10-Q 1 ni-2015630x10q.htm 10-Q NI-2015.6.30-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
or
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-16189
NiSource Inc.
(Exact name of registrant as specified in its charter)
Delaware               
 
35-2108964        
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
801 East 86th Avenue
Merrillville, Indiana    
 
46410
(Address of principal executive offices)
 
(Zip Code)
(877) 647-5990
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
Yesþ    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ                    Accelerated filer ¨
Non-accelerated filer ¨                      Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨    No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 Par Value: 317,859,139 shares outstanding at July 30, 2015.



NISOURCE INC.
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 30, 2015
Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
PART I
FINANCIAL INFORMATION
 
 
 
 
 
 
Item 1.
Financial Statements - unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 
 

2


DEFINED TERMS

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

NiSource Subsidiaries and Affiliates
 
Capital Markets
NiSource Capital Markets, Inc.
CER
Columbia Energy Resources, Inc.
CEVCO
Columbia Energy Ventures, LLC
CGORC
Columbia Gas of Ohio Receivables Corporation
Columbia
Columbia Energy Group
Columbia Gulf
Columbia Gulf Transmission Company, LLC
Columbia Midstream
Columbia Midstream Group, LLC
Columbia of Kentucky
Columbia Gas of Kentucky, Inc.
Columbia of Maryland
Columbia Gas of Maryland, Inc.
Columbia of Massachusetts
Bay State Gas Company
Columbia of Ohio
Columbia Gas of Ohio, Inc.
Columbia OpCo
CPG OpCo LP
Columbia of Pennsylvania
Columbia Gas of Pennsylvania, Inc.
Columbia of Virginia
Columbia Gas of Virginia, Inc.
Columbia Transmission
Columbia Gas Transmission, LLC
CPG
Columbia Pipeline Group, Inc.
CPPL
Columbia Pipeline Partners LP
CPRC
Columbia Gas of Pennsylvania Receivables Corporation
Crossroads Pipeline
Crossroads Pipeline Company
Hardy Storage
Hardy Storage Company, LLC
Millennium
Millennium Pipeline Company, L.L.C.
NARC
NIPSCO Accounts Receivable Corporation
NDC Douglas Properties
NDC Douglas Properties, Inc.
NIPSCO
Northern Indiana Public Service Company
NiSource
NiSource Inc.
NiSource Corporate Services
NiSource Corporate Services Company
NiSource Development Company
NiSource Development Company, Inc.
NiSource Finance
NiSource Finance Corp.
Pennant
Pennant Midstream, LLC
 
 
Abbreviations and Other
 
AFUDC
Allowance for funds used during construction
AOC
Administrative Order by Consent
AOCI
Accumulated Other Comprehensive Income (Loss)
ASU
Accounting Standards Update
BBA
British Banker Association
Bcf
Billion cubic feet
BNS
Bank of Nova Scotia
BTMU
The Bank of Tokyo-Mitsubishi UFJ, LTD.
BTU
British Thermal Unit
CAA
Clean Air Act
CAIR
Clean Air Interstate Rule

3


DEFINED TERMS (continued)

CAMR
Clean Air Mercury Rule
CCRs
Coal Combustion Residuals
CCRM
Capital Cost Recovery Mechanism
CERCLA
Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund)
CO2
Carbon Dioxide
DEP
Department of Environmental Protection
DIMP
Distribution Integrity Management Program

DPU
Department of Public Utilities
DSM
Demand Side Management
Dth
Dekatherm
Dth/d
Dekatherm per day
ECR
Environmental Cost Recovery
ECRM
Environmental Cost Recovery Mechanism
ECT
Environmental Cost Tracker
EERM
Environmental Expense Recovery Mechanism
EPA
United States Environmental Protection Agency
EPS
Earnings per share
FAC
Fuel adjustment clause
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FGD
Flue Gas Desulfurization
FTRs
Financial Transmission Rights
GAAP
Generally Accepted Accounting Principles
GAF
Gas Adjustment Factor
GCIM
Gas Cost Incentive Mechanism
GCR
Gas cost recovery
GHG
Greenhouse gases
gwh
Gigawatt hours
Hilcorp
Hilcorp Energy Company
hp
Horsepower
IDEM
Indiana Department of Environmental Management
IPO
Initial Public Offering
INDIEC
Indiana Industrial Energy Consumers, Inc.
IRP
Infrastructure Replacement Program
IURC
Indiana Utility Regulatory Commission
kV
Kilovolt
LDAF
Local Distribution Adjustment Factor
LDCs
Local distribution companies
LIBOR
London InterBank Offered Rate
LIFO
Last-in, first-out
LNG
Liquefied Natural Gas
MATS
Mercury and Air Toxics Standards
Mcf
Thousand cubic feet

4


DEFINED TERMS (continued)

MMcf
Million cubic feet
MGP
Manufactured Gas Plant
MISO
Midcontinent Independent System Operator
Mizuho
Mizuho Corporate Bank Ltd.
MLP
Master Limited Partnership
MMDth
Million dekatherms
mw
Megawatts
mwh
Megawatt hours
NAAQS
National Ambient Air Quality Standards
NGL
Natural Gas Liquids
NOV
Notice of Violation
NO2
Nitrogen dioxide
NOx
Nitrogen oxide
NYMEX
New York Mercantile Exchange
OCI
Other Comprehensive Income (Loss)
OPEB
Other Postretirement Benefits
OUCC
Indiana Office of Utility Consumer Counselor
PEF
Pension Expense Factor
Piedmont
Piedmont Natural Gas Company, Inc.
PM
Particulate matter
PNC
PNC Bank, N.A.
Separation
The separation of NiSource's natural gas pipeline, midstream and storage business from NiSource's natural gas and electric utility business accomplished through the pro rata distribution by NiSource to holders of its outstanding common stock of all the outstanding shares of common stock of CPG. The Separation was completed on July 1, 2015.
ppb
Parts per billion
PSC
Public Service Commission
PUC
Public Utility Commission
PUCO
Public Utilities Commission of Ohio
RA
Resource Adequacy
RAAF
Residential Assistance Adjustment Factor
RACT
Reasonably Available Control Technology
RBS
Royal Bank of Scotland, PLC
RTO
Regional Transmission Organization
SAVE
Steps to Advance Virginia’s Energy
SEC
Securities and Exchange Commission
SIP
State Implementation Plan
SO2
Sulfur dioxide
TDSIC
Transmission, Distribution and Storage System Improvement Charge
TIRF
Targeted Infrastructure Reinvestment Factor
TUAs
Transmission Upgrade Agreements
VIE
Variable Interest Entities
VSCC
Virginia State Corporation Commission



5



PART I

ITEM 1. FINANCIAL STATEMENTS
NiSource Inc.
Condensed Statements of Consolidated (Loss) Income (unaudited)
  
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions, except per share amounts)
2015
 
2014
 
2015
 
2014
Net Revenues
 
 
 
 
 
 
Gas Distribution
$
305.9

 
$
423.5

 
$
1,386.6

 
$
1,638.5

Gas Transportation and Storage
427.4

 
390.1

 
1,055.4

 
968.6

Electric
375.6

 
404.8

 
770.3

 
854.8

Other
60.1

 
116.7

 
106.4

 
193.7

Gross Revenues
1,169.0

 
1,335.1

 
3,318.7

 
3,655.6

Cost of Sales (excluding depreciation and amortization)
218.6

 
371.7

 
1,024.6

 
1,433.0

Total Net Revenues
950.4

 
963.4

 
2,294.1

 
2,222.6

Operating Expenses
 
 
 
 
 
 
 
Operation and maintenance
561.0

 
533.1

 
1,135.1

 
1,034.3

Depreciation and amortization
167.4

 
149.1

 
324.9

 
297.8

Gain on sale of assets
(8.5
)
 
(0.7
)
 
(13.5
)
 
(16.4
)
Other taxes
79.1

 
73.4

 
181.5

 
174.5

Total Operating Expenses
799.0

 
754.9

 
1,628.0

 
1,490.2

Equity Earnings in Unconsolidated Affiliates
13.7

 
11.1

 
29.1

 
20.9

Operating Income
165.1

 
219.6

 
695.2

 
753.3

Other Income (Deductions)
 
 
 
 
 
 
 
Interest expense, net
(117.1
)
 
(109.1
)
 
(228.1
)
 
(218.2
)
Other, net
6.5

 
7.5

 
13.6

 
12.0

Loss on early extinguishment of long-term debt

(97.2
)
 

 
(97.2
)
 

Total Other Deductions
(207.8
)

(101.6
)

(311.7
)

(206.2
)
(Loss) Income from Continuing Operations before Income Taxes
(42.7
)
 
118.0

 
383.5

 
547.1

Income Taxes
(15.3
)
 
39.5

 
135.6

 
202.2

(Loss) Income from Continuing Operations
(27.4
)
 
78.5

 
247.9

 
344.9

Loss from Discontinued Operations - net of taxes
(0.3
)
 
(0.3
)
 
(0.3
)
 
(0.5
)
Net (Loss) Income
(27.7
)
 
78.2

 
247.6

 
344.4

Less: Net income attributable to noncontrolling interest
8.7

 

 
15.6

 

Net (Loss) Income attributable to NiSource
$
(36.4
)
 
$
78.2


$
232.0


$
344.4

Amounts attributable to NiSource:
 
 
 
 
 
 
 
(Loss) Income from continuing operations
$
(36.1
)
 
$
78.5

 
$
232.3

 
$
344.9

Loss from discontinued operations
(0.3
)
 
(0.3
)
 
(0.3
)
 
(0.5
)
Net (Loss) Income attributable to NiSource
$
(36.4
)
 
$
78.2

 
$
232.0

 
$
344.4

Basic (Loss) Earnings Per Share
 
 
 
 
 
 
 
Continuing operations
$
(0.11
)
 
$
0.25

 
$
0.73

 
$
1.10

Discontinued operations

 

 

 

Basic (Loss) Earnings Per Share
$
(0.11
)
 
$
0.25

 
$
0.73

 
$
1.10

Diluted (Loss) Earnings Per Share
 
 
 
 
 
 
 
Continuing operations
$
(0.11
)
 
$
0.25

 
$
0.73

 
$
1.09

Discontinued operations

 

 

 

Diluted (Loss) Earnings Per Share
$
(0.11
)
 
$
0.25

 
$
0.73

 
$
1.09

Dividends Declared Per Common Share
$

 
$
0.26

 
$
0.52

 
$
0.76

Basic Average Common Shares Outstanding
317.5

 
315.0

 
317.0

 
314.6

Diluted Average Common Shares
317.5

 
316.1

 
318.0

 
315.7

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

6

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)


NiSource Inc.
Condensed Statements of Consolidated Comprehensive (Loss) Income (unaudited)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions, net of taxes)
2015
 
2014
 
2015
 
2014
Net (Loss) Income
$
(27.7
)
 
$
78.2

 
$
247.6

 
$
344.4

Other comprehensive (loss) income
 
 
 
 
 
 
 
 Net unrealized (loss) gain on available-for-sale securities(1)
(1.2
)
 
0.5

 
(0.3
)
 
0.8

Net unrealized gain on cash flow hedges(2)
0.7

 
0.7

 
1.6

 
1.3

Unrecognized pension and OPEB benefit (cost)(3)
2.7

 
(0.1
)
 
2.9

 
0.1

Total other comprehensive income
2.2

 
1.1

 
4.2

 
2.2

Comprehensive (Loss) Income
$
(25.5
)
 
$
79.3


$
251.8


$
346.6

Less: Comprehensive income attributable to noncontrolling interest
8.7

 

 
15.6

 

Comprehensive (Loss) Income attributable to NiSource
$
(34.2
)
 
$
79.3


$
236.2


$
346.6

(1) Net unrealized (loss) gain on available-for-sale securities, net of $0.7 million tax benefit and $0.2 million tax expense in the second quarter of 2015 and 2014, respectively, and $0.2 million tax benefit and $0.4 million tax expense for the first six months of 2015 and 2014, respectively.

