consuming.
Our response to suggested actions, proposals, director nominations and 22 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC . contests for the election of directors by activist stockholders could disrupt our business and operations, divert the attention of our board of directors, management and employees, and be costly and time‐consuming.
The high level of uncertainty surrounding the completion of our solar renewable energy projects creates significant risks for us to reliably meet our capacity and energy obligations to MISO and to provide reliable and affordable energy to our customers.
The uncertainty surrounding the completion of generation resource projects could create significant risks for us to reliably meet our capacity and energy obligations to MISO and to provide reliable and affordable energy to our customers.
Current and prospective employees may determine that they do not wish to work for us due to market, economic, employment and other conditions, including those related to organizational changes as described in the risk factor below. We face increased competition for talent in the current environment of sustained labor shortage and increased turnover rates.
Current and prospective employees may determine that they do not wish to work for us due to market, economic, employment or other conditions, including those related to organizational changes as described in the risk factor below.
If transportation is disrupted, if capacity is inadequate or if supply is interrupted due to issues at the wellhead, we may be unable to sell and deliver our gas and electric services to some or all of our customers.
If transportation is disrupted, if 21 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC . capacity is inadequate or if supply is interrupted due to issues at the wellhead, we may be unable to sell and deliver our gas and electric services to some or all of our customers.
Deployment of new business technologies, along with maintaining legacy technology, represents a large-scale opportunity for attacks on our information systems and confidential customer and employee information, as well as on the integrity of the energy grid and the natural gas infrastructure.
Deployment of new business technologies, along with maintaining legacy technology, represents a large-scale opportunity for attacks on our information systems and confidential customer and employee information, as well as on the integrity of the energy grid and the natural gas infrastructure. Increasing large-scale corporate cyber-attacks in conjunction with more sophisticated threats continue to challenge power and utility companies.
We may conduct certain operations, including in connection with the NIPSCO Minority Interest Sale, through a JV arrangement involving third-party investors that may result in delays, litigation or operational impasses. We may enter into JV arrangements involving third-party investors, including in connection with the NIPSCO Minority Interest Sale.
We currently conduct and may conduct in the future certain operations through a JV arrangement involving third- party investors that may result in operational impasses or litigation, including business delays as a result of such arrangements. We have and may enter into JV arrangements involving third-party investors, including the NIPSCO Minority Interest Transaction.
Business or regulatory conditions may result in our inability to execute our business plan or growth strategy, including the NIPSCO Minority Interest Sale and identified, planned and other utility infrastructure investments, which includes investments related to natural gas pipeline modernization and our renewable energy projects, and the build-transfer execution goals within our business plan.
Operational, financial or regulatory conditions may result in our inability to execute our business plan or growth strategy, including investments related to natural gas pipeline modernization and our renewable energy projects, and the build-transfer execution goals within our business plan.
ITEM 1. BUSINESS N I S OURCE I NC . Employee and Workplace Health and Safety . We have several programs to support employees, and their families’ physical, mental, and financial well-being.
Employee and Workplace Health and Safety . We have several programs to support employees, and their families’ physical, mental, and financial well-being.
Brown 51 Executive Vice President and Chief Financial Officer Executive Vice President of NiSource since May 2015. Chief Financial Officer of NiSource since July 2015. President, NiSource Corporate Services since June 2020. Melody Birmingham 51 Executive Vice President, Chief Innovation Officer Senior Vice President and Chief Administrator Officer of Duke Energy Corporation from May 2021 to June 2022.
Melody Birmingham 52 Executive Vice President, and President, NiSource Utilities of NiSource since March 2023 Executive Vice President, Chief Innovation Officer of NiSource from July 2022 to March 2023. Senior Vice President and Chief Administrator Officer of Duke Energy Corporation from May 2021 to June 2022.
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, cash flows, and the market price of our common stock.
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, cash flows, and the market price of our common stock. OPERATIONAL RISKS We may not be able to execute our business plan or growth strategy, including utility infrastructure investments.
Any losses for which we are not fully insured or that are not covered by insurance at all could materially adversely affect our results of operations, cash flows and financial position. Aspects of the implementation of our electric generation strategy, including the retirement of our coal generation units, may be delayed and may not achieve intended results.
Any losses for which we are not fully insured or that are not covered by insurance at all could materially adversely affect our results of operations, cash flows and financial position.
Additionally, we may construct or purchase some of these projects and programs to capture anticipated future growth, which may not materialize, and may cause the construction to occur over an extended period of time. Our existing and planned capital projects require numerous permits, approvals and certificates from federal, state, and local governmental agencies.
Additionally, we may construct or purchase some of these projects and programs to capture anticipated future growth, which may not materialize, and may cause the construction to occur over an extended period of time.
Our workforce continuity plans may not be effective in avoiding work stoppages that may result from labor negotiations or mass resignations. Labor disruptions, strikes or significant negotiated wage and benefit increases, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our businesses, results of operations and/or cash flows.
Labor disruptions, strikes or significant negotiated wage and benefit increases, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our businesses, results of operations and/or cash flows.
Our ability to obtain insurance, as well as the cost and coverage of such insurance, are affected by developments affecting our business; international, national, state, or local events; and the financial condition and underwriting considerations of insurers.
Our ability to obtain insurance, as well as the cost and coverage of such insurance, is impacted by various events and developments affecting our industry and the financial condition and underwriting considerations of insurers.
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.” To the extent that delays occur, costs become unrecoverable or recovery is delayed, or we otherwise become unable to effectively manage and complete our capital projects, our results of operations, cash flows, and financial condition may be adversely affected.
To the extent that delays occur, costs increase, costs become unrecoverable or recovery is delayed, or we otherwise become unable to effectively manage our affordability and complete our capital projects, our business operations, results of operations, cash flows, and financial condition may be adversely affected.
As a result of the challenges in obtaining solar panels, many solar projects in the U.S. have been delayed or canceled. As we are in the midst of a transition to an electric generation portfolio with more renewable resources, including solar, our projects are subject to the effects of these issues.
As we are in the midst of a transition to an electric generation portfolio with more renewable resources, including solar, our projects are vulnerable to the effects of these issues.
Any additional delays to the completion dates of our ten planned and approved solar projects are expected to impact our capacity position and our ability to meet our resource adequacy obligations to MISO.
Any additional delays to the completion dates of our planned and approved solar projects or other electric generation projects, including our proposed gas peaking facility could impact our capacity position and our ability to meet our resource adequacy obligations to MISO.
Certain perils, such as cyber, are now being excluded from some master policies for property and casualty insurance, requiring procurement of additional policies to be obtained to maintain consistent coverage at an additional cost. Capacity limits insurers are willing to issue have decreased, requiring participation from more insurers to provide adequate coverage.
Certain perils, such as cyber liability, are now being excluded from some master policies for property and casualty insurance, requiring, where we have the ability, procurement of additional policies to maintain consistent coverage at an additional cost.
Technological complexities combined with advanced cyber-attack techniques, lack of cyber hygiene and human error can result in a cybersecurity incident, such as a ransomware attack. Supplier non-compliance with cyber controls can also result in a cybersecurity incident. Attacks can occur at any point in the supply chain or with any suppliers.
Technological complexities combined with advanced cyber- attack or security breach techniques, lack of cybersecurity hygiene and human error can result in a cybersecurity incident, such as a ransomware attack. Supplier non-compliance with 23 Table of Contents
RISK FACTORS N I S OURCE I NC . impacting our generation transition timeline and may negatively impact our achievement of decarbonization goals and reputation. Our capital projects and programs subject us to construction risks and natural gas costs and supply risks, and are subject to regulatory oversight, including requirements for permits, approvals and certificates from various governmental agencies.
Our capital projects and programs subject us to construction and supply risks, and are subject to regulatory oversight, including requirements for permits, approvals and certificates from various governmental agencies. 20 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
For example, certain skills, such as those related to construction, maintenance and repair of transmission and distribution systems, are in high demand and have a limited supply.
These operating challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development. For example, certain skills, such as those related to construction, maintenance and repair of transmission and distribution systems, are in high demand and have a limited supply.
The failure to operate our assets as desired could result in interruption of electric service, major component failure at generating facilities and electric substations, gas leaks and other incidents, and an inability to meet firm service and compliance 17 Table of Contents ITEM 1A.
The failure to operate our assets as desired could result in interruption of electric service, major component failure at generating facilities and electric substations, gas leaks and other incidents, and an inability to meet firm service and compliance obligations, which could adversely impact revenues, and could also result in increased capital expenditures and maintenance costs, which, if not fully recovered from customers, could negatively impact our financial results. 19 Table of Contents ITEM 1A.
Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric generating facilities, electric and natural gas distribution infrastructure, natural gas storage and other projects, including projects for environmental compliance.
Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric generating facilities, electric and natural gas distribution infrastructure, natural gas storage and other projects, including projects for environmental compliance. As we undertake these projects and programs, we may be unable to complete them on schedule or at the anticipated costs.
Additionally, our information systems experience ongoing, often sophisticated, cyber-attacks by a variety of sources, including foreign sources, with the apparent aim to breach our cyber-defenses. While we have implemented and maintain a cybersecurity program designed to protect our information technology, operational technology, and data systems from such attacks, our cybersecurity program does not prevent all breaches or cyberattack incidents.
While we have implemented and maintain a cybersecurity program designed to protect our information technology, operational technology, and data systems from such cyber-attacks or security breaches, our cybersecurity program does not prevent all breaches, cyber-attack or security breach incidents.
As noted above, we expect our electric generation strategy to require additional investment to meet our MISO obligations and may require significant future capital expenditures, operating costs and charges to earnings that may negatively impact our financial position, financial results and cash flows. An inability to secure and deliver on renewable projects is negatively 18 Table of Contents ITEM 1A.
Our electric generation strategy may require additional investment to meet our MISO obligations and may require significant future capital expenditures, operating costs and charges to earnings that may negatively impact our financial position, financial results and cash flows.
Culture and Engagement. Our culture is another important aspect of our ability to advance our strategic and operational objectives. In addition to our DE&I, recruiting, development and retention programs described above, we also invest in internal communications programs, including in-person and virtual learning and networking opportunities, as well as regular town hall communications with employees.
In addition to our DE&I, recruiting, development and retention programs described above, we also invest in internal communications programs, including in-person and virtual learning and networking opportunities, as well as regular town hall communications to employees. We measure and monitor culture and employee engagement through various channels including employee lifecycle, pulse, and census surveys.
Front-line workers are being impacted by the variety of process and technology changes that are currently in progress. 20 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
Front-line workers are being impacted by the variety of process and technology changes that are currently in progress.
Shawn Anderson 41 Senior Vice President,Strategy and Chief Risk Officer Vice President, Strategy of NiSource from January 2019 to May 2020. Vice President of NiSource from May 2018 to December 2018. Treasurer and Chief Risk Officer of NiSource from June 2016 to December 2018. Kimberly S.
Shawn Anderson 42 Executive Vice President and Chief Financial Officer of NiSource since March 2023 Senior Vice President and Chief Strategy and Risk Officer from June 2020 to March 2023. Vice President, Strategy and Chief Risk Officer from January 2019 to May 2020.
Certain types of damages, expenses or claimed costs, such as fines and penalties, have been and in the future may be excluded under the policies.
In addition, our insurance is not sufficient or effective under all circumstances and against all hazards or liabilities to which we are subject. Certain types of damages, expenses or claimed costs, such as fines and penalties, have been and in the future may be excluded under the policies.
Fluctuations in the price of energy commodities or their related transportation costs or an inability to obtain an adequate, reliable and cost-effective fuel supply to meet customer demands may have a negative impact on our financial results. 19 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
Fluctuations in the price of energy commodities or their related transportation costs, or an inability to obtain an adequate, reliable and cost- effective fuel supply may impact our ability to meet customer demand.
We do not have full visibility into our supply chain, which may impact our ability to serve customers in a safe, reliable and cost-effective manner. These risks include the risk of operational failure, reputation damage, disruption due to new supply chain disruptions, exposure to significant commercial losses and fines and poorly positioned and distressed suppliers.
These risks include the risk of operational failure, reputation damage, disruption due to new supply chain disruptions, exposure to significant commercial losses and fines and poorly positioned and distressed suppliers.
Our executive leadership team, including our Chief Executive Officer, communicates directly and regularly with all employees on timely ethics topics through electronic messages, coffee chats, and all-employee town hall meetings. These communications emphasize the importance of our values and culture in the workplace.
Our Board reviews results and action plans related to our enterprise-wide comprehensive employee engagement survey. Our executive leadership team, including our Chief Executive Officer, communicates directly and regularly with all employees on timely ethics topics through electronic messages, coffee chats, and all-employee town hall meetings.
Vice President and General Counsel, Columbia Gas of Massachusetts, NiSource Corporate Services Company, from October 2019 to December 2020. Vice President and General Counsel, Massachusetts Restoration, NiSource Corporate Services Company, from October 2018 to October 2019. Chief Counsel, Columbia Gas Companies from June 2015 to September 2018. Melanie B.
Vice President and General Counsel of Columbia Gas of Massachusetts and of NiSource Corporate Services Company, from 2019 to 2020. Melanie B. Berman 53 Senior Vice President and Chief Human Resources Officer since June 2021 Executive Vice President and Chief Human Resources Officer of The Michaels Companies, Inc. from 2020 to 2021.
We continue to transition our generation portfolio in order to implement new and diverse technologies including renewable energy, distributed generation, energy storage, and energy efficiency designed to reduce regulated emissions.
A key element of our electric business model includes generating power at central station power plants to achieve economies of scale and produce power at a competitive cost. We continue to transition our generation portfolio in order to implement new and diverse technologies including renewable energy, distributed generation, energy storage, and energy efficiency designed to reduce regulated emissions.
An aging workforce without appropriate replacements, the mismatch of skill sets to future needs, the unavailability of talent for internal positions and the unavailability of contract resources may lead to operating challenges or increased costs. These operating challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development.
We operate in an industry that requires many of our employees and contractors to possess unique technical skill sets. An aging workforce without appropriate replacements, the mismatch of skill sets to future needs, the unavailability of talent for internal positions and the unavailability of contract resources may lead to operating challenges or increased costs.
For example, some insurers are moving away from underwriting certain carbon-intensive energy-related businesses such as those in the coal industry or those exposed to specific perils such as wildfires as well as gas explosion events or other infrastructure-related or natural catastrophe risks.
For example, some insurers have discontinued underwriting certain carbon-intensive energy-related businesses such as those in the coal industry or excluded coverage for specific perils such as wildfires or punitive damage risks.
As part of a JV arrangement, third-party investors may hold certain protective rights that may impact our ability to make certain decisions. Any such third-party investors may have interests and objectives which may differ from ours and, accordingly, disputes may arise that may result in delays, litigation or operational impasses.
As part of a JV arrangement, third-party investors may hold certain protective rights that may impact our ability to make certain decisions, restricting our operational and corporate flexibility.
To the extent that delays occur or costs increase, customer affordability as well as our business operations, results of operations, cash flows and financial condition could be materially adversely affected. In addition, to the extent that delays occur on projects that target system integrity, the risk of an operational incident could increase.
In addition, to the extent that delays occur on projects that target system integrity, the risk of an operational incident could increase.
We are currently experiencing, and expect to continue to experience, supply chain challenges, including labor availability issues, impacting our ability to obtain materials for our gas and electric projects. Risks to our capital projects, including risks related to supply chain challenges and labor availability, are described in a separate risk factor below.
We are currently experiencing, and expect to continue to experience, supply chain challenges, including labor availability issues, impacting our ability to obtain materials for our gas and electric projects, as well as our ability to ensure timely completion. Our distribution, transmission and generation activities involve a variety of inherent hazards and operating risks, including potential public safety risks.
A significant portion of the gas and electricity we sell is used by residential and commercial customers for heating and air conditioning. Accordingly, fluctuations in weather, gas and electricity commodity costs, inflation and economic conditions impact demand of our customers and our operating results. Energy sales are sensitive to variations in weather.
We also may not receive the anticipated increases in revenue and cash flows resulting from such projects and programs until after their completion. A significant portion of the gas and electricity we sell is used by residential and commercial customers for heating and air conditioning. Accordingly, fluctuations in weather, gas and electricity commodity costs, and economic conditions impact customer demand.
Senior Vice President, Supply Chain and Chief Procurement Officer of Duke Energy Corporation from November 2018 to April 2021. President of Duke Energy Corporation from June 2015 to November 2018 William Jefferson, Jr 61 Executive Vice President, Operations and Chief Safety Officer Station Director and Vice President at STPNOC, Wadsworth, Texas, from 2016 to May 2022.
William Jefferson, Jr 62 Executive Vice President, Operations and Chief Safety Officer of NiSource since July 2022 Station Director and Plant General Manager at STPNOC, Wadsworth, Texas, from 2016 to May 2022. Michael S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are a holding company and conduct our operations primarily through our subsidiaries, which are separate and distinct legal entities. Substantially all of our consolidated assets are held by our subsidiaries. Accordingly, our ability to meet our debt obligations or pay dividends on our common stock and preferred stock is largely dependent upon cash generated by these subsidiaries.
Biggest changeWe are a holding company and are dependent on cash generated by our subsidiaries to meet our debt obligations and pay dividends on our stock. We are a holding company and conduct our operations primarily through our subsidiaries, which are separate and distinct legal entities. Substantially all of our consolidated assets are held by our subsidiaries.
The rates that our electric and natural gas companies charge their customers are determined by their state regulatory commissions and by the FERC. These commissions also regulate the companies’ accounting, operations, the issuance of certain securities and certain other matters.
The rates that our electric and natural gas companies charge their customers are determined by their state regulatory commissions and by the FERC. These state regulatory commissions also regulate the companies’ accounting, operations, the issuance of certain securities and certain other matters.
Certain of the assumptions that could impact our ability to meet our emissions goal include, but are not limited to: the accuracy of current emission measurements, service territory size and capacity needs remaining in line with expectations; regulatory approval; impacts of future environmental regulations or legislation; impact of future GHG pricing regulations or legislation, including a future carbon tax or methane fee; price, availability and regulation of carbon offsets; price of fuel, such as natural gas; cost of energy generation technologies, such as wind and solar, natural gas and storage solutions; adoption of alternative energy by the public, including adoption of electric vehicles; rate of technology innovation with regards to alternative energy resources; our ability to implement our modernization plans for our pipelines and facilities; the ability to complete and implement generation alternatives to NIPSCO’s coal generation and retirement dates of NIPSCO’s coal facilities by 2028; the ability to construct and/or permit new natural gas pipelines; the ability to procure resources needed to build at a reasonable cost, the lack of scarcity of resources and labor, project cancellations, construction delays or overruns and the ability to appropriately estimate costs of new generation; impact of any supply chain disruptions; and advancement of energy efficiencies.
