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 ~~September 30~~March 31, ~~2019~~ 2020



o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-49807

WASHINGTON GAS LIGHT COMPANY

(Exact name of Registrant as Specified in Its Charter)

1000 Maine Ave., S.W.

Washington, D.C. 20024

(Address of Principal Executive Offices and Zip Code)

(703) 750-4440

(Registrant’'s telephone number, including area code)

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant: (1) has filed all reports required~~ to ~~be filed by~~ Section 13 ~~or 15~~12(db) of the ~~Securities Exchange~~ Act: of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ü] No [ ]None

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Common stock, $1.00 par value

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 [ü] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ü] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “"emerging growth company”" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes [ ] No [ü]

Securities registered pursuant to Section 12(b) of the Act: None.

As of ~~October~~ April 30, ~~2019~~2020, there were 46,479,536 shares of registrant common stock, $1 par value, outstanding. All of the outstanding shares of common stock are held by Wrangler SPE LLC, an indirect wholly owned subsidiary of AltaGas Ltd.

REDUCED DISCLOSURE FORMAT

Washington Gas Light Company, an indirect wholly owned subsidiary of AltaGas Ltd., meets the requirements set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

Washington Gas Light Company

For the Quarter Ended ~~September 30~~March 31, ~~2019~~2020

Table of Contents

PART I. Financial Information
PART I
Safe Harbor for Forward-Looking Statements		34
Item 1.	Financial Statements (Unaudited)
	Condensed Balance Sheets	56
	Condensed Statements of Operations	67
	Condensed Statements of Comprehensive Income	78
	Condensed Statements of Cash Flows	89
	Notes to Condensed Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3530
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5236
Item 4.	Controls and Procedures	5237
PART II. Other Information
Item 1.	Legal Proceedings	5338
Item 1A.	Risk Factors	5338
Item 4.	Mine Safety Disclosures	5340
Item 6.	Exhibits	5441
Signature		5542

(i)

Washington Gas Light Company

Part I-Financial Information

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Washington Gas Light Company (Washington Gas) is an indirect, ~~majority-~~wholly owned subsidiary of, among other entities, WGL Holdings, Inc (WGL). WGL is an indirect wholly owned subsidiary of AltaGas Ltd. (AltaGas). Except where the content clearly indicates otherwise, any reference in this report to “Washington Gas”,” “we,” “us,”, “our” or “the Company,” refers to Washington Gas Light Company. References to “WGL” refer to WGL Holdings, Inc. and all of its subsidiaries.

Certain matters discussed in this report, excluding historical information, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the outlook for earnings, dividends, revenues and other future financial business performance, strategies, financing plans, AltaGas’' integration of us and other expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates,” “expects,” “anticipates,” “intends,” “believes,” “plans” and similar expressions, or future or conditional terms such as “will,” “should,” “would” and “could.” Forward-looking statements speak only as of the filing date of this report, and the registrant assumes no duty to update them. Factors that could cause actual results to differ materially from forward-looking statements or historical performance include those discussed in Item 1A. Risk Factors in the Company’s ~~Transition~~Annual Report on Form 10-K for the ~~three~~fiscal ~~months~~year ended December 31, ~~2018 (Form 10-KT)~~2019, and may include, but are not limited to the following:

• Impacts related to the ~~inability~~outbreak of COVID-19, a strain of novel coronavirus disease, which the World Health Organization declared a global health pandemic on March 11, 2020, that has spread rapidly and led to ~~successfully~~widespread ~~integrate~~efforts ~~into~~to halt the ~~operations~~disease’s ofspread, ~~AltaGas~~including business closures, travel restrictions, quarantines, and agovernmental ~~failure~~orders requiring individuals to ~~realize~~remain ~~anticipated~~in ~~benefits~~their homes;

• ~~the~~hazards ~~effect~~involved ofin the ~~consummation of the merger (as defined below) on our ability to maintain supplier relationships~~storage, ~~keep customers~~transportation, and ~~retain~~moving ~~and~~of ~~hire~~marketing ~~key~~of ~~personnel~~hydrocarbon products;

• ~~unexpected~~leaks, ~~costs~~mechanical ~~incurred~~problems, inincidents, ~~connection~~or ~~with~~other operational issues could affect public safety and the ~~merger~~reliability of Washington Gas’ distribution system;

• the ~~inability~~availability toof ~~meet~~natural ~~commitments~~gas ~~under~~supply ~~various~~or ~~orders~~an ~~and~~inability ~~agreements~~to ~~associated~~obtain ~~with~~an ~~regulatory~~adequate ~~approvals~~supply ~~for~~of ~~the~~gas ~~merger,~~to ~~which~~satisfy ~~could~~present ~~have a detrimental impact on our business, financial condition, operating results~~ and ~~prospects~~future demands;


•	challenges in securing the necessary transportation or storage capacity to deliver or acquire the volume of gas necessary to meet customer demands and future growth expectations;


•	cyberattacks, including cyberterrorism, or other information technology security breaches or failures;


•	the inability to meet commitments under various orders and agreements associated with regulatory approvals for the Merger;


•	the Merger may not achieve its expected results and Washington Gas may be unable to successfully integrate into the operations of AltaGas;


•	the occurrence of unexpected costs in connection with the Merger;


•	securities class action suits and derivative suits;


•	the loss of certain administrative and management functions and services provided by AltaGas;

• ~~potential~~changes ~~litigation~~ in ~~connection~~AltaGas' strategy or relationship with ~~the~~Washington ~~merger~~Gas that could affect our performance or operations;

• ~~changes~~the inability ~~AltaGas’~~to ~~strategy~~access orcapital ~~relationship~~and ~~with~~the costs at which Washington Gas ~~that~~is ~~could~~able ~~affect~~to ~~our~~access ~~performance~~capital orand ~~operations~~credit markets, including changes in the credit ratings of Washington Gas, WGL, and AltaGas;

• changes in our credit rating, WGL’s, or AltaGas’ credit ratings, and disruptions in credit market conditions or other factors that may affect our access to and cost of capital;

• the level and rate at which we incur costs and expenses, and the extent to which we are allowed to recover from customers, through the regulatory process, such costs and expenses relating to constructing, operating and maintaining our distribution system;

• the availability of natural gas supply, interstate pipeline transportation and storage capacity;

• leaks, mechanical problems, incidents or other operational issues in our natural gas distribution system, including the effectiveness of our efforts to mitigate the effects of receiving low-HHC natural gas;

• changes in laws and regulations affecting our business, including in the areas of the environment, pipeline integrity, and employment;

• changes in energy commodity market conditions, including the relative prices of alternative forms of energy such as electricity, fuel oil and propane;


•	disruptions or decline in the local economy in which Washington Gas operates;

• strikes or work stoppages by unionized employees;

• adjustment to the cost of providing retirement plan benefits;

• changes to government fiscal and trade policies;

• security breaches of our information technology infrastructure, including cyber-attacks and cyber-terrorism;

Washington Gas Light Company

Part I-Financial Information

• acts of nature and catastrophic events, including terrorist acts;


•	the credit-worthiness of customers; suppliers and derivatives counterparties;


•	changes in the value of derivative contracts and the availability of suitable derivative counterparties;


•	rules implementing the derivatives transaction provisions of the Dodd-Frank Act may impose costs on our derivatives activities;

Washington Gas Light Company

Part I-Financial Information


•	failures of Washington Gas service providers that could negatively impact the Company’s business;


•	compliance with Section 404(a) of Sarbanes-Oxley Act;


•	acts of nature and catastrophic events, including terrorist acts;


•	an inability to attract and retain key management and sufficiently skilled operational personnel;


•	strikes or work stoppages by unionized employees;


•	changes in the costs of providing retirement plan benefits;


•	the extent to which we are allowed to recover from our customers, through the regulatory process, costs and expenses related to our operations and the ability of the Company to earn a reasonable rate of return on its invested capital;


•	concerns involving climate change and the movement for carbon neutral energy sources;


•	changes in energy commodity market conditions, including the relative prices of alternative forms of energy such as electricity, fuel oil and propane;


•	physical and financial risks associated with climate change;


•	unusual weather conditions and changes in natural gas consumption patterns;

• ~~legislative,~~costs ~~regulatory,~~associated ~~and~~with ~~judicial~~certain ~~mandates~~legacy ~~or decisions affecting our~~ operations, ~~including interpretations~~ of ~~the~~Washington ~~Tax~~Gas ~~Cuts~~ and ~~Jobs~~environmental ~~Act~~remediation ~~of 2017 (Tax Act)~~efforts;

• ~~our~~the ~~ability~~outcome toof ~~manage~~new ~~the~~and ~~outsourcing~~existing ofmatters ~~several~~before ~~business~~courts, ~~processes~~regulators, government agencies or arbitrators;

• ~~the~~changes ~~outcome~~to ~~of new and existing matters before courts, regulators,~~ government ~~agencies~~fiscal ~~or arbitrators, including that relating to the August 2016 explosion~~ and ~~fire~~trade ~~at an apartment complex in Silver Spring, Maryland~~policies;


•	regulatory and financial risks related to pipeline safety legislation;


•	changes to the tax code and our ability to quantify such changes and seek recovery for the manner in which corporate taxes are shared with customers; and


•	changes in accounting principles and the effect of accounting pronouncements issued periodically by accounting standard-setting bodies.

All such factors are difficult to predict accurately and are generally beyond the direct control of the registrant. Readers are urged to use care and consider the risks, uncertainties and other factors that could affect the registrant’s business as described in this Quarterly Report on Form 10-Q.

Washington Gas Light Company

Condensed Balance Sheets (Unaudited)

Part I-Financial Information

	September 30,			December 31,
(In thousands)	2019			2018
ASSETS
Property, Plant and Equipment
At original cost	$	5,997,026		$	5,702,927
Accumulated depreciation and amortization	(1,580,141		)	(1,513,590		)
Net property, plant and equipment	4,416,885			4,189,337
Current Assets
Cash and cash equivalents	1			6,082
Receivables
Accounts receivable	175,571			292,871
Gas costs and other regulatory assets	11,100			6,020
Unbilled revenues	66,230			189,497
Allowance for doubtful accounts	(25,739		)	(29,461		)
Net receivables	227,162			458,927
Materials and supplies—principally at average cost	19,870			19,727
Storage gas	92,450			103,929
Prepaid taxes	30,984			27,193
Other prepayments	22,035			28,232
Receivables from associated companies	8,800			4,819
Derivatives	3,562			19,488
Other	4,378			20,347
Total current assets	409,242			688,744
Deferred Charges and Other Assets
Regulatory assets
Gas costs	91,913			141,636
Pension and other post-retirement benefits	77,200			86,493
Other	82,116			99,105
Prepaid post-retirement benefits	254,837			249,462
Right of use asset	40,966			—
Derivatives	8,462			11,318
Other	50,098			50,490
Total deferred charges and other assets	605,592			638,504
Total Assets	$	5,431,719		$	5,516,585
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholder’s equity	$	1,539,947		$	1,562,573
Preferred stock	28,173			28,173
Long-term debt	1,331,116			1,035,033
Total capitalization	2,899,236			2,625,779
Current Liabilities
Current maturities of long-term debt	50,000			50,000
Notes payable and project financing	117,000			311,460
Accounts payable and other accrued liabilities	182,784			288,376
Wages payable	20,947			22,629
Accrued interest	4,193			14,504
Dividends declared	—			24,567
Customer deposits and advance payments	42,859			54,370
Gas costs and other regulatory liabilities	71,978			75,151
Accrued taxes	35,281			28,451
Payables to associated companies	68,066			95,228
Operating lease liability	5,632			—
Derivatives	12,775			20,295
Other	7,266			7,507
Total current liabilities	618,781			992,538
Deferred Credits
Unamortized investment tax credits	2,739			3,233
Deferred income taxes	431,408			454,248
Accrued pensions and benefits	165,365			156,210
Asset retirement obligations	308,470			300,769
Regulatory liabilities
Accrued asset removal costs	245,334			264,556
Other post-retirement benefits	109,934			121,345
Excess deferred taxes and other	400,248			431,913
Operating lease liability	54,686			—
Derivatives	105,101			116,847
Other	90,417			49,147
Total deferred credits	1,913,702			1,898,268
Commitments and Contingencies (Note 10)
Total Capitalization and Liabilities	$	5,431,719		$	5,516,585

Item 1-Financial Statements



(In thousands)	March 31, 2020			December 31, 2019
ASSETS
Property, Plant and Equipment
At original cost	$	6,046,692		$	5,962,866
Accumulated depreciation and amortization	(1,603,239		)	(1,579,718		)
Net property, plant and equipment	4,443,453			4,383,148
Current Assets
Cash and cash equivalents	42,418			17,069
Receivables (net of allowance for doubtful accounts of $18,829 and $18,708, respectively)	340,198			400,891
Gas costs and other regulatory assets	35,217			9,894
Materials and supplies—principally at average cost	19,964			20,184
Storage gas	31,547			87,977
Prepaid taxes	30,865			34,576
Other prepayments	29,695			33,867
Receivables from associated companies	14,042			12,421
Derivatives	11,248			6,553
Other	11,491			19,619
Total current assets	566,685			643,051
Deferred Charges and Other Assets
Regulatory assets
Gas costs	60,069			98,717
Pension and other post-retirement benefits	36,175			39,435
Other	82,682			84,886
Prepaid post-retirement benefits	368,542			366,508
Right of use asset	39,045			40,004
Derivatives	15,540			10,370
Other	35,825			30,620
Total deferred charges and other assets	637,878			670,540
Total Assets	$	5,648,016		$	5,696,739
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholder’s equity	$	1,798,678		$	1,572,196
Long-term debt	1,431,093			1,430,949
Total capitalization	3,229,771			3,003,145
Current Liabilities
Notes payable	45,511			299,483
Accounts payable and other accrued liabilities	219,773			267,408
Customer deposits and advance payments	33,103			40,052
Gas costs and other regulatory liabilities	87,109			105,399
Accrued taxes	29,280			23,781
Payables to associated companies	71,193			57,923
Operating lease liability	5,752			5,850
Derivatives	6,166			4,069
Other	29,788			30,032
Total current liabilities	527,675			833,997
Deferred Credits
Deferred income taxes	510,201			462,475
Accrued pensions and benefits	119,461			115,837
Asset retirement obligations	208,946			206,820
Regulatory liabilities
Accrued asset removal costs	254,213			254,429
Other post-retirement benefits	196,545			199,665
Excess deferred taxes and other	401,279			404,700
Operating lease liability	52,593			53,642
Derivatives	91,760			97,695
Other	55,572			64,334
Total deferred credits	1,890,570			1,859,597
Commitments and Contingencies (Note 11)
Total Capitalization and Liabilities	$	5,648,016		$	5,696,739

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Operations (Unaudited)

Part I-Financial Information

Item 1. -Financial Statements (continued)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
(In thousands)	~~2019~~2020			~~2018~~2019			~~2019~~		~~2018~~
OPERATING REVENUES	$	~~122~~501,~~305~~735		$	~~139~~593,~~041~~653		$	~~914,442~~	$	~~870,593~~
OPERATING EXPENSES
Utility cost of gas	$141,951	~~33,433~~		20242,~~939~~263			~~331,285~~		~~282,298~~
Operation and maintenance	~~101~~102,~~195~~678			~~282~~111,~~793~~002			~~300,433~~		~~461,808~~
Depreciation and amortization	3435,~~383~~870			3335,~~914~~189			~~106,623~~		~~101,425~~
General taxes and other assessments	2650,~~344~~069			2652,~~857~~619			~~106,709~~		~~108,195~~
Total Operating Expenses	~~195~~330,~~355~~568			~~364~~441,~~503~~073			~~845,050~~		~~953,726~~
OPERATING INCOME (LOSS)	(73,050		)	(225,462		)	69,392		(83,133		)
OPERATING INCOME	171,167			152,580
Other income (expense) — net	3,~~533~~070			~~(10~~4,~~408~~522		)	~~7,298~~		~~(8,621~~		)
Interest expense	1516,~~575~~694			14,~~404~~876			~~45,092~~		~~43,531~~
INCOME (LOSS) BEFORE INCOME TAXES	(85,092		)	(250,274		)	31,598		(135,285		)
INCOME BEFORE INCOME TAXES	157,543			142,226
INCOME TAX EXPENSE (BENEFIT)	(19,293		)	(69,121		)	4,992		(50,717		)
INCOME TAX EXPENSE	31,459			29,230
NET INCOME (LOSS)	$	(65,799	)	$	(181,153	)	$	26,606	$	(84,568	)
NET INCOME	$	126,084		$	112,996
Dividends on preferred stock	—			330			~~660~~		~~990~~
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(65,799	)	$	(181,483	)	$	25,946	$	(85,558	)
NET INCOME APPLICABLE TO COMMON STOCK	$	126,084		$	112,666

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Comprehensive Income (~~Loss) (~~Unaudited)

Part I-Financial Information

Item 1-Financial Statements (continued)

	Three Months Ended September 30,							Nine Months Ended September 30,
	Three Months Ended March 31,
(In thousands)	~~2019~~2020			2019	~~2018~~			~~2019~~			~~2018~~
NET INCOME (LOSS)	$	(65,799	)		$	(181,153	)	$	26,606		$	(84,568	)
NET INCOME	$	126,084		$	112,996
OTHER COMPREHENSIVE INCOME BEFORE INCOME TAXES:
OTHER COMPREHENSIVE INCOME, BEFORE INCOME TAXES:
Pension and other post-retirement benefit plans
Change in prior service cost	(~~163~~304		)	(162	~~145~~	)		~~(486~~		)	~~(401~~		)
Change in actuarial net gain (loss)	392				4,737			2,448			5,797
Change in actuarial net gain	2,926			4,904
Total pension and other post-retirement benefit plans	$	~~229~~2,622		$	$4,742	~~4,882~~		$	~~1,962~~		$	~~5,396~~
INCOME TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME	(713		)		2,753			534			2,896
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME	681			477
OTHER COMPREHENSIVE INCOME (LOSS)	$	942			$	2,129		$	1,428		$	2,500
OTHER COMPREHENSIVE INCOME	$	1,941		$	4,265
COMPREHENSIVE INCOME (LOSS)	$	(64,857	)		$	(179,024	)	$	28,034		$	(82,068	)
COMPREHENSIVE INCOME	$	128,025		$	117,261

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Cash Flows (Unaudited)

Part I-Financial Information

Item 1. -Financial Statements (continued)