(2) Net unrealized gains on derivatives qualifying as cash flow hedges, net of $0.5 million and $0.4 million tax expense in the second quarter of 2015 and 2014, respectively, and $0.9 million and $0.8 million tax expense for the first six months of 2015 and 2014, respectively.

(3) Unrecognized pension and OPEB benefit (cost), net of $2.3 million tax expense and $0.7 million tax benefit in the second quarter of 2015 and 2014, respectively, and $2.2 million and $0.7 million tax expense for the first six months of 2015 and 2014, respectively.
The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.


7

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)


NiSource Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in millions)
June 30,
2015
 
December 31,
2014
ASSETS
 
 
 
Property, Plant and Equipment
 
 
 
Utility plant
$
26,225.2

 
$
25,234.8

Accumulated depreciation and amortization
(9,718.8
)
 
(9,578.6
)
Net utility plant
16,506.4

 
15,656.2

Other property, at cost, less accumulated depreciation
401.9

 
360.9

Net Property, Plant and Equipment
16,908.3

 
16,017.1

Investments and Other Assets
 
 
 
Unconsolidated affiliates
452.3

 
452.6

Other investments
200.7

 
210.4

Total Investments and Other Assets
653.0

 
663.0

Current Assets
 
 
 
Cash and cash equivalents
496.6

 
25.4

Restricted cash
25.2

 
24.9

Accounts receivable (less reserve of $38.1 and $25.2, respectively)
672.7

 
1,070.1

Gas inventory
259.2

 
445.1

Underrecovered gas costs
3.5

 
32.0

Materials and supplies, at average cost
112.4

 
106.0

Electric production fuel, at average cost
96.5

 
64.8

Exchange gas receivable
57.1

 
63.1

Regulatory assets
175.5

 
193.5

Deferred income taxes
303.8

 
272.1

Prepayments and other
133.2

 
169.5

Total Current Assets
2,335.7

 
2,466.5

Other Assets
 
 
 
Regulatory assets
1,673.7

 
1,696.4

Goodwill
3,666.2

 
3,666.2

Intangible assets
258.4

 
264.7

Deferred charges and other
111.6

 
92.4

Total Other Assets
5,709.9

 
5,719.7

Total Assets
$
25,606.9

 
$
24,866.3

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

8

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)


NiSource Inc.
Condensed Consolidated Balance Sheets (unaudited) (continued)
(in millions, except share amounts)
June 30,
2015
 
December 31,
2014
CAPITALIZATION AND LIABILITIES
 
 
 
Capitalization
 
 
 
NiSource Common Stockholders’ Equity
 
 
 
Common stock - $0.01 par value, 400,000,000 shares authorized; 317,668,149 and 316,037,421 shares outstanding, respectively
$
3.2

 
$
3.2

Additional paid-in capital
5,065.1

 
4,787.6

Retained earnings
1,561.1

 
1,494.0

Accumulated other comprehensive loss
(44.4
)
 
(50.6
)
Treasury stock
(79.1
)
 
(58.9
)
Total NiSource Common Stockholders’ Equity
6,505.9

 
6,175.3

Noncontrolling interest in consolidated subsidiaries
950.0

 

Total Equity
7,455.9

 
6,175.3

Long-term debt, excluding amounts due within one year
8,881.1

 
8,155.9

Total Capitalization
16,337.0


14,331.2

Current Liabilities
 
 
 
Current portion of long-term debt
442.6

 
266.6

Short-term borrowings
161.8

 
1,576.9

Accounts payable
429.2

 
670.6

Customer deposits and credits
206.9

 
294.3

Taxes accrued
221.5

 
266.7

Interest accrued
141.6

 
140.7

Overrecovered gas and fuel costs
198.6

 
45.6

Exchange gas payable
63.9

 
136.2

Deferred revenue
21.6

 
25.6

Regulatory liabilities
136.1

 
62.4

Accrued capital expenditures
146.3

 
61.1

Accrued liability for postretirement and postemployment benefits
5.9

 
5.9

Legal and environmental
34.5

 
24.2

Other accruals
313.8

 
378.1

Total Current Liabilities
2,524.3

 
3,954.9

Other Liabilities and Deferred Credits
 
 
 
Deferred income taxes
3,822.6

 
3,661.6

Deferred investment tax credits
16.1

 
17.3

Deferred credits
105.1

 
101.1

Accrued liability for postretirement and postemployment benefits
633.9

 
675.9

Regulatory liabilities
1,692.6

 
1,673.8

Asset retirement obligations
204.7

 
159.4

Other noncurrent liabilities
270.6

 
291.1

Total Other Liabilities and Deferred Credits
6,745.6

 
6,580.2

Commitments and Contingencies (Refer to Note 17)

 

Total Capitalization and Liabilities
$
25,606.9

 
$
24,866.3

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

9

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)

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

Six Months Ended June 30, (in millions)
2015
 
2014
Operating Activities
 
 
 
Net Income
$
247.6

 
$
344.4

Adjustments to Reconcile Net Income to Net Cash from Continuing Operations:
 
 
 
Loss on early extinguishment of debt
97.2

 

Depreciation and amortization
324.9

 
297.8

Net changes in price risk management assets and liabilities
0.1

 
1.4

Deferred income taxes and investment tax credits
119.2

 
186.8

Deferred revenue
6.8

 
1.6

Stock compensation expense and 401(k) profit sharing contribution
33.4

 
27.9

Gain on sale of assets
(13.5
)
 
(16.4
)
Income from unconsolidated affiliates
(28.4
)
 
(20.6
)
Loss from discontinued operations - net of taxes
0.3

 
0.5

Amortization of debt related costs
5.4

 
5.1

AFUDC equity
(13.3
)
 
(9.2
)
Distributions of earnings received from equity investees
27.9

 
12.9

Changes in Assets and Liabilities
 
 
 
Accounts receivable
385.6

 
176.4

Income tax receivable
(0.2
)
 
1.0

Inventories
146.8

 
28.2

Accounts payable
(249.6
)
 
(170.3
)
Customer deposits and credits
(114.8
)
 
(20.9
)
Taxes accrued
(44.7
)
 
(43.2
)
Interest accrued
0.9

 
5.5

Over (Under) recovered gas and fuel costs
181.5

 
(11.6
)
Exchange gas receivable/payable
(66.2
)
 
(112.3
)
Other accruals
(69.8
)
 
(47.6
)
Prepayments and other current assets
36.7

 
43.0

Regulatory assets/liabilities
125.4

 
14.8

Postretirement and postemployment benefits
(41.5
)
 
(61.8
)
Deferred credits
3.7

 
11.1

Deferred charges and other noncurrent assets
2.3

 
(0.3
)
Other noncurrent liabilities
12.0

 
7.8

Net Operating Activities from Continuing Operations
1,115.7

 
652.0

Net Operating Activities used for Discontinued Operations
(0.1
)
 
(1.0
)
Net Cash Flows from Operating Activities
1,115.6

 
651.0

Investing Activities
 
 
 
Capital expenditures
(991.1
)
 
(852.9
)
Insurance recoveries
2.1

 
6.8

Proceeds from disposition of assets
16.7

 
6.2

Restricted cash deposits
(0.3
)
 
(1.8
)
Distributions from (contributions to) equity investees
2.2

 
(54.8
)
Other investing activities
(23.4
)
 
(1.1
)
Net Cash Flows used for Investing Activities
(993.8
)
 
(897.6
)
Financing Activities
 
 
 
Issuance of common units of CPPL, net of issuance costs
1,168.4

 

Issuance of long-term debt
2,745.9

 

Repayments of long-term debt and capital lease obligations
(1,856.4
)
 
(13.3
)
Premiums and other debt related costs
(116.0
)
 

Change in short-term borrowings, net
(1,415.1
)
 
402.4

Issuance of common stock
12.4

 
16.1

Acquisition of treasury stock
(20.2
)
 
(10.2
)
Distributions to noncontrolling interest
(4.9
)
 

Dividends paid - common stock
(164.7
)
 
(157.2
)
Net Cash Flows from Financing Activities
349.4

 
237.8

Change in cash and cash equivalents from (used for) continuing operations
471.3

 
(7.8
)
Change in cash and cash equivalents used for discontinued operations

(0.1
)
 
(1.0
)
Cash and cash equivalents at beginning of period
25.4

 
26.8

Cash and Cash Equivalents at End of Period
$
496.6

 
$
18.0


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

10

Table of Contents

ITEM 1. FINANCIAL STATEMENTS (continued)


NiSource Inc.
Condensed Statement of Consolidated Equity (unaudited)
(in millions)
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Noncontrolling Interest in Consolidated Subsidiaries
 
Total
Balance as of January 1, 2015
$
3.2

 
$
(58.9
)
 
$
4,787.6

 
$
1,494.0

 
$
(50.6
)
 
$

 
$
6,175.3

Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income

 

 

 
232.0

 

 
15.6

 
247.6

Other comprehensive income, net of tax

 

 

 

 
4.2

 

 
4.2

Allocation of AOCI to noncontrolling interest

 

 

 

 
2.0

 
(2.0
)
 

Common stock dividends ($0.52 per share)

 

 

 
(164.9
)
 

 

 
(164.9
)
Treasury stock acquired

 
(20.2
)
 

 

 

 

 
(20.2
)
Distribution to noncontrolling interest ($0.09 per unit)

 

 

 

 

 
(4.9
)
 
(4.9
)
Issued:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common units of CPPL

 

 

 

 

 
1,168.4

 
1,168.4

Employee stock purchase plan

 

 
2.6

 

 

 

 
2.6

Long-term incentive plan

 

 
13.2

 

 

 

 
13.2

401(k) and profit sharing issuance

 

 
30.8

 

 

 

 
30.8

Dividend reinvestment plan

 

 
3.8

 

 

 

 
3.8

Sale of interest in Columbia OpCo to CPPL(1)

 

 
227.1

 

 

 
(227.1
)
 

Balance as of June 30, 2015
$
3.2

 
$
(79.1
)
 
$
5,065.1

 
$
1,561.1

 
$
(44.4
)
 
$
950.0

 
$
7,455.9

(1) Represents the purchase of an additional 8.4% limited partner interest in Columbia OpCo, recorded at the historical carrying value of Columbia OpCo's net assets after giving effect to the $1,168.4 million equity contribution.