Certain of the assumptions that could impact our ability to meet our emissions goal include, but are not limited to: the accuracy of current emission measurements, service territory size and capacity needs remaining in line with expectations; regulatory approval; impacts of future environmental regulations or legislation; impact of future GHG pricing regulations or legislation, including a future carbon tax or methane fee; price, availability and regulation of carbon offsets; price of fuel, such as natural gas; cost of energy generation technologies, such as wind and solar, natural gas and storage solutions; adoption of alternative energy, including adoption of electric vehicles; rate of technology innovation with regards to alternative energy resources; our ability to implement our modernization plans for our pipelines and facilities; the ability to complete and implement generation alternatives to NIPSCO’s coal generation and retirement dates of NIPSCO’s coal facilities by 2028; the ability to construct and/or permit new natural gas pipelines; the ability to procure resources needed to build at a reasonable cost, the lack of scarcity of resources and labor, project cancellations, construction delays or overruns and the ability to appropriately estimate costs of new generation; impact of any supply chain disruptions; and advancement of energy efficiencies.
As these technologies become a more cost-competitive option over time, whether through cost effectiveness or government incentives and subsidies, certain customers may choose to meet their own energy needs and subsequently decrease usage of our systems and services, which may result in, among other things, our generating facilities becoming less competitive and economical.
As these technologies become a more cost-competitive option over time, whether through cost effectiveness or government incentives and subsidies, certain customers may choose to meet their own energy needs and subsequently decrease usage of our systems and services, which may result in, among other things, our facilities becoming less competitive and economical.
Adverse economic and market conditions, including increased inflation, increases in interest rates, recession or changes in investor sentiment could materially and adversely affect our business, results of operations, cash flows, financial condition and liquidity.
Adverse economic and market conditions, including increases in inflation or interest rates, recession or changes in investor sentiment could materially and adversely affect our business, results of operations, cash flows, financial condition and liquidity.
Existing laws, regulations, tariffs and policies may be revised or become subject to new interpretations, and new laws, regulations, tariffs and policies may be adopted or become applicable to us and our operations. In some cases, compliance with new laws, regulations, tariffs and policies increases our costs or risks of liability.
Existing laws, regulations, tariffs and policies may be revised or become subject to new interpretations, and new laws, regulations, tariffs and policies may be adopted or become applicable to us and our operations. In some cases, compliance with new or different laws, regulations, tariffs and policies increases our costs or risks of liability.
Additionally, catastrophic events at other utilities could result in our regulators and legislators imposing additional requirements that may lead to additional costs for the companies. In addition to the risk of disallowance of incurred costs, regulators may also impose downward adjustments in a company’s allowed ROE as well as assess penalties and fines.
Additionally, catastrophic events at other utilities could result in our regulators and legislators imposing additional requirements that may lead to additional costs or operational requirements for the companies. In addition to the risk of disallowance of incurred costs, regulators may also impose downward adjustments in a company’s allowed ROE as well as assess penalties and fines.
As a utility company, we are subject to adverse publicity focused on the reliability of our services, the speed with which we are able to respond effectively to electric outages, natural gas leaks or events and related accidents and similar interruptions caused by storm damage, physical or cyber security incidents, or other unanticipated events, as well as our own or third parties’ actions or failure to act.
As a utility company, we are subject to adverse publicity focused on the reliability of our services, the speed with which we are able to respond effectively to electric outages, natural gas leaks or events and related accidents and similar interruptions caused by storm damage, physical or cybersecurity incidents, or other unanticipated events, as well as our own or third parties’ actions or failure to act.
Separately, a challenge by a taxing authority, changes in taxing authorities’ administrative interpretations, decisions, policies and positions, our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions may cause actual financial results to deviate from previous estimates. 31 Table of Content s ITEM 1B.
Separately, a challenge by a taxing authority, changes in taxing authorities’ administrative interpretations, decisions, policies and positions, our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions may cause actual financial results to deviate from previous estimates. 31 Table of Contents ITEM 1B.
Our extension of credit is governed by a Corporate Credit Risk Policy, involves considerable judgment by our employees and is based on an evaluation of a customer or counterparty’s financial condition, credit history and other factors.
Our extension of credit is governed by a Corporate Credit Risk Policy, involves judgment by our employees and is based on an evaluation of customer, supplier, or counterparty’s financial condition, credit history and other factors.
Challenges arise with state regulators on inflationary pricing for electric and gas materials and potential price increases, ensuring that updated pricing for electric and gas materials is included in plans and regulatory assumptions, and ensuring there is a regulatory recovery model for emergency inventory stock.
Challenges arise with state regulators on inflationary pricing for electric and gas materials and potential price increases, ensuring that updated pricing for electric and gas materials is included in plans and regulatory assumptions, and ensuring there is a regulatory recovery model.
Our businesses are subject to extensive federal, state and local environmental laws and rules that regulate, among other things, air emissions, water usage and discharges, GHG and waste products such as CCR.
Our businesses are subject to extensive federal, state and local environmental laws and rules that regulate, among other things, air emissions, water usage and discharges, leak detection and repair, GHG and waste products such as CCR.
Existing environmental laws and regulations may be revised and new laws and regulations may be adopted or become applicable to us, with an increasing focus on the impact of coal and natural gas facilities that may result in significant additional expense and operating restrictions on our facilities, which may not be fully recoverable from customers and could materially affect the continued economic viability of our facilities.
Existing environmental laws and regulations may be revised and new laws and regulations may be adopted or become applicable to us, with an increasing focus on the impact of coal and natural gas facilities that may result in significant additional expense and operating restrictions on our facilities, which may not be fully recoverable from customers and could materially affect the continued economic viability of our facilities. 30 Table of Contents ITEM 1A.
Reduced access to capital markets, increased borrowing costs, and/or lower equity valuation levels could reduce future earnings per share and cash flows. In addition, any rise in interest rates may lead to higher borrowing costs, which may adversely impact reported earnings, cost of capital and capital holdings.
Reduced access to capital markets, increased borrowing costs, and/or lower equity valuation levels could reduce future earnings per share and cash flows. In addition, any rise in interest rates may lead to higher borrowing costs, which may adversely impact reported earnings, cost of capital and capital holdings. 27 Table of Contents ITEM 1A.
We have increased security given the current environment and may be required by regulators or by the future threat environment to make investments in security that we cannot currently predict. In addition, the supply chain constraints that we are experiencing could impact timely restoration of services.
We have increased security given the current environment and may be required by regulators or by the future threat environment to make investments in security that we cannot currently predict. In addition, the supply chain constraints that we are experiencing could impact our ability to timely restore services.
These agreements are primarily for insurance purposes and for the physical purchase or sale of gas or power. As of December 31, 2022, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately $85.7 million.
These agreements are primarily for insurance purposes and for the physical purchase or sale of gas or power. As of December 31, 2023, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately $90.1 million.
Given that we pass through commodity costs to customers, this could also create the potential for regulatory questions resulting from increased customer costs. We are unable to forecast the future of commodity markets, but reduced fossil fuel investment, due to evolving investor sentiment, could lead to higher commodity prices and shortages impacting our generation and our reputation with regulators.
Given that we pass through commodity costs to customers, this could also create the potential for regulatory questions resulting from increased customer costs, reduced fossil fuel investment, due to evolving investor sentiment, could lead to higher commodity prices and shortages impacting our generation and our reputation with regulators.
With higher frequency of these and other possible extreme weather events it may become more costly for us to safely and reliably deliver certain products and services to our customers. Some of these costs may not be recovered.
With higher frequency of these and other possible extreme weather events it may become more costly for us to safely and reliably deliver certain products and services to our customers.
These assets are subject to market fluctuations and may yield uncertain returns, which fall below our projected rates of return. A decline in the market value of assets may increase the funding requirements of the obligations under the defined benefit pension plans.
We have significant obligations in these areas and hold significant assets in these trusts. These assets are subject to market fluctuations and may yield uncertain returns, which could fall below our projected rates of return. A decline in the market value of assets may increase the funding requirements of the obligations under the defined benefit pension plans.
Our business is capital intensive and we rely significantly on long-term debt to fund a portion of our capital expenditures and repay outstanding debt, and on short-term borrowings to fund a portion of day-to-day business operations. We had total consolidated indebtedness of $11,315.5 million outstanding as of December 31, 2022. Our substantial indebtedness could have important consequences.
Our business is capital intensive and we rely significantly on long-term debt to fund a portion of our capital expenditures and repay outstanding debt, and on short-term borrowings to fund a portion of day-to-day business operations. We had total consolidated indebtedness of $14,127.9 million outstanding as of December 31, 2023. Our substantial indebtedness could have important consequences.
We are subject to a financial covenant under our revolving credit facility and term credit agreement, which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2022, the ratio was 58.9%.
We are subject to a financial covenant under our revolving credit facility, which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2023, the ratio was 58.2%.
The IRA imposed a 15 percent minimum tax rate on book earnings for corporations with higher than $1 billion of annual income, along with a 1 percent excise tax on corporate stock repurchases while providing tax incentives to promote various clean energy initiatives. We are currently assessing the potential impact of these legislative changes.
The IRA imposed a 15 percent minimum tax rate on book earnings for corporations with higher than $1 billion of annual income, along with a 1 percent excise tax on corporate stock repurchases while providing tax incentives to promote various clean energy initiatives.
ITEM 1A. RISK FACTORS N I S OURCE I NC .
RISK FACTORS N I S OURCE I NC .
Schahfer Generating Station Units 17 and 18 to the end of 2025, with the CCR impoundment closing by October 2028. In 30 Table of Contents ITEM 1A.
Schahfer Generating Station Units 17 and 18 to the end of 2025, with the CCR impoundment closing by October 2028.
We have experienced disruptions in the past from hurricanes and tornadoes and other events of this nature. Also, companies in our industry face a heightened risk of exposure to and have experienced acts of terrorism and vandalism. Our electric and gas physical infrastructure may be targets of physical security threats or terrorist activities that could disrupt our operations.
Also, companies in our industry face a heightened risk of exposure to and have experienced acts of terrorism and vandalism. Our electric and gas physical infrastructure may be targets of physical security threats or terrorist activities that could disrupt our operations.
We are subject to taxation by the various taxing authorities at the federal, state and local levels where we do business. Legislation or regulation which could affect our tax burden could be enacted by any of these governmental authorities.
Changes in tax laws or the interpretation thereof and challenges to tax positions could adversely affect our financial results. We are subject to taxation by the various taxing authorities at the federal, state and local levels where we do business. Legislation or regulation which could affect our tax burden could be enacted or interpreted by any of these governmental authorities.
An area of significant uncertainty and risk are potential changes to the laws concerning emission of GHG.
RISK FACTORS N I S OURCE I NC . An area of significant uncertainty and risk are potential changes to the laws concerning emission of GHG.
RISK FACTORS N I S OURCE I NC . • limit our flexibility in planning for, or reacting to, changes in the business and the industries in which we operate; • lead parties with whom we do business to require additional credit support, such as letters of credit, in order for us to transact such business; • place us at a competitive disadvantage compared to competitors that are less leveraged; • increase vulnerability to general adverse economic and industry conditions; and • limit our ability to execute on our growth strategy, which is dependent upon access to capital to fund our substantial infrastructure investment program.
For example, it could: • limit our ability to borrow additional funds or increase the cost of borrowing additional funds; • reduce the availability of cash flow from operations to fund working capital, capital expenditures and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in the business and the industries in which we operate; • lead parties with whom we do business to require additional credit support, such as letters of credit, in order for us to transact such business; • place us at a competitive disadvantage compared to competitors that are less leveraged; • increase vulnerability to general adverse economic and industry conditions; and • limit our ability to execute on our growth strategy, which is dependent upon access to capital to fund our substantial infrastructure investment program.
Conversely, demand for our services may increase as a result of customer changes in response to climate change. For example, as the utilization of electric vehicles increases, demand for electricity may increase, resulting in increased usage of our systems and services.
Conversely, demand for our services may increase as a result of customer changes in response to climate change. For example, as the utilization of electric vehicles increases, demand for electricity may increase, resulting in increased usage of our systems and services. 25 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
The physical impacts of climate change and the transition to a lower carbon future are impacting our business and could materially adversely affect our results of operations.
The foregoing may have adverse effects on our business, results of operations, cash flow and financial condition. The physical impacts of climate change and the transition to a lower carbon future are impacting our business and could materially adversely affect our results of operations.
In addition, compliance with PHMSA regulations could subject our gas utilities to higher operating costs. If our businesses are found to be in noncompliance, we could be subject to sanctions, including substantial monetary penalties, or damage to our reputation.
If our businesses are found to be in noncompliance, we could be subject to sanctions, including substantial monetary penalties, or damage to our reputation.
These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns. Any change in rates, including changes in allowed rate of return, are subject 26 Table of Contents ITEM 1A.
These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing interests. Any change in rates, including changes in allowed rate of return, are subject to regulatory approval proceedings that can be contentious, lengthy, and subject to appeal.
In the event a major subsidiary is not able to pay dividends or transfer cash flows to us, our ability to service our debt obligations or pay dividends could be negatively affected.
Accordingly, our ability to meet our debt obligations or pay dividends on our common stock and preferred stock is largely dependent upon cash generated by these subsidiaries. In the event a major subsidiary is not able to pay dividends or transfer cash flows to us, our ability to service our debt obligations or pay dividends could be negatively affected.
Goodwill is also tested for impairment when factors, examples of which include reduced cash flow estimates, a sustained decline in stock price or market capitalization below book value, indicate that the carrying value may not be recoverable. A significant charge in the future could impact the capitalization ratio covenant under certain financing agreements.
Goodwill is also tested for impairment when factors, examples of which include reduced cash flow estimates, a sustained decline in stock price or market capitalization below book value, indicate that the carrying value may not be recoverable and results in a significant charge to earnings. We cannot predict the timing, magnitude, or duration of such changes.
RISK FACTORS N I S OURCE I NC . proposed and final EPA actions denying continued operation of CCR impoundments at other utilities, EPA said that CCR impoundments should cease receipt of CCRs within 135 days of final EPA action unless certain conditions are demonstrated, such as potential reliability issues.
In proposed and final EPA actions denying continued operation of CCR impoundments at other utilities, EPA said that CCR impoundments should cease receipt of CCRs within 135 days of final EPA action unless certain conditions are demonstrated, such as potential reliability issues. In the event that approval is not obtained, future operations could be impacted.
Further, evolving investor sentiment related to the use of fossil fuels and initiatives to restrict continued production of fossil fuels could result in a significant impact on our electric generation and natural gas businesses in the future. 23 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
Further, evolving investor sentiment related to the use of fossil fuels and initiatives to restrict continued production of fossil fuels could result in a significant impact on our electric generation and natural gas businesses in the future. We are unable to forecast the future of commodity markets.
The U.S. manufacturing industry continues to adjust to changing market conditions including international competition, inflation and increasing costs, and fluctuating demand for its products. In addition, our results of operations are negatively impacted by lower revenues resulting from higher bankruptcies, predominately focused on commercial and industrial customers not able to sustain operations through the economic disruptions related to the pandemic.
In addition, our results of operations are negatively impacted by lower revenues resulting from higher bankruptcies, predominately focused on commercial and industrial customers not able to sustain operations through the economic disruptions related to the pandemic.
We are involved in legal and regulatory proceedings, investigations, inquiries, claims and litigation in connection with our business operations, including those related to the Greater Lawrence Incident, the most significant of which are summarized in Note 19, "Other Commitments and Contingencies," in the Notes to Consolidated Financial Statements.
We are, or may be, involved in legal and regulatory proceedings, investigations, inquiries, claims and litigation in connection with our business operations, the most significant of which are summarized in, Note 19, "Other Commitments and Contingencies," in the Notes to Consolidated Financial Statements. While we have insurance, it may not cover all costs or expenses incurred relating to litigation.
Actions to reduce inflation, including raising interest rates, increase our cost of borrowing, which in turn could make it more difficult to obtain financing for our operations or investments on favorable terms. Successful implementation of our long-term business strategies, including capital investment, is dependent upon our ability to access the 25 Table of Contents ITEM 1A.
Actions to reduce inflation, including raising interest rates, increase our cost of borrowing, which in turn could make it more difficult to obtain financing for our operations or investments on favorable terms.
Regulators may reduce ROE to mitigate potential customer bill increases due to items unrelated to capital investments such as potential increases in taxes and incremental costs related to COVID-19. These actions would have an adverse effect on our financial position, results of operations and cash flows.
Regulators may reduce ROE to mitigate potential customer bill increases due to items unrelated to capital investments. These actions would have an adverse effect on our financial position, results of operations and cash flows. 28 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC .
On November 7, 2022, we announced our goal of reaching net zero Scope 1 and 2 greenhouse gas emissions by 2040 (the “Net Zero Goal”).
We are subject to operational and financial risks and liabilities associated with the implementation and efforts to achieve our carbon emission reduction goals. On November 7, 2022, we announced our goal of reaching net zero Scope 1 and 2 greenhouse gas emissions by 2040 (the “Net Zero Goal”).
Our businesses are subject to various federal, state and local laws, regulations, tariffs and policies. We could be materially adversely affected if we fail to comply with such laws, regulations, tariffs and policies or with any changes in or new interpretations of such laws, regulations, tariffs and policies.
Our businesses are subject to various federal, state and local laws, regulations, tariffs and policies and a failure to comply with changes in, or new or different interpretations of, such laws, regulations, tariffs and policies could have an adverse impact on our business.
The performance of the capital markets affects the value of the assets that are held in trust to satisfy future obligations under defined benefit pension and other postretirement benefit plans. We have significant obligations in these areas and hold significant assets in these trusts.
Capital market performance and other factors may decrease the value of benefit plan assets, which then could require significant additional funding and impact earnings. The performance of the capital markets affects the value of the assets that are held in trust to satisfy future obligations under defined benefit pension and other postretirement benefit plans.
In the event that approval is not obtained, future operations could be impacted. The actual future expenditures to achieve environmental compliance depends on many factors, including the nature and extent of impact, the method of improvement, the cost of raw materials, contractor costs, and requirements established by environmental authorities.
The actual future expenditures to achieve environmental compliance depends on many factors, including the nature and extent of impact, the method of improvement, the cost of raw materials, contractor costs, and requirements established by environmental authorities. Changes or increases in costs and the ability to recover under regulatory mechanisms could affect our financial position, financial results and cash flows.
Ultimately, significant funding requirements and increased pension or other postretirement benefit plan expense could negatively impact our results of operations and financial position. We have significant goodwill. Any future impairments of goodwill could result in a significant charge to earnings in a future period and negatively impact our compliance with certain covenants under financing agreements.
Ultimately, significant funding requirements and increased pension or other postretirement benefit plan expenses could negatively impact our results of operations and financial position. We have significant goodwill.
Established rates are also subject to subsequent prudency reviews by state regulators, whereby various portions of rates could be adjusted, subject to refund or disallowed, including cost recovery mechanisms. The ultimate outcome and timing of regulatory rate proceedings could have a significant effect on our ability to recover costs or earn an adequate return.
This may lead to uncertainty as to the ultimate result of those proceedings. Established rates are also subject to subsequent prudency reviews by state regulators, whereby various portions of rates could be adjusted, subject to refund or disallowed, including cost recovery mechanisms.
The occurrence of such events could adversely affect our financial position and results of operations. In accordance with customary industry practice, we maintain insurance against some, but not all, of these risks and losses. We are exposed to significant reputational risks, which make us vulnerable to a loss of cost recovery, increased litigation and negative public perception.