	Nine Months Ended September 30,			Nine Months Ended September 30,
	Three Months Ended March 31,
(In thousands)	~~2019~~2020			~~2018~~2019
OPERATING ACTIVITIES
Net income	$	26126,~~606~~084		$	~~(84~~112,~~568~~996	)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization	~~106~~35,~~623~~870			~~101~~35,~~425~~189
Amortization of:
Other regulatory assets and liabilities—net	52,~~583~~225			51,~~283~~730
Debt related costs	~~1,128~~360			~~1,179~~373
Deferred income taxes—net	731,~~087~~609			~~(33~~29,~~821~~394		)
Accrued/deferred pension and other post-retirement benefit cost	~~(949~~465		)	83,~~729~~885
Compensation expense related to stock-based awards	~~2,275~~446			141,~~549~~185
Provision for doubtful accounts	105,~~615~~874			167,~~296~~489
Impairment loss	—			37,969
Unrealized (gain) loss on derivative contracts	(6,122		)	(7,148		)
Unrealized (gain) loss on derivative contracts	(128		)	(11,825		)
Amortization of investment tax credits	(150		)	(165		)
Amortization of investment tax credits	(494		)	(523		)
Other non-cash charges (credits)—net	(22		)	208
Other non-cash charges (credits)—net	1,226			(2,253		)
Changes in operating assets and liabilities (Note 16)	49,043			3,632
Changes in operating assets and liabilities (Note 15)	94,572			98,314
Net Cash Provided by Operating Activities	245,682			188,768
Net Cash Provided by Operating Activities	254,144			150,754
FINANCING ACTIVITIES
Capital contributions from parent	—			302,728
Capital contribution from parent	125,000			—
Long-term debt issued	298,482			—
Debt issuance costs	—			(209		)
Debt issuance costs	(2,756		)	(130		)
Notes payable issued (retired)—net	(253,972		)	(91,000		)
Notes payable issued (retired)—net	(179,000		)	(66,998		)
Dividends on common stock and preferred stock	(25,000		)	(24,567		)
Project financing	—			53,018
Net Cash Used in Financing Activities	(153,972		)	(115,776		)
Dividends on common stock and preferred stock	(75,227		)	(66,742		)
Net Cash Provided by Financing Activities	41,499			221,876
INVESTING ACTIVITIES
Capital expenditures (excluding AFUDC)	(318,895		)	(317,537		)
Capital expenditures	(70,995		)	(92,739		)
Insurance proceeds related to investing properties	—			3,238
Net Cash Used in Investing Activities	(70,995		)	(92,739		)
Net Cash Used in Investing Activities	(318,895		)	(314,299		)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	20,715			(19,747		)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(23,252		)	58,331
Cash, Cash Equivalents, and Restricted Cash at Beginning of the Period	61,148			71,423
Cash, Cash Equivalents, and Restricted Cash at Beginning of the Period	71,423			6,652
Cash, Cash equivalents and Restricted Cash at End of the Period	$	81,863		$	51,676
Cash, Cash equivalents and Restricted Cash at End of the Period	$	48,171		$	64,983
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 16)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 15)

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

Following the 2018 Merger Agreement, Washington Gas isbecame an indirect, majority owned subsidiary of, among other entities, AltaGas and WGL. ~~On July 6, 2018, a merger of WGL into AltaGas was consummated (the Merger).~~ In connection with the Merger, WGL, ~~the former parent entity of Washington Gas,~~ formed a wholly owned subsidiary, Wrangler SPE LLC (Wrangler SPE), a bankruptcy remote, special purpose entity to own the common stock of Washington Gas~~, which survived the Merger as an indirect, wholly owned subsidiary of AltaGas~~. In addition, WGL owns all of the shares of common stock of ~~Washington~~certain ~~Gas~~affiliated ~~Resources Corporation (Washington Gas Resources) and Hampshire Gas Company (Hampshire). Washington Gas Resources owns all of the shares of common stock of four~~ non-utility subsidiaries ~~that include WGL Energy Services~~, ~~Inc.~~some ~~(WGL~~of ~~Energy~~which ~~Services),~~provide ~~WGL~~services ~~Energy~~to ~~Systems,~~Washington ~~Inc. (WGL Energy Systems)~~Gas, ~~WGL Midstream, Inc. (WGL Midstream)~~ and ~~WGSW,~~some ~~Inc. (WGSW). Additionally, several subsidiaries~~ of ~~WGL~~which own interests in other entities. ~~Except~~On ~~where~~December ~~the~~20, ~~content clearly indicates otherwise~~2019, ~~any reference in this report to “~~Washington Gas,” ~~“we,”~~redeemed ~~“our”,~~all or the ~~“Company,”~~outstanding ~~refers~~shares toof ~~Washington~~its ~~Gas~~preferred ~~Light Company~~stock. ~~References~~As toa ~~“WGL”~~result, ~~refer~~Washington toGas ~~WGL~~is ~~Holdings~~now an indirect, ~~Inc.~~wholly ~~and~~owned ~~all~~subsidiary of ~~its~~AltaGas ~~subsidiaries~~and WGL.

The condensed financial statements of Washington Gas have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Therefore, certain financial information and note disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) are omitted in this interim report. The interim condensed financial statements and accompanying notes should be read in conjunction with the Financial Statements on Form 10-KTK for the year ended December 31, 2019. Due to the seasonal nature of our business, the results of operations for the periods presented in this report are not necessarily indicative of actual results for the full years ending December 31, ~~2019~~2020 and ~~2018~~2019.

The information presented in this report on Form 10-Q are presented solely for the registrant Washington Gas on a stand-alone basis.

The accompanying unaudited condensed financial statements for Washington Gas reflect all normal recurring adjustments that are necessary, in our opinion, to present fairly the results of operations in accordance with GAAP.

For a complete description of our significant accounting policies, refer to Note 1-Accounting Policies of the Notes to ~~Consolidated~~ Financial Statements on Form 10-KTK for year ended December 31, 2019. We include herein certain updates to those policies.

Leases

Lessee

We determine if an arrangement is a lease and the lease classification at inception. For the operating leases in which we are the lessee, a right-of-use (ROU) asset and a lease liability is recognized at the commencement date based on the present value of lease payments over the lease term. We use the rate implicit in the lease to determine the present value of the lease payments when the rate is readily determinable or we use our incremental borrowing rate. Our ROU assets are adjusted for lease incentives, any lease payments made in advance, and initial direct costs incurred. Lease expenses are recognized on a straight-line basis over the lease term. The estimated lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For our lessee building and certain equipment leases, we do not separate the lease and non-lease components. Variable lease payments are recognized as lease expense when the related facts and circumstances occur, and are dependent on various external factors, including real estate taxes, common area maintenance and usage charges.

For our multiple office location leases classified as operating leases, the lease term begins on the date when construction of the leasehold improvements can start and the lessor has allowed us to occupy the respective locations. Leasehold improvement costs are classified as “Property, Plant, and Equipment” on the balance sheet, and are being amortized to “Depreciation and amortization” expense on a straight-line basis over the non-cancelable period of the leases.

Lessor

We determine if an arrangement is a lease and the lease classification at inception. Lease payments under operating leases are recognized on a straight-line basis over the lease term. For our building leases, we do not separate the lease and non-lease components.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Accounting Standards Adopted during the Period and Other Newly Issued Accounting Standards

The following tables summarize the Accounting Standards Updates (ASUs) adopted by Washington Gas during the nine months ended September 30, 2019 and other newly issued accounting standards that will be adopted by Washington Gas in the future.

ACCOUNTING STANDARDS ADOPTED IN CALENDAR YEAR 2019
Standard	Description	Date of adoption	Effect on the financial statements or other significant matters
ASU 2016-02, Leases (Topic 842), ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-11, Targeted Improvements, and ASU 2018-20, Narrow-Scope Improvements for Lessors, including other subsequent ASUs clarifying the guidance.	ASU 2016-02 requires recognition of a right-to-use asset and lease liability by lessees on the statement of financial position and disclosure of key information about leasing arrangements. Lessor accounting remains substantially unchanged but the standard modifies what qualifies as a sales-type and direct financing lease and eliminated real-estate specific provisions. The standard requires application using a modified retrospective approach. ASU 2018-01 provides an optional election not to evaluate existing and expired land easements not previously accounted for as a lease. ASU 2018-11 allows entities to elect to report comparative periods presented after adoption under the old lease standard (ASC Topic 840, Leases) and recognize a cumulative effect adjustment to the opening balance at the date of adoption. The update also provides lessors a practical expedient not requiring the separation of lease and non-lease components provided that certain conditions are met. ASU 2018-20 allows lessors to include and exclude certain costs from variable payments. The ASU also requires lessors to allocate certain variable payments to the lease and non-lease components when the changes in facts and circumstances on which the variable payments are based occur.	January 1, 2019	Leases, with terms longer than 12 months, for which Washington Gas is the lessee have been reflected on the balance sheet by recording an increase to non- current assets and an increase to deferred credits net of the current portion that is recorded in current liabilities. Upon adoption, Washington Gas recorded lease liabilities of $58.9 million and a right-of-use asset of $43.2 million, net of lease incentives and prepaid or deferred rent balances of $15.7 million. Washington Gas utilized the transition practical expedients which allow entities to not have to reassess whether an arrangement contains a lease and the lease classification under the provisions of ASC Topic 842, land easements, and not separating out the lease and non-lease components for certain classes of assets. As a result of the transition practical expedients, Washington Gas’ operating leases on transition are consistent with its conclusions under ASC 840. Washington Gas has also elected to present prior comparative information under ASC 840. See Note 3 - Leases for further information and the new required lease disclosures.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities and ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes		ASU 2017-12 amends the hedge accounting and recognition requirements by expanding an entity’s ability to hedge non-financial and financial risk components and reduce the complexity in fair value hedges of interest rate risk. Additionally, this standard eliminates the requirement to separately measure and disclose the ineffective portion of the hedge with the entire change in the fair value of a hedging instrument to be presented in the same statement of operations line as the hedged item. Early adoption is permitted.ASU 2018-16 adds the OIS rate based on SOFR as a fifth U.S. benchmark interest rate for hedge accounting purposes. This standard should be adopted in conjunction with ASU 2017-12 if not early adopted.		January 1, 2019		The guidance will only have an impact on new transactions that are entered into and where hedge accounting is elected.
ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)		The update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements to capitalize implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Capitalized implementation costs should be presented in the statement of financial position as a prepaid expense and amortized over the term of the hosting arrangement, presented in the statements of operations in the same line items as prepayment of fees associated with the hosting arrangement. The updates in this standard may be applied on a prospective or retrospective basis. Early adoption is permitted.		January 1, 2019		We early adopted this standard on a prospective basis. The adoption of this ASU did not have a material effect on our financial statements.

Accounting Standards Adopted in the Calendar Year and Other Newly Issued Accounting Standards

The following tables represent accounting standards adopted by Washington Gas during the three months ended March 31, 2020, and other newly issued accounting standards that will be adopted by Washington Gas in the future.



ACCOUNTING STANDARDS ADOPTED IN CALENDAR YEAR 2020
Standard	Description	Date of adoption	Effect on the financial statements or other significant matters
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, including other subsequent ASUs further amending and clarifying the guidance.	For credit losses on financial instruments measured at amortized cost, this standard changes the current incurred loss impairment methodology to an expected loss methodology and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. In addition, entities may make a one-time irrevocable election on certain eligible financial instruments to elect fair value treatment on an instrument-by-instrument basis. Early adoption is permitted.	January 1, 2020	Cash equivalents, accounts receivable, unbilled revenue, and contract assets are within the scope of the new standard. Upon adoption, we recorded an increase to our allowance for credit losses and a reduction to retained earnings of $1.5 million. See Note 2 - Credit Losses for further information and the new required disclosures.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	This update modifies the disclosure requirements on fair value measurements. Early adoption is permitted.	January 1, 2020	The adoption of this standard did not have a material effect on our financial statements.
ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606	Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements. This update clarifies the interaction between Topic 606, Revenue from Contracts with Customers and Topic 808.	January 1, 2020	The adoption of this standard did not have a material effect on our financial statements.
ASU 2019-01, Leases (Topic 842) Codification Improvements	This update addresses the determination of the fair value of the underlying asset by lessors that are not manufacturers or dealers, provides guidance for the presentation of the statement of cash flows for sales-type and direct financing leases, and clarifies transition disclosures related to the adoption of ASC 842.	January 1, 2020	The adoption of this standard did not have a material effect on our financial statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

OTHER NEWLY ISSUED ACCOUNTING STANDARDS
Standard	Description	Date of adoption	Effect on the financial statements or other significant matters
Standard	Description	Required date of adoption	Effect on the financial statements or other significant matters
ASU 2019-04, Codification Improvements to Topic 326, FinancialInstruments—Credit Losses, Topic 815, Derivatives andHedging, and Topic 825, Financial Instruments	The amendments in this ASU provide clarification and improve the codification in recently issued accounting standards.	January 1, 2020	The adoption of this standard did not have a material effect on our financial statements.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, including other subsequent ASUs clarifying the guidance.	For credit losses on financial instruments, this standard changes the current incurred loss impairment methodology to an expected loss methodology and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. Early adoption is permitted.	January 1, 2020	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.
ASU 2020-03, Codification Improvements to Financial Instruments	This Update makes technical corrections and minor improvements to the guidance on financial instruments.	January 1, 2020	The adoption of this standard did not have a material effect on our financial statements.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	This update modifies the disclosure requirements on fair value measurements. Early adoption is permitted.	January 1, 2020	It is not expected that the adoption of this standard will have a material effect on our financial statements.
ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities	This standard provides a private-company scope exception to the VIE guidance for certain entities under common control and clarify that indirect interest held through related parties under common control will be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Early adoption is permitted.	January 1, 2020	We are in the process of evaluating this new accounting standard but it is expected that the adoption of this standard will not have a material effect on our financial statements.
ASU 2019-01, Leases (Topic 842) Codification Improvements	This update addresses the determination of the fair value of the underlying asset by lessors that are not manufacturers or dealers, provides guidance for the presentation of the statement of cash flows for sales-type and direct financing leases, and clarifies transition disclosures related to Topic 250.	January 1, 2020	We do not anticipate that adoption of this standard will have a material effect on our financial statements.
ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	This standard modifies the disclosure requirements related to defined benefit pension and other postretirement plans. Early adoption is permitted.	December 31, 2020	We do not anticipate that adoption of this standard will have a material effect on our financial statements.



OTHER NEWLY ISSUED ACCOUNTING STANDARDS
Standard	Description	Required date of adoption	Effect on the financial statements or other significant matters
ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	This standard modifies the disclosure requirements related to defined benefit pension and other postretirement plans. Early adoption is permitted.	December 31, 2020	It is not expected that the adoption of this standard will have a material effect on our financial statements.
ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes	As part of FASB's Simplification Initiative, this standard amends ASC Topic 740 by removing certain exceptions to the general principles and clarifying and amending other current guidance. Early adoption is permitted.	January 1, 2021	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.
ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting	This standard provides optional expedients and exceptions to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The amendments may be elected prospectively to contract modifications made and to hedging relationships existing as of or entered into on or after the date of adoption and through December 31, 2022.	December 31, 2022	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 2. CREDIT LOSSES

~~The~~On January 1, 2020, the Company adopted ASU ~~2014~~2016-0913, ~~Revenue~~Financial ~~from~~Instruments ~~Contracts~~- ~~with~~Credit ~~Customers~~Losses (~~Accounting~~Topic ~~Standard~~326): ~~Codification~~Measurement ~~(ASC)~~of ~~606)~~Credit ~~and~~Losses ~~subsequent~~on ~~ASUs~~Financial ~~clarifying~~Instruments, which replaces the ~~guidance~~incurred onloss ~~October~~methodology 1,with ~~2018,~~an ~~using~~expected loss methodology that is referred to as the ~~modified~~current ~~retrospective~~expected ~~method~~credit ofloss ~~adoption~~(CECL) model. ~~Under~~The ~~this~~measurement ~~approach,~~of ~~prior~~expected ~~year~~credit ~~results~~losses ~~are~~under ~~not~~the ~~required~~CECL model is applicable to befinancial ~~restated. Adoption~~assets ofmeasured ~~this~~at ~~standard~~amortized ~~did~~cost ~~not~~and ~~change~~off-balance sheet credit exposures. The CECL model requires the ~~timing~~expected orcredit ~~pattern~~losses ofto ~~revenue~~consider ~~recognition~~past ~~and~~events, aincluding ~~cumulative-effect~~historical ~~adjustment~~experience, ~~was~~current ~~not~~conditions ~~recorded~~and ~~upon~~reasonable ~~adoption~~and supportable forecasts. AsWhen ameasuring ~~result~~credit losses, ~~comparative~~financial ~~disclosures~~assets ~~for~~with ~~operating~~similar ~~results~~risk ~~for~~characteristics ~~the~~should ~~three~~be pooled, and ~~nine~~credit ~~months~~losses ~~ended~~should ~~September 30,~~be ~~2019~~recognized ~~are~~over ~~not~~the ~~applicable~~contractual ~~because~~term ~~implementing~~of the ~~new~~financial ~~standard~~asset. ~~did~~In ~~not~~addition, ~~change~~entities ~~the~~may ~~timing~~make ora ~~pattern~~one-time ofirrevocable ~~revenue~~election ~~recognition~~on certain eligible financial instruments to elect fair-value treatment on an instrument-by-instrument basis.