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


11

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)

 
1.    Basis of Accounting Presentation

The accompanying Condensed Consolidated Financial Statements (unaudited) for NiSource Inc. ("NiSource" or the “Company”) reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with GAAP in the United States of America. The accompanying financial statements contain the accounts of the Company and its majority-owned or controlled subsidiaries, including Columbia Pipeline Group, Inc. ("CPG"). Refer to Note 21 for further information regarding the Separation of CPG from the Company, which was completed on July 1, 2015. Beginning with NiSource's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015, CPG will be reported as discontinued operations.
The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in NiSource’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Income for interim periods may not be indicative of results for the calendar year due to weather variations and other factors.

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

2.    Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim periods. Companies are permitted to adopt ASU 2014-09 on the original effective date of the ASU. NiSource is currently evaluating the impact the adoption of ASU 2014-09 will have on its Condensed Consolidated Financial Statements (unaudited) or Notes to Condensed Consolidated Financial Statements (unaudited).

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 clarifies guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. NiSource is required to adopt ASU 2015-05 for periods beginning after December 15, 2015, including interim periods, and the guidance is permitted to be applied either (1) prospectively to all agreements entered into or materially modified after the effective date or (2) retrospectively, with early adoption permitted. NiSource is currently evaluating the impact the adoption of ASU 2015-05 will have on the Condensed Consolidated Financial Statements (unaudited) or Notes to Condensed Consolidated Financial Statements (unaudited).

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 changes the way entities present debt issuance costs in financial statements by presenting issuance costs on the balance sheet as a direct deduction from the related debt liability rather than as a deferred charge. Amortization of these costs will continue to be reported as interest expense. NiSource is required to adopt ASU 2015-03 for periods beginning after December 15, 2015, including interim periods, and the guidance is to be applied retrospectively with early adoption permitted. NiSource is currently evaluating the impact the adoption of ASU 2015-03 will have on the Condensed Consolidated Financial Statements (unaudited) or Notes to Condensed Consolidated Financial Statements (unaudited).

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 amends consolidation guidance by including changes to the variable and voting interest models used by entities to evaluate whether an entity should be consolidated. NiSource is required to adopt ASU 2015-02 for periods beginning after December 15, 2015, including interim periods, and the guidance is to be applied retrospectively or using a modified retrospective approach, with early adoption permitted. NiSource is currently evaluating the impact the adoption of ASU 2015-02 will have on the Condensed Consolidated Financial Statements (unaudited) or Notes to Condensed Consolidated Financial Statements (unaudited).


12

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

3.    Columbia Pipeline Partners LP (CPPL)

On December 5, 2007, NiSource formed CPPL (the "Partnership") (NYSE: CPPL) to own, operate and develop a portfolio of pipelines, storage and related assets.

On February 11, 2015, CPPL completed its IPO of 53.8 million common units representing limited partnership interests, constituting 53.5% of the Partnership's outstanding limited partnership interests. The Partnership received $1,168.4 million of net proceeds from the IPO. NiSource, through CPG, owned the general partner of the Partnership, all of the Partnership's subordinated units and the incentive distribution rights. The assets of the Partnership consist of a 15.7 percent limited partner interest in Columbia OpCo, which consists of substantially all of the Columbia Pipeline Group Operations segment. The operations of the Partnership are consolidated in NiSource's financial statements for the three and six months ended June 30, 2015. Beginning July 1, 2015, CPG is no longer a subsidiary of NiSource and, thus, NiSource ceased to own (a) any interest in Columbia OpCo, (b) the general partner of the Partnership, (c) any of the limited partner interests in the Partnership or (d) any of the incentive distribution rights in the Partnership. As of June 30, 2015, the portion of CPPL owned by the public is reflected as a noncontrolling interest in the Condensed Consolidated Financial Statements (unaudited).
The table below summarizes the effects of the changes in NiSource's ownership interest in Columbia OpCo on equity for the three and six months ended June 30, 2015:
(in millions)
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
Net (loss) income attributable to NiSource
$
(36.4
)
 
$
232.0

Increase in NiSource's paid-in capital for the sale of 8.4% of Columbia OpCo

 
227.1

Change from net (loss) income attributable to NiSource and transfers to noncontrolling interest
$
(36.4
)
 
$
459.1

The Partnership maintains a $500.0 million revolving credit facility, of which $50.0 million is available for issuance of letters of credit. The purpose of the facility is to provide cash for general partnership purposes, including working capital, capital expenditures and the funding of capital calls. At June 30, 2015, CPPL had $20.0 million of outstanding borrowings under this facility.

4.    Earnings Per Share

Basic EPS is computed by dividing net income attributable to NiSource by the weighted-average number of shares of common stock outstanding for the period. The weighted average shares outstanding for diluted EPS includes the incremental effects of the various long-term incentive compensation plans. The numerator in calculating both basic and diluted EPS for each period is reported net income attributable to NiSource. The computation of diluted average common shares for the three months ended June 30, 2015 is not presented since NiSource had a loss from continuing operations and a net loss on the Condensed Statements of Consolidated (Loss) Income (unaudited) during the period and any incremental shares would have an antidilutive effect on EPS. The computation of diluted average common shares follows:
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands)
2014
 
2015
 
2014
Denominator
 
 
 
 
 
Basic average common shares outstanding
315,013

 
317,035

 
314,620

Dilutive potential common shares:
 
 
 
 
 
Stock options
41

 

 
39

Shares contingently issuable under employee stock plans
616

 
513

 
580

Shares restricted under stock plans
431

 
483

 
427

Diluted Average Common Shares
316,101

 
318,031

 
315,666


13

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 
5.    Gas in Storage
Both the LIFO inventory methodology and the weighted average cost methodology are used to value natural gas in storage. Gas Distribution Operations price natural gas storage injections at the average of the costs of natural gas supply purchased during the year. For interim periods, the difference between current projected replacement cost and the LIFO cost for quantities of gas temporarily withdrawn from storage is recorded as a temporary LIFO liquidation credit or debit within the Condensed Consolidated Balance Sheets (unaudited). Due to seasonality requirements, NiSource expects interim variances in LIFO layers to be replenished by year-end. NiSource had a temporary LIFO liquidation debit of $9.8 million and zero as of June 30, 2015 and December 31, 2014, respectively, for certain gas distribution companies recorded within “Prepayments and other,” on the Condensed Consolidated Balance Sheets (unaudited).

6.    Asset Retirement Obligations
Certain costs of removal that have been, and continue to be, included in depreciation rates and collected in the service rates of the rate-regulated subsidiaries are classified as “Regulatory liabilities” on the Condensed Consolidated Balance Sheets (unaudited).

Changes in NiSource’s liability for asset retirement obligations for the six months ended June 30, 2015 and 2014 are presented in the table below:
 
(in millions)
2015
 
2014
Balance as of January 1,
$
159.4

 
$
174.4

Accretion expense
0.6

 
0.8

Accretion recorded as a regulatory asset/liability
3.9

 
4.2

Additions
7.6

 
3.0

Settlements
(1.2
)
 
(1.0
)
Change in estimated cash flows(1)
34.4

 
(3.4
)
Balance as of June 30,
$
204.7

 
$
178.0

(1) The change in estimated cash flows is primarily attributable to estimated costs to comply with the EPA's final rule for regulation of CCRs and changes to cost estimates for certain solid waste management units. Refer to Note 17-C for additional information on CCRs.
 
7.    Regulatory Matters
Gas Distribution Operations Regulatory Matters

Significant Rate Developments. On November 25, 2014, Columbia of Ohio filed a Notice of Intent to file an application to adjust rates associated with its IRP and DSM Riders. Columbia of Ohio filed its Application on February 27, 2015, and requested authority to increase revenues by $24.7 million. On March 26, 2015, PUCO Staff filed Comments recommending that the PUCO approve Columbia of Ohio’s application in full. On April 22, 2015, the PUCO issued an Order that approved Columbia of Ohio's application. New rates went into effect on May 1, 2015.

On March 19, 2015, Columbia of Pennsylvania filed a base rate case with the Pennsylvania PUC, seeking a revenue increase of $46.2 million annually. The case is driven by Columbia of Pennsylvania’s capital investment program which exceeds $197.0 million in 2015 and $211.0 million in 2016 as well as costs to train and comply with pipeline safety-related operation and maintenance expenditures. Columbia of Pennsylvania's request for rate relief includes the recovery of costs that are projected to be incurred after the implementation of new rates, as authorized by the Pennsylvania General Assembly with the passage of Act 11 of 2012. New rates are expected to go into effect during the fourth quarter of 2015.

On May 1, 2015, Columbia of Massachusetts filed its 2015 TIRF compliance filing for recovery of calendar year 2014 eligible facilities requesting recovery of a revenue requirement of $13.9 million effective November 1, 2015. If approved, the 2015 TIRF would terminate on March 1, 2016 concurrent with the effective date of the new distribution rates in Columbia of Massachusetts' currently pending rate case.