The occurrence of such events could materially adversely affect our business, financial position and results of operations. In accordance with customary industry practice, we maintain insurance against some, but not all, of these risks and losses. As a result, the amount and scope 24 Table of Contents ITEM 1A.
A disruption or failure of natural gas distribution systems, or within electric generation, transmission or distribution systems, in the event of a major hurricane, tornado, or other major weather event, or terrorist attack, acts of war, including the political and economic disruption and uncertainty related to Russia’s military invasion of Ukraine, civil unrest, cyber-attack (as further detailed above), accident, public health emergency, pandemic, or other catastrophic event could cause delays in completing sales, providing services, or performing other critical functions.
A disruption or failure of natural gas distribution systems, or within electric generation, transmission or distribution systems, in the event of a major hurricane, tornado, wildfire, or other major weather event, or terrorist attack, acts of war, international military invasions, including the political and economic disruption and uncertainty related to such terrorist attack, acts of war, or international military invasions (e.g.
Adverse decisions in our proceedings could adversely affect our financial position, results of operations and cash flows.
The ultimate outcome and timing of regulatory rate proceedings could have a significant effect on our ability to recover costs or earn an adequate return. Adverse decisions in our proceedings could adversely affect our financial position, results of operations and cash flows.
RISK FACTORS N I S OURCE I NC . capital and credit markets, including the banking and commercial paper markets, on competitive terms and rates.
Successful implementation of our long-term business strategies, including capital investment, is dependent upon our ability to access the capital and credit markets, including the banking and commercial paper markets, on competitive terms and rates.
Removed
The adverse publicity and investigations we experienced as a result of the Greater Lawrence Incident may have an ongoing negative impact on the public’s perception of us. It is difficult to predict the ultimate impact of this adverse publicity. The foregoing may have continuing adverse effects on our business, results of operations, cash flow and financial condition.
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ITEM 1A. RISK FACTORS N I S OURCE I NC . cybersecurity controls can also result in a cybersecurity incident. We are aware of vendor cyber incidents that have impacted our business, although no such events have had a material impact.
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For example, in February 2023, the Maryland Office of People's Counsel filed a petition with the Maryland Public Service Commission seeking an investigation regarding planning, practices, and future operations of natural gas suppliers in the state. We are subject to operational and financial risks and liabilities associated with the implementation and efforts to achieve our carbon emission reduction goals.
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Cyber-attacks or security breaches can occur at any point in the supply chain or with any suppliers, and future supplier non-compliance with cybersecurity controls could result in material cybersecurity incidents. In addition, we use unmanned aircraft systems (UAS) or drones in our business operations.
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For example, it could: • limit our ability to borrow additional funds or increase the cost of borrowing additional funds; • reduce the availability of cash flow from operations to fund working capital, capital expenditures and other general corporate purposes; 24 Table of Contents ITEM 1A.
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UASs are also being used for malicious activities and the cybersecurity risk in connection with operating UASs is increasing. In addition, we collect and retain personally identifiable information of our customers and employees. Customers and employees expect that we will adequately protect their personal information. The legal and regulatory environment surrounding information security and privacy is increasingly demanding.
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The COVID-19 pandemic has adversely impacted and may continue to adversely impact our business, results of operations, financial condition, liquidity and cash flows. The COVID-19 pandemic has resulted in widespread impacts on the global economy and financial markets.
Added
Although we attempt to maintain adequate defenses to these cyber-attacks or security breaches and work through industry groups and trade associations to identify common threats and assess our countermeasures, a security breach of our information systems or operational technology, or a security breach of the information systems of our customers, suppliers or others with whom we do business, could (i) adversely impact our ability to safely and reliably deliver electricity and natural gas to our customers through our generation, transmission and distribution systems and potentially negatively impact our compliance with certain mandatory reliability and gas flow standards, (ii) subject us to reputational and other harm or liabilities associated with theft or inappropriate release of certain types of information such as system operating information or information, personal or otherwise, relating to our customers or employees, (iii) impact our ability to manage our businesses, and/or (iv) subject us to legal and regulatory proceedings and claims from third parties, in addition to remediation costs, any of which, in turn, could have a material adverse effect on our businesses, cash flows, financial condition, results of operations and/or prospects.
Removed
The duration and ultimate impact of the COVID-19 pandemic on our business, results of operations and financial condition, including liquidity, capital and financing resources, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be predicted at this time.
Added
Although we do maintain cybersecurity insurance, it is possible that such insurance will not adequately cover any losses or liabilities we may incur as a result of a cybersecurity incident.
Removed
Such factors and developments may include the severity and duration of the COVID-19 pandemic, including whether there are periods of increased COVID-19 cases; the emergence of other new or more contagious variants that may render vaccines ineffective or less effective; disruption to our operations resulting from employee illnesses or any inability to attract, retain or motivate employees; the development, availability and administration of effective treatment or vaccines and the willingness of individuals to receive a vaccine; the extent and duration of the impact on the U.S. or global economy, including the pace and extent of recovery from the COVID-19 pandemic; and the actions that have been or may be taken by various governmental authorities in response to the COVID-19 pandemic.
Added
Compliance with and changes in cybersecurity requirements have a cost and operational impact on our business, and failure to comply with such laws and regulations could adversely impact our reputation, results of operations, financial condition and/or cash flows. As cyber-attacks or security breaches are becoming more sophisticated, critical infrastructure assets, including pipelines and electric infrastructure, may be specifically targeted.
Removed
RISK FACTORS N I S OURCE I NC . to regulatory approval proceedings that can be contentious, lengthy, and subject to appeal. This may lead to uncertainty as to the ultimate result of those proceedings.
Added
In 2021, the TSA announced two new security directives in response to a ransomware attack on the Colonial Pipeline that occurred earlier in the year. These directives, including updates or amendments to such TSA directives, require critical pipeline owners to comply with mandatory reporting measures, designate a cybersecurity coordinator, provide vulnerability assessments, and ensure compliance with certain cybersecurity requirements.
Removed
Adverse economic conditions result in an increase in defaults by customers, suppliers and counterparties. 27 Table of Contents ITEM 1A. RISK FACTORS N I S OURCE I NC . We are a holding company and are dependent on cash generated by our subsidiaries to meet our debt obligations and pay dividends on our stock.
Added
NiSource continues to work with the TSA to ensure that compliance with the security directives are being met. Additionally, on November 30, 2022, the TSA issued an advance notice of proposed rulemaking (ANPRM) seeking public comment on more comprehensive, formal cybersecurity regulations for the pipeline industry.
Removed
The trading prices for our Equity Units, initially consisting of Corporate Units, and related treasury units and Series C Mandatory Convertible Preferred Stock, are expected to be affected by, among other things, the trading prices of our common stock, the general level of interest rates and our credit quality.
Added
Such directives or additional legal requirements may require expenditure of significant additional resources to respond to cyber-attacks or security breaches, to continue to modify or enhance protective measures, or to assess, investigate and remediate any critical infrastructure security vulnerabilities.
Removed
The trading prices of the Equity Units, initially consisting of Corporate Units, which are listed on the New York Stock Exchange, and the related treasury units and Series C Mandatory Convertible Preferred Stock in the secondary market, are expected to be affected by, among other things, the trading prices of our common stock, the general level of interest rates and our credit quality.
Added
Increased costs and the operational impacts of compliance and changes in cybersecurity requirements, including any failure to comply with government regulations or any failure in our cybersecurity protective measures may result in enforcement actions, all of which may have a material adverse effect on our business, results of operations and financial condition.
Removed
It is impossible to predict whether the price of our common stock or interest rates will rise or fall. The price of our common stock could be subject to wide fluctuations in the future in response to many events or factors, including those discussed in the risk factors herein, many of which events and factors are beyond our control.
Added
In addition, there is no certainty that costs incurred related to securing against threats will be recovered through rates. The impacts of natural disasters, acts of terrorism, acts of war, civil unrest, accidents, public health emergencies or other catastrophic events may disrupt operations and reduce the ability to service customers.
Removed
Fluctuations in interest rates may give rise to arbitrage opportunities based upon changes in the relative value of the common stock underlying the purchase contracts and of the other components of the Equity Units. Any such arbitrage could, in turn, affect the trading prices of the Corporate Units, treasury units, mandatory convertible preferred stock and our common stock.
Added
Russia’s military invasion of Ukraine, Israel/Hamas conflict), civil unrest, accident, public health emergency (e.g. pandemic), or other catastrophic event could cause delays in completing sales, providing services, or performing other critical functions. We have experienced disruptions in the past from hurricanes and tornadoes and other events of this nature.
Removed
The early settlement right triggered under certain circumstances and the supermajority rights of the Series C Mandatory Convertible Preferred Stock following a fundamental change, could discourage a potential acquirer.
Added
RISK FACTORS N I S OURCE I NC . of insurance coverage maintained against losses resulting from any such event may not be sufficient to cover such losses or otherwise adequately compensate for any business disruptions that could result.
Removed
The fundamental change early settlement right with respect to the purchase contracts triggered under certain circumstances by a fundamental change and the supermajority voting rights of the Series C Mandatory Convertible Preferred Stock in connection with certain fundamental change transactions jointly could discourage a potential acquirer, including potential acquirers that would otherwise seek a transaction with us that would be attractive to our investors.
Added
We are exposed to significant reputational risks, which make us vulnerable to a loss of cost recovery, increased litigation and negative public perception.
Removed
Our Equity Units, initially consisting of Corporate Units, and related Series C Mandatory Convertible Preferred Stock, and the issuance and sale of common stock in settlement of the purchase contracts and conversion of mandatory convertible preferred stock, may all adversely affect the market price of our common stock and will cause dilution to our stockholders.
Added
Further, as our generation profile increases geographically, it is potentially more vulnerable to certain weather hazards than centralized fossil generation, thereby increasing the frequency of weather impacts to overall electric reliability and such distributed renewables. Some of these costs may not be recovered.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Discussed below are the principal properties held by us and our subsidiaries as of December 31, 2022. Gas Distribution Operations Refer to Item 1, "Business - Gas Distribution Operations," of this report for further information on Gas Distribution Operations properties.
Biggest changeITEM 2. PROPERTIES Discussed below are the principal properties held by us and our subsidiaries as of December 31, 2023. Gas Distribution Operations Refer to Item 1, "Business - Gas Distribution Operations," of this report for further information on Gas Distribution Operations properties.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 32 Item 4 Mine Safety Disclosures 32 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Reserved 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54 Item 8.
Biggest changeItem 3. Legal Proceedings 33 Item 4 Mine Safety Disclosures 33 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Reserved 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe policy of the Board has been to declare cash dividends on a quarterly basis payable on or about the 20th day of February, May, August, and November. At its January 26, 2023 meeting, the Board declared a quarterly common dividend of $0.250 per share, payable on February 17, 2023 to holders of record on February 7, 2023.
Biggest changeThe policy of the Board has been to declare cash dividends on a quarterly basis payable on or about the 20th day of February, May, August, and November. At its January 25, 2024 meeting, the Board declared a quarterly common dividend of $0.265 per share, payable on February 20, 2024 to holders of record on February 5, 2024.
The foregoing performance graph is being furnished as part of this annual report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by NiSource under the Securities Act or the Exchange Act.
The foregoing performance graph is being furnished as part of this Annual Report on Form 10-K solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by NiSource under the Securities Act or the Exchange Act.
For the three months ended December 31, 2022, no equity securities that are registered by NiSource Inc. pursuant to Section 12 of the Securities Exchange Act of 1934 were purchased by or on behalf of us or any of our affiliated purchasers. 33 Table of Contents
For the three months ended December 31, 2023, no equity securities that are registered by NiSource Inc. pursuant to Section 12 of the Securities Exchange Act of 1934 were purchased by or on behalf of us or any of our affiliated purchasers. 34 Table of Contents
The graph below compares the cumulative total shareholder return of NiSource’s common stock for the period commencing December 31, 2017 and ending December 31, 2022 with the cumulative total return for the same period of the S&P 500 and the Dow Jones Utility indices.
The graph below compares the cumulative total shareholder return of NiSource’s common stock for the period commencing December 31, 2018 and ending December 31, 2023 with the cumulative total return for the same period of the S&P 500 and the Dow Jones Utility indices.
There can be no assurance that NiSource will continue to pay such dividends or the amount of such dividends. As of February 15, 2023, NiSource had 16,572 common stockholders of record and 412,507,944 shares outstanding.
There can be no assurance that NiSource will continue to pay such dividends or the amount of such dividends. As of February 14, 2024, NiSource had 15,832 common stockholders of record and 447,524,529 shares outstanding.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeGas Distribution Operations Financial and operational data for the Gas Distribution Operations segment for the years ended December 31, 2022, 2021 and 2020, are presented below: Favorable (Unfavorable) Year Ended December 31, (in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Operating Revenues $ 4,019.8 $ 3,183.5 $ 3,140.1 $ 836.3 $ 43.4 Operating Expenses Cost of energy 1,534.8 962.7 794.2 (572.1) (168.5) Operation and maintenance 1,045.3 993.8 1,138.0 (51.5) 144.2 Depreciation and amortization 415.9 383.0 363.1 (32.9) (19.9) Loss (gain) on sale of fixed assets and impairments, net (103.9) 8.7 412.4 112.6 403.7 Other taxes 211.9 217.8 233.3 5.9 15.5 Total Operating Expenses 3,104.0 2,566.0 2,941.0 (538.0) 375.0 Operating Income $ 915.8 $ 617.5 $ 199.1 $ 298.3 $ 418.4 Revenues Residential $ 2,609.6 $ 2,143.4 $ 2,110.6 $ 466.2 $ 32.8 Commercial 942.4 731.0 679.7 211.4 51.3 Industrial 221.5 197.2 213.8 24.3 (16.6) Off-System 192.9 71.3 41.0 121.6 30.3 Other 53.4 40.6 95.0 12.8 (54.4) Total $ 4,019.8 $ 3,183.5 $ 3,140.1 $ 836.3 $ 43.4 Sales and Transportation (MMDth) Residential 249.0 231.2 249.5 17.8 (18.3) Commercial 181.3 167.0 170.5 14.3 (3.5) Industrial 490.7 507.1 538.1 (16.4) (31.0) Off-System 32.3 21.6 23.3 10.7 (1.7) Other 0.3 0.3 0.3 — — Total 953.6 927.2 981.7 26.4 (54.5) Heating Degree Days 5,436 5,002 5,097 434 (95) Normal Heating Degree Days 5,347 5,427 5,485 (80) (58) % Colder (Warmer) than Normal 2 % (8) % (7) % % Colder (Warmer) than Prior Year 9 % (2) % (5) % Gas Distribution Customers Residential 2,991,913 2,970,157 2,954,478 21,756 15,679 Commercial 254,436 253,987 253,184 449 803 Industrial 4,870 4,921 4,968 (51) (47) Other 3 4 3 (1) 1 Total 3,251,222 3,229,069 3,212,633 22,153 16,436 39 Table of Contents ITEM 7.
Biggest changeGas Distribution Operations Financial and operational data for the Gas Distribution Operations segment for the years ended December 31, 2023, 2022 and 2021, are presented below: Favorable (Unfavorable) Year Ended December 31, (in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Operating Revenues $ 3,732.7 $ 4,019.8 $ 3,183.5 $ (287.1) $ 836.3 Operating Expenses Cost of energy 1,087.0 1,534.8 962.7 447.8 (572.1) Operation and maintenance 1,061.3 1,045.3 993.8 (16.0) (51.5) Depreciation and amortization 464.6 415.9 383.0 (48.7) (32.9) (Gain) loss on sale of fixed assets and impairments, net — (103.9) 8.7 (103.9) 112.6 Other taxes 217.9 211.9 217.8 (6.0) 5.9 Total Operating Expenses 2,830.8 3,104.0 2,566.0 273.2 (538.0) Operating Income $ 901.9 $ 915.8 $ 617.5 $ (13.9) $ 298.3 Revenues Residential $ 2,517.7 $ 2,609.6 $ 2,143.4 $ (91.9) $ 466.2 Commercial 855.3 942.4 731.0 (87.1) 211.4 Industrial 226.4 221.5 197.2 4.9 24.3 Off-System 60.7 192.9 71.3 (132.2) 121.6 Other 72.6 53.4 40.6 19.2 12.8 Total $ 3,732.7 $ 4,019.8 $ 3,183.5 $ (287.1) $ 836.3 Sales and Transportation (MMDth) Residential 215.4 249.0 231.2 (33.6) 17.8 Commercial 164.3 181.3 167.0 (17.0) 14.3 Industrial 517.1 490.7 507.1 26.4 (16.4) Off-System 31.8 32.3 21.6 (0.5) 10.7 Other 0.3 0.3 0.3 — — Total 928.9 953.6 927.2 (24.7) 26.4 Heating Degree Days 4,583 5,436 5,002 (853) 434 Normal Heating Degree Days 5,347 5,347 5,427 — (80) % (Warmer) Colder than Normal (14) % 2 % (8) % % (Warmer) Colder than Prior Year (16) % 9 % (2) % Gas Distribution Customers Residential 3,010,949 2,991,913 2,970,157 19,036 21,756 Commercial 254,866 254,436 253,987 430 449 Industrial 4,794 4,870 4,921 (76) (51) Other 4 3 4 1 (1) Total 3,270,613 3,251,222 3,229,069 19,391 22,153 40 Table of Contents ITEM 7.
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.
Gas Distribution Operations (continued) 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.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" within the Notes to the Consolidated Financial Statements and primarily are comprised of interest expense on holding company debt, and unallocated corporate costs and activities. 38 Table of Contents ITEM 7.
The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" within the Notes to the Consolidated Financial Statements and primarily are comprised of interest expense on holding company debt, and unallocated corporate costs and activities. 39 Table of Contents ITEM 7.
Refer to Note 11, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information on income taxes and the change in the effective tax rate. RESULTS AND DISCUSSION OF OPERATIONS Presentation of Segment Information Our operations are divided into two primary reportable segments: Gas Distribution Operations and Electric Operations.
Refer to Note 15, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information on income taxes and the change in the effective tax rate. RESULTS AND DISCUSSION OF OPERATIONS Presentation of Segment Information Our operations are divided into two primary reportable segments: Gas Distribution Operations and Electric Operations.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results and Discussion of Segment Operations - Gas Distribution Operations," of the Company's 2021 Annual Report on Form 10-K for discussion of underlying reasons for changes in our operating revenues and expenses for 2021 versus 2020.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results and Discussion of Operations - Gas Distribution Operations," of the Company's 2022 Annual Report on Form 10-K for discussion of underlying reasons for changes in our operating revenues and expenses for 2022 versus 2021.
ITEM 6. RESERVED N I S OURCE I NC . Not applicable. 34 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS N I S OURCE I NC .
ITEM 6. RESERVED N I S OURCE I NC . Not applicable. 35 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS N I S OURCE I NC .
The underlying reasons for changes in our operating revenues and expenses from 2022 to 2021 are presented in the respective tables below.
The underlying reasons for changes in our operating revenues and expenses from 2023 to 2022 are presented in the respective tables below.
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. 40 Table of Contents ITEM 7.
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.
Refer to the "Business" section under Item 1 of this annual report and Note 21, "Business Segment Information," in the Notes to Consolidated Financial Statements for further discussion of our regulated utility business segments.