~~The~~Our ~~Company~~assessment ~~recognizes~~concluded ~~revenue~~that ~~from~~our ~~contracts~~cash ~~with~~equivalents, ~~customers~~accounts toreceivables, ~~depict~~unbilled ~~the~~revenue, ~~transfer~~contract ~~of goods or services to customers at an amount it expects to be entitled to in exchange for those goods or services. Washington Gas sells natural gas and distribution services to residential~~assets, ~~commercial, industrial~~ and ~~governmental~~a ~~customers~~long ~~through~~term ~~regulated~~receivable ~~tariff~~from ~~rates~~one ~~approved~~of byour ~~regulatory~~trading ~~commissions~~partners inthat ~~the~~is ~~jurisdictions~~part ~~where it operates (District~~ of ~~Columbia,~~a ~~Maryland,~~collaborative ~~and~~arrangement ~~Virginia). Customers~~ are ~~billed~~within ~~monthly~~scope ~~based~~of onthe ~~regular~~new ~~meter readings~~standard. ~~Customer~~We ~~billings~~adopted ~~are~~the ~~based~~standard onusing ~~two main components: (i)~~ a ~~fixed~~modified-retrospective ~~service~~approach ~~fee~~through ~~and (ii)~~ a ~~variable~~cumulative-effect ~~fee~~adjustment ~~based on usage. For customers who choose~~ to ~~purchase~~retained ~~their~~earnings ~~natural~~at ~~gas~~January ~~from Washington Gas~~1, ~~the~~2020. ~~bill~~Prior ~~will~~periods ~~include~~presented ~~a usage based charge~~ for ~~the~~comparative ~~cost~~purposes ofare ~~the~~not ~~commodity~~adjusted. ~~Revenue~~Upon isimplementation ~~recognized~~of ~~over~~ASU ~~time~~2016-13, aswe ~~the~~recorded ~~natural~~a ~~gas~~$1.5 ismillion ~~delivered~~increase orto as the ~~service~~Company's isallowance ~~performed.~~for Asdoubtful ~~meter~~accounts ~~readings~~and ~~are performed on~~ a ~~cycle~~decrease ~~basis, Washington Gas recognizes accrued revenue for any services rendered~~ to ~~its~~retained ~~customers but not billed at month-end~~earnings. The tariff sales are generally considered daily or “at-will” contracts as customers may cancel their service at any time (subject to notification requirements in the tariff), and revenue generally represents the amount Washington Gas isalso ~~entitled~~elected to ~~invoice.~~account ~~There~~for ~~are~~its ~~certain~~cash ~~contracts~~equivalents ~~that~~at ~~have~~fair ~~terms of one year or longer~~value. ~~For these contracts, revenue is recognized based on the amount Washington Gas is entitled to bill the customer.~~

~~Customers~~ ~~have~~Utility ~~the~~Customer ~~choice~~Receivables: Washington Gas is exposed to ~~purchase~~risk ~~natural~~through ~~gas~~the ~~from~~non-payment ~~competitive~~of ~~service~~utility ~~providers~~bills by customers. To manage this customer credit risk, Washington Gas ~~charges~~customers ~~the~~are ~~competitive~~offered ~~service~~budget ~~providers~~billing ~~balancing~~options ~~fees~~or higher risk customers may be required to ~~manage~~provide ~~the~~a ~~natural~~cash ~~gas~~deposit ~~transportation~~until ~~imbalances.~~the ~~Where~~requirement ~~regulations~~for ~~require,~~deposit refunds are met. Washington Gas ~~issues~~can ~~customers~~recover a ~~consolidated~~portion ~~bill~~of tonon-payments ~~include~~from customers in future periods through the ~~natural~~rate-setting ~~gas~~process. ~~supplied~~For accounts receivable and unbilled revenue generated by the ~~competitive~~utility ~~service~~business, ~~providers~~an allowance for doubtful accounts is recognized using a historical loss-rate based on historical payment and ~~distribution~~collection experience. This rate may be adjusted based on management’s expectations of ~~natural~~unusual ~~gas~~macroeconomic conditions and other factors. Washington Gas ~~recognizes~~regularly ~~revenue~~evaluates ~~only~~the ~~for~~reasonableness ~~distribution~~of ~~services~~the ~~that~~allowance itbased ~~has~~on ~~provided~~a tocombination of factors, such as: the ~~customer~~length of time receivables are past due, historical expected payment, collection experience, financial condition of customers, and ~~the~~other ~~balancing~~circumstances ~~fees~~that ~~for~~could ~~the~~impact ~~services~~customers' ~~provided~~ability or desire to make payments. Upon implementation of the ~~competitive~~new ~~service~~standard, ~~provider~~Washington Gas increased the allowance for doubtful accounts by $1.4 million.

WeBased ~~disaggregate~~on ~~revenue~~previous bycollection ~~type~~experience, ofWashington ~~service.~~Gas ~~The~~did ~~following~~not ~~table~~record ~~disaggregates~~an ~~revenue~~allowance for doubtful accounts for its contract assets associated with our energy management services projects with the ~~three~~federal ~~and~~government. ~~nine~~Refer ~~months~~to ~~ended~~Note ~~September 30,~~14 ~~2019~~- Related Party Transactions for further information.

Disaggregated Revenue by Type of Service
(In millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Revenue from contracts with customers
Gas and transportation sales
Gas sold and delivered	$	70.7	$	665.1
Gas delivered for others	33.4		186.8
Other	10.9		34.4
Other revenues	1.4		4.2
Total revenue from contracts with customers	$	116.4	$	890.5
Other sources of revenue
Revenue from alternative revenue programs (a)	$	3.6	$	14.9
Leasing revenue (b)	0.2		0.5
Other	2.1		8.5
Total revenue from other sources	5.9		23.9
Total Operating Revenue	$	122.3	$	914.4

Washington Gas Asset Optimization: The Utility operates under an existing wholesale counterparty credit policy that is designed to mitigate credit risk. Credit limits are established for each counterparty and credit enhancements such as letters of credits, parent guarantees and cash collateral maybe required. The creditworthiness of all counterparties is continuously monitored. The allowance for doubtful accounts is estimated by applying 30-year historical default rates for one-year receivables sourced from external credit rating agencies to the accounts receivable and unbilled revenue balances associated with counterparties the Utility has determined to be below investment grade. In the event that a counterparty no longer exhibits similar risk characteristics, the associated receivable is evaluated individually. Upon implementation of ASU 2016-13, Washington Gas did not record an amount to the allowance for doubtful accounts.

~~(a)~~ Washington Gas also has ~~determined~~a ~~that~~long ~~its~~term ~~Revenue~~receivable ~~Normalization~~from ~~Adjustment~~a ~~(RNA),~~trading ~~Weather~~partner ~~Normalization~~totaling ~~Adjustment~~$1.4 ~~(WNA),~~million ~~and~~in ~~Conservation~~“Deferred charges and ~~Ratemaking~~other ~~Efficiency~~assets-Other”, ~~(CARE)~~of ~~Ratemaking~~which ~~Adjustment~~no ~~(CRA)~~portion ~~billing~~of ~~adjustment~~the ~~mechanisms~~balance is past due. The trading partner was evaluated and ~~accelerated~~assigned ~~pipe~~an ~~replacement~~internal ~~programs~~credit ~~are~~rating ~~alternative~~in ~~revenue~~accordance ~~programs~~with ~~and~~our ~~accounted~~credit policy. An allowance for ~~under~~doubtful ~~ASC~~accounts ~~Topic~~is ~~980~~recorded based on historical default rates published by external credit rating agencies and a rate commensurate with the period in which the receivable is expected to be collected. With implementation of the new standard, Washington Gas recorded an estimated credit loss reserve of $0.1 million reported as a reduction to “Deferred charges and other assets-Other”.

~~(b)~~The ~~Revenue~~following ~~generated~~table ~~from~~presents ~~Washington~~the ~~Gas~~activity ~~lessor~~of ~~operating~~allowance ~~leases accounted~~ for ~~under~~doubtful ~~ASC~~accounts ~~Topic~~by ~~842,~~types ~~Leases. See Note 3-Leases~~ for ~~further~~the ~~information~~reporting ~~on leases~~periods.

Washington Gas accrues unbilled revenues for gas delivered, but not yet billed at the end of each accounting period due to our customer billing cycles. “Unbilled revenues” represent performance obligations that have been satisfied and to which W

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

ashington Gas has an unconditional right to payment, except for contract assets related to Washington Gas’ area-wide contract, which requires project acceptance by federal government for the right to payment to occur. As of September 30, 2019, contract assets of $40.5 million have been recorded for financed projects within “Unbilled revenues” on the condensed balance sheets. Washington Gas did not have any contract liabilities at September 30, 2019. The Company does not have transaction price amounts allocated to future performance obligations. The Company applies the practical expedient available under ASC Topic 606 and does not disclose information about the remaining performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for performance completed, and (iii) contracts with variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.



Three Months Ended March 31, 2020
(In millions)	Account receivables and Unbilled Revenue			Asset Optimization
Balance, beginning of period	$	18.7		$	—
Provision	5.9			—
Write offs charged against the allowance	(7.5		)	—
Recoveries	0.3			—
Adjustment upon adoption of ASC 326	1.4			0.1
Balance, end of period	$	18.8		$	0.1

On ~~January~~March 111, ~~2019~~2020, the ~~Company~~World ~~adopted~~Health ~~ASU~~Organization ~~2016-02,~~declared ~~Leases~~the ~~(ASC~~outbreak ~~842)~~of ~~and~~a ~~the~~strain ~~following~~of ~~subsequent~~novel ~~ASUs~~coronavirus ~~which~~disease, ~~amended~~COVID-19, ~~the~~a ~~guidance:~~global ~~ASU~~pandemic. ~~2018-01,~~Governments ~~Land~~in ~~Easement~~affected ~~Practical~~areas ~~Expedient~~in ~~for~~which ~~Transition~~we operate have imposed a number of measures designed to ~~Topic~~contain ~~842~~the outbreak, ~~ASU 2018~~including non-10essential business closures, ~~Codification~~travel ~~Improvements~~restrictions, quarantines and ~~ASU~~cancellations of gatherings and events. ~~2018-11,~~These ~~Leases~~measures ~~Targeted~~have ~~Improvements,~~resulted in widespread challenges to businesses and ~~ASU~~the ~~2018-20~~job market resulting in increased unemployment rates, ~~Narrow-Scope~~which ~~Improvements~~could impact the ability of the Company’s customers to pay for ~~Lessors~~services. Washington ~~The~~Gas ~~new~~has ~~leasing~~temporarily ~~standard~~suspended ~~requires~~shut-off, ~~lessees~~collection toactivities, ~~recognize~~and assessment of late fees as a ~~ROU~~result ~~asset~~of ~~and~~public ~~lease~~service ~~liability~~commission ~~for~~orders ~~leases~~in ~~classified~~the asjurisdictions anin ~~operating~~which ~~lease~~the Company operates. In ~~The~~addition, ~~significant~~we ~~effects~~have ofreceived ~~adopting~~orders ~~this~~from ~~standard~~our ~~and~~public ~~the~~service ~~qualitative~~commissions to establish a regulatory asset for incremental collection and ~~quantitative~~other ~~disclosures~~costs ~~required~~related to ~~enable~~COVID-19. Due ~~users~~to ofthe speed with which the ~~financial~~situation ~~statements~~is todeveloping ~~assess~~and the ~~amount,~~uncertainty ~~timing~~of its magnitude, outcome and ~~uncertainty~~duration, ofit ~~cash~~is ~~flows~~currently ~~arising~~not ~~from~~possible ~~leases~~to ~~are~~reasonably ~~included~~estimate inthe ~~Note~~impact ~~1-Accounting~~of ~~Policies~~the ~~and~~pandemic ~~below~~on our customer collections at this time.

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

~~Adoption~~The ofCompany ~~the~~recognizes ~~new~~revenue ~~standard~~from ~~had~~contracts awith ~~material~~customers ~~impact~~ to ~~our~~depict ~~balance~~the ~~sheet~~transfer ~~but~~of ~~did~~goods ~~not~~or ~~have~~services ato ~~material~~customers ~~impact~~at an amount it expects to ~~our~~be ~~statement~~entitled ofto ~~operations~~in exchange for those goods or services. OnWashington ~~January~~Gas 1sells natural gas and distribution services to residential, ~~2019~~commercial, industrial and governmental customers through regulated tariff rates approved by regulatory commissions in the ~~Company~~jurisdictions ~~recorded~~where ~~ROU~~it ~~assets~~operates. ofCustomers ~~$43~~are billed monthly based on regular meter readings.2 ~~million~~Customer billings are based on two main components: (~~net~~i) ofa ~~lease~~fixed ~~incentives~~service fee and ~~prepaid~~(ii) ora ~~deferred~~variable ~~rent~~fee ofbased ~~$15~~on usage.7 ~~million)~~For customers who choose to purchase their natural gas from Washington Gas, ~~current~~the ~~lease~~bill ~~liability~~will ofinclude ~~$2.8~~a ~~million~~usage ~~and~~based ~~non-current~~charge ~~lease~~for ~~liability~~the cost of ~~$56~~the commodity.1 ~~million~~Revenue ~~related~~is torecognized ~~our~~over ~~operating~~time ~~leases~~as natural gas is delivered or as service is performed. ~~The~~Since ~~Company~~meter ~~currently~~readings ~~does~~are performed on a cycle basis, Washington Gas recognizes accrued revenue for any services rendered to its customers but not ~~have~~billed ~~finance~~at ~~leases~~month-end. WeThe ~~elected~~tariff tosales ~~implement~~are ~~the~~generally ~~new~~considered ~~leasing~~daily ~~standard~~or ~~retrospectively~~“at-will” contracts as customers may cancel their service at any time (subject to notification requirements in the ~~beginning~~tariff), ofand revenue generally represents the ~~period~~amount ofWashington ~~adoption~~Gas ~~through~~is aentitled ~~cumulative-effect~~to ~~adjustment~~invoice. ~~Under~~There ~~this~~are ~~approach,~~certain ~~prior~~contracts that have terms of one year ~~results~~or ~~are~~longer. ~~not~~For ~~required~~these tocontracts, berevenue ~~restated~~is ~~and~~recognized ~~disclosures~~based ~~associated~~on ~~with~~the ~~prior~~amount ~~periods~~Washington ~~are~~Gas ~~reported~~is ~~under~~entitled ~~ASC~~to ~~840~~bill the customer.

~~Lessee~~Customers ~~Leases~~have the choice to purchase natural gas from competitive service providers. Washington Gas charges the competitive service providers balancing fees to manage the natural gas transportation imbalances. Where regulations require, Washington Gas issues customers a consolidated bill to include the natural gas supplied by the competitive service providers and distribution of natural gas. Washington Gas recognizes revenue only for distribution services that it has provided to the customer, and the balancing fees for the services provided to the competitive service provider.

~~The~~We ~~Company~~disaggregate ~~elected~~revenue toby ~~use~~type ~~the~~of transition practical expedient which allows an entity not to reassess whether any expired or existing contracts are, or contain, leases; the lease classification for any expired or existing leases; and the initial direct costs for any existing leasesservice. The ~~practical~~following ~~expedient~~table ~~also~~disaggregates ~~allows~~revenue ~~an entity not to reassess whether existing or expired land easements that were not previously accounted~~ for asthe athree lease under Topic 840 was also elected. The Company elected not to separate lease and non-lease components for its building leases and has elected not to record a ROU asset and lease liability for short-term leases. Short-term leases are defined as leases with a term of 12 months orended ~~less~~March ~~at the commencement date~~31, ~~including~~2020 ~~extension options that are reasonably certain of being exercised,~~ and ~~do not include an option to purchase the underlying asset. Short-term lease costs for the period were not material.~~2019:

Washington Gas has operating leases for our corporate headquarters and other corporate offices, communication tower space, and certain office equipment. Our leases have remaining lease terms from 1 to 22 years. Some of the leases include options to extend the lease terms for 1 to 5 years with prior written notice or automatically renew if either party does not provide intent to terminate. The leases generally have options to terminate with notice prior to the end of the lease term based on the contract terms. Refer to Note 13-Related Party Transactions for discussion of leases with associated companies.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Maturity of Operating Lease Liabilities
Disaggregated Revenue by Type of Service
(In millions)	September 30, 2019
		Three Months Ended March 31,
2019	$	1.3
(In millions)		2020		2019
2020	5.9
Revenue from contracts with customers
2021	5.5
Gas and transportation sales
2022	5.5
Gas sold and delivered		$	346.3	$	462.1
2023	5.5
Gas delivered for others		97.6		109.4
Thereafter	52.1
Other		13.7		13.6
Total lease payments	$	75.8
Other revenues		0.7		1.1
Less: Interest	(15.5		)
Total revenue from contracts with customers		$	458.3	$	586.2
Present Value of Lease Liabilities	$	60.3
Other sources of revenue
Revenue from alternative revenue programs (a)		$	40.6	$	4.0
Leasing revenue		0.2		0.2
Other (b)		2.6		3.3
Total revenue from other sources		$	43.4	$	7.5
Total Operating Revenue		$	501.7	$	593.7

~~The~~(a) ~~following~~Washington ~~table~~Gas ~~provides~~has ~~supplemental~~determined ~~cash~~that ~~flow~~its ~~information~~Revenue ~~related~~Normalization toAdjustment ~~operating~~(RNA), ~~leases~~Weather ~~for~~Normalization ~~the~~Adjustment ~~three~~(WNA), and ~~nine~~Conservation ~~months~~and ~~ended~~Ratemaking ~~September~~Efficiency ~~30,~~(CARE) ~~2019~~Ratemaking Adjustment (CRA) billing adjustment mechanisms and accelerated pipe replacement programs are alternative revenue programs and accounted for under ASC Topic 980.

Supplemental Cash Flow Information Related to Operating Leases
($ in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the lease liabilities in the operating cash flows	$	0.5	$	1.5
Operating lease cost (including variable lease costs of $0.5 million and $1.5 million for the three and nine months ended September 30, 2019, respectively)	$	1.8	$	5.4
Right-of-use assets obtained in exchange for new operating lease liabilities	$	0.4	$	1.5

^(b)The amount includes late fees billed.

At Washington ~~September~~Gas 30accrues unbilled revenues for gas delivered, but not yet billed at the end of each accounting period due to our customer billing cycles. Unbilled revenues of $74.0 million and $116.3 million are included within "Receivables" on Washington Gas' balance sheets at March 31, 2020 and December 31, 2019, respectively. Unbilled revenues represent performance obligations that have been satisfied and to which Washington Gas has an unconditional right to payment, except for contract assets related to Washington Gas’ area-wide contract, which requires project acceptance by federal government for the ~~weighted~~right ~~average~~to payment to occur. The Company does not have transaction price amounts allocated to future performance obligations. The Company applies the practical expedient available under ASC Topic 606 and does not disclose information about the remaining ~~lease~~performance ~~term~~obligations for ~~operating~~(i) ~~leases~~contracts ~~was~~with ~~13.5~~an ~~years~~original expected length of one year or less, ~~and~~(ii) contracts for which revenue is recognized at the ~~weighted~~amount ~~average~~to ~~discount~~which ~~rate~~the ~~was~~Company 3has the right to invoice for performance completed, and (iii) contracts with variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.~~32%.~~

~~Lessor~~The ~~Leases~~following table shows the opening and closing balances of contract assets from contracts with customers for the reporting periods, which were included within "Receivables" on Washington Gas' balance sheets.

The Company also has lessor leases for land, office space and communication tower space that are classified as operating leases. The accounting for these operating leases remained unchanged upon the adoption of ASC 842. Washington Gas has elected not to separate the lease and non-lease components for its building leases. Our leases have remaining lease terms ranging from less than a year to 82 years. Some of the leases include options to extend the lease terms for 1 to 5 years with prior written notice or automatically renew if the lessee does not provide intent not to renew. The leases generally have options to terminate the leases with notice prior to the end of the lease term based on the contract terms. The lease agreements do not contain material residual value guarantees.