14

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

On April 16, 2015, Columbia of Massachusetts filed a base rate case with the Massachusetts DPU. The case, which seeks increased annual revenues of approximately $49.0 million, is designed to support the company's continued focus on providing safe and reliable service in compliance with increasing state and federal regulations and oversight, and recovery of associated increased operations and maintenance costs. Columbia of Massachusetts has arrived at a settlement agreement in principle with the Attorney General in the case. The settlement agreement is expected to be finalized and filed for approval with the Massachusetts DPU in August 2015.

On April 30, 2014, Columbia of Virginia filed a base rate case with the VSCC seeking an annual revenue increase of $31.8 million. On December 10, 2014, Columbia of Virginia presented at hearing a Stipulation and Proposed Recommendation (“Stipulation”) executed by certain parties to the rate proceeding. The Stipulation includes a base revenue increase of $25.2 million, recovery of costs related to the implementation of pipeline safety programs, and the proposed change to thermal billing. On January 13, 2015, the Hearing Examiner issued a report that recommended that the VSCC approve the Stipulation. On March 30, 2015, the VSCC issued an Order Remanding for Further Action. In the Order, the VSCC found the revenue increase of $25.2 million contained in the Stipulation reasonable. However, the VSCC remanded back to the Hearing Examiner for further proceedings the manner in which fixed costs are to be assigned to the fixed customer charges of each rate class. Following a hearing on June 3, 2015, the Hearing Examiner issued a report on June 30, 2015 recommending specific customer charges for each rate class. VSCC action on the report is pending, and a final order is expected by the end of 2015.

Cost Recovery and Trackers. A significant portion of the distribution companies' revenue is related to the recovery of gas costs, the review and recovery of which occurs via standard regulatory proceedings. All states require periodic review of actual gas procurement activity to determine prudence and to permit the recovery of prudently incurred costs related to the supply of gas for customers. NiSource distribution companies have historically been found prudent in the procurement of gas supplies to serve customers.

Certain operating costs of the NiSource distribution companies are significant, recurring in nature, and generally outside the control of the distribution companies. Some states allow the recovery of such costs via cost tracking mechanisms. Such tracking mechanisms allow for abbreviated regulatory proceedings in order for the distribution companies to implement charges and recover appropriate costs. Tracking mechanisms allow for more timely recovery of such costs as compared with more traditional cost recovery mechanisms. Examples of such tracking mechanisms include GCR adjustment mechanisms, tax riders and bad debt recovery mechanisms.

Comparability of Gas Distribution Operations line item operating results is impacted by regulatory trackers that allow for the recovery in rates of certain costs such as bad debt expense. Increases in the expenses that are the subject of trackers, result in a corresponding increase in net revenues and therefore have essentially no impact on total operating income results.

Certain of the NiSource distribution companies have completed rate proceedings involving infrastructure replacement or are embarking upon regulatory initiatives to replace significant portions of their operating systems that are nearing the end of their useful lives. Each LDC's approach to cost recovery may be unique, given the different laws, regulations and precedent that exist in each jurisdiction.

NIPSCO has approval from the IURC to recover certain costs for gas transmission, distribution and storage system improvements. On February 27, 2015, NIPSCO filed gas TDSIC-2 which included $43.3 million of net capital expenditures for the period ended December 31, 2014. Given the Indiana Court of Appeals decision in NIPSCO's electric TDSIC filing (for further information, see "Electric Operations Regulatory Matters" below), NIPSCO elected to dismiss its TDSIC-2 filing in favor of supplying further detailed plan updates in the next proceeding, TDSIC-3, which NIPSCO expects to file by September 1, 2015. The TDSIC-3 filing will include net capital expenditures for the period ended June 30, 2015, inclusive of the $43.3 million from the TDSIC-2 filing.

Electric Operations Regulatory Matters

Significant Rate Developments. On July 19, 2012 and December 19, 2012, the FERC issued orders approving construction work in progress in rate base and abandoned plant cost recovery requested by NIPSCO for a 100-mile, 345 kV transmission project and its right to develop 50 percent of a 65-mile, 765 kV project. NIPSCO began recording revenue in the first quarter of 2013 using a forward looking rate, based on an average construction work in progress balance. For the six months ended June 30, 2015 and 2014, revenue of $10.0 million and $4.2 million, respectively, was recorded.

15

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)


On July 19, 2013, NIPSCO filed its electric TDSIC with the IURC. The filing included the seven-year plan of eligible investments for a total of approximately $1.1 billion with the majority of the spend occurring in years 2016 through 2020. On February 17, 2014, the IURC issued an order approving NIPSCO’s seven-year plan of eligible investments. The Order also granted NIPSCO ratemaking relief associated with the eligible investments through a rate adjustment mechanism. The NIPSCO Industrial Group and the OUCC filed Notices of Appeal with the Indiana Court of Appeals in response to the IURC's ruling. On November 25, 2014, NIPSCO’s requested TDSIC factors were approved on an interim basis and subject to refund, pending the outcome of the appeals of the IURC’s February 17, 2014 Orders. On April 8, 2015, the Court of Appeals issued an Order concluding that the IURC erred in approving NIPSCO’s seven-year plan given its lack of detail regarding the projects for years two through seven. The Court then remanded the decision to the IURC. On May 26, 2015, NIPSCO filed a settlement on remand which, among other things, requires NIPSCO to file an electric general rate case proceeding by December 31, 2015 and a new seven-year electric TDSIC plan following the filing of its next general rate case proceeding. This settlement is currently pending at the IURC, and a hearing was held on July 20, 2015. An order is expected in the third quarter of 2015.

Cost Recovery and Trackers. A significant portion of NIPSCO's revenue is related to the recovery of fuel costs to generate power and the fuel costs related to purchased power. These costs are recovered through a FAC, a standard, quarterly, “summary” regulatory proceeding in Indiana.

Certain operating costs of the Electric Operations are significant, recurring in nature, and generally outside the control of NIPSCO. The IURC allows for recovery of such costs via cost tracking mechanisms. Such tracking mechanisms allow for abbreviated regulatory proceedings in order for NIPSCO to implement charges and recover appropriate costs. Tracking mechanisms allow for more timely recovery of such costs as compared with more traditional cost recovery mechanisms. Examples of such mechanisms include electric energy efficiency programs, MISO non-fuel costs and revenues, resource capacity charges, and environmental related costs.

NIPSCO has approval from the IURC to recover certain environmental related costs through an ECT. Under the ECT, NIPSCO is permitted to recover (1) AFUDC and a return on the capital investment expended by NIPSCO to implement environmental compliance plan projects through an ECRM and (2) related operation and maintenance and depreciation expenses once the environmental facilities become operational through an EERM.

On April 22, 2015, the IURC issued an order on ECR-25 approving NIPSCO's request to begin earning a return on $734.1 million of net capital expenditures for the period ended December 31, 2014. The order also approved a revised capital cost estimate of $264.8 million for its Phase III multi-pollutant compliance plan projects related to the Unit 12 FGD, an increase from the previous IURC approved cost estimate of $246.3 million. On July 31, 2015, NIPSCO filed ECR-26 which included $776.5 million of net capital expenditures for the period ended June 30, 2015.

NIPSCO has approval from the IURC to recover certain costs for transmission and distribution system improvements through the electric TDSIC. On November 25, 2014, the IURC approved, on an interim basis and subject to refund pending the outcome of appeals, NIPSCO’s requested TDSIC factors associated with the eligible investments, which included $19.4 million of net capital expenditures for the period ended June 30, 2014. On February 26, 2015, NIPSCO filed electric TDSIC-2 which included $62.3 million of net capital expenditures for the period ended December 31, 2014. The TDSIC-2 proceeding is stayed pending the outcome of the remand. See further discussion regarding the electric TDSIC above.

Columbia Pipeline Group Operations Regulatory Matters

Columbia Transmission Customer Settlement. In January 2015, Columbia Pipeline Group Operations commenced the third year of the Columbia Transmission long-term system modernization program. The Columbia Pipeline Group Operations segment expects to invest approximately $300.0 million in modernization investments during 2015. Recovery of approximately $320.0 million of investments made in 2014 began on February 1, 2015.

Cost Recovery Trackers. A significant portion of the transmission and storage regulated companies' revenue is related to the recovery of their operating costs, the review and recovery of which occurs via standard regulatory proceedings with the FERC under section 4 of the Natural Gas Act. However, certain operating costs of the NiSource regulated transmission and storage companies are significant and recurring in nature, such as fuel for compression and lost and unaccounted for gas. The FERC allows for the recovery of such costs via cost tracking mechanisms. These tracking mechanisms allow the transmission and storage

16

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

companies' rates to fluctuate in response to changes in certain operating costs or conditions as they occur to facilitate the timely recovery of its costs incurred. The tracking mechanisms involve a rate adjustment that is filed at a predetermined frequency, typically annually, with the FERC and is subject to regulatory review before new rates go into effect. Other such costs under regulatory tracking mechanisms include upstream pipeline transmission, electric compression, operational purchases and sales of natural gas, and the revenue requirement for capital investments made under Columbia Transmission's long-term plan to modernize its interstate transmission system as discussed above.

8.    Fair Value
 
A.    Fair Value Measurements
Recurring Fair Value Measurements. The following tables present financial assets and liabilities measured and recorded at fair value on NiSource’s Condensed Consolidated Balance Sheets (unaudited) on a recurring basis and their level within the fair value hierarchy as of June 30, 2015 and December 31, 2014:
 
Recurring Fair Value Measurements
June 30, 2015 (in millions)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance as of June 30, 2015
Assets
 
 
 
 
 
 
 
Price risk management assets:
 
 
 
 
 
 
 
Commodity financial price risk programs
$
0.4

 
$

 
$
0.2

 
$
0.6

Available-for-sale securities
27.3

 
99.7

 

 
127.0

Total
$
27.7

 
$
99.7

 
$
0.2

 
$
127.6

Liabilities
 
 
 
 
 
 
 
Price risk management liabilities:
 
 
 
 
 
 
 
Commodity financial price risk programs
$
8.3

 
$

 
$

 
$
8.3

Total
$
8.3

 
$

 
$

 
$
8.3


Recurring Fair Value Measurements
December 31, 2014
(in millions)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance as of
December 31, 2014
Assets
 
 
 
 
 
 
 
Price risk management assets:
 
 
 
 
 
 
 
Commodity financial price risk programs
$
0.1

 
$

 
$

 
$
0.1

Available-for-sale securities
28.4

 
103.5

 

 
131.9

Total
$
28.5

 
$
103.5

 
$

 
$
132.0

Liabilities
 
 
 
 
 
 
 
Price risk management liabilities:
 
 
 
 
 
 
 