Refer to the "Business" section under Item 1 of this Annual Report on Form 10-K and Note 21, "Business Segment Information," in the Notes to Consolidated Financial Statements for further discussion of our regulated utility business segments.
This Management's Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with our Consolidated Financial Statements and related Notes to Consolidated Financial Statements in this annual report.
This Management's Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with our Consolidated Financial Statements and related Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Our goal is to develop strategies that benefit all stakeholders as we (i) embark 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.
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 energy demand.
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.
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.
Index Page Executive Summary 35 Summary of Consolidated Financial Results 37 Results and Discussion of Segment Operations 38 Gas Distribution Operations 39 Electric Operations 42 Liquidity and Capital Resources 46 Market Risk Disclosures 50 Other Information 51 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.
Index Page Executive Summary 36 Summary of Consolidated Financial Results 38 Results and Discussion of Operations 39 Gas Distribution Operations 40 Electric Operations 43 Liquidity and Capital Resources 47 Market Risk Disclosures 51 Other Information 52 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.
Favorable (Unfavorable) Changes in Operating Revenues (in millions) 2022 vs 2021 New rates from base rate proceedings and regulatory capital programs $ 169.7 The effects of weather in 2022 compared to 2021 31.1 Higher revenue related to off system sales 8.8 The effects of customer growth 4.9 Higher revenue due to the effects of resuming common credit mitigation practices 3.5 Increased customer usage 2.3 Other 4.7 Change in operating revenues (before cost of energy and other tracked items) $ 225.0 Operating revenues offset in operating expense Higher cost of energy billed to customers 572.1 Higher tracker deferrals within operation and maintenance, depreciation, and tax 39.2 Total change in operating revenues $ 836.3 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.
Favorable (Unfavorable) Changes in Operating Revenues (in millions) 2023 vs 2022 New rates from base rate proceedings and regulatory capital programs $ 241.1 The effects of customer growth 7.5 Higher revenue related to off system sales 2.7 Increased customer usage 1.5 The effects of weather in 2023 compared to 2022 (59.9) Other 7.4 Change in operating revenues (before cost of energy and other tracked items) $ 200.3 Operating revenues offset in operating expense Lower cost of energy billed to customers (447.8) Lower tracker deferrals within operation and maintenance, depreciation, and tax (31.2) Reduction in gross receipts tax, offset in operating expenses (8.4) Total change in operating revenues $ (287.1) 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.
Economic Environment: We are monitoring 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.
Economic Environment: We continue to monitor risks related to order and delivery lead times for construction and other materials, potential unavailability of materials due to global shortages in raw materials, and 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.
Additionally, the 2021 Plan calls for a 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. The planned retirement of the two vintage gas peaking units at the R.M.
Additionally, the 2021 Plan calls for a new natural gas peaking facility to replace existing vintage gas peaking facilities at the R.M. Schahfer Generating Station to support system reliability and resiliency, and upgrades to to the electric transmission system.
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." Summary of Consolidated Financial Results A summary of our consolidated financial results for the years ended December 31, 2022, 2021 and 2020, are presented below: Favorable (Unfavorable) Year Ended December 31 , (in millions, except per share amounts) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Operating Revenues $ 5,850.6 $ 4,899.6 $ 4,681.7 $ 951.0 $ 217.9 Operating Expenses Cost of energy 2,110.5 1,392.3 1,109.3 (718.2) (283.0) Other Operating Expenses 2,474.3 2,500.4 3,021.6 26.1 521.2 Total Operating Expenses 4,584.8 3,892.7 4,130.9 (692.1) 238.2 Operating Income 1,265.8 1,006.9 550.8 258.9 456.1 Total Other Deductions, Net (309.4) (300.3) (582.1) (9.1) 281.8 Income Taxes 164.6 117.8 (17.1) (46.8) (134.9) Net Income (Loss) 791.8 588.8 (14.2) 203.0 603.0 Net income (loss) attributable to noncontrolling interest (12.3) 3.9 3.4 16.2 (0.5) Net Income (Loss) attributable to NiSource 804.1 584.9 (17.6) 219.2 602.5 Preferred dividends (55.1) (55.1) (55.1) — — Net Income (Loss) Available to Common Shareholders 749.0 529.8 (72.7) 219.2 602.5 Basic Earnings (Loss) Per Share $ 1.84 $ 1.35 $ (0.19) $ 0.49 $ 1.54 Diluted Earnings (Loss) Per Share $ 1.70 $ 1.27 $ (0.19) $ 0.43 $ 1.46 The majority of the costs 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.
Summary of Consolidated Financial Results A summary of our consolidated financial results for the years ended December 31, 2023, 2022 and 2021, are presented below: Favorable (Unfavorable) Year Ended December 31 , (in millions, except per share amounts) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Operating Revenues $ 5,505.4 $ 5,850.6 $ 4,899.6 $ (345.2) $ 951.0 Operating Expenses Cost of energy 1,533.3 2,110.5 1,392.3 577.2 (718.2) Other Operating Expenses 2,676.6 2,474.3 2,500.4 (202.3) 26.1 Total Operating Expenses 4,209.9 4,584.8 3,892.7 374.9 (692.1) Operating Income 1,295.5 1,265.8 1,006.9 29.7 258.9 Total Other Deductions, Net (481.6) (309.4) (300.3) (172.2) (9.1) Income Taxes 139.5 164.6 117.8 25.1 (46.8) Net Income 674.4 791.8 588.8 (117.4) 203.0 Net (loss) income attributable to noncontrolling interest (39.9) (12.3) 3.9 27.6 16.2 Net Income attributable to NiSource 714.3 804.1 584.9 (89.8) 219.2 Preferred dividends and redemption premium (52.6) (55.1) (55.1) 2.5 — Net Income Available to Common Shareholders 661.7 749.0 529.8 (87.3) 219.2 Basic Earnings Per Share $ 1.59 $ 1.84 $ 1.35 $ (0.25) $ 0.49 Diluted Earnings Per Share $ 1.48 $ 1.70 $ 1.27 $ (0.22) $ 0.43 The majority of the costs 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.
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 sold and transported in 2022 compared to 2021 of 26.4 MMDth is primarily attributable to the effects of colder weather.
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.
With a focus on workforce planning, we are anticipating to evaluate our talent footprint for the future by creating flexible work arrangements where we can, to ensure we have the right people, in the right role, and at the right time.
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. Refer to Item 1A. Risk Factors, "Operational Risks" of this Annual Report on Form 10-K for further detail.
As of December 31, 2022, we have executed and received IURC approval for BTAs and PPAs with a combined nameplate capacity of 1,950 MW and 1,380 MW, respectively, under the 2018 Plan. During 2022, we made significant progress on our first two solar BTAs and anticipate completion of these projects and tax equity financing in 2023.
December 31, 2023, we have executed and received IURC approval for BTAs and PPAs with a combined nameplate capacity of 1,950 MW and 1,400 MW, respectively, under the 2018 Plan.
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.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . leadership enablement programs, succession, performance management) to promote retention of our current employees along with having a competitive and attractive appeal for potential recruits.
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 in 2022 compared to 2021 associated with short-term borrowings. We continue to evaluate our financing plan to manage interest expense and exposure to rates.
Risk Factors, "Operational Risks" of this Annual Report on Form 10-K, "Results and Discussion of Segment Operations - Gas Distribution Operations," "Results and Discussion of Segment Operations - Electric Operations," and "Market Risk Disclosures." Due to rising interest rates, we experienced higher interest expense during 2023 compared to 2022 associated with short-term borrowings.
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. In 2022, NiSource achieved conformance certification to the American Petroleum Institute Recommended Practice 1173, which serves as the guiding practice for our SMS.
These strategies focus on improving safety and reliability, enhancing customer experience, pursuing regulatory and legislative initiatives to increase accessibility for customers currently not on our gas and electric service, ensuring customer affordability and reducing emissions while generating sustainable returns. The safety of our customers, communities and employees remains our focus.
Gas Distribution Operations (continued) Favorable (Unfavorable) Changes in Operating Expenses (in millions) 2022 vs 2021 Property insurance settlement related to the Greater Lawrence Incident $ 105.0 Lower NiSource Next program expenses 20.0 Lower other than income taxes primarily related to property tax expense 17.8 Loss on sale and expenses related to the Massachusetts Business in 2021 16.6 Higher depreciation and amortization expense (35.1) Higher outside services expenses (12.2) Higher employee and administrative related expenses (10.0) Higher fleet expenses (5.5) Rate case settlement impacts (3.7) Higher unrecoverable environmental remediation costs (2.7) Higher materials and supplies expense (2.7) Earnings test reserve adjustment in 2021 (2.5) Other (11.7) Change in operating expenses (before cost of energy and other tracked items) $ 73.3 Operating expenses offset in operating revenue Higher cost of energy billed to customers (572.1) Higher tracker deferrals within operation and maintenance, depreciation, and tax (39.2) Total change in operating expense $ (538.0) Columbia of Massachusetts Asset Sale On October 9, 2020, we completed the sale of our Massachusetts Business.
Favorable (Unfavorable) Changes in Operating Expenses (in millions) 2023 vs 2022 Property insurance settlement related to the Greater Lawrence Incident in 2022 $ (105.0) Higher depreciation and amortization expense (50.6) Higher employee and administrative related expenses (38.3) Higher property tax (14.9) Impact from Columbia of Ohio's rate case settlement (9.1) Higher expenses related to uncollectible customer accounts (3.8) Lower environmental remediation costs 12.4 Other (4.9) Change in operating expenses (before cost of energy and other tracked items) $ (214.2) Operating expenses offset in operating revenue Lower cost of energy billed to customers 447.8 Lower tracker deferrals within operation and maintenance, depreciation, and tax 31.2 Increase in gross receipts tax 8.4 Total change in operating expense $ 273.2 42 Table of Contents
Other Deductions, Net The change in Other deductions, net in 2022 compared to 2021 is primarily driven by higher long-term and short-term debt interest in 2022 and lower non-service pension benefits partially offset by the interest rate swap settlement gain in 2022 and charitable contributions in 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . Other Deductions, Net The change in Other deductions, net in 2023 compared to 2022 is primarily driven by higher long-term and short-term debt interest in 2023 and higher non-service pension costs offset by increases in AFUDC.
We are also seeing 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.
To the extent that work plan delays occur or our costs increase, our business operations, results of operations, cash flows, and financial condition could be materially adversely affected. Refer to Item 1A. Risk Factors, "Financial, Economic and Market Risks" of this Annual Report on Form 10-K for further detail.
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.
The decrease in preferred dividends during 2023 was due primarily to the redemption of Series A Preferred Stock in the second quarter 2023. See Note 6, "Equity," for additional information. For additional information on operating income variance drivers see "Results and Discussion of Operations" for Gas and Electric Operations in this Management's Discussion. 38 Table of Contents ITEM 7.
We also invested $1.6 billion in infrastructure modernization to enhance safe, reliable service, including replacement of 410 miles of distribution main and service lines, 48 miles of underground cable and 1,352 electric poles. We also made advancements in key strategic initiatives, described in further detail below.
These cases represent balanced outcomes supporting all stakeholders. Between our Gas Distribution and Electric Operating Segments, we added 22,000 customers. We also invested $1.5 billion in infrastructure modernization to enhance safe, reliable service, including replacement of 339 miles of distribution main and service lines, 34 miles of underground cable and 1,942 electric poles.
The increase in net income available to common shareholders during 2022 was primarily due to higher revenues from outcomes of gas base rate proceedings and regulatory capital programs, as well as an insurance settlement related to the Greater Lawrence Incident, offset by higher income taxes in 2022 compared to 2021.
The decrease in net income available to common shareholders during 2023 was primarily due to lower revenue resulting from the effects of weather, the receipt of the insurance settlement related to the Greater Lawrence Incident in 2022, higher other deductions due to higher interest expense in 2023, partially offset by lower tax expense and favorable impact from net loss attributable to noncontrolling interest.
We have also taken contractual actions on a number of our other renewable projects to address the 35 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . timing of these projects as well as consider the broad market issues facing the industry.
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.
See Note 15, "Long-Term Debt," Note 16, "Short-Term Borrowings," and Note 12, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements for additional information. 37 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
See Note 7, "Short-Term Borrowings," Note 8, "Long-Term Debt," and Note 16, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements for additional information. Income Taxes The decrease in income tax expense in 2023 compared to the same period in 2022 is primarily attributable to lower pre-tax income.
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.
Our electric generation transition, initiated through our 2018 Integrated Resource Plan ("2018 Plan") is well underway, and we are continually adjusting to the dynamic energy landscape. As of 36 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
NIPSCO believes these shortages have been resolved but continues to monitor deliveries of coal from its rail carriers. This did not have a material impact on our operations in 2022. 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 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, 37 Table of Contents ITEM 7.
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This certification marks an important milestone for our SMS and NiSource’s journey towards operational excellence.
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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. 2023 Overview: In 2023, we continued to make significant progress towards our strategic and financial goals and objectives by achieving in-service status in June 2023 and substantial completion in August 2023 for our first two solar BTA projects, Indiana Crossroads Solar and Dunns Bridge I.
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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. 2022 Overview: In 2022, we continued to make significant progress towards our strategic and financial goals and objectives.
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We continue to progress on the remaining portfolio of projects that will enable our electric generation transition. During the year, we received orders for four cases: Columbia of Virginia, Columbia of Ohio, Columbia of Maryland, and NIPSCO Electric. In addition, the NIPSCO Gas rate case filed in 2023 is anticipated to be resolved in the third quarter of 2024.
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We completed the first full year of operating Indiana Crossroads Wind, and construction is near completion for two of our solar projects. In 2022, we filed four rate cases and resolved three, in Pennsylvania, Maryland, and the gas rate case in Indiana filed in 2021.
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We also made advancements in key strategic initiatives, described in further detail below.
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In addition, the Ohio rate case was resolved in January 2023 and the Virginia rate case is anticipated to be resolved in the first quarter of 2023. These cases represent balanced outcomes supporting all stakeholders. Between our Gas Distribution and Electric Operating Segments, we added 25,000 customers.
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Your Energy, Your Future: We continue to advance Your Energy, Your Future primarily through the continuation and enhancement of existing programs, such as retiring and replacing remaining coal-fired electric generation by 2028 with a balanced mix of low or zero-emission electric generation, ongoing pipe replacement and modernization programs, and deployment of advanced leak detection and repair.
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We remain on track to retire R.M Schahfer's remaining two coal units by the end of 2025. In August 2022, the IRA was signed into law. We are evaluating the impact of this legislation to our renewable projects with potential to drive increased value to customers as part of our expansion of renewable projects and generation transition strategy.
Added
On January 17, 2024, the IURC approved full ownership of the Cavalry and Dunns Bridge II projects, allowing NIPSCO to leverage provisions of the IRA to monetize tax credits for the benefit of customers in lieu of utilizing tax equity partnerships.
Removed
However, the leveraging of the IRA will be considered on a project-by-project basis and evaluate several factors, both quantitative and qualitative, that results in the best position for project success as well as customer and company considerations. For additional information, see "Results and Discussion of Segment Operations - Electric Operations," in this Management's Discussion.
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We are evaluating the impact of this legislation on our remaining projects, with potential to drive increased value to customers. For additional information, see "Results and Discussion of 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").
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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.
Added
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 facility with the IURC. The planned retirement of the two vintage gas peaking facilities at the R.M. Schahfer Generating Station is also expected to occur by the end of 2028.
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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. We are continuing to evaluate potential projects under the 2021 Plan given the responses to our Request for Proposal issued in August 2022.
Added
Final retirement dates for these units, as well as Michigan City, will be subject to MISO approval. We continue to enhance safety and reduce methane emissions on our gas systems through modernization programs and utilization of advanced leak detection and repair. Advanced mobile methane-detection vehicles are being deployed across our service territory.
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Transformation: The NiNext initiative, which commenced in 2020, focused on optimizing our workforce and advancing our operations. NiNext has been foundational in preparing for incremental, enterprise-wide investments to address inefficiencies in our current technology footprint, which stem primarily from a complex array of legacy systems.
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These vehicles are designed to identify potential natural gas leaks using proven technology that is more sensitive than traditional leak-detection equipment. Resources like these vehicles are advancing the company’s commitment to safety and reaching our goal of net zero greenhouse gas emissions by 2040.
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We plan to address these inefficiencies through our Enterprise Transformation Roadmap with investments in technology systems and infrastructure.
Added
In addition, we plan to advance other low- or zero-emission energy resources and technologies, such as hydrogen and renewable natural gas. In 2023, we launched a multi-phase pilot project at the Columbia Gas of Pennsylvania Training Center’s Safety Town to better understand the impact of blending hydrogen into the natural gas system.
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As a result of these investments, we will deliver more modern, dependable, and secure IT systems backed with standardized processes to reduce the operating risks of our business, increase workforce efficiencies, and increase visibility to data which will be leveraged to drive risk-informed decisions. Our Enterprise Transformation Roadmap will position us to accomplish future strategic investments and aspirational goals.
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We have partnered with outside experts to conduct a series of field trials blending hydrogen with the natural gas system at various percentages. The blending system allows blending from 0% to 20% hydrogen, by volume. The field trials have initially focused on the customer experience and are now moving toward system operations and other procedures.
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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.
Added
This pilot is designed to help us understand hydrogen blending into the natural gas system, identify best practices, and analyze the operational and safety impact on company infrastructure and customer appliances. Carbon offsets and renewable energy credits may also be used to assist with achieving GHG reductions and our Net Zero Goal.
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Early in 2022, NIPSCO experienced a rail service shortage in deliveries of coal, particularly to its Michigan City Generating Station, and the primary rail carrier for that generating station was unable to provide assurance of adequate future service to maintain coal inventory.
Added
NIPSCO Minority Interest Transaction: On December 31, 2023, we consummated the closing of the NIPSCO Minority Interest Transaction and issued the 19.9% equity interest in NIPSCO Holdings II to BIP in exchange for a capital contribution of $2.16 billion in cash.
Removed
A lack of adequate coal deliveries to any of our coal-fired generating facilities for an extended period could deplete our inventories to a level that prevents the generating station from running, and NIPSCO would need to rely on market purchases of replacement power, which could increase the cost of electricity for NIPSCO's customers.
Added
Refer to Note 4, "Noncontrolling Interest," in the Notes to the Consolidated Financial Statements for more information on this transaction. Transformation: Our enterprise-wide transformation roadmap focuses on operational excellence, safety, operation and maintenance management, and unlocking efficiencies. We are committed to identifying and implementing initiatives that will enable us to streamline work and improve logistics company-wide.
Removed
To the extent we are unable to execute on our workforce planning initiatives and experience increased employee and contractor costs, our business operations, results of operations, cash flows, and financial condition could be materially adversely affected.
Added
These efforts 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 of our optimization initiatives will prioritize safety and continue to optimize our long-term growth profile.
Removed
We experienced an increase in natural gas costs as the spot market for natural gas substantially increased throughout much of 2022, followed by a decrease in the price of natural gas since November 2022.
Added
The market price of natural gas has been stable during the last half of 2023 at lower levels than 2022 and with little volatility. Similar to natural gas pricing, electric commodity costs have stayed subdued due to plentiful supplies of natural gas and coal and the growing influence of renewable generation on power market pricing.