(In millions)	2020		2019
Contract assets at January 1	$	44.2	$	85.3
Contract assets at March 31	$	46.1	$	34.6
Increase (decrease) in contract assets	$	1.9	$	(50.7	)

NOTE 4. LEASES

Maturity of Operating Lease Payments(a)
(In millions)	September 30, 2019
2019	$	0.2
2020	0.7
2021	0.6
2022	0.6
2023	0.6
Thereafter	58.3
Total lease payments	$	61.0

Washington Gas has operating leases as a lessee for our corporate headquarters and other offices, communication tower space, and certain office equipment.

~~(a)~~ The ~~payments~~Company also has lessor leases for land, office space and communication tower space that are ~~presented~~classified as operating leases. Washington Gas has elected not to separate the lease and non-lease components for its building leases. The leases generally have options to terminate the leases with notice prior to the end of the lease term based on anthe ~~undiscounted~~contract ~~basis~~terms. The lease agreements do not contain material residual value guarantees. For information on the lease income recognized during the period, see the Disaggregated Revenue by Type of Service table in Note 3 — Revenue from Contracts with Customers.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

~~The~~There ~~property,~~were ~~plant~~no ~~and~~other ~~equipment~~significant ~~associated~~changes ~~with~~for ~~these~~our operating leases ~~are~~during ~~not material. For information on~~ the ~~lease~~three ~~income~~months ~~recognized~~ended ~~during~~March ~~the period~~31, ~~see the Disaggregated Revenue by Type of Service table in Note 2 - Revenue from Contracts with Customers~~2020.

NOTE 5. ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

~~During~~The ~~the~~table ~~three~~below ~~and~~provides ~~nine~~details ~~months~~for ~~ended~~the ~~September 30,~~amounts ~~2019,~~included ~~Washington~~in ~~Gas~~“Accounts ~~did~~payable ~~not~~and ~~record~~other ~~any~~accrued ~~impairments~~liabilities” ~~related~~on tothe ~~our~~balance ~~leased assets~~sheets.

The table below provides details for the amounts included in “Accounts payable and other accrued liabilities” on the condensed balance sheets.



(In millions)	March 31, 2020		December 31, 2019
Accounts payable—trade	$	135.9	$	154.3
Employee benefits and payroll accruals	20.6		39.2
Wages payable	24.1		22.2
Accrued interest	3.1		17.3
Other accrued liabilities ^(a)	36.1		34.4
Total	$	219.8	$	267.4

(In millions)	September 30, 2019		December 31, 2018
Accounts payable—trade	$	139.4	$	228.9
Employee benefits and payroll accruals	16.5		28.0
Other accrued liabilities	26.9		31.5
Total	$	182.8	$	288.4

^(a) Amount includes $11.9 million and $11.7 million estimated liability associated with Antero judgment at March 31, 2020 and December 31, 2019, respectively, Refer to Note 11 -Commitments and Contingencies for further information.

NOTE 6. SHORT-TERM DEBT

Washington Gas satisfies ~~its~~the short-term financing requirements through the sale of commercial paper, ~~financing arrangements with third-party lenders,~~ or through bank borrowings. Due to the seasonal nature of our operations, short-term financing requirements can vary significantly during the year. Revolving credit agreements are maintained to support outstanding commercial paper and to permit short-term borrowing flexibility. The policy of Washington Gas is to maintain bank credit facilities in amounts equal to or greater than the expected maximum commercial paper position. ~~The following is a summary of committed credit available at September 30, 2019 and December 31, 2018.~~

Committed Credit Available
($ in millions)	September 30, 2019			December 31, 2018
Committed credit agreements
Unsecured revolving credit facility	$	450.0		$	350.0
Less: Commercial paper outstanding	(117.0		)	(296.0		)
Net committed credit available	$	333.0		$	54.0
Weighted average interest rate	2.31		%	2.93		%

Credit Facility

AtThe ~~September 30,~~following ~~2019~~is ~~and~~a ~~December 31,~~summary ~~2018,~~of ~~there~~committed ~~were~~credit noavailable ~~outstanding~~at ~~bank~~March 31, ~~loans~~2020 ~~from~~and ~~Washington~~December 31, ~~Gas’ revolving credit facilities~~2019.

On July 19, 2019, Washington Gas entered into an amended and restated senior unsecured revolving credit facility with a term of five years, plus two one-year extension options, available with the bank group’s approval (Credit Facility). The Credit Facility amended and restated Washington Gas’ prior $350 million credit facility and permits Washington Gas to borrow up to $450 million with an option to increase the facility by an additional $100 million, with the bank group’s approval, for a total potential maximum borrowing of $550 million. Washington Gas incurs credit facility fees, which in some cases are based on the long-term debt ratings of Washington Gas. In the event that the long-term debt ratings are downgraded below certain levels, Washington Gas would be required to pay higher fees. There are five different levels of fees. Under the terms of the credit facilities, the lowest level facility fee is 0.06% and the highest is 0.175%. The interest rate of loans made under the credit facilities will be a fluctuating rate per annum that will be set using certain parameters at the time each loan is made.




(In millions)	March 31, 2020	December 31, 2019
Committed credit agreements
Unsecured revolving credit facility, expires July 19, 2024^(a)	$450.0	$450.0
Less: Commercial Paper outstanding^(b)	(145.6)	(400.0)
Net committed credit available	$304.4	$50.0
Weighted average interest rate	1.91%	2.04%

(a) ~~Project~~Washington ~~Financing~~Gas has the right to request extensions with the bank group 's approval. Washington Gas’ revolving credit facility permits it to borrow an additional $100.0 million, with the bank groups' approval, for a total potential maximum borrowing of $550.0 million.

~~Washington~~(b) ~~Gas~~The ~~previously~~amount ~~obtained~~presents ~~third-party~~principal ~~project~~amount ~~financing on behalf~~ of ~~the~~commercial ~~federal government to provide funds for the construction of certain energy management services projects entered under Washington Gas’ area-wide contract~~paper. Washington Gas recorded a project financing obligation in “Notes payable and project financing” on the balance sheet. As the construction work was performed by WGL Energy Systems, Washington Gas established a contract asset in “Unbilled revenue”

At March 31, 2020 and December 31, 2019, there were no outstanding bank loans from Washington Gas’ revolving credit facilities.

Under the terms of the credit facility, the ratio of financial indebtedness to total capitalization may not exceed 0.65 to 1.0 (65.0%). At March 31, 2020 and December 31, 2019, Washington Gas' ratios of consolidated financial indebtedness to consolidated total capitalization was 45% and 52%, respectively. In addition, Washington Gas is required to inform lenders of changes in corporate existence, financial conditions, litigation and environmental warranties that might have a material adverse effect. Failure to inform the lenders’ agent of these material changes might constitute default under the agreements. Should Washington Gas fail to pay principal or interest when due on any other indebtedness, such failure may be deemed to constitute a default. Such defaults, if not remedied, could lead to suspension of further loans and/or acceleration in which obligations

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

~~representing~~become ~~the~~immediately ~~government’s~~due ~~obligation to remit principal~~ and ~~interest, and recorded a “Payable to associated company” to WGL Energy Systems for the construction work performed for the same amount~~payable. ~~WGL~~At ~~Energy~~March 31, ~~Systems~~2020 ~~now~~and ~~directly~~December 31, ~~obtains third-party project financing for its energy management services projects. As work is performed~~2019, Washington Gas ~~establishes~~was ~~a contract asset~~ in ~~“Unbilled~~compliance ~~revenue”~~with ~~representing~~all ~~the~~of ~~government’s obligation to remit principal and interest and records a “Payable to associated company” to WGL Energy Systems for~~ the ~~construction~~covenants ~~work~~under ~~performed~~its ~~for~~credit ~~the same amount~~facility.

AsCommercial of September 30, 2019, Washington Gas recorded $40.5 million of contract assets in “Unbilled revenues” and a $40.5 million payable to WGL Energy Systems in “Payables to associated companies,” respectively, for energy management services projects financed by WGL Energy Systems that were not complete. There was no project financing obligation on Washington Gas’ balance sheet as of September 30, 2019. Paper

AsThe oftotal commercial paper carrying value was $145.5 million and $399.5 million at March 31, 2020 and December 31, ~~2018~~2019, respectively. At both March 31, 2020 and December 31, 2019, Washington Gas ~~recorded~~classified $85100.30 million of ~~contract~~our ~~assets~~commercial inpaper ~~“Unbilled~~balance ~~revenues,”~~as ~~$15.5~~"Long-term ~~million~~debt" inon aWashington ~~corresponding~~Gas' ~~short-term~~balance ~~financing~~sheets due to ~~third-party~~its ~~lenders~~ability inand ~~“Notes~~intent ~~payable~~to ~~and~~refinance ~~project~~these ~~financing,”~~balances ~~and~~on a long-term basis. Accordingly, $6945.75 million ~~accounts~~and ~~payable~~$299.5 tomillion ~~WGL~~of ~~Energy~~commercial ~~Systems~~paper remained in “~~Payables~~Notes ~~to associated companies~~payable” ~~for~~at ~~energy~~March 31, ~~management~~2020 ~~services~~and ~~projects~~December 31, ~~that~~2019, ~~were not complete~~respectively.

NOTE 7. LONG-TERM DEBT

~~In October 2018, WGL Energy Systems repaid $53.0 million drawn by~~ Washington Gas ~~from~~issues aunsecured ~~third~~long-~~party~~term ~~lender~~debt ~~for a specific project for which the lender demanded repayment due to delays~~ in ~~achieving final acceptance from~~ the ~~federal~~form ~~government agency customer. The $53.0 million was included in “Payables to associated companies” on Washington Gas’ balance sheet as~~ of ~~December~~medium-term ~~31,~~notes ~~2018.~~(MTNs) Onand ~~January~~private ~~16,~~placement ~~2019,~~notes ~~the~~with ~~federal~~individual ~~government~~terms ~~agency~~regarding ~~customer~~interest ~~provided notification of final acceptance as of December 14~~rates, ~~2018.~~maturities ~~In February 2019, WGL sold the receivables,~~ and ~~accordingly,~~call ~~Washington~~or ~~Gas~~put ~~reversed the associated amount in “Payables to associated companies” and “Unbilled revenue” on its balance sheet~~options.

Washington Gas ~~did~~classified ~~not~~certain ~~record~~commercial apaper ~~corresponding~~balance ~~reserve~~as ~~for~~"Long-term ~~bad~~debt" ~~debts~~due ~~related~~ to ~~these~~its ~~contract~~ability ~~assets~~and atintent ~~September 30,~~to ~~2019~~refinance ~~and~~these ~~December 31,~~balances ~~2018, based~~ on ~~our~~a ~~previous~~long-term ~~collection experience with receivables that have been financed for government agencies with minimal credit risk~~basis.

~~Unsecured~~The ~~Notes~~following table shows the long-term debt outstanding at March 31, 2020 and December 31, 2019.

Washington Gas issues long-term debt in the form of medium-term notes (MTNs), unsecured long-term notes and private placement notes, all of which contain individual terms regarding interest rates, maturities and call or put options. Each of these note types can have maturity dates of one or more years from the date of issuance. The following table shows the outstanding notes as of September 30, 2019 and December 31, 2018.



Long Term Debt Outstanding
(In millions)	March 31, 2020			December 31, 2019
Washington Gas Unsecured Notes ^(a)	$	1,346.0		$	1,346.0
Commercial Paper	100.0			100.0
Total Long-Term Debt	$	1,446.0		$	1,446.0
Unamortized discount	(4.3		)	(4.3		)
Unamortized debt expense	(10.6		)	(10.8		)
Less—current maturities	—			—
Total Long-Term Debt (carrying value)	$	1,431.1		$	1,430.9
Weighted average interest rate^(b)	4.52		%	4.52		%

Long-Term Debt Outstanding
($ in millions)	September 30, 2019			December 31, 2018
Total Long-Term Debt(a)	$	1,396.0		$	1,096.0
Unamortized discount	(4.3		)	(2.9		)
Unamortized debt expense	(10.6		)	(8.1		)
Less—current maturities	50.0			50.0
Total Long-Term Debt	$	1,331.1		$	1,035.0
Weighted average interest rate(b)	4.53		%	4.77		%

^(a)Includes MTNs and private placement notes. The amount represents face value of Washington Gas' unsecured notes including current maturities.

(ab) ~~Includes~~Weighted ~~MTNs~~average ~~and~~interest ~~private~~rate ~~placement~~is ~~notes.~~for ~~The~~the ~~amount~~Washington ~~represents~~Gas ~~face~~unsecured ~~value~~notes ~~of long-term debt~~ including current maturities.

~~(b)~~ ~~Weighted~~There ~~average~~were ~~interest~~no ~~rate~~issuances isor ~~for~~retirements ~~the~~of long- term debt ~~including~~for ~~current~~the ~~maturities~~three months ended March 31, 2020 and 2019.

On September 13, 2019, Washington Gas issued medium-term notes with an aggregate principal amount of $300 million and 3.65% fixed interest rate that are due in September 2049. The interest will be paid semi-annually in March and September of each year. The notes have a make-whole call provision at a U.S. Treasury rate plus 25 basis points prior to March 15, 2049, and then are callable at par after March 15, 2049. There was no issuance of long-term debt for the nine months ended September 30, 2018. There were no retirements of long-term debt for the nine months ended September 30, 2019 or 2018.

The tables below reflect the components of “Total equity” for the three and nine months ended September 30, 2019 and 2018.

NOTE 8. COMPONENTS OF TOTAL EQUITY

Washington Gas Light Company



	Common Stock			Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income/(Loss), Net of Taxes
(In thousands, except shares)	Shares	Amount		Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income/(Loss), Net of Taxes			Total
Balance at December 31, 2019	46,479,536	$	46,479	$	979,273	$	541,535		$	4,909		$	1,572,196
Net income	—	—		—		126,084			—			126,084
Other comprehensive income	—	—		—		—			1,941			1,941
Capital contribution from parent	—	—		125,000		—			—			125,000
ASU 2016-13 implementation ^(a)	—	—		—		(1,543		)	—			(1,543		)
Dividends declared:
Common stock	—	—		—		(25,000		)	—			(25,000		)
Balance at March 31, 2020	46,479,536	46,479		1,104,273		641,076			6,850			1,798,678
Balance at December 31, 2018	46,479,539	46,479		979,273		543,448			(6,627		)	1,562,573
Net income	—	—		—		112,996			—			112,996
Other comprehensive income	—	—		—		—			4,265			4,265
Dividends declared:
Common stock	—	—		—		(25,000		)	—			(25,000		)
Preferred stock	—	—		—		(330		)	—			(330		)
Balance at March 31, 2019	46,479,539	46,479		979,273		631,114			(2,362		)	1,654,504

~~Part I~~(a) Due to implementation of ASU 2016-13 Financial ~~Information~~Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, see Note 2 — Credit Losses for further information.

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Components of Total Equity
(In thousands, except shares)	Common Stock		Paid-InCapital		RetainedEarnings			Accumulated OtherComprehensive Income (Loss), Net of Taxes			Total
	Shares	Amount
Three Months Ended September 30, 2019
Balance at June 30, 2019	46,479,536	46,479	979,273		585,193			(6,141		)	$	1,604,804
Net loss	—	—	—		(65,799		)	—			$	(65,799	)
Other comprehensive income (loss)	—	—	—		—			942			$	942
Dividends declared:
Common stock	—	—	—		—			—			$	—
Preferred stock	—	—	—		—			—			$	—
Balance at September 30, 2019	46,479,536	46,479	979,273		519,394			(5,199		)	1,539,947
Three Months Ended September 30, 2018
Balance at June 30, 2018	46,479,536	46,479	585,562		723,749			(3,959		)	1,351,831
Net loss	—	—	—		(181,153		)	—			$	(181,153	)
Other comprehensive income (loss)	—	—	—		—			3,613			$	3,613
Stock-based compensation(a)	—	—	(9,017	)	—			—			$	(9,017	)
Capital contribution from parent		—	302,728								$	302,728
ASU 2018-02 adoption impact (b)					1,484			(1,484		)	—
Dividends declared:
Common stock	—	—	—		(24,908		)	—			$	(24,908	)
Preferred stock	—	—	—		(330		)	—			$	(330	)
Balance at September 30, 2018	46,479,536	46,479	879,273		518,842			(1,830		)	1,442,764
Nine Months Ended September 30, 2019
Balance at December 31, 2018	46,479,536	46,479	979,273		543,448			(6,627		)	1,562,573
Net income	—	—	—		26,606			—			26,606
Other comprehensive income (loss)	—	—	—		—			1,428			1,428
Dividends declared:
Common stock	—	—	—		(50,000		)	—			(50,000		)
Preferred stock	—	—	—		(660		)	—			(660		)
Balance at September 30, 2019	46,479,536	46,479	979,273		519,394			(5,199		)	1,539,947
Nine Months Ended September 30, 2018
Balance at December 31, 2017	46,479,536	46,479	583,185		670,580			(4,330		)	$	1,295,914
Net income	—	—	—		(84,568		)	—			$	(84,568	)
Other comprehensive income (loss)	—	—	—		—			3,984			$	3,984
Stock-based compensation(a)	—	—	(6,640	)	—			—			$	(6,640	)
Capital contribution from parent	—	—	302,728		—			—			$	302,728
ASU 2018-02 adoption impact (b)					$	1,484		$	(1,484	)	—
Dividends declared:
Common stock	—	—	—		(67,664		)	—			$	(67,664	)
Preferred stock	—	—	—		(990		)	—			$	(990	)
Balance at September 30, 2018	46,479,536	46,479	879,273		518,842			(1,830		)	1,442,764

(a) Stock-based compensation is based on the stock awards of WGL that are allocated to Washington Gas Light Company for its pro-rata share and includes implementation of ASU 2016-09.

(b) Amount related to the adoption of ASU 2018-02. Washington Gas reclassified a credit of $1.5 million from AOCI to retained earnings at September 30, 2018.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 9. INCOME TAXES

~~Washington~~ WGL ~~Gas~~and isits wholly owned subsidiaries are included in ~~the~~AltaGas' ~~ASUS~~ consolidated income tax returns. ~~beginning~~We have established a new tax sharing policy with ~~the~~AltaGas ~~period~~Services ~~from~~(US) ~~July~~Inc. 7(ASUS), ~~2018~~an toindirect, ~~December~~wholly 31owned subsidiary of AltaGas, ~~2018.~~that Weallocates ~~have~~consolidated ~~established~~tax liabilities and benefits using a ~~new~~ratio ~~tax~~determined ~~sharing~~by ~~policy~~the ~~with~~separate ~~ASUS.~~taxable ~~During~~income for each member applied to the ~~three~~consolidated ~~and~~return ~~nine~~tax ~~months~~liability ~~ended~~of ~~September 30,~~the ~~2019,~~group. ~~Washington~~State ~~Gas~~income ~~did~~tax ~~not~~returns ~~make~~are orfiled ~~receive~~on ~~any~~a ~~payments~~separate tocompany orbasis ~~from~~in ~~its~~most ~~associated~~states ~~companies~~and ~~related~~on toa ~~the~~unitary ~~legacy~~basis ~~WGL~~as ~~tax~~required, ~~sharing~~where ~~agreement~~we or the ~~new~~consolidated ~~tax~~ASUS ~~sharing~~group ~~agreement~~have operations and/or a requirement to file.