Commodity financial price risk programs
$
14.2

 
$

 
$
0.1

 
$
14.3

Total
$
14.2

 
$

 
$
0.1

 
$
14.3

Price risk management assets and liabilities primarily include NYMEX futures and NYMEX options which are commodity exchange-traded and non-exchange-based derivative contracts. Exchange-traded derivative contracts are based on unadjusted quoted prices in active markets and are classified within Level 1. These financial assets and liabilities are secured with cash on deposit with the exchange; therefore nonperformance risk has not been incorporated into these valuations. Certain non-exchange-traded derivatives are valued using broker or over-the-counter, on-line exchanges. In such cases, these non-exchange-traded derivatives are classified within Level 2. Non-exchange-based derivative instruments include swaps, forwards, and options. In certain instances, these instruments may utilize models to measure fair value. NiSource uses a similar model to value similar instruments. Valuation models utilize various inputs that include quoted prices for similar assets or liabilities in active markets,

17

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability, and market-corroborated inputs, i.e., inputs derived principally from or corroborated by observable market data by correlation or other means. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Certain derivatives trade in less active markets with a lower availability of pricing information and models may be utilized in the valuation. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3. Credit risk is considered in the fair value calculation of derivative instruments that are not exchange-traded. Credit exposures are adjusted to reflect collateral agreements which reduce exposures. As of June 30, 2015 and December 31, 2014, there were no material transfers between fair value hierarchies. Additionally, there were no changes in the method or significant assumptions used to estimate the fair value of NiSource’s financial instruments.
Commodity price risk resulting from derivative activities at NiSource’s rate-regulated subsidiaries is limited, since regulations allow recovery of prudently incurred purchased power, fuel and gas costs through the ratemaking process, including gains or losses on these derivative instruments. If states should explore additional regulatory reform, these subsidiaries may begin providing services without the benefit of the traditional ratemaking process and may be more exposed to commodity price risk. Some of NiSource’s rate-regulated utility subsidiaries offer commodity price risk products to its customers for which derivatives are used to hedge forecasted customer usage under such products. These subsidiaries do not have regulatory recovery orders for these products and are subject to gains and losses recognized in earnings due to hedge ineffectiveness.
Available-for-sale securities are investments pledged as collateral for trust accounts related to NiSource’s wholly-owned insurance company. Available-for-sale securities are included within “Other investments” in the Condensed Consolidated Balance Sheets (unaudited). Securities classified within Level 1 include U.S. Treasury debt securities which are highly liquid and are actively traded in over-the-counter markets. NiSource values corporate and mortgage-backed debt securities using a matrix pricing model that incorporates market-based information. These securities trade less frequently and are classified within Level 2. Total unrealized gains and losses from available-for-sale securities are included in other comprehensive income (loss). The amortized cost, gross unrealized gains and losses and fair value of available-for-sale debt securities at June 30, 2015 and December 31, 2014 were: 
June 30, 2015 (in millions)
Amortized
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair
Value
Available-for-sale debt securities
 
 
 
 
 
 
 
U.S. Treasury securities
$
27.5

 
$
0.2

 
$
(0.2
)
 
$
27.5

Corporate/Other bonds
99.5

 
0.7

 
(0.7
)
 
99.5

Total Available-for-sale debt securities
$
127.0

 
$
0.9

 
$
(0.9
)
 
$
127.0

December 31, 2014 (in millions)
Amortized
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair
Value
Available-for-sale debt securities
 
 
 
 
 
 
 
U.S. Treasury securities
$
30.8

 
$
0.3

 
$
(0.2
)
 
$
30.9

Corporate/Other bonds
100.6

 
1.0

 
(0.6
)
 
101.0

Total Available-for-sale debt securities
$
131.4

 
$
1.3

 
$
(0.8
)
 
$
131.9

For the three months ended June 30, 2015 and 2014, the net realized gain on the sale of available-for-sale U.S. Treasury debt securities was $0.1 million and zero, respectively. For the three months ended June 30, 2015 and 2014, the net realized gain on the sale of available-for-sale Corporate/Other bond debt securities was $0.1 million for each period.
For the six months ended June 30, 2015 and 2014, the net realized gain on sale of available-for-sale U.S. Treasury debt securities was $0.1 million for each period. For the six months ended June 30, 2015 and 2014, the net gain on the sale of available-for-sale Corporate/Other bond debt securities was $0.1 million and $0.2 million, respectively.
The cost of maturities sold is based upon specific identification. At June 30, 2015, approximately $2.2 million of U.S. Treasury debt securities have maturities of less than a year while the remaining securities have maturities of greater than one year. At June 30, 2015, approximately $7.9 million of Corporate/Other bonds have maturities of less than a year while the remaining securities have maturities of greater than one year.
There are no material items in the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ended June 30, 2015 and 2014.

18

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 
 
Non-recurring Fair Value Measurements. There were no significant non-recurring fair value measurements recorded during the six months ended June 30, 2015.

B.    Other Fair Value Disclosures for Financial Instruments. The carrying amount of cash and cash equivalents, restricted cash, notes receivable, customer deposits and short-term borrowings is a reasonable estimate of fair value due to their liquid or short-term nature. NiSource’s long-term borrowings are recorded at historical amounts.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate fair value.
Long-term Debt. The fair values of these securities are estimated based on the quoted market prices for the same or similar issues or on the rates offered for securities of the same remaining maturities. Certain premium costs associated with the early settlement of long-term debt are not taken into consideration in determining fair value. These fair value measurements are classified as Level 2 within the fair value hierarchy. For the six months ended June 30, 2015 and 2014, there were no changes in the method or significant assumptions used to estimate the fair value of the financial instruments.

The carrying amount and estimated fair values of financial instruments were as follows:
 
(in millions)
Carrying
Amount as of
June 30, 2015
 
Estimated Fair
Value as of
June 30, 2015
 
Carrying
Amount as of
Dec. 31, 2014
 
Estimated Fair
Value as of
Dec. 31, 2014
Long-term debt (including current portion)
$
9,323.7

 
$
9,958.4

 
$
8,422.5

 
$
9,505.7


9.    Transfers of Financial Assets
Transfers of accounts receivable are accounted for as secured borrowings resulting in the recognition of short-term borrowings on the Condensed Consolidated Balance Sheets (unaudited). The maximum amount of debt that can be recognized related to NiSource’s accounts receivable programs is $515 million.

All accounts receivables sold to the purchasers are valued at face value, which approximates fair value due to their short-term nature. The amount of the undivided percentage ownership interest in the accounts receivables sold is determined in part by required loss reserves under the agreements. Below is information about the accounts receivable securitization agreements entered into by NiSource’s subsidiaries.

Columbia of Ohio is under an agreement to sell, without recourse, substantially all of its trade receivables, as they originate, to CGORC, a wholly-owned subsidiary of Columbia of Ohio. CGORC, in turn, is party to an agreement with BTMU and BNS, under the terms of which it sells an undivided percentage ownership interest in its accounts receivable to commercial paper conduits sponsored by BTMU and BNS. This agreement was last renewed on October 17, 2014; the current agreement expires on October 16, 2015 and can be further renewed if mutually agreed to by all parties. The maximum seasonal program limit under the terms of the current agreement is $240 million. As of June 30, 2015, no accounts receivable had been transferred by CGORC. CGORC is a separate corporate entity from NiSource and Columbia of Ohio, with its own separate obligations, and upon a liquidation of CGORC, CGORC’s obligations must be satisfied out of CGORC’s assets prior to any value becoming available to CGORC’s stockholder.
NIPSCO is under an agreement to sell, without recourse, substantially all of its trade receivables, as they originate, to NARC, a wholly-owned subsidiary of NIPSCO. NARC, in turn, is party to an agreement with PNC and Mizuho under the terms of which it sells an undivided percentage ownership interest in its accounts receivable to PNC and a commercial paper conduit sponsored by Mizuho. This agreement was last renewed on August 27, 2014; the current agreement expires on August 26, 2015 and can be further renewed if mutually agreed to by all parties. The maximum seasonal program limit under the terms of the current agreement is $200 million. As of June 30, 2015, $141.8 million of accounts receivable had been transferred by NARC. NARC is a separate corporate entity from NiSource and NIPSCO, with its own separate obligations, and upon a liquidation of NARC, NARC’s obligations must be satisfied out of NARC’s assets prior to any value becoming available to NARC’s stockholder.


19

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Columbia of Pennsylvania is under an agreement to sell, without recourse, substantially all of its trade receivables, as they originate, to CPRC, a wholly-owned subsidiary of Columbia of Pennsylvania. CPRC, in turn, is party to an agreement with BTMU under the terms of which it sells an undivided percentage ownership interest in its accounts receivable to a commercial paper conduit sponsored by BTMU. The agreement with BTMU was last renewed on March 10, 2015, having a current scheduled termination date of March 9, 2016 and can be further renewed if mutually agreed to by both parties. The maximum seasonal program limit under the terms of the agreement is $75 million. As of June 30, 2015, no accounts receivable had been transferred by CPRC. CPRC is a separate corporate entity from NiSource and Columbia of Pennsylvania, with its own separate obligations, and upon a liquidation of CPRC, CPRC’s obligations must be satisfied out of CPRC’s assets prior to any value becoming available to CPRC’s stockholder.
The following table reflects the gross and net receivables transferred as well as short-term borrowings related to the securitization transactions as of June 30, 2015 and December 31, 2014 for Columbia of Ohio, NIPSCO and Columbia of Pennsylvania:
 
(in millions)
June 30, 2015
 
December 31, 2014
Gross Receivables
$
443.3

 
$
611.7

Less: Receivables not transferred
301.5

 
327.4

Net receivables transferred
$
141.8

 
$
284.3

Short-term debt due to asset securitization
$
141.8

 
$
284.3

Columbia of Ohio, NIPSCO and Columbia of Pennsylvania remain responsible for collecting on the receivables securitized and the receivables cannot be sold to another party.
 
10.    Goodwill
 
NiSource tests its goodwill for impairment annually as of May 1 unless indicators, events, or circumstances would require an immediate review. Goodwill is tested for impairment using financial information at the reporting unit level, which is consistent with the level of discrete financial information reviewed by operating segment management. NiSource's three reporting units are Columbia Distribution Operations, Columbia Transmission Operations and NIPSCO Gas Distribution Operations.