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Nationally, levels of gas in storage were lower in 2022 compared to 2021, liquified natural gas exports to Europe continued at a steady pace, and domestic production saw a recent decline in demand. These factors drove increased volatility in the marketplace, which influenced customer bills 36 Table of Contents ITEM 7.
Added
Changes in commodity prices do not have a material impact on our results of operations, however higher commodity prices can impact our cash flows and liquidity. For more information on our commodity price impacts, see Item 1A.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . throughout 2022. While production was increasing towards the end of 2022, weather changes have limited demand and decreased withdrawals, causing inventory balances to be higher compared to 2021.
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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" and Item 1A. Risk Factors, "Financial, Economic and Market Risks" of this Annual Report on Form 10-K.
Removed
With this decline in price, we expect to see lower volatility and declining customer bills. For the year ended December 31, 2022, we did not see this volatility have a material impact on our results of operations.
Added
Throughput The decrease in total volumes sold and transported in 2023 compared to 2022 of 24.7 MMDth is primarily attributable to the effects of warmer weather offset by increased industrial usage. 41 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
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For more information on interest rate risk, see "Market Risk Disclosures".
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Income Taxes The increase in income tax expense in 2022 compared to the same period in 2021 is primarily attributable to higher pre-tax income, offset by higher state flow through and the reduction of the Pennsylvania corporate income tax rate.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
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In March 2021, we reached an agreement with Eversource regarding the final purchase price, including net working capital adjustments.
Removed
This resulted in a pre-tax loss for the years ended December 31, 2022 and 2021 of zero and $6.8 million, respectively, based on asset and liability balances as of the close of the transaction on October 9, 2020, transaction costs and the final purchase price.
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The pre-tax loss is presented as "Loss (gain) on sale of assets, net" on the Statements of Consolidated Income (Loss). 41 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+23 added−33 removed44 unchanged
Biggest changeElectric Operations Financial and operational data for the Electric Operations segment for the years ended December 31, 2022, 2021 and 2020, are presented below: Favorable (Unfavorable) Year Ended December 31, (in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Operating Revenues $ 1,831.7 $ 1,697.1 $ 1,536.6 $ 134.6 $ 160.5 Operating Expenses Cost of energy 575.8 429.7 315.2 (146.1) (114.5) Operation and maintenance 486.2 493.6 497.6 7.4 4.0 Depreciation and amortization 362.9 329.4 321.3 (33.5) (8.1) Gain on sale of fixed assets and impairments, net — (0.9) — (0.9) 0.9 Other taxes 44.4 57.5 53.7 13.1 (3.8) Total Operating Expenses 1,469.3 1,309.3 1,187.8 (160.0) (121.5) Operating Income $ 362.4 $ 387.8 $ 348.8 $ (25.4) $ 39.0 Revenues Residential $ 592.4 $ 568.0 $ 527.8 $ 24.4 $ 40.2 Commercial 571.0 534.9 480.3 36.1 54.6 Industrial 561.4 494.1 412.9 67.3 81.2 Wholesale 13.5 15.7 12.3 (2.2) 3.4 Other 93.4 84.4 103.3 9.0 (18.9) Total $ 1,831.7 $ 1,697.1 $ 1,536.6 $ 134.6 $ 160.5 Sales (Gigawatt Hours) Residential 3,482.9 3,546.8 3,484.0 (63.9) 62.8 Commercial 3,682.4 3,698.0 3,550.0 (15.6) 148.0 Industrial 7,915.3 8,253.7 7,480.3 (338.4) 773.4 Wholesale 50.0 124.7 83.6 (74.7) 41.1 Other 89.5 108.5 106.0 (19.0) 2.5 Total 15,220.1 15,731.7 14,703.9 (511.6) 1,027.8 Cooling Degree Days 942 1,020 900 (78) 120 Normal Cooling Degree Days 831 803 803 28 — % Warmer than Normal 13 % 27 % 12 % % Warmer (Colder) than prior year (8) % 13 % Electric Customers Residential 424,735 422,436 418,871 2,299 3,565 Commercial 58,374 58,010 57,435 364 575 Industrial 2,130 2,137 2,154 (7) (17) Wholesale 710 714 722 (4) (8) Other 3 2 2 1 — Total 485,952 483,299 479,184 2,653 4,115 42 Table of Contents ITEM 7.
Biggest changeElectric Operations Financial and operational data for the Electric Operations segment for the years ended December 31, 2023, 2022 and 2021, are presented below: Favorable (Unfavorable) Year Ended December 31, (in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Operating Revenues $ 1,785.0 $ 1,831.7 $ 1,697.1 $ (46.7) $ 134.6 Operating Expenses Cost of energy 446.4 575.8 429.7 129.4 (146.1) Operation and maintenance 518.0 486.2 493.6 (31.8) 7.4 Depreciation and amortization 400.9 362.9 329.4 (38.0) (33.5) Loss (gain) on sale of fixed assets and impairments, net 2.2 — (0.9) (2.2) (0.9) Other taxes 38.8 44.4 57.5 5.6 13.1 Total Operating Expenses 1,406.3 1,469.3 1,309.3 63.0 (160.0) Operating Income $ 378.7 $ 362.4 $ 387.8 $ 16.3 $ (25.4) Revenues Residential $ 583.9 $ 592.4 $ 568.0 $ (8.5) $ 24.4 Commercial 578.1 571.0 534.9 7.1 36.1 Industrial 475.0 561.4 494.1 (86.4) 67.3 Wholesale 32.0 13.5 15.7 18.5 (2.2) Other 116.0 93.4 84.4 22.6 9.0 Total $ 1,785.0 $ 1,831.7 $ 1,697.1 $ (46.7) $ 134.6 Sales (Gigawatt Hours) Residential 3,262.9 3,482.9 3,546.8 (220.0) (63.9) Commercial 3,614.2 3,682.4 3,698.0 (68.2) (15.6) Industrial 7,820.3 7,915.3 8,253.7 (95.0) (338.4) Wholesale 556.4 50.0 124.7 506.4 (74.7) Other 78.9 89.5 108.5 (10.6) (19.0) Total 15,332.7 15,220.1 15,731.7 112.6 (511.6) Cooling Degree Days 710 942 1,020 (232) (78) Normal Cooling Degree Days 831 831 803 — 28 % (Colder) Warmer than Normal (15) % 13 % 27 % % (Colder) Warmer than prior year (25) % (8) % 13 % Electric Customers Residential 427,217 424,735 422,436 2,482 2,299 Commercial 58,779 58,374 58,010 405 364 Industrial 2,126 2,130 2,137 (4) (7) Wholesale 708 710 714 (2) (4) Other 3 3 2 — 1 Total 488,833 485,952 483,299 2,881 2,653 43 Table of Contents ITEM 7.
Our financing is sourced through cash flow from operations and the issuance of debt and/or equity. External debt financing is provided primarily through the issuance of long-term debt, accounts receivable securitization programs and our $1.5 billion commercial paper program, which is backstopped by our committed revolving credit facility with a total availability from third-party lenders of $1.85 billion.
Our financing is sourced through cash flow from operations and the issuance of debt and/or equity. External debt financing is provided primarily through the issuance of long-term debt, accounts receivable securitization programs and our $1.85 billion commercial paper program, which is backstopped by our committed revolving credit facility with a total availability from third-party lenders of $1.85 billion.
When the detailed results are combined for reporting, there may be weather-related dollar impacts on operations when there is not an apparent or significant change in our aggregated composite heating or cooling degree day comparison. Sales NIPSCO's Electric Segment results remains closely linked to the performance of the steel industry.
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 cooling degree day comparison. Sales NIPSCO's Electric Segment results remains closely linked to the performance of the steel industry.
Significant judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of tax benefits to be recorded in the consolidated financial statements. At December 31, 2022 we had $21.7 million of unrecognized tax benefits.
Significant judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of tax benefits to be recorded in the consolidated financial statements. At December 31, 2023 and 2022, we had $21.7 million of unrecognized tax benefits.
Interest Rate Risk We are exposed to interest rate risk as a result of changes in interest rates on borrowings under our revolving credit agreement, commercial paper program, term credit agreement and accounts receivable programs, which have interest rates that are indexed to short-term market interest rates.
Interest Rate Risk We are exposed to interest rate risk as a result of changes in interest rates on borrowings under our revolving credit agreement, commercial paper program, term credit agreements and accounts receivable programs, which have interest rates that are indexed to short-term market interest rates.
We have uncertain income tax positions for which we are unable to predict when the matters will be resolved. Refer to Note 11, "Income Taxes," in the Notes to Consolidated Financial Statements for more information. NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh.
We have uncertain income tax positions for which we are unable to predict when the matters will be resolved. Refer to Note 15, "Income Taxes," in the Notes to Consolidated Financial Statements for more information. NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh.
Commodity price risk resulting from derivative activities at our rate-regulated subsidiaries is limited and does not bear signification exposure to earnings risk, since our current regulatory mechanisms allow recovery of prudently incurred purchased power, fuel and gas costs through the rate-making process, including gains or losses on these derivative instruments.
Commodity price risk resulting from derivative activities at our rate-regulated subsidiaries is limited and does not bear significant exposure to earnings risk, since our current regulatory mechanisms allow recovery of prudently incurred purchased power, fuel and gas costs through the rate-making process, including gains or losses on these derivative instruments.
ASC Topic 980, Regulated Operations , provides that rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and if the competitive environment makes it probable that such rates can be charged and collected.
ASC Topic 980, Regulated Operations , provides that rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and if the competitive environment makes it probable that such rates can be billed and collected.
See Note 7, "Goodwill," in the Notes to Consolidated Financial Statements for further information. Unbilled Revenue. We record utility operating revenues when energy is delivered to our customers. However, the determination of energy sales to individual customers is based upon the reading of their meters, which occurs on a systematic basis throughout the month.
See Note 10, "Goodwill," in the Notes to Consolidated Financial Statements for further information. Unbilled Revenue. We record utility operating revenues when energy is delivered to our customers. However, the determination of energy sales to individual customers is based upon the reading of their meters, which occurs on a systematic basis throughout the month.
Our subsidiaries are required to make cash margin deposits with their brokers to cover actual and potential losses in the value of outstanding exchange traded derivative contracts. The amount of these deposits, some of which is reflected in our restricted cash balance, may fluctuate significantly during periods of high volatility in the energy commodity markets.
Certain of our subsidiaries are required to make cash margin deposits with their brokers to cover actual and potential losses in the value of outstanding exchange traded derivative contracts. The amount of these deposits, some of which are reflected in our restricted cash balance, may fluctuate significantly during periods of high volatility in the energy commodity markets.
Refer to Note 12, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements for more information. We cannot reasonably estimate the settlement amounts or timing of cash flows related to certain of our long-term obligations classified as "Total Other Liabilities" on the Consolidated Balance Sheets.
Refer to Note 16, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements for more information. We cannot reasonably estimate the settlement amounts or timing of cash flows related to certain of our long-term obligations classified as "Total Other Liabilities" on the Consolidated Balance Sheets.
A qualitative ("step 0") test was completed on May 1, 2022 for all reporting units. In the Step 0 analysis, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the applicable reporting units as compared to the baseline "step 1" fair value measurement performed May 1, 2020.
A qualitative ("Step 0") test was completed on May 1, 2023, for all reporting units. In the Step 0 analysis, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the applicable reporting units as compared to the baseline "step 1" fair value measurement performed May 1, 2020.
For further discussion of our pension and other postretirement benefits, see Note 12, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements. Typically, we use the Society of Actuaries’ most recently published mortality data in developing a best estimate of mortality as part of the calculation of the pension and other postretirement benefit obligations.
For further discussion of our pension and other postretirement benefits, see Note 16, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements. Typically, we use the Society of Actuaries’ most recently published mortality data in developing a best estimate of mortality as part of the calculation of the pension and other postretirement benefit obligations.
Goodwill and Other Intangible Assets. We have six goodwill reporting units, comprised of the six state operating companies within the Gas Distribution Operations reportable segment. Our goodwill assets at December 31, 2022 were $1,486 million, most of which resulted from the acquisition of Columbia on November 1, 2000.
Goodwill and Other Intangible Assets. We have six goodwill reporting units, comprised of the six state operating companies within the Gas Distribution Operations reportable segment. Our goodwill assets at December 31, 2023 were $1,486 million, most of which resulted from the acquisition of Columbia on November 1, 2000.
The credit rating agencies periodically review our ratings, taking into account factors such as our capital structure and earnings profile. The following table includes our and NIPSCO's credit ratings and ratings outlook as of December 31, 2022. There have been no changes to our credit ratings or outlooks since February 2020.
The credit rating agencies periodically review our ratings, taking into account factors such as our capital structure and earnings profile. The following table includes our and NIPSCO's credit ratings and ratings outlook as of December 31, 2023. There have been no changes to our credit ratings or outlooks since February 2020.
As required by GAAP, we test for impairment of goodwill on an annual basis and on an interim basis when events or circumstances indicate that a potential impairment may exist. Our annual goodwill test takes place in the second quarter of each year and was performed on May 1, 2022.
As required by GAAP, we test for impairment of goodwill on an annual basis and on an interim basis when events or circumstances indicate that a potential impairment may exist. Our annual goodwill test takes place in the second quarter of each year and was performed on May 1, 2023.
Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income. 43 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income. 44 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. See Note 19, "Other Commitments and Contingencies - A. Contractual Obligations," and Note 19, "Other Commitments and Contingencies," - F. "Other Matters - Generation Transition," in the Notes to Consolidated Financial Statements for additional information.
NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. See Note 19, "Other Commitments and Contingencies - A. Contractual Obligations," and Note 19, "Other Commitments and Contingencies," - E. "Other Matters - Generation Transition," in the Notes to Consolidated Financial Statements for additional information.
See "Executive Summary - Your Energy, Your Future" in this Management's Discussion for additional information. 44 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
See "Executive Summary - Your Energy, Your Future" in this Management's Discussion for additional information. 45 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . Capital Expenditures. The table below reflects actual capital expenditures and certain other investing activities by segment for 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . Capital Expenditures. The table below reflects actual capital expenditures and certain other investing activities by segment for 2023.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results and Discussion of Segment Operations - Electric Operations," of the Company's 2021 Annual Report on Form 10-K for discussion of underlying reasons for changes in our operating revenues and expenses for 2021 versus 2020.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results and Discussion of Operations - Electric Operations," of the Company's 2022 Annual Report on Form 10-K for discussion of underlying reasons for changes in our operating revenues and expenses for 2022 versus 2021.
Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the Consolidated Balance Sheets and are recognized in income as the related amounts are included in service rates and recovered from or refunded to customers.
Accordingly, certain expenses and credits subject to utility regulation or rate determination normally reflected in income may be deferred on the Consolidated Balance Sheets and recognized in income as the related amounts are included in service rates and recovered from or refunded to customers.
The underlying reasons for changes in our operating revenues and expenses from 2022 to 2021 are presented in the respective tables below.
The underlying reasons for changes in our operating revenues and expenses from 2023 to 2022 are presented in the respective tables below.
Plan contributions beyond 2023 are dependent upon a number of factors, including actual returns on plan assets, which cannot be reliably estimated at this time. In 2023, we expect to make contributions of approximately $2.6 million to our pension plans and approximately $23.7 million to our postretirement medical and life plans.
Plan contributions beyond 2024 are dependent upon a number of factors, including actual returns on plan assets, which cannot be reliably estimated at this time. In 2024, we expect to make contributions of approximately $2.2 million to our pension plans and approximately $23.1 million to our postretirement medical and life plans.
Based upon average borrowings and debt obligations subject to fluctuations in short-term market interest rates, an increase (or decrease) in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest expense by $8.7 million and $3.1 million for 2022 and 2021, respectively.
Based upon average borrowings and debt obligations subject to fluctuations in short-term market interest rates, an increase (or decrease) in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest expense by $18.9 million and $8.7 million for 2023 and 2022, respectively.
We estimate the assumed health care cost trend rate, which is used in determining our other postretirement benefit net expense, based upon our actual health care cost experience, the effects of recently enacted legislation, third-party actuarial surveys and general economic conditions.
We estimate the assumed health care cost trend rate, which is used in determining our other postretirement benefit net expense, based upon our actual health care cost experience, the effects of recently enacted legislation, third-party actuarial surveys and general economic conditions. 53 Table of Contents ITEM 7.
Refer to Note 9, "Regulatory Matters," in the Notes to Consolidated Financial Statements for a further discussion of regulatory developments during 2022. 48 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . Financing Activities Common Stock, Preferred Stock and Equity Unit Sale.
Refer to Note 12, "Regulatory Matters," in the Notes to Consolidated Financial Statements for a further discussion of regulatory developments during 2023. 49 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . Financing Activities Common Stock, Preferred Stock and Equity Unit Sale.
Refer to Note 10, "Risk Management Activities," in the Notes to Consolidated Financial Statements for further information on our commodity price risk assets and liabilities as of December 31, 2022 and 2021.
Refer to Note 13, "Risk Management Activities," in the Notes to Consolidated Financial Statements for further information on our commodity price risk assets and liabilities as of December 31, 2023 and 2022.
Refer to Note 13, "Equity," in the Notes to Consolidated Financial Statements for information on common stock, preferred stock and equity units activity. Short-term Debt. Refer to Note 16, "Short-Term Borrowings," in the Notes to Consolidated Financial Statements for information on short-term debt. Long-term Debt.
Refer to Note 6, "Equity," in the Notes to Consolidated Financial Statements for information on common stock, preferred stock and equity units activity. Short-term Debt. Refer to Note 7, "Short-Term Borrowings," in the Notes to Consolidated Financial Statements for information on short-term debt. Long-term Debt.
These agreements are primarily for insurance purposes and for the physical purchase or sale of power. As of December 31, 2022, a collateral requirement of approximately $85.7 million would be required in the event of a downgrade below investment grade.
These agreements are primarily for insurance purposes and for the physical purchase or sale of power. As of December 31, 2023, a collateral requirement of approximately $90.1 million would be required in the event of a downgrade below investment grade.
In the event that regulation significantly changes the opportunity for us to recover our costs in the future, all or a portion of our regulated operations may no longer meet the criteria for the application of ASC Topic 980, Regulated Operations .
In the event that regulation significantly changes the opportunity for us to recover our costs in the future, all or a portion of our regulated operations may no longer meet the criteria for the application of ASC Topic 980, Regulated Operations . In such 52 Table of Contents ITEM 7.
Debt Covenants . We are subject to a financial covenant under our revolving credit facility and term credit agreement, which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2022, the ratio was 58.9%. Credit Ratings .
Debt Covenants . We are subject to a financial covenant under our revolving credit facility which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2023, the ratio was 58.2%. Credit Ratings .