At March 31, 2020 and December 31, 2019, Washington Gas recorded a $5.5 million receivable in "Receivables from associated companies" and a $0.6 million payable in "Payables to associated companies" under the ASUS tax sharing policy on Washington Gas' balance sheets, respectively.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act includes various income and payroll tax provisions. While we are still assessing the impact of the legislation, we do not expect there to be a material impact to our financial statements at this time.

Amounts of Interest and Penalties Recognized

Washington Gas recognizes any accrued interest associated with uncertain tax positions in interest expense and recognizes any accrued penalties associated with uncertain tax positions in other expenses in the statements of ~~operations~~income. During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2019~~2020 and ~~2018~~2019, there were no accrued interest ~~expenses~~expense or penalties associated with uncertain tax positions.

NOTE 10. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

The following table shows the components of the net periodic benefit costs (income) recognized in our financial statements during the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2019~~2020 and ~~2018~~2019:



Components of Net Periodic Benefit Costs (Income)
	Three Months Ended March 31,
	2020						2019
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits
Service cost	$	3.2		$	1.3		$	3.0		$	1.3
Interest cost	8.9			2.3			10.2			3.0
Expected return on plan assets	(10.1		)	(5.6		)	(10.7		)	(6.1		)
Recognized prior service cost (credit)	0.1			(3.4		)	0.1			(3.9		)
Recognized actuarial loss (gain)	3.3			(0.1		)	1.3			—
Settlement charge^(a)	1.1			—			4.3			—
Net periodic benefit cost (income)	6.5			(5.5		)	8.2			(5.7		)
Allocation to affiliates	(0.3		)	0.4			(0.4		)	0.7
Adjusted net periodic benefit cost (income)	6.2			(5.1		)	7.8			(5.0		)
Amount allocated to construction projects	(0.4		)	(0.2		)	(0.4		)	(0.2		)
Amount deferred as regulatory asset (liability)-net allocations ^(b)	—			—			0.7			—
Amount charged (credited) to expense	$	5.8		$	(5.3	)	$	8.1		$	(5.2	)

^(a)Amounts relate to partial settlement charges associated with lump sum payments from the Washington Gas’ defined benefit supplemental executive retirement plan (DB SERP) that were paid in the first quarter of 2020 and 2019.

^(b)Amount represents the amortization of previously unrecovered costs of the applicable pension benefits or the health and life benefits as approved in the District of Columbia through 2019.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Components of Net Periodic Benefit Costs (Income)
	Three Months Ended September 30,
	2019						2018
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits
Service cost	$	3.0		$	1.3		$	3.7		$	1.3
Interest cost	10.2			3.0			9.9			2.9
Expected return on plan assets	(10.7		)	(6.1		)	(10.6		)	(5.9		)
Recognized prior service cost (credit)	0.1			(3.9		)	0.1			(4.4		)
Recognized actuarial loss	1.3			—			3.9			—
Net periodic benefit cost (income)	3.9			(5.7		)	7.0			(6.1		)
Allocation to affiliates	(0.4		)	0.5			(0.9		)	0.7
Adjusted net periodic benefit cost (income)	3.5			(5.2		)	6.1			(5.4		)
Amount allocated to construction projects(b)	(0.4		)	(0.2		)	(1.0		)	0.8
Amount deferred as regulatory asset (liability)-net allocations(c)	—			—			1.7			—
Amount charged (credited) to expense	$	3.1		$	(5.4	)	$	6.8		$	(4.6	)
	Nine Months Ended September 30,
	2019						2018
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits
Service cost	$	9.1		$	3.8		$	11.1		$	3.9
Interest cost	30.7			9.0			29.7			8.7
Expected return on plan assets	(32.1		)	(18.3		)	(31.7		)	(17.7		)
Recognized prior service cost (credit)	0.3			(11.7		)	0.3			(13.2		)
Recognized actuarial loss	4.0			—			11.7			—
Settlement charge(a)	4.3			—			—			—
Net periodic benefit cost (income)	16.3			(17.2		)	21.1			(18.3		)
Allocation to affiliates	(1.3		)	1.8			(2.6		)	2.1
Adjusted net periodic benefit cost (income)	15.0			(15.4		)	18.5			(16.2		)
Amount allocated to construction projects(b)	(1.2		)	(0.6		)	(3.6		)	2.9
Amount deferred as regulatory asset (liability)-net allocations(c)	0.7			—			4.7			—
Amount charged (credited) to expense	$	14.5		$	(16.0	)	$	19.6		$	(13.3	)

At March 31, 2020 and December 31, 2019, the rabbi trust balance associated with the DB SERP and non-funded defined benefit restoration plan (DB restoration) plans were $35.4 million and $40.0 million, respectively. $11.3 million and $24.0 million were recorded in “Current Assets-Other” and “Deferred Charges and Other Assets - Other” on Washington Gas' balance sheets at March 31, 2020; $19.5 million and $20.5 million were recorded in “Current Assets-Other” and “Deferred Charges and Other Assets - Other” at December 31, 2019, respectively, along with other rabbi trust balances.

~~(a)Amount~~NOTE ~~relates~~11. toCOMMITMENTS aAND ~~one-time partial settlement charge associated with a lump sum payment to Washington Gas’ defined benefit supplemental executive retirement plan (DB SERP) that was paid in the first quarter of 2019.~~CONTINGENCIES

~~(b)On~~Commitments ~~October 1, 2018, Washington Gas adopted ASU 2017-07. As a result, only the service cost component of net periodic benefit costs (income) is eligible for capitalization.~~

~~(c)Amount~~Washington ~~represents~~Gas has certain natural gas contracts incurred in the ~~amortization~~normal course of ~~previously~~business ~~unrecovered~~that ~~costs~~require offixed and determinable payments in the ~~applicable~~future, ~~pension~~including ~~benefits~~unconditional orpurchase ~~the~~obligations ~~health~~for pipeline capacity, transportation and ~~life~~storage ~~benefits~~services. asRefer ~~approved~~to Note 13- Commitments and Contingencies to the Financial Statements in Form 10-K for the ~~District~~calendar ofyear ~~Columbia~~ended ~~through~~December 31, 2019 for future payments.

AtThere ~~September 30,~~were ~~2019~~no ~~and~~significant ~~December 31,~~changes ~~2018,~~to ~~the~~contractual ~~rabbi~~obligations ~~trust~~that ~~balance~~are ~~associated~~out ~~with~~of the DBnormal ~~SERP~~course ~~and~~of ~~non-funded~~business ~~defined~~during ~~benefit~~the three ~~restoration~~months ~~plan~~ended ~~(DB~~March ~~restoration) plans was $43.8 million and $60.8 million~~31, ~~respectively~~2020. $4.2 million and $20.2 million was recorded in “Current Assets-Other” and $39.6 million and $40.6 million was recorded in “Deferred Charges and Other Assets - Other” respectively, along with other rabbi trust balances.

OnMerger October 1, 2018, Washington Gas adopted ASU 2017-07. This standard requires entities to report the service cost component in the same financial statement line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are to be presented separately from service cost and outside of operating income. In addition, only the service cost component of net benefit cost is eligible for Commitments

In connection with the Merger, Washington Gas and AltaGas have made commitments related to the terms of settlement agreement with the Public Service Commission of the District of Columbia (PSC of DC) and the conditions of approval from the Public Service Commission of Maryland (PSC of MD) and the Virginia State Corporation Commission (SCC of VA). Among other things, these commitments included rate credits distributable to both residential and non-residential customers, gas expansion and other programs, various public interest commitments, and safety programs. As of March 31, 2020, the cumulative amount of merger commitments expensed was $136.6 million, of which, $16.6 million has not been paid. In addition, there are certain additional regulatory commitments that were and will be expensed as the costs are incurred, including the hiring of damage prevention trainers in each jurisdiction for a total of $2.4 million over 5 years; investing up to $70.0 million over a 10-year period to further extend natural gas service; and spending $8.0 million for leak mitigation within 3 years after the Merger close. Additionally, there are a number of operational commitments that will have an impact on the ongoing business of Washington Gas, including reductions of leak backlogs, conducting a root cause analysis related to customer service, increasing supplier diversity, achieving synergy savings benefits, developing protocols for moving meters from inside to outside customers’ premises, as well as reporting and tracking related to all the commitments.

Contingencies

We account for contingent liabilities utilizing ASC Topic 450, Contingencies. By their nature, the amount of the contingency and the timing of a contingent event and any resulting accounting recognition are subject to our judgment of such events and our estimates of the amounts. Actual results related to contingencies may be difficult to predict and could differ significantly from the estimates included in reported earnings.

Antero Contract

In June 2019, a jury trial was held in the County Court for Denver, Colorado to consider a contractual dispute relating to gas pricing between Washington Gas and WGL Midstream (together, the Companies) and Antero Resources Corporation (Antero). Following the trial, the jury returned a verdict in favor of Antero for $95.9 million, of which $11.2 million was against Washington Gas, and $84.7 million against WGL Midstream. Following the official entry of the judgment, the Company filed an appeal on August 16, 2019.

As a result of this verdict, it was determined that a loss contingency is probable and Washington Gas recorded an estimated liability and recognized a loss in June 2019. In addition, Washington Gas recorded a receivable from our trading partner, and a receivable related to sharing with our customers as the contract relates to asset optimization. Washington Gas has been accruing interest expense on a monthly basis associated with the liability since June 2019. At March 31, 2020, the estimated liability with court fees and accrued interest was $11.9 million recorded in “Accounts payable and accrued liabilities” on Washington Gas' balance sheets. The receivable from our trading partner was $1.3 million in “Deferred charges and other assets-Other”, and sharing with customers was $4.8 million in “Regulatory assets - Gas costs” on the balance sheets. The interest expense associated with the legal liability was minimal for the three months ended March 31, 2020.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

capitalization. Changes to the presentation of service costs and other components of net benefit cost were applied retrospectively. As a result of the retrospective adoption, we reclassified $2.8 million and $8.4 million of net periodic benefit income from “Operation and maintenance” expense to “Other income (expense)-net” on the statement of operations for the three and nine months ended September 30, 2018. Changes in capitalization practices were implemented prospectively.

Contractual Obligations

Washington Gas has certain contractual obligations incurred in the normal course of business that require fixed and determinable payments in the future. These commitments include long-term debt, lease obligations, unconditional purchase obligations for pipeline capacity, transportation and storage services, and our commitments related to the business process outsourcing program.

For our contractual obligations, refer to Note 12- Commitments and Contingencies to the Financial Statements in Form 10-KT for the Transition Period from October 1, 2018 to December 31, 2018.

Refer to Note 6- Long-term Debt of the Notes to Condensed Financial Statements for long term debt issued during the current period.

There were no other significant changes to contractual obligations that are out of the normal course of business during the nine months ended September 30, 2019.

Silver Spring, Maryland Incident

On April 23, 2019, the National Transportation and Safety Board (NTSB) held a hearing during which it found, among other things, that the probable cause of the August 10, 2016, explosion and fire at an apartment complex on Arliss Street in Silver Spring, Maryland “was the failure of an indoor mercury service regulator with an unconnected vent line that allowed natural gas into the meter room where it accumulated and ignited from an unknown ignition source. Contributing to the accident was the location of the mercury service regulators where leak detection by odor was not readily available.” Washington Gas disagrees with the NTSB’s probable cause findings. Following this hearing, on June 10, 2019, the NTSB issued an accident report.

In connection with the incident, a total of 37 civil actions related to the incident have been filed and are pending against WGL and Washington Gas in the Circuit Court for Montgomery County, Maryland. All cases have been consolidated for discovery purposes. All of these suits seek unspecified damages for personal injury and/or property damage. A trial date for eight bellwether civil actions has been scheduled for December 2, 2019. In addition, two suits were recently filed related to the incident, one each in the Superior Court for the District of Columbia and one in the Circuit Court of Montgomery County, Maryland.

At this stage of the litigation, the outcome is not yet determinable and management is unable to make an estimate of any potential loss or range of potential losses that are reasonably possible of occurring. As a result, management has only recorded a reserve for a few of the actions for which a settlement offer was made. Washington Gas maintains excess liability insurance coverage from highly-rated insurers, subject to a nominal self-insured retention. Washington Gas believes that this coverage will be sufficient to cover any significant liability that may result from this incident.

Regulatory Contingencies

Certain legal and administrative proceedings incidental to our business, including regulatory contingencies, involve Washington Gas. In our opinion, we have recorded an adequate provision for probable losses or refunds to customers for regulatory contingencies related to these proceedings.

Merger Commitments

In connection with the Merger, AltaGas and WGL made commitments related to the terms of the Public Service Commission of the District of Columbia (PSC of DC) settlement agreement and the conditions of approval from the Public Service Commission of Maryland (PSC of MD) and the State Corporation Commission of Virginia (SCC of VA). Among other things, these commitments include rate credits distributable to both residential and non-residential customers, gas expansion and other programs, various public interest commitments, and safety programs. The cumulative amount expensed as of September 30, 2019 was $136.6 million, of which $118.7 million has been paid, including $1.1 million and $7.6 million paid in the three and nine months ended September 30, 2019, respectively. In March 2019, the PSC of MD directed that the $3.9 million Most Favored Nation adjustment, originally recorded as a commitment expense, should be used to offset future rates under Washington Gas’ natural gas expansion program in Maryland. As a result, Washington Gas reversed the commitment expense in the fi

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

rst quarter of 2019. Further, there are additional regulatory commitments that will be recorded when the costs are incurred in the future, including the hiring of damage prevention trainers in each jurisdiction for a total amount of $2.4 million over 5 years; investing up to $70.0 million over a 10 year period to further extend natural gas service; and spending $7.5 million for leak mitigation within three years of the Merger close.

Application for Approval of Reduction of Distribution Rates

On January 12, 2018, Washington Gas filed applications to reduce customer rates in Maryland, Virginia, and the District of Columbia to reflect the impact of the Tax Act, including both the impact of the re-measurement of deferred tax assets and liabilities and reduction of the federal tax rate to 21%. Washington Gas began tracking the impact of the Tax Act on revenue requirements beginning January 1, 2018, recording all impacts to regulatory assets and liabilities. In Maryland and the District of Columbia, rates have been adjusted for the impact of the Tax Act. In Virginia, the SCC of VA dismissed the application on March 15, 2018. Washington Gas filed a new general rate case on July 31, 2018 incorporating the effects of the Tax Act. On September 16, 2019, the Hearing Examiner (HE) issued a report to the SCC of VA recommending the Company increase its liability balance for the Tax Act to $35.4 million and for it to be refunded to customers in a one-time sur-credit. Accordingly, at September 30, 2019, Washington Gas recorded an $18.9 million adjustment to the liability and will refund the credits after the SCC of VA’s final order is issued. See the discussion below for a further discussion of the HE’s report.

Virginia Jurisdiction

Virginia Rate Case. On July 31, 2018, Washington Gas filed an application with the SCC of VA to increase its base rates for natural gas service by $37.6 million, which includes $14.7 million of revenue associated with natural gas pipeline replacement initiatives previously approved by the SCC of VA and paid by customers through a monthly rider. Additionally, the requested revenue increase incorporated the effects of The Tax Act. Interim rates became effective, subject to refund, for usage in the January 2019 billing cycle. On April 12, 2019, Washington Gas filed rebuttal testimony and revised its original return on equity down from 10.6% to 10.3% and its overall rate of return down from 7.94% to 7.81%. Evidentiary hearings were held on April 30 and May 1, 2019. Post hearing briefs were filed on July 3, 2019. On September 16, 2019, the HE issued a report to the SCC of VA which recommended among other things: (i) no increase in base rate revenue; (ii) a return on equity of 9.2% compared to the current authorized return on equity rate of 9.5%; (iii) unprotected plant-related and non-plant-related excess deferred income tax should be amortized as a reduction in rates over 5 years compared to amortizing using Average Rate Assumption Method (ARAM) and over 15 years, respectively; (iv) refund $5.6 million to customers for tax savings related to the October 2017 to December 2017 period as part of the Tax Act savings owed to customer, and (v) write off a $7.1 million regulatory asset related to flowthrough income taxes that the company had recovered previously flowed through depreciation income tax deductions via the SAVE rider. For the nine months ended September 30, 2019, Washington Gas made the following pre-tax adjustments based on the HE’s recommendations: (i) reduced “Operating revenues-Utility” by $7.6 million to accrue additional amounts of liability subject to refund; (ii) reduced “Operating revenues-Utility” by $13.3 million associated with the revised amortization of the Tax Act liability; and (iii) wrote off $2.0 million in “Regulatory Assets - Other” and charged to “Operation and maintenance” expense. Additionally, the Company reduced income tax expense by $11.8 million related to the amortization of excess deferred income tax, and recorded a $5.5 million after-tax impairment of a tax regulatory asset related to flowthrough income taxes. Reply comments on the HE’s report were filed by Washington Gas on October 21, 2019. Washington Gas filed reply comments challenging eleven recommendations contained in the HE’s report, including some of the items highlighted above, where the bases for the findings either disregard or are contrary to the substantial evidentiary record.