NiSource's goodwill assets as of June 30, 2015 were $3.7 billion pertaining primarily to the acquisition of Columbia on November 1, 2000. Of this amount, approximately $2.0 billion is allocated to Columbia Transmission Operations and $1.7 billion is allocated to Columbia Distribution Operations. In addition, NIPSCO Gas Distribution Operations' goodwill assets of $17.8 million at June 30, 2015 relate to the purchase of Northern Indiana Fuel and Light in March 1993 and Kokomo Gas in February 1992.

NiSource completed a quantitative ("step 1") fair value measurement of its reporting units during the May 1, 2012 goodwill test. The test indicated that the fair value of each of the reporting units that carry or are allocated goodwill substantially exceeded their carrying values, indicating that no impairment existed.

ASU 2011-08 allows entities testing goodwill for impairment the option of performing a qualitative ("step 0") assessment before calculating the fair value of a reporting unit for the goodwill impairment test. If a step 0 assessment is performed, an entity is no longer required to calculate the fair value of a reporting unit unless the entity determines that, based on that assessment, it is more likely than not that its fair value is less than its carrying amount.

NiSource applied the qualitative step 0 analysis to its reporting units for the annual impairment test performed as of May 1, 2015. For the current year test, NiSource assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units as compared to its base line May 1, 2012 step 1 fair value measurement. The results of this assessment indicated that it is not more likely than not that its reporting unit fair values are less than the reporting unit carrying values.

NiSource considered whether there were any events or changes in circumstances subsequent to the annual test that would reduce the fair value of any of the reporting units below their carrying amounts and necessitate another goodwill impairment test. No such indicators were noted that would require a subsequent goodwill impairment test during the second quarter of 2015.

 

20

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

11.    Income Taxes
NiSource’s interim effective tax rates reflect the estimated annual effective tax rates for 2015 and 2014, adjusted for tax expense associated with certain discrete items. The effective tax rates for the three months ended June 30, 2015 and 2014 were 35.8% and 33.5%, respectively. The effective tax rates for the six months ended June 30, 2015 and 2014 were 35.4% and 37.0%, respectively. These effective tax rates differ from the Federal tax rate of 35% primarily due to the effects of tax credits, state income taxes, utility ratemaking and other permanent book-to-tax differences.
The increase in the three month effective tax rate of 2.3% in 2015 versus 2014 is primarily attributed to the difference in the relative impact of permanent differences over pre-tax loss in 2015 and pre-tax income in 2014. The decrease in the six month effective tax rate of 1.6% is primarily due to the impact of the Indiana rate change in 2014 and pass through benefits of NiSource's non-controlling interests, offset by the effects of ratemaking.

There were no material changes recorded in 2015 to NiSource's uncertain tax positions as of December 31, 2014.

12.    Pension and Other Postretirement Benefits

NiSource provides defined contribution plans and noncontributory defined benefit retirement plans that cover its employees. Benefits under the defined benefit retirement plans reflect the employees’ compensation, years of service and age at retirement. Additionally, NiSource provides health care and life insurance benefits for certain retired employees. The majority of employees may become eligible for these benefits if they reach retirement age while working for NiSource. The expected cost of such benefits is accrued during the employees’ years of service. Current rates of rate-regulated companies include postretirement benefit costs, including amortization of the regulatory assets that arose prior to inclusion of these costs in rates. For most plans, cash contributions are remitted to grantor trusts.

For the six months ended June 30, 2015, NiSource has contributed $1.4 million to its pension plans and $15.2 million to its other postretirement benefit plans.

The following tables provide the components of the plans’ net periodic benefits cost (credit) for the three and six months ended June 30, 2015 and 2014:
 

Pension Benefits
 
Other Postretirement
Benefits
Three Months Ended June 30, (in millions)
2015
 
2014
 
2015
 
2014
Components of Net Periodic Benefit Cost (Credit)
 
 
 
 
 
 
 
Service cost
$
9.5

 
$
8.7

 
$
1.8

 
$
2.2

Interest cost
25.2

 
27.3

 
6.8

 
7.8

Expected return on assets
(46.2
)
 
(45.3
)
 
(9.3
)
 
(9.1
)
Amortization of prior service credit
(0.1
)
 

 
(1.4
)
 
(0.9
)
Recognized actuarial loss
15.9

 
11.9

 
1.1

 
0.1

Total Net Periodic Benefit Cost (Credit)
$
4.3

 
$
2.6

 
$
(1.0
)
 
$
0.1

 
Pension Benefits
 
Other Postretirement
Benefits
Six Months Ended June 30, (in millions)
2015
 
2014
 
2015
 
2014
Components of Net Periodic Benefit Cost (Credit)
 
 
 
 
 
 
 
Service cost
$
19.0

 
$
17.4

 
$
3.6

 
$
4.5

Interest cost
50.4

 
54.6

 
13.6

 
16.0

Expected return on assets
(92.4
)
 
(90.6
)
 
(18.6
)
 
(18.2
)
Amortization of prior service credit
(0.2
)
 

 
(2.8
)
 
(1.5
)
Recognized actuarial loss
31.8

 
23.8

 
2.2

 
0.1

Total Net Periodic Benefit Cost (Credit)
$
8.6

 
$
5.2

 
$
(2.0
)
 
$
0.9


21

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

13.    Variable Interests and Variable Interest Entities
In general, a VIE is an entity that (1) has an insufficient amount of at-risk equity to permit the entity to finance its activities without additional financial subordinated support provided by any parties, (2) whose at-risk equity owners, as a group, do not have power, through voting rights or similar rights, to direct activities of the entity that most significantly impact the entity’s economic performance or (3) whose at-risk owners do not absorb the entity’s losses or receive the entity’s residual return. A VIE is required to be consolidated by a company if that company is determined to be the primary beneficiary of the VIE.
NiSource consolidates those VIEs for which it is the primary beneficiary. NiSource considers quantitative and qualitative elements in determining the primary beneficiary. Qualitative measures include the ability to control an entity and the obligation to absorb losses or the right to receive benefits.
NiSource’s analysis includes an assessment of guarantees, operating leases, purchase agreements, and other contracts, as well as its investments and joint ventures. For items that have been identified as variable interests, or where there is involvement with an identified VIE, an in-depth review of the relationship between the relevant entities and NiSource is made to evaluate qualitative and quantitative factors to determine the primary beneficiary, if any, and whether additional disclosures would be required under the current standard.
NIPSCO has a service agreement with Pure Air, a general partnership between Air Products and Chemicals, Inc. and First Air Partners LP, under which Pure Air provides scrubber services to reduce sulfur dioxide emissions for Units 7 and 8 at the Bailly Generating Station. NiSource has made an exhaustive effort to obtain information needed from Pure Air to determine the status of Pure Air as a VIE. However, NIPSCO has not been able to obtain this information and, as a result, it is unclear whether Pure Air is a VIE and if NIPSCO is the primary beneficiary. NIPSCO will continue to request the information required to determine whether Pure Air is a VIE. NIPSCO has no exposure to loss related to the service agreement with Pure Air. Payments under this agreement were $10.7 million and $10.6 million for the six months ended June 30, 2015 and 2014, respectively. 

14.    Long-Term Debt

On May 22, 2015, CPG closed its placement of $2,750.0 million in aggregate principal amount of its senior notes, comprised of $500.0 million of 2.45% senior notes due 2018, $750.0 million of 3.30% senior notes due 2020, $1,000.0 million of 4.50% senior notes due 2025 and $500.0 million of 5.80% senior notes due 2045.

CPG made cash payments to NiSource of approximately $2.6 billion from the proceeds of the CPG senior notes offering. In May 2015, using proceeds from the cash payments from CPG, NiSource Finance settled its two bank term loans in the amount of $1,075.0 million and executed a tender offer for $750.0 million consisting of a combination of its 5.25% notes due 2017, 6.40% notes due 2018 and 4.45% notes due 2021. In conjunction with the debt retired, NiSource Finance recorded a $97.2 million loss on early extinguishment of long-term debt, primarily attributable to early redemption premiums.

15.    Short-Term Borrowings
During the second quarter of 2015, NiSource Finance maintained a $2.0 billion revolving credit facility with a syndicate of banks led by Barclays Capital with a termination date of September 28, 2018. The purpose of the facility is to fund ongoing working capital requirements including the provision of liquidity support for NiSource’s $1.5 billion commercial paper program, provide for issuance of letters of credit and also for general corporate purposes. At June 30, 2015, NiSource had no outstanding borrowings under this facility. In connection with and effective upon the Separation, the $2.0 billion revolving credit facility was amended to reduce the amount available to $1.5 billion and extend the termination date to July 1, 2020. Refer to Note 21 for further information.
NiSource Finance's commercial paper program has a program limit of up to $1.5 billion with a dealer group comprised of Barclays, Citigroup, Credit Suisse and Wells Fargo. At June 30, 2015, NiSource had no commercial paper outstanding.
As of June 30, 2015 and December 31, 2014, NiSource had $30.9 million of stand-by letters of credit outstanding of which $14.7 million were supported by the revolving credit facility.
During the second quarter of 2015, CPPL maintained a $500.0 million revolving credit facility, of which $50.0 million was available for issuance of letters of credit. The purpose of the facility is to provide cash for general partnership purposes, including working capital, capital expenditures and the funding of capital calls. At June 30, 2015, CPPL had $20.0 million of outstanding borrowings under this facility.

22

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Transfers of accounts receivable are accounted for as secured borrowings resulting in the recognition of short-term borrowings on the Condensed Consolidated Balance Sheets (unaudited) in the amount of $141.8 million and $284.3 million as of June 30, 2015 and December 31, 2014, respectively. Refer to Note 9 for additional information.
 
(in millions)
June 30,
2015
 
December 31,
2014
Commercial Paper weighted average interest rate of 0.82% at December 31, 2014
$

 
$
792.6

Credit facilities borrowings weighted average interest rate of 1.26% and1.44% at June 30, 2015 and December 31, 2014, respectively
20.0

 
500.0

Accounts receivable securitization facility borrowings
141.8

 
284.3

Total Short-Term Borrowings
$
161.8

 
$
1,576.9


Given their turnover and stated maturities are less than 90 days, cash flows related to the borrowings and repayments of the items listed above are presented net in the Condensed Statements of Consolidated Cash Flows (unaudited). 