The following tables illustrate the effects of changes in these actuarial assumptions while holding all other assumptions constant: Impact on December 31, 2022 Projected Benefit Obligation Increase/(Decrease) Change in Assumptions (in millions) Pension Benefits Other Postretirement Benefits +50 basis points change in discount rate $ (52.6) $ (19.2) -50 basis points change in discount rate 56.7 20.8 Impact on 2022 Expense Increase/(Decrease) (1) Change in Assumptions (in millions) Pension Benefits Other Postretirement Benefits +50 basis points change in discount rate $ (1.7) $ 0.5 -50 basis points change in discount rate 1.9 0.8 +50 basis points change in expected long-term rate of return on plan assets (9.2) (1.5) -50 basis points change in expected long-term rate of return on plan assets 9.2 1.5 (1) Before labor capitalization and regulatory deferrals.
The following tables illustrate the effects of changes in these actuarial assumptions while holding all other assumptions constant: Impact on December 31, 2023 Projected Benefit Obligation Increase/(Decrease) Change in Assumptions (in millions) Pension Benefits Other Postretirement Benefits +50 basis points change in discount rate $ (51.8) $ (20.5) -50 basis points change in discount rate 55.9 22.3 Impact on 2023 Expense Increase/(Decrease) (1) Change in Assumptions (in millions) Pension Benefits Other Postretirement Benefits +50 basis points change in discount rate $ (1.6) $ 0.3 -50 basis points change in discount rate 1.4 (0.3) +50 basis points change in expected long-term rate of return on plan assets (6.8) (1.1) -50 basis points change in expected long-term rate of return on plan assets 6.8 1.1 (1) Before labor capitalization and regulatory deferrals.
The project includes a total estimated $40.0 million of federally mandated retirement costs. A final order is expected in the first quarter of 2023. On November 2, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of R.M. Schahfer Generation Station's multi-cell unit.
The project includes a total estimated $40.0 million of federally mandated retirement costs. On November 2, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of R.M. Schahfer Generation Station's multi-cell unit. The project includes a total estimated $53.0 million of federally mandated retirement costs.
Sources of Liquidity The following table displays our liquidity position as of December 31, 2022 and 2021: Year Ended December 31, (in millions) 2022 2021 Current Liquidity Revolving Credit Facility $ 1,850.0 $ 1,850.0 Accounts Receivable Programs (1) 447.2 251.2 Less: Commercial Paper 415.0 560.0 Accounts Receivable Programs Utilized 347.2 — Letters of Credit Outstanding Under Credit Facility 10.2 18.9 Add: Cash and Cash Equivalents 40.8 84.2 Net Available Liquidity $ 1,565.6 $ 1,606.5 (1) Represents the lesser of the seasonal limit or maximum borrowings supportable by the underlying receivables.
Sources of Liquidity The following table displays our liquidity position as of December 31, 2023 and 2022: Year Ended December 31, (in millions) 2023 2022 Current Liquidity Revolving Credit Facility $ 1,850.0 $ 1,850.0 Accounts Receivable Programs (1) 383.9 447.2 Less: Commercial Paper 1,061.0 415.0 Accounts Receivable Programs Utilized 337.6 347.2 Letters of Credit Outstanding Under Credit Facility 9.9 10.2 Add: Cash and Cash Equivalents 2,245.4 40.8 Net Available Liquidity $ 3,070.8 $ 1,565.6 (1) Represents the lesser of the seasonal limit or maximum borrowings supportable by the underlying receivables.
The total amounts of regulatory assets and liabilities reflected on the Consolidated Balance Sheets were $2,580.8 million and $2,012.6 million at December 31, 2022, and $2,492.2 million and $1,980.0 million at December 31, 2021, respectively. For additional information, refer to Note 9, "Regulatory Matters," in the Notes to Consolidated Financial Statements.
The total amounts of regulatory assets and liabilities reflected on the Consolidated Balance Sheets were $2,460.2 million and $1,789.3 million at December 31, 2023, and $2,580.8 million and $2,012.6 million at December 31, 2022, respectively. For additional information, refer to Note 12, "Regulatory Matters," in the Notes to Consolidated Financial Statements.
MWh sales to steel-related industries accounted for approximately 47.4% and 48.1% of the total industrial MWh sales for the years ended December 31, 2022 and 2021, respectively.
MWh sales to steel-related industries accounted for approximately 49.3% and 47.4% of the total industrial MWh sales for the years ended December 31, 2023 and 2022, respectively.
During 2023 and 2024, we expect to make cash payments of $642.2 million and $556.9 million, respectively, related to pipeline service obligations including demand for gas transportation, gas storage and gas purchases. Our expected payments include employer contributions to pension and other postretirement benefits plans expected to be made in 2023.
During 2024 and 2025, we expect to make cash payments of $652.0 million and $485.7 million, respectively, related to pipeline service obligations including demand for gas transportation, gas storage and gas purchases. Our expected payments include employer contributions to pension and other postretirement benefits plans expected to be made in 2024.
For measurement of 2023 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return of 7.00% and 6.69% for our pension and other postretirement benefit plan assets, respectively.
For measurement of 2024 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return o f 7.02% and 7.06 % respectively, for our pension and other postretirement benefit plan assets.
January 2023 Columbia of Maryland STRIDE - 2023 $ 1.3 $ 18.0 1/23-12/23 Pipeline upgrades designed to improve public safety or infrastructure reliability. January 2023 NIPSCO - Electric (7) TDSIC - 1 $ 10.4 $ 148.5 6/21-1/22 New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development.
Columbia of Maryland (2) STRIDE - 2023 $ 18.0 1/23-12/23 10/31/2022 Pipeline upgrades designed to improve public safety or infrastructure reliability. NIPSCO - Electric (3) TDSIC - 3 $ 144.8 7/22-1/23 3/28//2023 New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development.
At the end of each month, amounts of energy delivered to customers since the date of their last meter reading are estimated and corresponding unbilled revenues are calculated. This unbilled revenue is estimated each month based upon historical usage, customer rates and weather. As of December 31, 2022 we recorded $453.0 million of customer accounts receivable for unbilled revenue.
At the end of each month, amounts of energy delivered to customers since the date of their last meter reading are estimated and corresponding unbilled revenues are calculated. This unbilled revenue is estimated each month based upon historical usage, customer rates and weather. As of December 31, 2023, we recorded $337.6 million of customer 54 Table of Contents ITEM 7.
(4) NIPSCO received approval for a new certificate of public convenience and necessity on December 28, 2022 for an additional Pipeline Safety III Compliance Plan, including $235.3M in capital and $34.1M in operation and maintenance expense project investments. (5) Columbia of Virginia received a final order on November 1, 2022 modifying the SAVE filing incremental revenue and investments.
(4) NIPSCO received approval for a new certificate of public convenience and necessity on December 28, 2022 for an additional Pipeline Safety III Compliance Plan, including $235.3M in capital and $34.1M in operation and maintenance expense project investments.
Actual (in millions) 2022 Gas Distribution Operations System Growth and Tracker $ 1,266.1 Maintenance 329.7 Total Gas Distribution Operations (1) 1,595.8 Electric Operations System Growth and Tracker 345.0 Maintenance 164.2 Generation Transition Investments 31.4 Total Electric Operations (1) 540.6 Corporate and Other Operations - Maintenance (1) 161.6 Total Capital Expenditures (2) $ 2,298.0 (1) Amounts differ from those presented in Note 21, "Business Segment Information," in the Notes to Consolidated Financial Statements due to the allocation of Corporate and Other Maintenance Costs to the Gas Distribution and Electric Operations segments.
Actual (in millions) 2023 Gas Distribution Operations System Growth and Tracker $ 1,386.8 Maintenance 328.4 Total Gas Distribution Operations (1) 1,715.2 Electric Operations System Growth and Tracker 440.9 Maintenance 284.6 Generation Transition Investments 13.7 Total Electric Operations (1) 739.2 Corporate and Other Operations - Maintenance (1) 236.3 Total Capital Expenditures (2) $ 2,690.7 (1) Amounts differ from those presented in Note 21, "Business Segment Information," in the Notes to Consolidated Financial Statements due to the allocation of Corporate and Other Maintenance Costs to the Gas Distribution and Electric Operations segments.
Credit risk arises due to the possibility that a customer, supplier or counterparty will not be able or willing to fulfill its obligations on a transaction on or before the settlement date.
Exposures to credit risks are monitored by the risk management function, which is independent of commercial operations. Credit risk arises due to the possibility that a customer, supplier or counterparty will not be able or willing to fulfill its obligations on a transaction on or before the settlement date.
See "Project Status" discussion, below, and "Liquidity and Capital Resources" in this Management's Discussion for anticipated barriers to the success of our electric generation transition and additional information on our capital investment spend. NIPSCO continues to work with the EPA and the Indiana Department of Environmental Management to obtain administrative approvals associated with the operation of R.M.
See "Project Status" discussion, below, and "Liquidity and Capital Resources" in this Management's Discussion for information on anticipated in-service dates related to our electric generation transition and additional information on our capital investment spend. NIPSCO continues to work with the EPA to obtain an administrative approval associated with the operation of R.M. Schahfer’s remaining two coal units until 2025.
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.
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.
Our extension of credit is governed by a Corporate Credit Risk Policy. In addition, our Risk Management Committee has put guidelines in place which document management approval levels for credit limits, evaluation of creditworthiness, and credit risk mitigation efforts. Exposures to credit risks are monitored by the risk management function, which is independent of commercial operations.
Credit Risk Due to the nature of the industry, credit risk is embedded in many of our business activities. Our extension of credit is governed by a Corporate Credit Risk Policy. In addition, Risk Management Committee guidelines are in place which document management approval levels for credit limits, evaluation of creditworthiness, and credit risk mitigation efforts.
Our current year investing activities were comprised of increased capital expenditures related to system growth and reliability as well as payments to renewable generation asset developers related to Dunn's Bridge I and Indiana Crossroads Solar milestone payments. This was offset by the property insurance settlement related to the Greater Lawrence Incident. 46 Table of Contents ITEM 7.
Our current year investing activities were comprised of increased capital expenditures related to system growth and reliability as well as payments to renewable generation asset developers related to milestone payments for certain of our BTA projects in 2023, as well as the property insurance settlement related to the Greater Lawrence Incident received in the prior year. 47 Table of Contents ITEM 7.
Electric Operations (continued) Project Name Transaction Type Technology Nameplate Capacity (MW) Storage Capacity (MW) Dunn's Bridge I (1) BTA Solar 265 — Indiana Crossroads Solar (1) BTA Solar 200 — Dunn's Bridge II (1) BTA Solar & Storage 435 75 Cavalry (1) BTA Solar & Storage 200 60 Fairbanks (1) BTA Solar 250 — Elliott (1) BTA Solar 200 — Indiana Crossroads II 15 year PPA Wind 204 — Brickyard 20 year PPA Solar 200 — Greensboro 20 year PPA Solar & Storage 100 30 Gibson 22 year PPA Solar 280 — Green River 20 year PPA Solar 200 — (1) Ownership of the facilities will be transferred to JVs whose members are expected to include NIPSCO and an unrelated tax equity partner.
Electric Operations (continued) Remaining Renewables Projects Transaction Type Technology Nameplate Capacity (MW) Storage Capacity (MW) Cavalry BTA Solar & Storage 200 60 Dunns Bridge II BTA Solar & Storage 435 75 Fairbanks (1) BTA Solar 250 — Gibson (1) BTA Solar 200 — Green River 20 year PPA Solar 200 — Templeton 20 year PPA Wind 200 — Carpenter 20 year PPA Wind 200 — Appleseed 20 year PPA Solar 200 — (1) Under the structure approved by the IURC ownership of Fairbanks and Gibson will be transferred to JVs whose members are expected to include NIPSCO and an unrelated tax equity partner.
At December 31, 2022, we had established $7.8 million of valuation allowances related to certain state NOL carryforwards. Refer to Note 11, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information. Recently Issued Accounting Pronouncements Refer to Note 2, "Recent Accounting Pronouncements," in the Notes to Consolidated Financial Statements.
At December 31, 2023 and 2022, we had established $6.4 million and $7.8 million, respectively, of valuation allowances (net of federal benefit) related to certain state net operating loss carryforwards. Refer to Note 15, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information.
Heating or cooling degree days experienced during different times of the year may have more or less impact on volume and dollars depending on when they occur.
Our composite cooling degree days reported do not directly correlate to the weather-related dollar impact on the results of Electric Operations. Cooling degree days experienced during different times of the year may have more or less impact on volume and dollars depending on when they occur.
The following table describes the most recent vintage of our regulatory programs to recover infrastructure replacement and other federally mandated compliance investments currently in rates or pending commission approval: (in millions) Company Program Incremental Revenue Incremental Capital Investment Investment Period Costs Covered (1) Rates Effective Columbia of Ohio (2) IRP - 2022 $ 25.0 $ 232.9 1/21-12/21 Replacement of (1) hazardous service lines, (2) cast iron, wrought iron, uncoated steel, and bare steel pipe, (3) natural gas risers prone to failure and (4) installation of AMR devices.
The following table describes the most recent vintage of our regulatory programs to recover infrastructure replacement and other federally mandated compliance investments: (in millions) Company Program Capital Investment Investment Period Filing Date Costs Covered (1) Approved Columbia of Ohio IRP - 2023 $ 522.1 4/21-12/22 2/24/2023 Replacement of hazardous service lines, cast iron, wrought iron, uncoated steel, and bare steel pipe.
On June 10, 2022, we completed the issuance and sale of $350.0 million of 5.00% senior unsecured notes maturing in 2052, which resulted in approximately $344.6 million of net proceeds after discount and debt issuance costs.
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.
In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business. Equity. Our authorized capital stock consists of 620,000,000 shares, $0.01 par value, of which 600,000,000 are common stock and 20,000,000 are preferred stock.
In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business. 50 Table of Contents ITEM 7.
April 2023 Columbia of Virginia (5) SAVE - 2023 $ 4.5 $ 45.9 1/23-12/23 Replacement projects that (1) enhance system safety or reliability, or (2) reduce, or potentially reduce, greenhouse gas emissions. January 2023 Columbia of Kentucky (6) SMRP - 2023 $ 1.6 $ 41.6 1/23-12/23 Replacement of mains and inclusion of system safety investments.
Columbia of Virginia SAVE - 2024 $ 166.5 10/22-12/24 8/15/2023 Replacement projects that (1) enhance system safety or reliability, or (2) reduce, or potentially reduce, greenhouse gas emissions. Includes costs associated with Advanced Leak Detection and Repair. Columbia of Kentucky SMRP - 2023 $ 41.6 1/23-12/23 10/14/2022 Replacement of mains and inclusion of system safety investments.
We estimate the expected return on plan assets by evaluating expected bond returns, equity risk premiums, target asset allocations, the effects of active plan management, the impact of periodic plan asset rebalancing and historical performance. We also consider the guidance from our investment advisors in making a final determination of our expected rate of return on assets.
The expected long-term rate of return on plan assets is a component utilized in calculating annual pension and other postretirement benefit plan costs. We estimate the expected return on plan assets by evaluating expected bond returns, equity risk premiums, target asset allocations, the effects of active plan management, the impact of periodic plan asset rebalancing and historical performance.
For measurement of 2022 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return of 4.80% and 5.72% for our pension and other postretirement benefit plan assets, respectively.
We also consider the guidance from our investment advisors in making a final determination of our expected rate of return on assets. For measurement of 2023 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return of 7.00% and 6.96% for our pension and other postretirement benefit plan assets, respectively.
In June 2022, the Biden Administration announced a 24-month tariff relief on solar panels subject to the ongoing U.S. Department of Commerce investigation and authorized the use of the Defense Production Act, to accelerate domestic production of clean energy technologies, including solar panel parts. 45 Table of Contents ITEM 7.
We are actively monitoring progress towards project milestones for each of our remaining projects. In June 2022, the Biden Administration announced a 24-month tariff relief on solar panels subject to the DOC Investigation and authorized the use of the Defense Production Act, to accelerate domestic production of clean energy technologies, including solar panel parts.
Favorable (Unfavorable) Changes in Operating Revenues (in millions) 2022 vs 2021 PPA revenue from renewable JV projects, fully offset by JV operating expenses and noncontrolling interest net income (loss) $ 27.5 The effects of customer growth 4.6 Decreased fuel handling costs 4.0 New rates from regulatory capital and DSM programs 2.8 Decreased customer usage (18.5) Reduction in gross receipts tax, offset in operating expenses (10.3) FAC adjustment (1) (8.0) FAC over earnings reserve (5.8) The effects of weather in 2022 compared to 2021 (5.0) Other (2.4) Change in operating revenues (before cost of energy and other tracked items) $ (11.1) Operating revenues offset in operating expense Higher cost of energy billed to customers 146.1 Lower tracker deferrals within operation and maintenance, depreciation and tax (0.4) Total change in operating revenues $ 134.6 (1) See Note 9, "Regulatory Matters," in the Notes to Consolidated Financial Statements for additional information.
Favorable (Unfavorable) Changes in Operating Revenues (in millions) 2023 vs 2022 New rates from base rate proceedings, regulatory capital, and DSM programs $ 103.5 Renewable Joint Venture revenue, fully offset by Joint Venture operating expense and noncontrolling interest net income (loss) 10.2 2022 FAC refund to customers 8.0 FAC over earnings reserve 5.8 The effects of weather in 2023 compared to 2022 (25.6) Decreased customer usage (12.8) Other 0.6 Change in operating revenues (before cost of energy and other tracked items) $ 89.7 Operating revenues offset in operating expense Lower cost of energy billed to customers (129.4) Reduction in gross receipts tax, offset in operating expenses (12.0) Higher tracker deferrals within operation and maintenance, depreciation and tax 5.0 Total change in operating revenues $ (46.7) Weather In general, we calculate the weather-related revenue variance based on changing customer demand driven by weather variance from normal cooling degree days.
May 2022 Columbia of Ohio (2) CEP - 2022 $ 32.2 $ 253.5 1/21-12/21 Assets not included in the IRP. September 2022 NIPSCO - Gas (3) TDSIC 4 $ 0.5 $ 77.5 7/21-12/21 New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development.
Columbia of Ohio CEP - 2023 $ 482.1 4/21-12/22 2/24/2023 Assets not included in the IRP. NIPSCO - Gas TDSIC - 6 $ 237.8 1/23-2/23 4/28/2023 New or replacement projects undertaken for the purpose of safety, reliability, system modernization or economic development. NIPSCO - Gas FMCA - 1 $ 22.1 1/23-3/23 5/30/2023 Project costs to comply with federal mandates.
For additional information, see "Results and Discussion of Segment Operations" in this Management's Discussion. 50 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
In 2022, we continued to move forward on core infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all six states of our operating area. 47 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
An ancillary benefit of these programs is the reduction of GHG emissions. In 2023, we continued to move forward on core infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all six states of our operating area. 48 Table of Contents ITEM 7.
For additional information, refer to Note 1, "Nature of Operations and Summary of Significant Accounting Policies - S. VIEs and Allocation of Earnings," in the Notes to Consolidated Financial Statements. Equity Unit Transaction.
For additional information, refer to Note 1, "Nature of Operations and Summary of Significant Accounting Policies - S. Noncontrolling Interest," in the Notes to Consolidated Financial Statements. Pension and Postretirement Benefits. We have defined benefit plans for both pension and other postretirement benefits.