Maryland Jurisdiction

Maryland Show-Cause Order. On ~~September~~April 523, 2019, the ~~PSC~~National ofTransportation MDand ~~ordered~~Safety ~~the~~Board ~~Company, within 30 days, to~~ (iNTSB) ~~provide~~held a ~~detailed~~hearing ~~response~~during towhich ~~the~~it ~~NTSB’s~~found, ~~probable~~among ~~cause~~other ~~findings~~things, ~~and~~that ~~(ii)~~the ~~provide~~probable ~~evidence~~cause ~~regarding~~of the ~~status~~August ~~of a 2003 mercury regulator replacement program~~10, ~~and if the program was not completed~~2016, toexplosion ~~show~~and ~~cause~~fire ~~why~~at ~~the~~an ~~Commission~~apartment ~~should~~complex ~~not impose a civil penalty~~ on ~~the~~Arliss ~~Company.~~Street Onin ~~September~~Silver 16Spring, ~~2019,~~Maryland “was the ~~PSC~~failure of MDan ~~granted~~indoor ~~the~~mercury ~~Company~~service aregulator ~~14-day~~with ~~extension~~an tounconnected ~~file~~vent ~~its~~line ~~Response~~that toallowed ~~the~~natural ~~Show-Cause~~gas ~~Order.~~into ~~On October 18, 2019,~~ the ~~Company~~meter ~~filed~~room ~~its~~where ~~Response~~it toaccumulated ~~the~~and ~~Show-Cause~~ignited ~~Order,~~from ~~(i)~~an ~~providing~~unknown aignition ~~detailed~~source. ~~response~~Contributing to the ~~NTSB’s~~accident ~~probable~~was ~~cause findings and (ii) providing evidence regarding~~ the ~~status~~location of athe ~~2003~~ mercury ~~regulator~~service ~~replacement~~regulators ~~program~~where ~~and~~leak ~~why~~detection ~~the~~by ~~Commission~~odor ~~should~~was not ~~impose~~readily ~~a civil penalty on the Company~~available.” ~~The~~Washington ~~PSC~~Gas ofdisagrees ~~MD has not adopted a procedural schedule~~ with ~~respect to this matter but has indicated that it will schedule one public hearing near~~ the ~~apartment~~NTSB’s ~~complex~~probable atcause ~~Arliss Street~~findings. ~~Given~~Following ~~the~~this ~~early~~hearing, ~~stage~~on ofJune ~~the~~10, ~~Show-Cause proceeding~~2019, the ~~outcome~~NTSB isissued ~~not yet determinable and management is unable to predict the likelihood of a civil penalty, or make~~ an ~~estimate~~accident ~~of any potential civil penalty or range of potential civil penalty~~report.

~~Financial~~Following ~~Guarantees~~the NTSB hearing on September 5, 2019, the PSC of MD ordered the Company, within 30 days, to (i) provide a detailed response to the NTSB’s probable cause findings, and (ii) provide evidence regarding the status of a 2003 mercury regulator replacement program, and if the program was not completed, to show cause why the Commission should not impose a civil penalty on the Company.

AtThe ~~September 30~~Company timely responded to the PSC of MD’s Show-Cause Order, ~~2019~~providing a detailed response to the NTSB’s probable cause findings, providing evidence regarding the status of its 2003 mercury regulator replacement program and ~~December 31~~demonstrating cause why the PSC of MD should not impose a civil penalty on the Company. Following the Company’s response, ~~2018~~certain intervenors filed written comments and a public hearing was held on the matter, ~~there~~with ~~were~~some nointervenors ~~guarantees~~and members of the public advocating for penalties against the Company. The Company filed its rejoinder comments and the Show-Cause Order is working its way through the regulatory proceeding process with the PSC of MD. A hearing is expected to ~~external~~occur ~~parties~~later this year.

22Management believes that the likelihood of a civil penalty is probable and has accrued $330,000 to reflect the minimum liability expected to result from the proceeding. Though the Company is unable to estimate the maximum possible penalty, other parties recommended penalties ranging from $32.0 million (Apartment and Office Building Association of Metropolitan Washington argued the Company should absorb all costs of removal and relocation of mercury service regulators) to $123.3 million (Office of People's Counsel argued the Company should absorb all costs of removal and relocation of mercury service regulators and pay a fine of $25,000 per day for each day mercury service regulators remain on the Company’s system).

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Antero Contract

As a result of this verdict, it was determined that a loss contingency is probable and Washington Gas has recorded an estimated liability of $11.2 million in “Accounts payable and accrued liabilities” on the balance sheet as of September 30, 2019, of which $2.6 million had already been recorded in a prior period. Washington Gas has also recorded a receivable from our trading partner of $1.3 million net in “Accounts payable and accrued liabilities” and sharing with customers as the contract relates to asset optimization of $4.5 million in “Deferred charges and other assets - Gas costs”. In addition, Washington Gas has recorded an accrual for estimated court fees of $0.1 million, and an accrual of interest expense associated with the liability.

For the nine months ending September 30, 2019, the net pre-tax loss recorded as a result of the verdict was $3.0 million in “Utility cost of gas” on Washington Gas’ statements of operations.

Environmental Matters

We are subject to federal, state and local laws and regulations related to environmental matters. These laws and regulations may require expenditures over a long time frame to control environmental effects. Almost all of the environmental liabilities we have recorded are for costs expected to be incurred to remediate sites where we or a predecessor affiliate operated manufactured gas plants (MGPs).

Washington Gas has identified up to ten sites where it or its predecessors may have operated MGPs. Washington Gas last used any such plant in 1984. In connection with these operations, we are aware that coal tar and certain other by-products of the gas manufacturing process are present at or near some former sites and may be present at others.

At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, Washington Gas reported a liability of $1011.70 million and $1110.37 million, respectively, on an undiscounted basis related to future environmental response costs. These estimates principally include the minimum liabilities associated with a range of environmental response costs expected to be incurred. At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018,~~2019 Washington Gas estimated the maximum liability associated with all of its sites to be approximately $3530.89 million and $2930.47 million, respectively. The estimates were determined by Washington Gas’ environmental experts, based on experience in remediating MGP sites and advice from legal counsel and environmental consultants. The variation between the recorded and estimated maximum liability primarily results from differences in the number of years that will be required to perform environmental response processes and the extent of remediation that may be required.

Washington Gas is currently remediating its East Station property, located ~~in Washington D.C.~~ adjacent to the Anacostia River in Washington D.C., including ground water pump and treat, tar recovery, soil encapsulation and other treatment. Under a 2012 consent decree with the District of Columbia and the federal government, Washington Gas is also conducting a remedial investigation and feasibility study on an adjacent property owned by the District of Columbia. Additional remediation may be required at this property.

In addition, at another adjoining property known as the “Boat Club Property,” located to the east of the property owned by the District of Columbia, Washington Gas agreed to perform a site investigation and report the findings pursuant to oversight by the District of Columbia Department of Energy and Environment (DOEE). This property was subject to a July 12, 2019, Administrative Order from the DOEE. This Administrative Order has been withdrawn. A consent order is being negotiated. 21

Washington Gas received a letter in February 2016 from the DOEE and National Park Service regarding the Anacostia River Sediment Project, indicating that the District of Columbia is conducting a separate remedial investigation and feasibility study of the river to determine if and what cleanup measures may be required and to prepare a natural resource damage assessment. The sediment project draft remedial investigation report issued on March 30, 2018 identifies East Station as one of seventeen potential environmental cleanup sites. We are not able to estimate the total amount of potential damages or timing associated with the District of Columbia’s environmental investigation on the Anacostia River at this time. While an allocation method has not been established, Washington Gas has accrued an amount for study costs based on a potential range of estimates.

Regulatory orders issued by the PSC of MD allow Washington Gas to recover the costs associated with the sites applicable to Maryland over the period ending in 2025. Rate orders issued by the PSC of DC allow Washington Gas a three-year recovery of prudently incurred environmental response costs and allow Washington Gas to defer additional costs incurred between rate

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

~~cases.~~In ~~Regulatory~~addition, ~~orders~~at ~~from~~another adjoining property known as the ~~SCC~~“Boat Club Property,” located to the east of VAthe ~~have~~property ~~generally~~owned ~~allowed~~by the ~~recovery~~District of ~~prudent~~Columbia, ~~environmental~~Washington ~~remediation~~Gas ~~costs~~agreed to perform a site investigation and report the ~~extent~~findings ~~they~~pursuant ~~were~~to ~~included~~oversight inby the ~~underlying~~District ~~financial~~of ~~data~~Columbia ~~supporting~~Department anof ~~application~~Energy ~~for~~and ~~rate~~Environment ~~change~~(DOEE). This property was subject to a July 12, 2019, Administrative Order from the DOEE. This Administrative Order has been withdrawn and a consent order was negotiated and the Company is awaiting its issuance by the DOEE.

AtWashington ~~September 30,~~Gas ~~2019~~received a letter in February 2016 from the DOEE and ~~December 31,~~National ~~2018~~Park Service regarding the Anacostia River Sediment Project, ~~Washington~~indicating ~~Gas~~that ~~reported~~the District of Columbia is conducting a ~~regulatory~~separate ~~asset~~remedial investigation and feasibility study of ~~$6.3~~the ~~million~~river to determine if and $5what cleanup measures may be required and to prepare a natural resource damage assessment.8 ~~million~~On December 27, 2019, DOEE issued an Anacostia River Sediment Project Proposed Plan, a River-wide Feasibility Study, and supporting documents for public comment. Although the ~~portion~~Proposed Plan identifies East Station as one of fifteen potential environmental ~~response~~cleanup ~~costs~~sites, DOEE is proposing to continue the remediation of East Station under Washington Gas’ existing Consent Decree rather than as part of the Anacostia River Sediment Project. DOEE is proposing to issue an Interim Record of Decision for remediation of “Early Action Areas” (that do not include East Station) in the Anacostia River by September 30, 2020. We are ~~expected~~not able to beestimate ~~recoverable~~the intotal ~~future~~amount ~~rates~~of potential costs or timing associated with the District of Columbia’s environmental investigation on the Anacostia River at this time. While an allocation method has not been established, Washington Gas has accrued an amount for estimated study costs based on a potential range of estimates.

Regulatory orders issued by the PSC of MD allow Washington Gas to recover the costs associated with the sites applicable to Maryland over the period ending in 2025. Regulatory orders issued by the PSC of DC allow Washington Gas a three-year recovery of prudently incurred environmental response costs and allow Washington Gas to defer additional costs incurred between rate cases. Regulatory orders from the SCC of VA have generally allowed the recovery of prudent environmental remediation costs to the extent they were included in the underlying financial data supporting an application for rate change.

At both March 31, 2020 and December 31, 2019, Washington Gas reported a regulatory asset of $7.0 million for the portion of environmental response costs that are expected to be recoverable in future rates.

NOTE 12. DERIVATIVES

Derivative Instruments

Washington Gas enters into contracts that qualify as derivative instruments and are accounted for under ASC Topic 815. These derivative instruments are recorded at fair value on our balance ~~sheet~~sheets and Washington Gas does not currently designate any derivatives as hedges under ASC Topic 815. Washington Gas’ derivative instruments relate to: (i) Washington Gas’ asset optimization program; (ii) managing price risk associated with the purchase of gas to serve utility customers and (iii) managing interest rate risk.

Asset Optimization. Washington Gas optimizes the value of its long-term natural gas transportation and storage capacity resources during periods when these resources are not being used to physically serve utility customers. Specifically, Washington Gas utilizes its transportation capacity assets to benefit from favorable natural gas prices between different geographic locations and utilizes its storage capacity assets to benefit from favorable natural gas prices between different time periods. As part of this asset optimization program, Washington Gas enters into physical and financial derivative transactions in the form of forward, futures and option contracts with the primary objective of securing operating margins that Washington Gas will ultimately realize. The derivative transactions entered into under this program are subject to mark-to-market accounting treatment under ASC Topic 820.

Regulatory sharing mechanisms provide for the annual realized profit from these transactions to be shared between Washington Gas’ shareholders and customers; therefore, changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that it is probable that realized gains and losses associated with these derivative transactions will be included in the rates charged to customers when they are realized. Unrealized gains and losses recorded to earnings may cause significant period-to-period volatility; this volatility does not change the operating margins that Washington Gas expects to ultimately realize from these transactions through the use of its storage and transportation capacity resources.

~~All~~Washington ~~physically~~Gas ~~and~~has ~~financially~~a ~~settled~~collaborative ~~contracts~~arrangement ~~under~~with ~~our~~a ~~asset~~third ~~optimization~~party ~~program~~to ~~are~~facilitate ~~reported~~the onasset aoptimization ~~net~~program. ~~basis~~The incollaborative ~~the~~arrangement ~~statements~~allocates ofa ~~operations~~tiered inpercentage ~~“Utility cost~~ of ~~gas.”~~profits ~~Total~~or ~~net~~losses ~~margins recorded~~ to ~~“Utility~~the ~~cost~~third ofparty ~~gas”~~as ~~after~~compensation ~~sharing~~for ~~and~~its ~~management~~participation. ~~fees~~The ~~associated~~costs ~~with~~recorded ~~all~~by ~~asset~~Washington ~~optimization~~Gas ~~transactions~~related ~~for~~to the ~~three~~collaborative ~~months~~arrangement ~~ended~~totaled ~~September 30, 2019 was a net loss of~~ $1.20 million ~~including~~and ~~an unrealized loss of~~ $60.57 million. ~~During~~for the three months ended ~~September~~March 3031, ~~2018,~~2020 weand ~~recorded~~2019, ~~a net gain of $7~~respectively.7 ~~million~~These ~~including~~amounts anwere ~~unrealized gain of $3.3 million. Total net margins~~ recorded toin “Utility cost of gas” ~~after~~on ~~sharing~~Washington ~~and~~Gas’ ~~management~~statements ~~fees associated with all asset optimization transactions for the nine months ended September 30, 2019 was a net gain~~ of $8operations.3 ~~million~~Either ~~including~~party anmay ~~unrealized~~terminate ~~gain of $0.1 million and a $3.0 million loss related to~~ the collaborative ~~Antero~~arrangement ~~Contract. During~~ through the ~~nine~~delivery ~~months~~of ~~ended September 30, 2018, we recorded~~ a ~~net~~termination ~~gain of $28~~notice.5 In ~~million~~such ~~including~~ an ~~unrealized~~event, ~~gain~~Washington ofGas ~~$11.8~~may ~~million.~~make ~~Refer~~a topayment ~~Note~~upon ~~10-Commitments and Contingencies for further discussion of the Antero Contract~~termination.

~~Managing~~All ~~Price~~physically ~~Risk.~~and Tofinancially ~~manage~~settled ~~price~~contracts ~~risk~~under ~~associated~~our ~~with~~asset ~~acquiring~~optimization ~~natural~~program are reported on a net basis in the statements of operations in “Utility cost of gas”. ~~supply~~Total ~~for~~net ~~utility~~margins ~~customers,~~recorded ~~Washington~~to ~~Gas~~“Utility ~~enters~~cost ~~into~~of ~~physical~~gas” after sharing and ~~financial~~management ~~derivative~~fees associated with all asset optimization transactions infor the ~~form~~three ofmonths ~~forward,~~ended ~~option~~March ~~and~~31, ~~other~~2020 ~~contracts,~~was asa ~~authorized~~net bygain ~~its~~of ~~regulators~~$8.4 ~~Any~~million ~~gains~~including ~~and~~an ~~losses~~unrealized ~~associated~~gain ~~with~~of ~~these~~$6.1 ~~derivatives~~million. ~~are~~During ~~recorded~~the asthree ~~regulatory~~months ~~liabilities~~ended orMarch ~~assets~~31, ~~respectively~~2019, towe ~~reflect~~recorded ~~the~~a ~~rate~~net ~~treatment~~gain ~~for~~of ~~these~~$8.2 ~~economic~~million ~~hedging~~including ~~activities~~an unrealized gain of $7.2 million.

Managing Interest-Rate Risk. Washington Gas may utilize derivative instruments that are designed to minimize the risk of interest-rate volatility associated with planned issuances of debt securities. Any gains and losses associated with these types of derivatives are recorded as regulatory liabilities or assets, respectively, and amortized in accordance with regulatory requirements, typically over the life of the related debt. As of September 30, 2019 and December 31, 2018, Washington Gas does not have any interest rate swaps in derivatives.22

Operations

Absolute Notional Amounts
of Open Positions on Derivative Instruments
	Notional Amounts
	September 30, 2019	December 31, 2018
Natural Gas (In millions of therms)
Asset optimization & trading	11,951.0	13,051.0
Other risk-management activities	950.0	1,072.0

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

~~The~~Managing ~~following~~Price ~~table~~Risk. ~~presents~~To ~~the~~manage ~~balance~~price ~~sheet~~risk ~~classification~~associated with acquiring natural gas supply for ~~all~~utility customers, Washington Gas enters into physical and financial derivative ~~instruments~~transactions asin the form of ~~September 30~~forward, ~~2019~~option and ~~December 31~~other contracts, ~~2018~~as authorized by its regulators. Any gains and losses associated with these derivatives are recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities.

Balance Sheet Classification of Derivative Instruments(b)
(in millions)	GrossDerivativeAssets		GrossDerivativeLiabilities			Total(a)
As of September 30, 2019
Current Assets—Derivatives	$	3.0	$	0.6		$	3.6
Deferred Charges and Other Assets—Derivatives	8.5		—			8.5
Current Liabilities—Derivatives	0.1		(12.9		)	(12.8		)
Deferred Credits—Derivatives	—		(105.1		)	(105.1		)
Total	$	11.6	$	(117.4	)	$	(105.8	)
As of December 31, 2018
Current Assets—Derivatives	$	25.7	$	(6.2	)	$	19.5
Deferred Charges and Other Assets—Derivatives	11.3		—			11.3
Current Liabilities—Derivatives	1.1		(21.4		)	(20.3		)
Deferred Credits—Derivatives	—		(116.8		)	(116.8		)
Total	$	38.1	$	(144.4	)	$	(106.3	)

Operations

The following table presents the balance sheet classification for all derivative instruments at March 31, 2020 and December 31, 2019.

(a) Washington Gas has elected to offset the fair value of recognized derivative instruments against the right to reclaim or the obligation to return collateral for derivative instruments executed under the same master netting arrangement in accordance with ASC Topic 815. All recognized derivative contracts and associated financial collateral subject to a master netting arrangement or similar that is eligible for offset under ASC Topic 815 have been presented net in the balance sheet.



Absolute Notional Amounts
of Open Positions on Derivative Instruments
	March 31, 2020	December 31, 2019
Natural Gas (In millions of therms)
Asset optimization & trading	11,442.0	11,671.0
Other risk-management activities	887.0	976.0

~~(b)~~The ~~Washington~~following ~~Gas~~table ~~did~~presents ~~not~~the ~~have~~balance ~~derivative~~sheet ~~instruments~~classification ~~outstanding~~for ~~that~~all ~~were~~derivative ~~designated as hedging~~ instruments at ~~September~~March 3031, ~~2019~~2020 orand December 31, ~~2018~~2019.

The following table presents all gains and losses associated with derivative instruments for the three and nine months ended September 30, 2019 and 2018.