16.    Share-Based Compensation

The NiSource stockholders originally approved and adopted the NiSource Inc. 2010 Omnibus Incentive Plan (the “Omnibus Plan”), at the Annual Meeting of Stockholders held on May 11, 2010. Stockholders re-approved the Omnibus Plan as amended at the Annual Meeting of Stockholders held on May 12, 2015. The Omnibus Plan provides for awards to employees and non-employee directors of incentive and nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. The Omnibus Plan provides that the number of shares of common stock of NiSource available for awards is 8,000,000 plus the number of shares subject to outstanding awards granted under either the long-term incentive plan approved by stockholders on April 13, 1994 ("1994 Plan") or the Director Stock Incentive Plan ("Director Plan"), that expire or terminate for any reason. No further awards are permitted to be granted under the 1994 Plan or the Director Plan. At June 30, 2015, there were 5,698,507 shares reserved for future awards under the Omnibus Plan.
NiSource recognized stock-based employee compensation expense of $2.9 million and $5.7 million for the three months ended June 30, 2015 and 2014, respectively, as well as related tax benefits of $1.0 million and $1.9 million, respectively. For the six months ended June 30, 2015 and 2014, stock-based employee compensation expense of $14.1 million and $11.0 million was recognized, respectively, as well as related tax benefits of $5.0 million and $4.1 million, respectively.
As of June 30, 2015, the total remaining unrecognized compensation cost related to nonvested awards amounted to $33.9 million, which will be amortized over the weighted-average remaining requisite service period of 2.2 years.
Restricted Stock Units and Restricted Stock. During the six months ended June 30, 2015, NiSource granted 548,592 restricted stock units and shares of restricted stock, subject to service conditions. The total grant date fair value of restricted stock units and shares of restricted stock was $22.2 million, based on the average market price of NiSource’s common stock at the date of each grant less the present value of any dividends not received during the vesting period, which will be expensed, net of forfeitures, over the vesting period which is generally three years. As of June 30, 2015, 777,456 nonvested (all of which are expected to vest) restricted stock units and shares of restricted stock were granted and outstanding.
401(k) Match, Profit Sharing and Company Contribution. NiSource has a voluntary 401(k) savings plan covering eligible employees that allows for periodic discretionary matches as a percentage of each participant’s contributions payable in shares of common stock. NiSource also has a retirement savings plan that provides for discretionary profit sharing contributions payable in shares of common stock to eligible employees based on earnings results; and eligible exempt employees hired after January 1, 2010 receive a non-elective company contribution of three percent of eligible pay payable in shares of common stock. For the quarters ended June 30, 2015 and 2014, NiSource recognized 401(k) match, profit sharing and non-elective contribution expense of $11.2 million and $8.4 million, respectively. For the six months ended June 30, 2015 and 2014, NiSource recognized 401(k) match, profit sharing and non-elective contribution expenses of $19.4 million and $16.9 million, respectively.


23

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

17.    Other Commitments and Contingencies
A.    Guarantees and Indemnities. As a part of normal business, NiSource and certain subsidiaries enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries. Such agreements include guarantees and stand-by letters of credit. These agreements are entered into primarily to support or enhance the creditworthiness otherwise attributed to a subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish the subsidiaries’ intended commercial purposes. The total guarantees and indemnities in existence at June 30, 2015 and the years in which they expire were:
 
(in millions)
Total
 
2015
 
2016
 
2017
 
2018
 
2019
 
After
Guarantees of subsidiaries debt
$
6,135.5

 
$
230.0

 
$
291.5

 
$
267.4

 
$
476.0

 
$
500.0

 
$
4,370.6

Accounts receivable securitization
141.8

 
141.8

 

 

 

 

 

Letters of credit
30.9

 
29.2

 
1.7

 

 

 

 

Other guarantees
103.1

 

 

 

 

 
1.7

 
101.4

Total commercial commitments (1)
$
6,411.3

 
$
401.0

 
$
293.2

 
$
267.4

 
$
476.0

 
$
501.7

 
$
4,472.0

 (1)This amount does not include CPG's issuance of $2,750.0 million of long-term debt, which is guaranteed by certain subsidiaries of CPG. Additionally, this amount does not include CPPL's outstanding borrowings of $20.0 million under its revolving credit facility, which is guaranteed by CPG and certain subsidiaries of CPG.

Guarantees of Subsidiaries Debt. NiSource has guaranteed the payment of $6,135.5 million of debt for various wholly-owned subsidiaries including NiSource Finance and Columbia of Massachusetts, and through a support agreement, for Capital Markets, which is reflected on NiSource’s Condensed Consolidated Balance Sheets (unaudited). The subsidiaries are required to comply with certain covenants under the debt indenture and in the event of default, NiSource would be obligated to pay the debt’s principal and related interest. NiSource does not anticipate its subsidiaries will have any difficulty maintaining compliance. On October 3, 2011, NiSource executed a Second Supplemental Indenture to the original Columbia of Massachusetts Indenture dated April 1, 1991, for the specific purpose of guaranteeing Columbia of Massachusetts’ outstanding unregistered medium-term notes.
Lines and Letters of Credit and Accounts Receivable Advances. During the second quarter of 2015, NiSource Finance maintained a $2.0 billion revolving credit facility with a syndicate of banks led by Barclays Capital with a termination date of September 28, 2018. The purpose of the facility is to fund ongoing working capital requirements including the provision of liquidity support for NiSource’s $1.5 billion commercial paper program, provide for issuance of letters of credit, and also for general corporate purposes. In connection with and effective upon the Separation, the $2.0 billion revolving credit facility was amended to reduce the amount available to $1.5 billion and extend the termination date to July 1, 2020. Refer to Note 21 for further information.
At June 30, 2015, NiSource had no borrowings under its five-year revolving credit facility, no commercial paper outstanding and $141.8 million outstanding under its accounts receivable securitization agreements. At June 30, 2015, NiSource had issued stand-by letters of credit of approximately $30.9 million for the benefit of third parties. See Note 15 for additional information.
Other Guarantees or Obligations. As of June 30, 2015, NiSource had on deposit a letter of credit with MUFG Union Bank, N.A., Collateral Agent, in a debt service reserve account in association with Millennium's notes as required under the Deposit and Disbursement Agreement that governs the Millennium notes. This account is to be drawn upon by the note holders in the event that Millennium is delinquent on its principal and interest payments. The value of NiSource’s letter of credit represents 47.5% (NiSource’s ownership interest in Millennium) of the debt service reserve account requirement, or $16.2 million. The total exposure for NiSource is $16.2 million. NiSource has an accrued liability of $1.5 million related to the inception date fair value of this guarantee as of June 30, 2015.
B.    Other Legal Proceedings. The Company is party to certain claims and legal proceedings arising in the ordinary course of business, none of which is deemed to be individually significant at this time. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s results of operations, financial position or liquidity. It is possible that if one or more of such matters were decided against the Company, the effects could be material to the Company’s results of operations in the period in which the Company would be required to record or adjust the related liability and could also be material to the Company’s cash flows in the periods the Company would be required to pay such liability.

24

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

C.    Environmental Matters. NiSource operations are subject to environmental statutes and regulations related to air quality, water quality, hazardous waste and solid waste. NiSource believes that it is in substantial compliance with those environmental regulations currently applicable to its operations.
It is management's continued intent to address environmental issues in cooperation with regulatory authorities in such a manner as to achieve mutually acceptable compliance plans. However, there can be no assurance that fines and penalties will not be incurred. Management expects a significant portion of environmental assessment and remediation costs to be recoverable through rates for certain NiSource companies.
As of June 30, 2015 and December 31, 2014, NiSource had recorded an accrual of approximately $136.3 million and $128.4 million, respectively, to cover environmental remediation at various sites. The current portion of this accrual is included in "Legal and environmental" in the Condensed Consolidated Balance Sheets (unaudited). The noncurrent portion is included in "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets (unaudited). NiSource accrues for costs associated with environmental remediation obligations when the incurrence of such costs is probable and the amounts can be reasonably estimated. The original estimates for cleanup can differ materially from the amount ultimately expended. The actual future expenditures depend on many factors, including currently enacted laws and regulations, the nature and extent of contamination, the method of cleanup and the availability of cost recovery from customers. These expenditures are not currently estimable at some sites. NiSource periodically adjusts its accrual as information is collected and estimates become more refined.
Air
The actions listed below could require further reductions in emissions from various emission sources. NiSource will continue to closely monitor developments in these matters.

Climate Change. Future legislative and regulatory programs could significantly restrict emissions of GHGs or could impose a cost or tax on GHG emissions.
National Ambient Air Quality Standards. The CAA requires the EPA to set NAAQS for particulate matter and five other pollutants considered harmful to public health and the environment. Periodically the EPA imposes new or modifies existing NAAQS. States that contain areas that do not meet the new or revised standards must take steps to maintain or achieve compliance with the standards. These steps could include additional pollution controls on boilers, engines, turbines and other facilities owned by electric generation, gas distribution, and gas transmission operations.
The following NAAQS were recently added or modified:
Ozone: On November 25, 2014, the EPA proposed to lower the 8-hour ozone standard from 75 ppb to within a range of 65-70 ppb. If the standard is finalized and the EPA proceeds with designations, areas where NiSource operates currently designated as attainment may be re-classified as non-attainment. NiSource will continue to monitor this matter and cannot estimate its impact at this time.
Nitrogen Dioxide (NO2): The EPA revised the NO2 NAAQS by adding a one-hour standard while retaining the annual standard. The new standard could impact some NiSource combustion sources. The EPA designated all areas of the country as unclassifiable/attainment in January 2012. After the establishment of a new monitoring network and possible modeling implementation, areas will potentially be re-designated sometime in 2016. States with areas that do not meet the standard will be required to develop rules to bring areas into compliance within five years of designation. Additionally, under certain permitting circumstances, emissions from some existing NiSource combustion sources may need to be assessed and mitigated. NiSource will continue to monitor this matter and cannot estimate the impact of these rules at this time.

Waste
NiSource subsidiaries are potentially responsible parties at waste disposal sites under the CERCLA (commonly known as Superfund) and similar state laws. Additionally, NiSource affiliates have retained environmental liabilities, including cleanup liabilities, associated with certain former operations.
A program has been instituted to identify and investigate former MGP sites where Gas Distribution Operations subsidiaries or predecessors may have liability. The program has identified 66 such sites where liability is probable. Remedial actions at many of these sites are being overseen by state or federal environmental agencies through consent agreements or voluntary remediation agreements.