Department of Homeland Security's June 2021 Withhold Release Order on silica-based products made by Hoshine Silicon Industry Co., Ltd./Uyghur Forced Labor Prevention Act, (iii) Section 201 Tariffs and (iv) persistent general global supply chain and labor availability issues. We are also monitoring the developers of our renewable energy projects related to local permitting processes and obtaining interconnection rights.
Department of Commerce investigation on Antidumping and Countervailing Duties petition filed by a domestic solar manufacturer (the "DOC Investigation"), (ii) the U.S. Department of Homeland Security's June 2021 Withhold Release Order on silica-based products made by Hoshine Silicon Industry Co., Ltd./Uyghur Forced Labor Prevention Act, (iii) Section 201 Tariffs and (iv) persistent general global supply chain and labor availability issues.
The consolidated income tax provision and deferred income tax assets and liabilities, as well as any unrecognized tax benefits and valuation allowances, require use of estimates and significant management judgement.
Refer to Note 3, "Revenue Recognition," in the Notes to Consolidated Financial Statements for additional information regarding our significant judgments and estimates related to unbilled revenue recognition. Income Taxes. The consolidated income tax provision and deferred income tax assets and liabilities, as well as any unrecognized tax benefits and valuation allowances, require use of estimates and significant management judgement.
Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations. Valuation allowances against deferred tax assets are recorded when we conclude it is more likely than not such asset will not be realized in future periods.
Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
Electric Supply and Generation Transition NIPSCO continues to execute on an electric generation transition consistent with the 2018 Plan, which outlines the path to retire the remaining two coal units at Schahfer by the end of 2025 and the remaining coal-fired generation by the end of 2028, to be replaced by lower-cost, reliable and cleaner options.
Schahfer by the end of 2025 and the remaining coal-fired generation at Michigan City by the end of 2028, to be replaced by lower-cost, reliable and cleaner options.
The current replacement plan primarily includes renewable sources of energy, including wind, solar, and battery storage to be obtained through a combination of NIPSCO ownership and PPAs. NIPSCO has sold, and may in the future sell, renewable energy credits from this generation to third parties to offset customer costs.
The current replacement plan is aligned with the Preferred Energy Resource Plan outlined in the 2021 Plan and primarily includes renewable sources of energy, including wind, solar, battery storage, and flexible natural gas resources to be obtained through a combination of NIPSCO ownership and PPAs.
We expect to make capital investments totaling approximately $15 billion during the 2023-2027 period related to infrastructure modernization, generation transition and renewables and customer growth for the next five years: (in billions) 2022 Actual 2023 Estimated 2024 Estimated 2025 Estimated 2026 Estimated 2027 Estimated Capital Investments $2.6 $3.3 - 3.6 $2.6 - 2.9 $3.1 - 3.4 $2.7 - 3.0 $ 2.7 - 3.0 Regulatory Capital Programs.
We expect to make capital investments totaling approximately $16.0 billion during the 2024-2028 period related to infrastructure modernization, generation transition and customer growth over the next five years. This forecast incorporates an estimated $1.7 billion of additional investment in renewable generation projects.
In such event, a write-down of all or a portion of our existing regulatory assets and liabilities could result. If transition cost recovery is approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as 51 Table of Contents ITEM 7.
If transition cost recovery is approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts.
Since the annual evaluation, there have been no indications that the fair values of the goodwill reporting units have decreased below the carrying values. 53 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC .
Since the annual evaluation, there have been no indications that the fair values of the goodwill reporting units have decreased below the carrying values.
These changes are included in the GCA and FAC regulatory rate-recovery mechanisms. If these mechanisms were to be adjusted or eliminated, these subsidiaries may begin providing services without the benefit of the traditional rate-making process and may be more exposed to commodity price risk.
These changes are included in the GCA and FAC regulatory rate-recovery mechanisms. If these mechanisms were to be adjusted or 51 Table of Contents ITEM 7.
(7) NIPSCO filed for a new electric TDSIC plan on June 1, 2021. An order approving NIPSCO's new electric TDSIC plan was received on December 28, 2021. On March 30, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of Michigan City Generating Station's CCR ash ponds.
(5) Columbia of Kentucky placed these rates into effect, as of January 3, 2024, subject to refund, depending on a Commission order ruling on the Application. On March 30, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of Michigan City Generating Station's CCR ash ponds.
In addition to these capital expenditures, we made $323.9 million of capital investments in the form of milestone payments to the renewable generation asset developer.
In addition to these capital expenditures, we made $871.2 million of capital investments in the form of milestone and final payments to the renewable generation asset developers. Through December 2023, NiSource has added approximately $1 billion in renewable generation projects to its rate base.
These amendments also formally address inflationary cost pressures communicated from the developers of our solar and storage projects that are primarily due to (i) unavailability of solar panels and other uncertainties related to the pending U.S. Department of Commerce investigation on Antidumping and Countervailing Duties petition filed by a domestic solar manufacturer (the "DOC Investigation"), (ii) the U.S.
We expect the majority of our remaining BTA and PPA projects to be placed in service in 2024 and 2025. Our contract amendments for these projects formally address inflationary cost pressures communicated from the developers of our solar and storage projects that are primarily due to (i) limited supply of solar panels and other uncertainties related to the U.S.
This was offset by increased cash outflows related to inventory purchases year over year due to higher gas costs. Investing Activities Net cash used for investing activities for the year ended December 31, 2022 was $2,570.2 million, an increase of $365.3 million from 2021.
Investing Activities Net cash used for investing activities for the year ended December 31, 2023 was $3,571.6 million, an increase of $1,001.4 million from 2022.
If any of NIPSCO’s CCR costs were determined to be not eligible for recovery under the federal mandate mechanism, NIPSCO would seek recovery through depreciation within base rates. Refer to Note 19, "Other Commitments and Contingencies - E. Environmental Matters," in the Notes to Consolidated Financial Statements for further discussion of the CCRs.
Pursuant to that settlement agreement, NIPSCO filed and the IURC approved motions to dismiss the independent FMCA cases related to CCR ash pond recovery, as that recovery will now occur through NIPSCO’s electric base rates. Refer to Note 19, "Other Commitments and Contingencies - D. Environmental Matters," in the Notes to Consolidated Financial Statements for further discussion of the CCRs.
Significant fluctuations in energy demand for the unbilled period or changes in the composition of customer classes could impact the accuracy of the unbilled revenue estimate. Refer to Note 3, "Revenue Recognition," in the Notes to Consolidated Financial Statements for additional information regarding our significant judgments and estimates related to unbilled revenue recognition. Income Taxes.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) N I S OURCE I NC . accounts receivable for unbilled revenue. Significant fluctuations in energy demand for the unbilled period or changes in the composition of customer classes could impact the accuracy of the unbilled revenue estimate.
Refer to Note 15, "Long-Term Debt," in the Notes to Consolidated Financial Statements for information on long-term debt. Non-controlling Interest . Refer to Note 4, "Variable Interest Entities," in the Notes to Consolidated Financial Statements for information on contributions from noncontrolling interest activity.
Refer to Note 8, "Long-Term Debt," in the Notes to Consolidated Financial Statements for information on long-term debt. Non-controlling Interest . We received $2.16 billion upon closing the NIPSCO Minority Interest Transaction. Proceeds from the closing of the NIPSCO Minority Interest Transaction were used to repay short-term debt, including our credit agreements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSTATEMENTS OF CONSOLIDATED CASH FLOWS Year Ended December 31, (in millions) 2022 2021 2020 Operating Activities Net Income (Loss) $ 791.8 $ 588.8 $ (14.2) Adjustments to Reconcile Net Income to Net Cash from Operating Activities: Loss on early extinguishment of debt — — 243.5 Depreciation and amortization 820.8 748.4 725.9 Deferred income taxes and investment tax credits 156.9 111.9 (29.0) Stock compensation expense and 401(k) profit sharing contribution 24.9 24.3 17.4 Loss (gain) on sale of assets (105.3) 5.6 409.8 Other adjustments 5.7 (0.7) (0.3) Changes in Assets and Liabilities: Accounts receivable (216.3) (40.3) (3.9) Inventories (258.9) (112.9) (1.5) Accounts payable 165.0 54.9 (29.7) Exchange gas receivable/payable 57.8 (114.2) (6.9) Other accruals 73.4 43.0 (175.1) Prepayments and other current assets (9.8) (36.6) (5.9) Regulatory assets/liabilities (129.4) 76.8 70.8 Postretirement and postemployment benefits 84.7 (96.4) (103.6) Deferred charges and other noncurrent assets (4.1) (4.7) (15.0) Other noncurrent liabilities and deferred credits (47.8) (30.0) 21.7 Net Cash Flows from Operating Activities 1,409.4 1,217.9 1,104.0 Investing Activities Capital expenditures (2,203.1) (1,838.0) (1,758.1) Insurance Recoveries 105.0 — — Cost of removal (151.7) (121.1) (138.2) Proceeds from disposition of assets — 0.7 1,115.9 Purchases of available-for-sale securities (73.5) (102.9) (144.7) Sales of available-for-sale securities 75.7 97.8 131.4 Payment to renewable generation asset developer (323.9) (240.4) (85.3) Other investing activities 1.3 (1.0) (0.1) Net Cash Flows used for Investing Activities (2,570.2) (2,204.9) (879.1) Financing Activities Proceeds from issuance of long-term debt 345.6 — 2,974.0 Repayments of long-term debt and finance lease obligations (60.3) (25.7) (1,622.0) Issuance of short-term debt (maturity > 90 days) 1,000.0 — 1,350.0 Repayment of short-term debt (maturity > 90 days) — — (2,200.0) Change in short-term debt (maturity ≤ 90 days) 202.2 57.0 (420.1) Issuance of common stock, net of issuance costs 154.3 299.6 211.4 Equity costs, premiums and other debt related costs (13.0) (18.2) (246.5) Contributions from noncontrolling interest 21.2 245.1 82.2 Distributions to noncontrolling interest (6.0) (0.6) — Issuance of equity units, net of underwriting costs — 839.9 — Dividends paid - common stock (381.5) (345.2) (321.6) Dividends paid - preferred stock (55.1) (55.1) (55.1) Contract liability payment (66.1) (40.5) — Net Cash Flows from (used for) Financing Activities 1,141.3 956.3 (247.7) Change in cash, cash equivalents and restricted cash (19.5) (30.7) (22.8) Cash, cash equivalents and restricted cash at beginning of period 94.9 125.6 148.4 Cash, Cash Equivalents and Restricted Cash at End of Period $ 75.4 $ 94.9 $ 125.6 Reconciliation to Balance Sheet 2022 2021 2020 Cash and cash equivalents 40.8 84.2 116.5 Restricted Cash 34.6 10.7 9.1 Total Cash, Cash Equivalents and Restricted Cash 75.4 94.9 125.6 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 62 Table of Contents
Biggest changeSTATEMENTS OF CONSOLIDATED CASH FLOWS Year Ended December 31, (in millions) 2023 2022 2021 Operating Activities Net Income $ 674.4 $ 791.8 $ 588.8 Adjustments to Reconcile Net Income to Net Cash from Operating Activities: Depreciation and amortization 908.2 820.8 748.4 Deferred income taxes and investment tax credits 134.1 156.9 111.9 Stock compensation expense and 401(k) profit sharing contribution 33.5 24.9 24.3 Loss (gain) on sale of assets 2.9 (105.3) 5.6 Other adjustments (17.9) 5.7 (0.7) Changes in Assets and Liabilities: Accounts receivable 184.1 (216.3) (40.3) Gas storage and other inventories 233.9 (258.9) (112.9) Accounts payable (171.8) 165.0 54.9 Exchange gas receivable/payable 126.5 57.8 (114.2) Other accruals (102.9) 73.4 43.0 Prepayments and other current assets 36.7 (9.8) (36.6) Regulatory assets/liabilities (26.2) (129.4) 76.8 Postretirement and postemployment benefits (22.0) 84.7 (96.4) Deferred charges and other noncurrent assets (10.1) (4.1) (4.7) Other noncurrent liabilities and deferred credits (48.3) (47.8) (30.0) Net Cash Flows from Operating Activities 1,935.1 1,409.4 1,217.9 Investing Activities Capital expenditures (2,645.8) (2,203.1) (1,838.0) Insurance Recoveries 3.0 105.0 — Cost of removal (160.8) (151.7) (121.1) Purchases of available-for-sale securities (42.8) (73.5) (102.9) Sales of available-for-sale securities 39.9 75.7 97.8 Milestone and final payments to renewable generation asset developer (761.4) (323.9) (240.4) Other investing activities (3.7) 1.3 (1.0) Net Cash Flows used for Investing Activities (3,571.6) (2,570.2) (2,204.9) Financing Activities Proceeds from issuance of long-term debt 1,488.7 345.6 — Repayments of long-term debt and finance lease obligations (33.1) (60.3) (25.7) Issuance of short term credit agreements 650.0 1,000.0 — Net change in commercial paper and other short-term borrowings 636.4 202.2 57.0 Issuance of common stock, net of issuance costs 12.9 154.3 299.6 Payment of obligation to renewable generation asset developer (347.2) — — Equity costs, premiums and other debt related costs (30.2) (13.0) (18.2) Contributions from noncontrolling interests 2,402.8 21.2 245.1 Distributions to noncontrolling interest (14.1) (6.0) (0.6) Issuance of equity units, net of underwriting costs — — 839.9 Redemption of preferred stock (393.9) — — Dividends paid - common stock (413.5) (381.5) (345.2) Preferred stock redemption premium (6.2) — — Dividends paid - preferred stock (43.8) (55.1) (55.1) Contract liability payment (66.6) (66.1) (40.5) Net Cash Flows from Financing Activities 3,842.2 1,141.3 956.3 Change in cash, cash equivalents and restricted cash 2,205.7 (19.5) (30.7) Cash, cash equivalents and restricted cash at beginning of period 75.4 94.9 125.6 Cash, Cash Equivalents and Restricted Cash at End of Period $ 2,281.1 $ 75.4 $ 94.9 Reconciliation to Balance Sheet 2023 2022 2021 Cash and cash equivalents 2,245.4 40.8 84.2 Restricted Cash 35.7 34.6 10.7 Total Cash, Cash Equivalents and Restricted Cash 2,281.1 75.4 94.9 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 64 Table of Contents
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Quantitative and Qualitative Disclosures about Market Risk are reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.” 54 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA N I S OURCE I NC .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Quantitative and Qualitative Disclosures about Market Risk are reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.” 55 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA N I S OURCE I NC .
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NiSource Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related statements of consolidated income (loss), comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NiSource Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related statements of consolidated income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
(3) Unrecognized pension and OPEB benefit (costs), net of $2.3 million tax benefit, $3.8 million tax expense and $0.1 million tax benefit in 2022, 2021 and 2020, respectively. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 59 Table of Contents ITEM 8.
(3) Unrecognized pension and OPEB benefit (costs), net of $0.1 million tax benefit, $2.3 million tax benefit and $3.8 million tax expense in 2023, 2022 and 2021, respectively. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 61 Table of Contents ITEM 8.
Impact of Rate Regulation on the Financial Statements - Refer to Notes 1 and 9 to the consolidated financial statements Critical Audit Matter Description The Company’s subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states.
Regulatory Matters - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1, 9, and 12 to the financial statements Critical Audit Matter Description The Company’s subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) Year Ended December 31, (in millions, net of taxes) 2022 2021 2020 Net Income (Loss) $ 791.8 $ 588.8 $ (14.2) Other comprehensive income (loss): Net unrealized gain (loss) on available-for-sale securities (1) (13.3) (3.9) 2.7 Net unrealized gain (loss) on cash flow hedges (2) 109.9 25.4 (70.7) Unrecognized pension and OPEB benefit (costs) (3) (6.9) 8.4 3.9 Total other comprehensive income (loss) 89.7 29.9 (64.1) Total Comprehensive Income (Loss) $ 881.5 $ 618.7 $ (78.3) (1) Net unrealized gain (loss) on available-for-sale securities, net of $3.5 million tax benefit, $1.0 million tax benefit and $0.7 million tax expense in 2022, 2021 and 2020, respectively.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME Year Ended December 31, (in millions, net of taxes) 2023 2022 2021 Net Income $ 674.4 $ 791.8 $ 588.8 Other comprehensive income: Net unrealized gain (loss) on available-for-sale securities (1) 3.9 (13.3) (3.9) Net unrealized (loss) gain on cash flow hedges (2) (0.2) 109.9 25.4 Unrecognized pension and OPEB benefit (costs) (3) (0.2) (6.9) 8.4 Total other comprehensive income 3.5 89.7 29.9 Total Comprehensive Income $ 677.9 $ 881.5 $ 618.7 (1) Net unrealized gain (loss) on available-for-sale securities, net of $1.0 million tax expense, $3.5 million tax benefit and $1.0 million tax benefit in 2023, 2022 and 2021, respectively.
Other, Net 116 23 . Interest Expense, Net 116 24 . Supplemental Cash Flow Information 117 Schedule II 118 55 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC . REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of NiSource Inc.
Interest Expense, Net 117 24 . Supplemental Cash Flow Information 118 Schedule II 119 56 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC . REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of NiSource Inc.
Refer to Note 4, "Variable Interest Entities," for additional information. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 60 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
Refer to Note 4, "Noncontrolling Interest," for additional information. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 62 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
Refer to Note 4, "Variable Interest Entities," for additional information. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 61 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
Refer to Note 4, "Noncontrolling Interest," for additional information. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 63 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
We evaluated the appropriateness of recognizing a regulatory liability or asset representing timing differences between the profit allocated under the Hypothetical Liquidation at Book Value (HLBV) method related to the consolidated joint ventures and the allowed earnings included in regulatory rates.
We evaluated the appropriateness of recognizing a regulatory liability or asset representing timing differences between the profit allocated under the HLBV method related to the consolidated joint ventures and the allowed earnings included in regulatory rates.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The respective commission’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested 56 Table of Contents ITEM 8.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The respective commission’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
(2) Net unrealized gain (loss) on derivatives qualifying as cash flow hedges, net of $36.4 million tax expense, $8.4 million tax expense and $23.4 million tax benefit in 2022, 2021 and 2020, respectively.
(2) Net unrealized (loss) gain on derivatives qualifying as cash flow hedges, net of $0.1 million tax benefit, $36.4 million tax expense and $8.4 million tax expense in 2023, 2022 and 2021, respectively.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We inspected minutes of the board of directors and regulatory orders and other filings with the commissions to identify evidence that may contradict management’s assertion regarding probability of an abandonment. • We read the relevant regulatory orders issued by the Commission for the Company’s renewable energy investments.
Schahfer and Michigan City Generating Stations. We inspected minutes of the board of directors and regulatory orders and other filings with the IURC to identify evidence that may contradict management’s assertion regarding probability of an abandonment. • We read the relevant regulatory orders issued by the IURC for the Company’s renewable energy investments.
Index Page Report of Independent Registered Public Accounting Firm 56 Statements of Consolidated Income (Loss) 58 Statements of Consolidated Comprehensive Income (Loss) 59 Consolidated Balance Sheets 60 Statements of Consolidated Cash Flows 62 Statements of Consolidated Stockholders' Equity 63 Notes to Consolidated Financial Statements 65 1 . Nature of Operations and Summary of Significant Accounting Policies 65 2 .