Balance Sheet Classification of Derivative Instruments
(In millions)
March 31, 2020	Gross Derivative Assets			Gross Derivative Liabilities			Netting of Collateral		Total^(a)
Current Assets—Derivatives	$	2.9		$	8.3		$	—	$	11.2
Deferred Charges and Other Assets—Derivatives	15.5			—			—		$	15.5
Current Liabilities—Derivatives	(0.2		)	(6.0		)	—		$	(6.2	)
Deferred Credits—Derivatives	—			(91.8		)	—		$	(91.8	)
Total	$	18.2		$	(89.5	)	$	—	$	(71.3	)
December 31, 2019
Current Assets—Derivatives	$	2.9		$	3.7		$	—	$	6.6
Deferred Charges and Other Assets—Derivatives	9.9			0.5			—		10.4
Current Liabilities—Derivatives	0.7			(11.0		)	6.2		(4.1		)
Deferred Credits—Derivatives	(0.5		)	(97.2		)	—		(97.7		)
Total	$	13.0		$	(104.0	)	$	6.2	$	(84.8	)

Gains and (Losses) on Derivative Instruments
(In millions)	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Recorded to income
Utility cost of gas	(5.8		)	2.0		(0.1		)	0.5
Recorded to regulatory assets
Gas costs	(9.6		)	3.7		4.8			(1.8		)
Total	$	(15.4	)	$	5.7	$	4.7		$	(1.3	)

^(a) Washington Gas has elected to offset the fair value of recognized derivative instruments against the right to reclaim or the obligation to return collateral for derivative instruments executed under the same master netting arrangement in accordance with ASC Topic 815. All recognized derivative contracts and associated financial collateral subject to a master netting arrangement or similar that is eligible for offset under ASC Topic 815 have been presented net in the balance sheets.

The following tables present all gains and losses associated with derivative instruments for the three months ended March 31, 2020 and 2019.



Washington Gas Light Company Gains and (Losses) on Derivative Instruments
(In millions)	Three Months Ended March 31,
	2020		2019
Recorded to income
Utility cost of gas	3.1		4.0
Recorded to regulatory assets
Gas costs	8.9		11.9
Total	$	12.0	$	15.9

Collateral

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Washington Gas utilizes standardized master netting agreements, which facilitate the netting of cash flows into a single net exposure for a given counterparty. As part of these master netting agreements, cash, letters of credit and parent company guarantees may be required to be posted or obtained from counterparties in order to mitigate credit risk related to both derivatives and non-derivative positions. Under Washington Gas’ offsetting policy, collateral balances are offset against the related counterparties’ derivative positions to the extent the application would not result in the over-collateralization of those derivative positions on the balance ~~sheet~~sheets. Any collateral posted that is not offset against derivative assets and liabilities is included in “Other prepayments” inon the ~~condensed~~ balance ~~sheet~~sheets. Collateral received and not offset against derivative assets and liabilities is included in “Customer deposits and advance payments” inon the accompanying ~~condensed~~ balance ~~sheet~~sheets.

At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, Washington Gas had $34.38 million and $75.42 million, respectively, in collateral deposits posted with counterparties that are not offset against derivative asset and liabilities. At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, Washington Gas had $0.1 million and $0.21 million, respectively, cash collateral held representing an obligation, and are not offset against derivative asset and liabilities.

Certain derivative instruments of Washington Gas contain contract provisions that require collateral to be posted if the credit rating of Washington Gas falls below certain levels or if counterparty exposure to Washington Gas exceeds a certain level (credit-related contingent features). At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, Washington Gas was not required to post collateral related to a derivative liability that contained a credit-related contingent feature.

The following table shows the aggregate fair value of all derivative instruments with credit-related contingent features that are in a liability position, as well as the maximum amount of collateral that would be required if the most intrusive credit-risk-related contingent features underlying these agreements were triggered on March 31, 2020 and December 31, 2019, respectively.

Potential Collateral Requirements for Derivative Liabilitieswith Credit-Risk-Contingent Features
(In millions)	~~September~~March 3031, ~~2019~~2020		December 31, ~~2018~~2019
Derivative liabilities with credit-risk-contingent features	$	—0.1	$	10.14
Maximum potential collateral requirements	—0.1		1.0.4

We do not enter into derivative contracts for speculative purposes.

Concentration of Credit Risk

We are exposed to credit risk from derivative instruments with wholesale counterparties, which is represented by the fair value of these instruments at the reporting date. We actively monitor and work to minimize counterparty concentration risk through various practices. At ~~September~~March 3031, ~~2019~~2020, ~~two~~one ~~counterparties~~counterparty ~~each~~ represented over 10% of Washington Gas’ credit exposure to wholesale derivative counterparties for a total credit risk of $1416.65 million.

NOTE 1213. FAIR VALUE MEASUREMENTS

WeRecurring measure the fair value of our financial assets and liabilities using a combination of the income and market approaches in accordance with ASC Topic 820. These financial assets and liabilities primarily consist of derivatives recorded on our balance sheet under ASC Topic 815 and short-term investments, commercial paper and long-term debt outstanding required to be disclosed at fair value. Under ASC Topic 820, fair value is defined as the exit price, representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To value our financial instruments, we use market data or assumptions that market participants would use, including assumptions about credit risk (both our own credit risk and the counterparty’s credit risk) and the risks inherent in the inputs to valuation.Basis

We measure the fair value of our financial assets and liabilities using a combination of the income and market approaches in accordance with ASC Topic 820. These financial assets and liabilities primarily consist of derivatives recorded on our balance sheets under ASC Topic 815 and short-term investments, commercial paper and long-term debt outstanding required to be disclosed at fair value. Under ASC Topic 820, fair value is defined as the exit price, representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To value our financial instruments, we use market data or assumptions that market participants would use, including assumptions about credit risk (both our own credit risk and the counterparty’s credit risk) and the risks inherent in the inputs to valuation.

We enter into derivative contracts in the futures and over-the-counter (OTC) wholesale and retail markets. These markets are the principal markets for the respective wholesale and retail contracts. Our relevant market participants are our existing counterparties and others who have participated in energy transactions at our delivery points. These participants have access to the same market data as Washington Gas. Valuations are generally based on pricing service data or indicative broker quotes depending on the market location. We measure the net credit exposure at the counterparty level where the right to set-off exists. The net exposure is determined using the mark-to-market exposure adjusted for collateral, letters of credit and parent guarantees. We use published default rates from Standard & Poor’s Ratings Services and Moody’s Investors Service as inputs for determining credit adjustments.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy under ASC Topic 820 are described below:

26Level 1. Level 1 of the fair value hierarchy consists of assets or liabilities that are valued using observable inputs based upon unadjusted quoted prices in active markets for identical assets or liabilities at the reporting date. Washington Gas did not have any Level 1 derivatives at March 31, 2020 or December 31, 2019.

~~Washington~~Level 2. Level 2 ~~Gas~~of ~~Light~~the ~~Company~~fair value hierarchy consists of assets or liabilities that are valued using directly or indirectly observable inputs either corroborated with market data or based on exchange traded market data. Level 2 includes fair values based on industry-standard valuation techniques that consider various assumptions: (i) quoted forward prices, including the use of mid-market pricing within a bid/ask spread; (ii) discount rates; (iii) implied volatility and (iv) other economic factors. Substantially all of these assumptions are observable throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the relevant market. At March 31, 2020 and December 31, 2019, Level 2 financial assets and liabilities included energy-related physical and financial derivative transactions such as forward, option and other contracts for deliveries at active market locations.

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Level 1. Level 1 of the fair value hierarchy consists of assets or liabilities that are valued using observable inputs based upon unadjusted quoted prices in active markets for identical assets or liabilities at the reporting date. Washington Gas did not have any Level 1 derivatives at September 30, 2019 or December 31, 2018.

Level 2. Level 2 of the fair value hierarchy consists of assets or liabilities that are valued using directly or indirectly observable inputs either corroborated with market data or based on exchange traded market data. Level 2 includes fair values based on industry-standard valuation techniques that consider various assumptions: (i) quoted forward prices, including the use of mid-market pricing within a bid/ask spread; (ii) discount rates; (iii) implied volatility and (iv) other economic factors. Substantially all of these assumptions are observable throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the relevant market. At September 30, 2019 and December 31, 2018, Level 2 financial assets and liabilities included energy-related physical and financial derivative transactions such as forward, option and other contracts for deliveries at active market locations.

Level 3. Level 3 of the fair value hierarchy consists of assets or liabilities that are valued using significant unobservable inputs at the reporting date. These unobservable assumptions reflect our assumptions about estimates that market participants would use in pricing the asset or liability, including natural gas basis prices and annualized volatilities of natural gas prices. A significant change to any one of these inputs in isolation could result in a significant upward or downward fluctuation in the fair value measurement. These inputs may be used with industry standard valuation methodologies that result in our best estimate of fair value for the assets or liabilities at the reporting date.

~~Our~~At ~~Commodity~~March 31, 2020 and ~~Market~~December 31, ~~Risk~~2019, ~~(C&MR)~~Level ~~Group~~3 ~~determines~~derivative ~~the~~assets ~~valuation~~and ~~policies~~liabilities ~~and~~included: ~~procedures.~~(i) ~~The~~physical ~~C&MR~~contracts ~~Group~~valued ~~reports~~at toilliquid ~~AltaGas’~~market ~~Vice~~locations ~~President~~with ofno ~~Commodity~~observable ~~Risk.~~market Indata; ~~accordance~~(ii) long-dated ~~with~~positions ~~Washington~~where ~~Gas~~observable ~~valuation~~pricing ~~policy,~~is wenot ~~may~~available ~~utilize~~over athe ~~variety~~majority of ~~valuation methodologies to determine~~ the ~~fair~~life ~~value~~ of ~~Level~~the 3contract; ~~derivative~~ (iii) contracts, ~~including~~valued ~~internally~~using ~~developed~~historical ~~valuation~~spot ~~inputs~~price ~~and~~volatility ~~pricing~~assumptions ~~models. The~~and ~~prices used in our~~ (iv) valuations ~~are corroborated~~ using ~~multiple~~indicative ~~pricing~~broker ~~sources,~~quotes ~~and we periodically conduct assessments to determine whether each valuation model is appropriate~~ for ~~its~~inactive ~~intended~~market ~~purpose~~locations. ~~The C&MR Group also evaluates changes in fair value measurements on a daily basis.~~

At The ~~September~~following table sets forth financial instruments recorded at fair value at March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, ~~Level~~respectively. 3A ~~derivative~~financial ~~assets~~instrument’s ~~and~~classification ~~liabilities~~within ~~included:~~the ~~(i) physical~~fair ~~contracts~~value ~~valued~~hierarchy atis ~~illiquid~~based ~~market~~on ~~locations~~the ~~with~~lowest nolevel ~~observable~~of ~~market~~any ~~data;~~input ~~(ii) long-dated~~that ~~positions~~is ~~where~~significant ~~observable~~to ~~pricing~~the isfair ~~not~~value ~~available~~measurement. ~~over~~Our ~~the~~assessment ~~majority~~ of the ~~life~~significance of a particular input to the ~~contract;~~fair ~~(iii) contracts~~value ~~valued~~measurement ~~using~~requires ~~historical~~judgment ~~spot~~and ~~price~~may ~~volatility~~affect ~~assumptions~~the valuation of fair value assets and ~~(iv) valuations~~liabilities ~~using~~and ~~indicative~~their ~~broker~~placement ~~quotes~~within ~~for~~the ~~inactive~~fair ~~market~~value ~~locations~~hierarchy.

The following table sets forth financial instruments recorded at fair value as of September 30, 2019 and December 31, 2018, respectively. A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy.24

Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1		Level 2			Level 3			Total
At September 30, 2019
Assets
Natural gas related derivatives	$	—	$	1.6		$	10.0		$	11.6
Total Assets	$	—	$	1.6		$	10.0		$	11.6
Liabilities
Natural gas related derivatives	$	—	$	(1.1	)	$	(116.3	)	$	(117.4	)
Total Liabilities	$	—	$	(1.1	)	$	(116.3	)	$	(117.4	)
At December 31, 2018
Assets
Natural gas related derivatives	$	—	$	9.8		$	28.3		$	38.1
Total Assets	$	—	$	9.8		$	28.3		$	38.1
Liabilities
Natural gas related derivatives	$	—	$	(9.5	)	$	(134.9	)	$	(144.4	)
Total Liabilities	$	—	$	(9.5	)	$	(134.9	)	$	(144.4	)

The following table includes quantitative information about the significant unobservable inputs used in the fair value measurement of our Level 3 financial instruments and the respective fair values of the net derivative asset and liability positions, by contract type, as of September 30, 2019 and December 31, 2018.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1	~~Net Fair ValueSeptember 30, 2019~~	~~Valuation Techniques~~	Level 2	~~Unobservable Inputs~~		~~Range~~	Level 3			Total
Natural gas related derivatives		($106.3)	Discounted Cash Flow		Natural Gas Basis Price(per dekatherm)		($1.095) - $3.473
At March 31, 2020
		Net Fair ValueDecember 31, 2018
Assets	$	—		$	0.7			$	17.5		$	18.2
Natural gas related derivatives		($106.6)	Discounted Cash Flow		Natural Gas Basis Price(per dekatherm)		($1.028)-$5.34
Liabilities	$	—		$	(0.8	)		$	(88.7	)	$	(89.5	)
At December 31, 2019
Assets	$	—		$	0.8			$	12.2		$	13.0
Liabilities	$	—		$	(7.0	)		$	(97.0	)	$	(104.0	)

The following table ~~presents~~includes aquantitative ~~summary~~information ofabout the ~~changes~~significant unobservable inputs used in the fair value measurement of our ~~derivative~~Level ~~instruments~~3 ~~that~~financial ~~are~~instruments ~~measured~~and atthe ~~net~~respective fair ~~value~~values onof athe ~~recurring~~net ~~basis~~derivative inasset ~~accordance~~and ~~with~~liability ~~ASC~~positions, ~~Topic~~by ~~820~~contract ~~using~~type, ~~significant~~at ~~Level 3 inputs during the three and nine months ended September~~March 3031, ~~2019~~2020 and ~~2018~~December 31, ~~respectively~~2019.



Quantitative Information about Level 3 Fair Value Measurements
(In millions)	Net Fair Value	Valuation Techniques	Unobservable Inputs	Weighted Average ^(a)	Range
March 31, 2020	($71.2)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	($0.34)	($0.878)-$2.133
December 31, 2019	($84.8)	Discounted Cash Flow	Natural Gas Basis Price (per dekatherm)	—	($0.905)-$2.523

^(a) ASU 2018-13 has been applied prospectively, beginning with the interim period ending March 31, 2020. The average level 3 price was weighted by transaction volume.

The following table is a summary of the changes in the fair value of our natural gas related derivative instruments that are measured at net fair value on a recurring basis in accordance with ASC Topic 820 using significant Level 3 inputs during the three months ended March 31, 2020 and 2019, respectively.



Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs
	Three Months Ended March 31,
(In millions)	2020			2019
Balance at beginning of period	$	(84.8	)	$	(106.6	)
Realized and unrealized gains (losses)
Recorded to income	3.1			3.6
Recorded to regulatory assets—gas costs	9.1			12.5
Transfers into Level 3	—			(3.8		)
Transfers out of Level 3	—			5.0
Settlements	1.4			3.2
Balance at end of period	$	(71.2	)	$	(86.1	)

Transfers between different levels of the fair value hierarchy may occur based on fluctuations in the valuation inputs and on the level of observable inputs used to value the instruments from period to period. Transfers out of Level 3 were due to valuations that experienced an increase in observable market inputs. Transfers into Level 3 were due to an increase in unobservable market inputs, primarily pricing points. All amounts recorded to income are from the utility cost of gas.

Unrealized gains (losses) attributable to derivative assets and liabilities measured using significant Level 3 inputs were recorded as follows for the three months ended March 31, 2020 and 2019, respectively:

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs
Unrealized Gains (Losses) Recorded for Level 3 Measurements
(In millions)	Total - Natural GasRelatedDerivatives
	Three Months Ended March 31,
Three Months Ended September 30, 2019
(In millions)	2020	2019
Balance at July 1, 2019	$	(86.9	)
Recorded to income
Realized and unrealized gains (losses)
Utility cost of gas	$2.3	$2.5
Recorded to income	(6.2		)
Recorded to regulatory assets
Recorded to regulatory assets—gas costs	(10.1		)
Gas costs	7.6	10.5
Transfers into Level 3	(2.9		)
Total	$9.9	$13.0
Transfers out of Level 3	2.9
Purchases	—
Sales	—
Settlements	(3.1		)
Balance at September 30, 2019	$	(106.3	)
Three Months Ended September 30, 2018
Balance at July 1, 2018	$	(103.6	)
Realized and unrealized gains (losses)
Recorded to income	3.5
Recorded to regulatory assets—gas costs	5.6
Transfers into Level 3	(0.1		)
Transfers out of Level 3	(0.1		)
Purchases	—
Settlements	0.6
Balance at September 30, 2018	$	(94.1	)
Nine Months Ended September 30, 2019
Balance at January 1, 2019	$	(106.6	)
Realized and unrealized gains (losses)
Recorded to income	(1.4		)
Recorded to regulatory assets—gas costs	4.3
Transfers into Level 3	(6.7		)
Transfers out of Level 3	7.9
Purchases	—
Settlements	(3.8		)
Balance at September 30, 2019	$	(106.3	)
Nine Months Ended September 30, 2018
Balance at January 1, 2018	$	(125.4	)
Realized and unrealized gains (losses)
Recorded to income	(0.7		)
Recorded to regulatory assets—gas costs	(3.1		)
Transfers into Level 3	(7.1		)
Transfers out of Level 3	8.9
Settlements	33.3
Balance at September 30, 2018	$	(94.1	)

~~Transfers~~The ~~between~~following ~~different~~table ~~levels~~presents of the ~~fair~~carrying ~~value~~amounts ~~hierarchy may occur based~~ on ~~fluctuations~~Washington inGas' ~~the~~balance ~~valuation~~sheets ~~inputs~~ and onestimated ~~the~~fair ~~level~~values of ~~observable~~our ~~inputs~~financial ~~used to value the~~ instruments ~~from period to period. It is our policy to show both transfers into and out of the different levels of the fair value hierarchy~~ at ~~the fair value as of the beginning of the period. Transfers out of Level 3 during the three and nine months ended September~~March 3031, ~~2019~~2020 and ~~2018 were due to valuations that experienced an increase in observable market inputs. Transfers into Level 3 during the three and nine months ended September~~December 3031, 2019 ~~and 2018 were due to an increase in unobservable market inputs, primarily pricing points~~.

The table below sets forth the line items on the statements of operations to which amounts are recorded for the three and nine months ended September 30, 2019 and 2018, respectively, related to fair value measurements using significant Level 3 inputs.