25

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

NiSource utilizes a probabilistic model to estimate its future remediation costs related to its MGP sites. The model was prepared with the assistance of a third-party and incorporates NiSource and general industry experience with remediating MGP sites. NiSource completes an annual refresh of the model in the second quarter of each fiscal year. No material changes to the estimated future remediation costs were noted as a result of the refresh completed as of June 30, 2015. The total estimated liability at NiSource related to the facilities subject to remediation was $119.7 million and $121.5 million at June 30, 2015 and December 31, 2014, respectively. The liability represents NiSource’s best estimate of the probable cost to remediate the facilities. NiSource believes that it is reasonably possible that remediation costs could vary by as much as $25 million in addition to the costs noted above. Remediation costs are estimated based on the best available information, applicable remediation standards at the balance sheet date, and experience with similar facilities.
Additional Issues Related to Individual Business Segments

The sections below describe various regulatory actions that affect individual business segments for which NiSource has retained a liability.
Electric Operations.
Air
NIPSCO is subject to a number of air-quality mandates in the next several years. These mandates required NIPSCO to make capital improvements to its electric generating stations. The cost of capital improvements is estimated to be $870 million, of which approximately $78.3 million remains to be spent. This figure includes additional capital improvements associated with the New Source Review Consent Decree and the Utility Mercury and Air Toxics Standards Rule. NIPSCO believes that the capital costs are probable of recovery from customers.

Utility Mercury and Air Toxics Standards Rule: On December 16, 2011, the EPA finalized the MATS rule establishing new emissions limits for mercury and other air toxics. NIPSCO’s affected units have completed projects to meet the April 2015 compliance deadline. For NIPSCO’s remaining affected units, a one year compliance extension granted by IDEM delays the compliance date until April 2016. NIPSCO continues to implement an IURC-approved plan for the installation of additional environmental controls needed to comply with the MATS extension. On June 29, 2015, the United States Supreme Court remanded the MATS rule back to the United States Court of Appeals for the District of Columbia Circuit for further proceedings. The MATS rule remains in effect until the Court of Appeals issues a ruling. The timing for resolving the process is unclear at this time, NIPSCO will continue to monitor developments in this matter.

On June 2, 2014, the EPA proposed a GHG performance standard for existing fossil-fuel fired electric utility generating units under section 111(d) of the CAA. The proposed rule establishes state-specific CO2 emission rate goals applied to the state's fleet of fossil-fuel fired electric generating units, and requires each state to submit a plan indicating how the state will meet the EPA's emission rate goal, including possibly imposing reduction obligations on specific units. Final CO2 emission rate standards are expected to be set by the EPA by the third quarter of 2015, and state plans are required to be submitted to the EPA as early as the third quarter of 2016. The cost to comply with this rule will depend on a number of factors, including the requirements of the final federal regulation and the level of NIPSCO's required GHG reductions. It is possible that this new rule, comprehensive federal or state GHG legislation, or other GHG regulation could result in additional expense or compliance costs that could materially impact NiSource's financial results. NIPSCO will continue to monitor this matter and cannot estimate its impact at this time.

Water
On August 15, 2014, the EPA published the final Phase II Rule of the Clean Water Act Section 316(b), which requires all large existing steam electric generating stations to meet certain performance standards to reduce the effects on aquatic organisms at their cooling water intake structures. Under this rule, stations will have to either demonstrate that the performance of their existing fish protection systems meet the new standards or develop new systems, such as a closed-cycle cooling tower. The cost to comply will depend on a number of factors, including evaluation of the various compliance options available under the regulation and permitting-related determinations by IDEM. NIPSCO estimates that the cost of compliance is between $4 million and $35 million, dependent upon study results, agency requirements and technology ultimately required to achieve compliance.

On June 7, 2013, the EPA published a proposed rule to amend the effluent limitations guidelines and standards for the Steam Electric Power Generating category. These proposed regulations could impose new water treatment requirements on NIPSCO’s electric generating facilities. A final rule is expected in the fourth quarter of 2015. NIPSCO will continue to monitor developments in this matter and cannot estimate the cost of compliance at this time.

26

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Waste
On April 17, 2015, the EPA released a final rule for regulation of CCRs. The rule regulates CCRs under the Resource Conservation and Recovery Act Subtitle D, which determines them to be non-hazardous. The rule will require increased groundwater monitoring, reporting, recordkeeping and posting related information to the Internet. The rule also establishes requirements related to CCR management, impoundments, landfills and storage. The rule will allow NIPSCO to continue its byproduct beneficial use program.

The publication of the CCR rule resulted in revisions to previously recorded legal obligations associated with the retirement of certain NIPSCO facilities. The actual asset retirement costs related to the CCR rule may vary substantially from the estimates used to record the increased asset retirement obligation due to the uncertainty about the compliance strategies that will be used and the preliminary nature of available data used to estimate costs. Refer to Note 6 for further information. In addition, in order to comply with the rule NIPSCO will be required to incur future capital expenditures to modify its infrastructure and manage CCRs. As allowed by the EPA, NIPSCO will continue to collect data over time to determine the nature, extent and cost of these future capital expenditures. Given the preliminary stage of this data collection, NIPSCO is unable to estimate a range for these future capital expenditures at this time.

D.     Other Matters.

Transmission Upgrade Agreements. On February 11, 2014, NIPSCO entered into two TUAs with upgrade sponsors to complete upgrades on NIPSCO’s transmission system on behalf of those sponsors. The upgrade sponsors agreed to reimburse NIPSCO for the total cost to construct transmission upgrades and place them into service, multiplied by a rate of 1.71 ("the multiplier").

On June 10, 2014, certain upgrade sponsors for both TUAs filed a complaint at the FERC against NIPSCO regarding the multiplier stated in the TUAs. On June 30, 2014, NIPSCO filed an answer defending the terms of the TUAs and the just and reasonable nature of the multiplier charged therein and moved for dismissal of the complaint. On December 8, 2014, the FERC issued an order in response to the complaint finding that it is appropriate for NIPSCO to recover, through the multiplier, substantiated costs of ownership related to the TUAs. The FERC set for hearing the issue of what constitutes the incremental costs NIPSCO will incur, but is holding that hearing in abeyance to allow for settlement. NIPSCO will continue to monitor developments in this matter and does not believe the impact is material to the Condensed Consolidated Financial Statements (unaudited).

Springfield, Massachusetts. On November 23, 2012, while Columbia of Massachusetts was investigating the source of an odor of gas at a service location in Springfield, Massachusetts, a gas service line was pierced and an explosion occurred. While this explosion impacted multiple buildings and resulted in several injuries, no life threatening injuries or fatalities have been reported. Columbia of Massachusetts fully cooperated with both the Massachusetts DPU and the Occupational Safety & Health Administration in their investigations of this incident, which have been concluded. Columbia of Massachusetts believes any costs associated with damages, injuries and other losses related to this incident are substantially covered by insurance. Any amounts not covered by insurance are not expected to have a material impact on NiSource's consolidated financial statements. In accordance with GAAP, NiSource recorded any accruals and the related insurance recoveries resulting from this incident on a gross basis within the Condensed Consolidated Balance Sheets (unaudited).
 


27

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

18.    Accumulated Other Comprehensive Loss
The following tables display the components of Accumulated Other Comprehensive Loss for the three and six months ended June 30, 2015 and 2014:
Three Months Ended June 30, 2015 (in millions)
Gains and Losses on Securities(1)
 
Gains and Losses on Cash Flow Hedges(1)
 
Pension and OPEB Items(1)
 
Accumulated
Other
Comprehensive
Loss(1)
Balance as of April 1, 2015
$
1.2

 
$
(20.7
)
 
$
(27.1
)
 
$
(46.6
)
Other comprehensive income before reclassifications
(1.2
)
 

 
2.5

 
1.3

Amounts reclassified from accumulated other comprehensive income

 
0.7

 
0.2

 
0.9

Net current-period other comprehensive (loss) income
(1.2
)
 
0.7

 
2.7

 
2.2

Balance as of June 30, 2015
$

 
$
(20.0
)
 
$
(24.4
)
 
$
(44.4
)
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015 (in millions)
Gains and Losses on Securities(1)
 
Gains and Losses on Cash Flow Hedges(1)
 
Pension and OPEB Items(1)
 
Accumulated
Other
Comprehensive
Loss(1)
Balance as of January 1, 2015
$
0.3

 
$
(23.6
)
 
$
(27.3
)
 
$
(50.6
)
Other comprehensive income before reclassifications
(0.2
)
 

 
2.5

 
2.3

Amounts reclassified from accumulated other comprehensive income
(0.1
)
 
1.6

 
0.4

 
1.9

Net current-period other comprehensive (loss) income
(0.3
)
 
1.6

 
2.9

 
4.2

Allocation of AOCI to noncontrolling interest

 
2.0

 

 
2.0

Balance as of June 30, 2015
$

 
$
(20.0
)
 
$
(24.4
)
 
$
(44.4
)
Three Months Ended June 30, 2014 (in millions)
Gains and Losses on Securities(1)
 
Gains and Losses on Cash Flow Hedges(1)
 
Pension and OPEB Items(1)
 
Accumulated
Other
Comprehensive
Loss
(1)
Balance as of April 1, 2014
$

 
$
(25.2
)
 
$
(17.3
)
 
$
(42.5
)
Other comprehensive income before reclassifications
0.5

 

 
(0.3
)
 
0.2

Amounts reclassified from accumulated other comprehensive income

 
0.7

 
0.2

 
0.9

Net current-period other comprehensive income (loss)
0.5

 
0.7

 
(0.1
)
 
1.1

Balance as of June 30, 2014
$
0.5

 
$
(24.5
)
 
$
(17.4
)
 
$
(41.4
)
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014 (in millions)
Gains and Losses on Securities(1)
 
Gains and Losses on Cash Flow Hedges(1)
 
Pension and OPEB Items(1)
 
Accumulated
Other
Comprehensive
Loss(1)
Balance as of January 1, 2014
$
(0.3
)
 
$
(25.8
)
 
$
(17.5
)
 
$
(43.6
)
Other comprehensive income before reclassifications
1.0

 
0.1

 
(0.3
)
 
0.8

Amounts reclassified from accumulated other comprehensive income
(0.2
)
 
1.2

 
0.4

 
1.4

Net current-period other comprehensive income
0.8

 
1.3

 
0.1

 
2.2

Balance as of June 30, 2014
$
0.5

 
$
(24.5
)
 
$
(17.4
)
 
$
(41.4
)
(1)All amounts are net of tax. Amounts in parentheses indicate debits.




28

Table of Contents
ITEM 1. FINANCIAL STATEMENTS (continued)
NiSource Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Equity Investment
As Millennium is an equity method investment, NiSource is required to recognize a proportional share of Millennium’s OCI. The remaining unrecognized loss at June 30