Index Page Report of Independent Registered Public Accounting Firm 57 Statements of Consolidated Income 60 Statements of Consolidated Comprehensive Income 61 Consolidated Balance Sheets 62 Statements of Consolidated Cash Flows 64 Statements of Consolidated Stockholders' Equity 65 Notes to Consolidated Financial Statements 67 1 . Nature of Operations and Summary of Significant Accounting Policies 67 2 .
STATEMENTS OF CONSOLIDATED INCOME (LOSS) Year Ended December 31 , (in millions, except per share amounts) 2022 2021 2020 Operating Revenues Customer revenues $ 5,738.6 $ 4,731.3 $ 4,473.2 Other revenues 112.0 168.3 208.5 Total Operating Revenues 5,850.6 4,899.6 4,681.7 Operating Expenses Cost of energy 2,110.5 1,392.3 1,109.3 Operation and maintenance 1,489.4 1,456.0 1,585.9 Depreciation and amortization 820.8 748.4 725.9 Loss (gain) on sale of assets, net (104.2) 7.7 410.6 Other taxes 268.3 288.3 299.2 Total Operating Expenses 4,584.8 3,892.7 4,130.9 Operating Income 1,265.8 1,006.9 550.8 Other Income (Deductions) Interest expense, net (361.6) (341.1) (370.7) Other, net 52.2 40.8 32.1 Loss on early extinguishment of long-term debt — — (243.5) Total Other Deductions, Net (309.4) (300.3) (582.1) Income (Loss) before Income Taxes 956.4 706.6 (31.3) Income Taxes 164.6 117.8 (17.1) Net Income (Loss) 791.8 588.8 (14.2) Net income (loss) attributable to noncontrolling interest (12.3) 3.9 3.4 Net Income (Loss) attributable to NiSource 804.1 584.9 (17.6) Preferred dividends (55.1) (55.1) (55.1) Net Income (Loss) Available to Common Shareholders 749.0 529.8 (72.7) Earnings (Loss) Per Share Basic Earnings (Loss) Per Share $ 1.84 $ 1.35 $ (0.19) Diluted Earnings (Loss) Per Share $ 1.70 $ 1.27 $ (0.19) Basic Average Common Shares Outstanding 407.1 393.6 384.3 Diluted Average Common Shares 442.7 417.3 384.3 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 58 Table of Contents ITEM 8.
STATEMENTS OF CONSOLIDATED INCOME Year Ended December 31 , (in millions, except per share amounts) 2023 2022 2021 Operating Revenues Customer revenues $ 5,347.8 $ 5,738.6 $ 4,731.3 Other revenues 157.6 112.0 168.3 Total Operating Revenues 5,505.4 5,850.6 4,899.6 Operating Expenses Cost of energy 1,533.3 2,110.5 1,392.3 Operation and maintenance 1,494.9 1,489.4 1,456.0 Depreciation and amortization 908.2 820.8 748.4 Loss (gain) on sale of assets, net 2.9 (104.2) 7.7 Other taxes 270.6 268.3 288.3 Total Operating Expenses 4,209.9 4,584.8 3,892.7 Operating Income 1,295.5 1,265.8 1,006.9 Other Income (Deductions) Interest expense, net (489.6) (361.6) (341.1) Other, net 8.0 52.2 40.8 Total Other Deductions, Net (481.6) (309.4) (300.3) Income before Income Taxes 813.9 956.4 706.6 Income Taxes 139.5 164.6 117.8 Net Income 674.4 791.8 588.8 Net (loss) income attributable to noncontrolling interest (39.9) (12.3) 3.9 Net Income attributable to NiSource 714.3 804.1 584.9 Preferred dividends (42.8) (55.1) (55.1) Preferred redemption premium (9.8) — — Net Income Available to Common Shareholders 661.7 749.0 529.8 Earnings Per Share Basic Earnings Per Share $ 1.59 $ 1.84 $ 1.35 Diluted Earnings Per Share $ 1.48 $ 1.70 $ 1.27 Basic Average Common Shares Outstanding 416.1 407.1 393.6 Diluted Average Common Shares 447.9 442.7 417.3 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 60 Table of Contents ITEM 8.
CONSOLIDATED BALANCE SHEETS (in millions, except share amounts) December 31, 2022 December 31, 2021 CAPITALIZATION AND LIABILITIES Capitalization Stockholders’ Equity Common stock - $0.01 par value, 600,000,000 shares authorized; 412,142,602 and 405,303,023 shares outstanding, respectively $ 4.2 $ 4.1 Preferred stock - $0.01 par value, 20,000,000 shares authorized; 1,302,500 and 1,302,500 shares outstanding, respectively 1,546.5 1,546.5 Treasury stock (99.9) (99.9) Additional paid-in capital 7,375.3 7,204.3 Retained deficit (1,213.6) (1,580.9) Accumulated other comprehensive loss (37.1) (126.8) Total NiSource Stockholders' Equity 7,575.4 6,947.3 Noncontrolling interest in consolidated subsidiaries 326.4 325.6 Total Stockholders’ Equity 7,901.8 7,272.9 Long-term debt, excluding amounts due within one year 9,523.6 9,183.4 Total Capitalization 17,425.4 16,456.3 Current Liabilities Current portion of long-term debt 30.0 58.1 Short-term borrowings 1,761.9 560.0 Accounts payable 899.5 697.8 Customer deposits and credits 324.7 237.9 Taxes accrued 246.2 277.1 Interest accrued 138.4 105.5 Exchange gas payable 147.6 107.7 Regulatory liabilities 236.8 137.4 Accrued compensation and employee benefits 167.5 182.7 Obligations to renewable generation asset developer 347.2 — Other accruals 360.7 382.0 Total Current Liabilities (1) 4,660.5 2,746.2 Other Liabilities Deferred income taxes 1,854.5 1,659.4 Accrued liability for postretirement and postemployment benefits 245.5 292.5 Regulatory liabilities 1,775.8 1,842.6 Asset retirement obligations 478.1 469.7 Other noncurrent liabilities and deferred credits 296.8 690.2 Total Other Liabilities (1) 4,650.7 4,954.4 Commitments and Contingencies (Refer to Note 19, "Other Commitments and Contingencies") Total Capitalization and Liabilities $ 26,736.6 $ 24,156.9 (1) Includes $128.2 million and $10.0 million in 2022 and 2021, respectively, of current liabilities and $30.6 million and $20.5 million in 2022 and 2021, respectively, of other liabilities of consolidated VIEs that creditors do not have recourse to our general credit.
CONSOLIDATED BALANCE SHEETS (in millions, except share amounts) December 31, 2023 December 31, 2022 CAPITALIZATION AND LIABILITIES Capitalization Stockholders’ Equity Common stock - $0.01 par value, 750,000,000 shares authorized; 447,381,671 and 412,142,602 shares outstanding, respectively $ 4.5 $ 4.2 Preferred stock - $0.01 par value, 20,000,000 shares authorized; 40,000 and 1,302,500 shares outstanding, respectively 486.1 1,546.5 Treasury stock (99.9) (99.9) Additional paid-in capital 8,879.5 7,375.3 Retained deficit (967.0) (1,213.6) Accumulated other comprehensive loss (33.6) (37.1) Total NiSource Stockholders' Equity 8,269.6 7,575.4 Noncontrolling interest in consolidated subsidiaries 1,866.7 326.4 Total Stockholders’ Equity 10,136.3 7,901.8 Long-term debt, excluding amounts due within one year 11,055.5 9,523.6 Total Capitalization 21,191.8 17,425.4 Current Liabilities Current portion of long-term debt 23.8 30.0 Short-term borrowings 3,048.6 1,761.9 Accounts payable 749.4 899.5 Customer deposits and credits 294.4 324.7 Taxes accrued 166.2 246.2 Interest accrued 136.1 138.4 Asset retirement obligations 72.5 35.5 Exchange gas payable 50.5 147.6 Regulatory liabilities 278.6 236.8 Accrued compensation and employee benefits 227.6 167.5 Obligations to renewable generation asset developer — 347.2 Other accruals 217.4 325.2 Total Current Liabilities (1) 5,265.1 4,660.5 Other Liabilities Deferred income taxes 2,080.4 1,854.5 Accrued liability for postretirement and postemployment benefits 250.1 245.5 Regulatory liabilities 1,510.7 1,775.8 Asset retirement obligations 480.5 478.1 Other noncurrent liabilities and deferred credits 298.6 296.8 Total Other Liabilities (1) 4,620.3 4,650.7 Commitments and Contingencies (Refer to Note 19, "Other Commitments and Contingencies") Total Capitalization and Liabilities $ 31,077.2 $ 26,736.6 (1) Includes $68.3 million and $128.2 million in 2023 and 2022, respectively, of current liabilities and $55.7 million and $30.6 million in 2023 and 2022, respectively, of other liabilities of consolidated VIEs that creditors do not have recourse to our general credit.
CONSOLIDATED BALANCE SHEETS (in millions) December 31, 2022 December 31, 2021 ASSETS Property, Plant and Equipment Plant $ 27,551.3 $ 25,171.3 Accumulated depreciation and amortization (7,708.7) (7,289.5) Net Property, Plant and Equipment (1) 19,842.6 17,881.8 Investments and Other Assets Unconsolidated affiliates 1.6 0.8 Available-for-sale debt securities (amortized cost of $166.7 and $169.3, allowance for credit losses of $0.9 and $0.2, respectively) 151.6 171.8 Other investments 71.0 87.1 Total Investments and Other Assets 224.2 259.7 Current Assets Cash and cash equivalents 40.8 84.2 Restricted cash 34.6 10.7 Accounts receivable 1,065.8 849.1 Allowance for credit losses (23.9) (23.5) Accounts receivable, net 1,041.9 825.6 Gas inventory 531.7 327.4 Materials and supplies, at average cost 151.4 139.1 Electric production fuel, at average cost 68.8 32.2 Exchange gas receivable 128.1 99.6 Regulatory assets 233.2 206.2 Deposits to renewable generation asset developer 143.8 — Prepayments and other 210.0 195.8 Total Current Assets (1) 2,584.3 1,920.8 Other Assets Regulatory assets 2,347.6 2,286.0 Goodwill 1,485.9 1,485.9 Deferred charges and other 252.0 322.7 Total Other Assets 4,085.5 4,094.6 Total Assets $ 26,736.6 $ 24,156.9 (1) Includes $978.5 million and $695.9 million in 2022 and 2021, respectively, of net property, plant and equipment assets and $25.7 million and $14.3 million in 2022 and 2021, respectively, of current assets of consolidated VIEs that may be used only to settle obligations of the consolidated VIEs.
CONSOLIDATED BALANCE SHEETS (in millions) December 31, 2023 December 31, 2022 ASSETS Property, Plant and Equipment Plant $ 30,482.1 $ 27,551.3 Accumulated depreciation and amortization (8,207.2) (7,708.7) Net Property, Plant and Equipment (1) 22,274.9 19,842.6 Investments and Other Assets Unconsolidated affiliates 5.3 1.6 Available-for-sale debt securities (amortized cost of $169.0 and $166.7, allowance for credit losses of $0.6 and $0.9, respectively) 159.1 151.6 Other investments 82.7 71.0 Total Investments and Other Assets 247.1 224.2 Current Assets Cash and cash equivalents 2,245.4 40.8 Restricted cash 35.7 34.6 Accounts receivable 884.9 1,065.8 Allowance for credit losses (22.9) (23.9) Accounts receivable, net 862.0 1,041.9 Gas storage 265.8 531.7 Materials and supplies, at average cost 172.1 151.4 Electric production fuel, at average cost 65.3 68.8 Exchange gas receivable 66.0 128.1 Regulatory assets 214.3 233.2 Deposits to renewable generation asset developer 454.2 143.8 Prepayments and other 118.6 210.0 Total Current Assets (1) 4,499.4 2,584.3 Other Assets Regulatory assets 2,245.9 2,347.6 Goodwill 1,485.9 1,485.9 Deferred charges and other 324.0 252.0 Total Other Assets 4,055.8 4,085.5 Total Assets $ 31,077.2 $ 26,736.6 (1) Includes $1,369.8 million and $978.5 million in 2023 and 2022, respectively, of net property, plant and equipment assets and $63.6 million and $25.7 million in 2023 and 2022, respectively, of current assets of consolidated VIEs that may be used only to settle obligations of the consolidated VIEs.
We also tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments, that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments. • We read relevant regulatory orders issued by the commissions for the Company, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM • We tested the effectiveness of management’s controls over (1) the evaluation of the likelihood of (a) the recovery of costs deferred as regulatory assets in future periods, and (b) regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates; and (2) the evaluation of Hypothetical Liquidation Book Value (HLBV) Models for the company’s Renewable Joint Ventures and its impact on the Company’s regulatory assets for recovery in rate base. • We read relevant regulatory orders issued by the IURC and the PUCO, including regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances.
We also evaluated the appropriateness of the offset to the regulatory liability or asset recorded in depreciation expense. • We evaluated the Company’s disclosures related to the application of ASC Topic 980 to consolidated joint venture accounting. /s/ DELOITTE & TOUCHE LLP Columbus, Ohio February 22, 2023 We have served as the Company's auditor since 2002. 57 Table of Contents ITEM 8.
We also evaluated the appropriateness of the offset to the regulatory liability or asset recorded in depreciation expense. /s/ DELOITTE & TOUCHE LLP Columbus, Ohio February 21, 2024 We have served as the Company's auditor since 2002. 59 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
Recent Accounting Pronouncements 68 3 . Revenue Recognition 69 4 . Variable Interest Entities 72 5 . Earnings Per Share 73 6 . Property, Plant and Equipment 75 7 . Goodwill and Other Intangible Assets 76 8 . Asset Retirement Obligations 76 9 . Regulatory Matters 76 10 . Risk Management Activities 81 11 . Income Taxes 82 12 .
Recent Accounting Pronouncements 70 3 . Revenue Recognition 71 4 . Noncontrolling Interest 74 5 . Earnings Per Share 76 6 . Equity 77 7 . Short-Term Borrowings 80 8 . Long-Term Debt 82 9 . Property, Plant and Equipment 84 10 . Goodwill 85 11 . Asset Retirement Obligations 85 12 . Regulatory Matters 85 13 .
We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness. • For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the commissions that may impact the Company’s future rates, for any evidence that might contradict management’s assertions related to recoverability of recorded assets.
We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness, including the implementation of new rate orders at Northern Indiana Public Service Company LLC’s electric business and Columbia Gas of Ohio, Inc. • For the Northern Indiana Public Service Company LLC gas base rate case proceeding, we inspected the Company’s and intervenors’ filings with the commissions that may impact the Company’s future rates, for any evidence that might contradict management’s assertions related to recoverability of recorded assets. • We inquired of management about property, plant, and equipment that may be abandoned with an emphasis on the generation strategy related to Northern Indiana Public Service Company LLC’s R.M.
We identified the accounting for rate-regulated subsidiaries as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements.
We identified the impact of rate regulation, specifically certain regulatory assets and liabilities at the Company’s Northern Indiana Public Service Company LLC and Columbia Gas of Ohio, Inc. subsidiaries, as a critical audit matter due to the significant judgments made by management to support its assertions about certain account balances and the significant degree of subjectivity involved in assessing the likelihood of recovery of incurred costs in current or future rates due in part to uncertainty related to future decisions by the rate regulators.
Pension and Other Postretirement Benefits 85 13 . Equity 95 14 . Share-Based Compensation 99 15 . Long-Term Debt 102 16 . Short-Term Borrowings 103 17 . Leases 104 18 . Fair Value 106 19 . Other Commitments and Contingencies 110 20 . Accumulated Other Comprehensive Loss 114 21 . Segments of Business 114 22 .
Risk Management Activities 89 14 . Fair Value 90 15 . Income Taxes 93 16 . Pension and Other Postretirement Benefits 96 17 . Share-Based Compensation 106 18 . Leases 109 19 . Other Commitments and Contingencies 112 20 . Accumulated Other Comprehensive Loss 115 21 . Business Segment Information 115 22 . Other, Net 117 23 .
Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by regulatory commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate making process due to its inherent complexities.
This required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities and a significant degree of auditor judgment when performing audit procedures to evaluate the reasonableness of management’s conclusions.
Removed
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC . REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM capital.
Added
Non-Controlling Interest - Minority Interest Investment in NIPSCO Holdings II LLC – Refer to Notes 1, 4, 6, and 15 to the financial statements Critical Audit Matter Description On December 31, 2023, the Company consummated the closing of the issuance of a 19.9% equity interest in NIPSCO Holdings II LLC, a wholly-owned subsidiary of the Company and the sole owner of Northern Indiana Public Service Company LLC (“NIPSCO”), to BIP BLUE BUYER L.L.C., an affiliate of Blackstone Infrastructure Partners.
Removed
Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs and (2) refunds of amounts previously collected from customers.
Added
At closing, BIP BLUE BUYER L.L.C., acquired a 19.9% equity interest in NIPSCO Holdings II LLC in exchange for making a capital contribution of $2.16 billion in cash to NIPSCO Holdings II LLC.
Removed
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the commissions focused on the ongoing Columbia Gas of Ohio base rate case and the Northern Indiana Public Service Company electric base rate case proceedings and included the following, among others: • We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities.
Added
Upon consummation of the minority interest transaction, the Company owns an 80.1% controlling indirect equity interest in NIPSCO LLC while BIP BLUE BUYER L.L.C., owns the remaining 19.9% indirect equity interest.
Removed
Additionally, we evaluated the joint stipulation filed by Columbia Gas of Ohio with the Public Utilities Commission of Ohio. • We inquired of management about property, plant, and equipment that may be abandoned with an emphasis on the generation strategy related to Northern Indiana Public Service Company’s R.M. Schahfer and Michigan City Generating Stations.
Added
We identified the $2.16 billion minority interest investment in NIPSCO Holdings II LLC as a critical audit matter due to the significant degree of judgement involved in complex accounting and tax conclusions.
Added
This required a significant degree of auditor judgment when performing audit procedures, including the need to involve professionals in our firm with the 57 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued) N I S OURCE I NC .
Added
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM appropriate expertise to assist us in evaluating management’s conclusions around the accounting and tax treatment for the transaction.
Added
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the minority interest investment in NIPSCO Holdings II LLC included the following, among others: • We tested the effectiveness of controls over the accounting assessment for this transaction, including the controls over technical accounting conclusions and income tax treatment of this transaction. • We evaluated management’s conclusions related to accounting for the transaction by: ▪ Obtaining and reading the contractual agreements related to this transaction, ▪ Involving professionals in our firm with the appropriate expertise in accounting for minority interest transactions to evaluate the work performed by management related to the accounting treatment of the transaction, ▪ Involving professionals in our firm with the appropriate expertise in income taxes to evaluate the work performed by management related to the tax treatment of the transaction, • We evaluated the appropriateness of the Company’s disclosures related to the minority interest investment, including balances recorded.
Added
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation related to the uncertainty of future decisions by the rate regulators, specifically the Indiana Utility Regulatory Commission (IURC) and the Public Utility Commission of Ohio (PUCO), included the following, among others: 58 Table of Contents ITEM 8.

Other NI 10-K year-over-year comparisons