Fair Value of Financial Instruments
	March 31, 2020				December 31, 2019
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Money market funds^(a)	$	78.0	$	78.0	$	55.1	$	55.1
Other long-term receivable^(b)	$	1.3	$	1.3	$	1.3	$	1.3
Commercial paper ^(c)	$	145.5	$	145.5	$	399.5	$	399.5
Washington Gas Unsecured notes^(d)	$	1,331.1	$	1,486.5	$	1,330.9	$	1,480.8

29(a) The balance at March 31, 2020 includes $38.6 million money market funds located in "Cash and cash equivalents", $11.3 million rabbi trust investment located in "Current Assets-Other", and $28.1 million rabbi trust investments located in "Deferred Charges and Other Assets-Other" of the accompanying balance sheets; The balance at December 31, 2019 includes $11.0 million money market funds located in "Cash and cash equivalents", $19.5 million rabbi trust investment located in "Current Assets-Other" and $24.6 million rabbi trust investments located in "Deferred Charges and Other Assets-Other".

~~Washington~~(b) ~~Gas~~Amount ~~Light~~represents ~~Company~~a long-term receivable from one of our trading partners related to Antero contract discussed in Note 11-Commitments and Contingencies.

~~Part~~(c)The balance at March I31, 2020 includes $45.5 million located in "Notes payable", and $100.0 million located in “Long-~~Financial~~term ~~Information~~debt” on the accompanying balance sheets. The balance at December 31, 2019 includes $299.5 million located in "Notes payable", and $100.0 million located in “Long-term debt” on the accompanying balance sheets.

~~Item 1~~(d) Includes adjustments for current maturities and unamortized discounts, as applicable. The amount was included in "Long-~~Financial~~term ~~Statements~~debt" ~~(continued)~~on the accompanying balance sheets.

~~Notes~~Our tomoney ~~Condensed~~market ~~Financial~~funds ~~Statements~~are ~~(Unaudited)~~Level 1 valuations and their carrying amount is equal to fair value.

Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements
(In millions)	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Utility cost of gas	$(6.2)	$3.5	$(1.4)	$(0.7)

The other long-term receivable is from one of our trading partners related to the Antero contract. The fair value for our other long term receivable approximates its carrying value using Level 2 input to estimate the credit loss associated with the receivable.

~~Unrealized~~The ~~gains~~carrying ~~(losses)~~cost ~~attributable~~of toour ~~derivative~~commercial ~~assets~~paper ~~and~~approximates ~~liabilities~~fair ~~measured~~value using ~~significant~~ Level 3 ~~inputs~~2 ~~were recorded as follows for the three and nine months ended September 30, 2019 and 2018, respectively~~inputs.

Unrealized Gains (Losses) Recorded for Level 3 Measurements
(In millions)	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
Recorded to income
Utility cost of gas	$	(5.9	)	$	3.1	$	1.6	$	6.9
Recorded to regulatory assets—gas costs	(10.2		)	4.8		7.9		7.7
Total	$	(16.1	)	$	7.9	$	9.5	$	14.6

The fair value of Washington Gas unsecured notes was estimated based on valuation techniques using indirectly observable inputs corroborated with market data and therefore is classified as Level 2.

~~The~~NOTE ~~following table presents the carrying amounts recorded at amortized cost and estimated fair values of our financial instruments at September~~14. ~~30,~~RELATED ~~2019~~PARTY ~~and December 31, 2018.~~TRANSACTIONS

Fair Value of Financial Instruments
	September 30, 2019				December 31, 2018
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Money market funds(a)	$	48.7	$	48.7	$	69.7	$	69.7
Commercial paper (b)	$	117.0	$	117.0	$	296.0	$	296.0
Project financing (b)	$	—	$	—	$	15.5	$	15.5
Current maturities of long-term debt	$	50.0	$	50.0	$	50.0	$	50.0
Long-term debt(c)	$	1,331.1	$	1,501.5	$	1,035.0	$	1,096.3

(a) The balance as of September 30, 2019 includes $0.6 million money market funds located in “Cash and cash equivalents,” $4.2 million rabbi trust investment located in “Current Assets-Other,” and $43.9 million rabbi trust investments located in “Deferred Charges and Other Assets-Other” of the accompanying balance sheet; The balance as of December 31, 2018 includes $4.4 million money market funds located in “Cash and cash equivalents,” $20.2 million rabbi trust investment located in “Current Assets-Other” and $45.1 million rabbi trust investments located in “Deferred Charges and Other Assets-Other.” The amounts in cash and cash equivalent may be offset by outstanding checks.

(b) Balance is located in “Notes payable and project financing” in the accompanying balance sheet.

Our money market funds are Level 1 valuations and their carrying amount approximates fair value. The maturity of our commercial paper outstanding at both September 30, 2019 and December 31, 2018 is under 30 days. Due to the short term nature of these notes, the carrying cost of our commercial paper approximates fair value using Level 2 inputs. Due to the nature of our project financing arrangements, the carrying cost approximates fair value using Level 2 inputs. Due to the short term nature of current maturities of long-term debt, the carrying cost approximates fair value using Level 2 inputs, Washington Gas’ long-term debt is not actively traded. The fair value of long-term debt was estimated based on valuation techniques when observable market data is not available. Our long-term debt fair value measurement is classified as Level 3.

NOTE 13. RELATED PARTY TRANSACTIONS

Corporate Service Allocation

As a subsidiary of AltaGas and effective with the close of the Merger on July 6, 2018, Washington Gas is charged a proportionate share of corporate governance and other shared services costs from AltaGas, primarily related to human resources, employee benefits, finance, legal, accounting, tax, information technology services, and office services. AltaGas charges Washington Gas for the total shared service costs and Washington Gas in turn allocates a portion of the costs to WGL’s other subsidiaries at the lower of cost or market. Washington Gas records a payable of the total shared service costs allocated to all of WGL's subsidiaries in "Payable to associated companies" and a receivable of the shared service costs allocated to WGL’s other subsidiaries in “Receivables from associated companies” on the balance sheets. Additionally, effective upon the approval by the SCC of Virginia in March 2020, Washington Gas began receiving certain corporate services from SEMCO Energy, Inc., (SEMCO), a subsidiary of AltaGas. Washington Gas records in "Payable to associated companies" on its balance sheets for the

3026

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

~~charges~~services ~~Washington~~provided ~~Gas~~by ~~for~~SEMCO. ~~the~~The ~~total~~expenses ~~shared~~associated ~~service~~with ~~costs~~services ~~attributable~~provided toby ~~WGL~~AltaGas and ~~its~~SEMCO ~~affiliates~~are ~~and~~recorded ~~Washington Gas in turn allocates a portion of the costs~~ to ~~WGL’s~~“Operation ~~other~~and ~~subsidiaries~~maintenance” ~~based~~ on ~~methodologies further described below.~~ Washington Gas' ~~records~~statements ~~a payable~~ of the total shared service costs allocated to all WGL’s subsidiaries in “Payable to associated companies” and a receivable of the shared service costs allocated to WGL’s other subsidiaries in “Receivables from associated companies” on the balance sheetoperations.

As of September 30, 2019, Washington Gas recorded a $15.9 million liability to “Payables to associated companies,” reflecting Washington Gas’ unpaid shared service cost payable to AltaGas, and a receivable of $3.4 million to “Receivables from associated companies” on the balance sheet related to the shared service costs allocated to WGL’s subsidiaries. The net expenses of $5.0 million and $124.5 million were included in “Operation and maintenance” on the statements of operations for the three ~~and~~month ~~nine months~~ ended ~~September~~March 3031, 2020 and 2019, respectively, reflecting the ~~shared~~corporate service cost allocated to Washington Gas.

AsIn addition, Washington Gas provides accounting, treasury, legal and other administrative and general support to WGL’s subsidiaries, and files consolidated tax returns that include affiliated taxable transactions. Effective upon the approvals by the SCC of ~~December 31~~Virginia, ~~2018~~Washington Gas began providing accounting, legal, tax and other administrative and general support to various AltaGas U.S. entities. Washington Gas ~~recorded~~bills aaffiliates ~~receivable~~to which it provides services in accordance with regulatory requirements for the actual cost of $0providing these services, which approximates their market value.6 ~~million~~To tothe extent such billings are outstanding, they are reflected in “Receivables from associated companies” on ~~the~~Washington Gas’ balance ~~sheet~~sheets. ~~related~~Washington toGas ~~the~~assigns ~~shared~~or ~~service~~allocates these costs ~~allocated~~directly to ~~WGL’s~~its ~~subsidiaries~~affiliates and, therefore, does not recognize revenues or expenses associated with providing these services. ~~There~~Washington ~~was~~Gas nobelieves ~~payable~~that ~~balance~~allocations ~~related~~based toon ~~the~~broad ~~shared~~measures ~~service~~of ~~cost~~business ~~payable~~activity toare ~~AltaGas~~appropriate asfor allocating expenses resulting from common services. Affiliate entities are allocated a portion of ~~December 31~~common services based on a formula driven by appropriate indicators of activity, ~~2018.~~as approved by management.

In addition, Washington Gas provides accounting, treasury, legal and other administrative and general support to WGL’s subsidiaries, and files consolidated tax returns that include affiliated taxable transactions. Effective upon the approvals by the SCC of Virginia and beginning in January 2019 and June 2019, respectively, Washington Gas also provides accounting, legal, tax and other administrative and general support to various AltaGas U.S. entities and AltaGas. Washington Gas bills affiliates to which it provides services in accordance with regulatory requirements for the actual cost of providing these services, which approximates their market value. To the extent such billings are outstanding, they are reflected in “Receivables from associated companies” on Washington Gas’ balance sheet. Washington Gas assigns or allocates these costs directly to its affiliates and, therefore, does not recognize revenues or expenses associated with providing these services. Washington Gas believes that allocations based on broad measures of business activity are appropriate for allocating expenses resulting from common services. Affiliate entities are allocated a portion of common services based on a formula driven by appropriate indicators of activity, as approved by management.

Project Financing

~~Washington~~WGL ~~Gas~~Energy ~~previously~~Systems, ~~obtained~~Inc. ~~third-party~~(WGL ~~project~~Energy ~~financing~~Systems), onan ~~behalf~~indirect, ofwholly-owned ~~the~~subsidiary ~~federal~~of ~~government~~WGL, toobtains ~~provide~~third-party ~~funds~~project ~~during~~financing ~~the~~for ~~construction of certain~~ energy management services projects ~~entered~~with ~~into~~the federal government under Washington Gas’s area-wide contract. As work is performed, Washington Gas ~~recorded~~establishes a contract asset in “~~Unbilled revenues~~Receivables” representing the government’s obligation ~~and~~to anremit ~~account~~principal ~~payable~~and tointerest ~~WGL~~and ~~Energy~~records ~~Systems~~a in “Payable to associated ~~companies~~company” to WGL Energy Systems for the construction work performed for the same amount. ~~Refer to Note 5- Short Term Debt of the Notes to Condensed Financial Statements for further discussions of the project financing.~~

At March 31, 2020, Washington Gas recorded $46.1 million of contract assets in “Receivables” and a $46.1 million payable to WGL Energy Systems in “Payables to associated companies,” respectively, for energy management services projects financed by WGL Energy Systems that were not complete.

At December 31, 2019, Washington Gas recorded $44.2 million of contract assets in “Receivables” and a $44.2 million payable to WGL Energy Systems in “Payables to associated companies,” respectively, for energy management services projects financed by WGL Energy Systems that were not complete.

In October 2018, WGL Energy Systems repaid $53.0 million historically drawn by Washington Gas from a third-party lender for Washington Gas' area-wide contract that the lender demanded repayment for due to delays in achieving final acceptance from the federal government agency customer. The $53.0 million was included in "Payables to associated companies" on Washington Gas' balance sheets at December 31, 2018. In February 2019, WGL sold the receivables, and accordingly, Washington Gas reversed the associated amount in “Payables to associated companies” and “Receivables” on its balance sheets during the three months ended March 31. 2019.

Related Party Transactions with Hampshire

Hampshire Gas Company (Hampshire), a wholly-owned subsidiary of WGL, owns full and partial interests in underground natural gas storage facilities, including pipeline delivery facilities located in and around Hampshire County, West Virginia, and operates those facilities to serve Washington Gas, which purchases all of the storage services of Hampshire. Washington Gas includes the cost of these services in the bills sent to its customers and records the cost of the services in “"Operation and maintenance”" in its statements of operations. Hampshire operates under a “pass-through” cost of service-based tariff approved by the ~~Federal Energy Regulatory Commission (~~FERC) and adjusts its billing rates to Washington Gas on a periodic basis to account for changes in its investment in utility plant and associated expenses. The arrangement between Hampshire and Washington Gas is classified as an operating lease. AnA right-of-use (ROU) asset and lease liability was not recognized upon the adoption of ASC 842 because all the costs associated with the arrangement are variable. Washington Gas recorded $2.0 million and $2.1 million of the expenses related to the cost of services provided by Hampshire in "Operation and maintenance " on Washington Gas’' statements of operations ~~of $1.5 million and $5.5 million~~ for the three ~~and nine~~ months ended ~~in September 30~~March 31, ~~2019,~~2020 and ~~$1.9 million and $5.3 million for the three and nine months ended in September 30~~2019, ~~2018,~~ respectively. The outstanding balance not cleared between Washington Gas and Hampshire at the end of the reporting period was recorded in ~~“Receivables~~"Payable ~~from~~to associated companies”" onof Washington Gas’' balance ~~sheet~~sheets. Refer to Note 34 - Leases for further discussion of ASC 842.

Other Related Party Transactions

In connection with billing for unregulated third-party marketers, including WGL Energy Services, ~~and~~Inc., ~~with~~(WGL ~~other~~Energy ~~miscellaneous~~Services), ~~billing~~an ~~processes~~indirect, ~~Washington~~wholly-owned ~~Gas~~subsidiary ~~collects cash on behalf~~ of ~~affiliates~~WGL, and ~~transfers~~with ~~the~~other ~~cash~~miscellaneous inbilling aprocesses, ~~reasonable~~Washington ~~time~~Gas

3127

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

collects cash on behalf of affiliates and transfers the cash in a reasonable time period. Cash collected by Washington Gas on behalf of its affiliates but not yet transferred is recorded in “Payables to associated companies” on Washington Gas’ balance ~~sheet~~sheets.

Washington Gas provides gas balancing services related to storage, injections, withdrawals and deliveries to all energy marketers participating in the sale of natural gas on an unregulated basis through the customer choice programs that operate in its service territory., These balancing services include the sale of natural gas supply commodities related to various peaking arrangements contractually supplied to Washington Gas and then partially allocated and assigned by Washington Gas to the energy marketers, including WGL Energy Services. Washington Gas records revenues in " Operating revenue" of its statements of operations for these balancing services pursuant to tariffs approved by the appropriate regulatory bodies. The following table shows the amounts Washington Gas charged WGL Energy Services for balancing services.

Gas Balancing Service Charges

Washington Gas - Gas Balancing Service Charges

Three Months Ended September 30,

Nine Months Ended September 30,

Three Month Ended March 31,

(In millions)

~~2019~~2020

~~2018~~2019

~~2019~~

~~2018~~

Gas balancing service charge

26.96

38.29

~~14.9~~

~~16.0~~

As a result of these balancing services, an imbalance is created for volumes of natural gas received by Washington Gas that are not equal to the volumes of natural gas delivered to customers of the energy marketers. Washington Gas recorded a$2.6 million and $2.1 million payable to WGL Energy Services at ~~September 30~~March 31, ~~2019~~2020 and ~~$0.7 million receivable from WGL Energy Services at~~ December 31, ~~2018~~2019, respectively, related to an imbalance in gas volumes. The ~~receivable~~payables ~~and~~were ~~payable are~~ recorded in ~~“Account~~"Accounts ~~receivable” and “Account~~ payable and other accrued liabilities”" on Washington Gas’' balance ~~sheet~~sheets. ~~Refer to Note 1- Accounting Policies of the Notes to Financial Statements on Form 10-KT for the three months ended December 31, 2018 for further discussion of these imbalance transactions.~~

Washington Gas participates in a purchase of receivables (POR) program as approved by the PSC of MD and separate program approved by the PSC of DC, whereby it purchases receivables from participating energy marketers, ~~including~~at approved discount rates. WGL Energy Services, atis ~~approved~~one ~~discount~~of ~~rates.~~the ~~Washington~~energy ~~Gas~~marketers ~~implemented~~that ~~the~~participates in these POR ~~program~~programs inwhereby ~~the~~it ~~District~~sells ofits ~~Columbia~~receivables ~~beginning~~to invarious ~~January~~utilities, ~~2019~~including Washington Gas, at approved discount rates. The receivables purchased by Washington Gas are included in “Accounts receivable” in the accompanying balance ~~sheet~~sheets. At ~~September~~March 3031, ~~2019~~2020 and December 31, ~~2018~~2019, Washington Gas had balances of $37.50 million and $67.49 million, respectively, of purchased receivables from WGL Energy Services.

~~Refer~~NOTE to15. ACCUMULATED ~~Note~~OTHER ~~8-Income~~COMPREHENSIVE ~~Taxes~~INCOME ~~of the Notes to Condensed Financial Statements for discussion of related party income taxes.~~(LOSS)

The following table shows the changes in accumulated other comprehensive income (loss) for Washington Gas by component for the three months ended March 31, 2020 and 2019.

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)



Changes in Accumulated Other Comprehensive Income (Loss) by Component
	Three Months Ended March 31,
(In thousands)	2020			2019
Beginning Balance	$	4,909		$	(6,627	)
Amortization of prior service credit ^(a)(b)	(304		)	(162		)
Amortization of actuarial loss ^(a)(b)	1,016			415
Actuarial gain (loss) arising during the period ^(a)	1,910			4,489
Current-period other comprehensive income	2,622			4,742
Income tax expense related to pension and other post-retirement benefit plans	681			477
Ending Balance	$	6,850		$	(2,362	)

^(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost.

~~The~~(b) ~~following~~Amortization ~~table~~of ~~shows~~prior ~~the~~service ~~changes~~cost inand ~~accumulated~~amortization ~~other~~of ~~comprehensive~~actuarial ~~income~~gain (loss) byrepresent ~~component~~the ~~for~~amounts ~~three~~reclassified ~~and~~out ~~nine~~of ~~months~~AOCI ~~ended~~to ~~September 30,~~“Other ~~2019~~income ~~and~~(expense)” ~~2018~~of statements of operations for the reporting periods.

Changes in Accumulated Other Comprehensive Income (Loss) by Component
	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2019			2018			2019			2018
Beginning Balance	$	(6,141	)	$	(3,959	)	$	(6,627	)	$	(4,330	)
Amortization of prior service cost (a)(b)	(163		)	145			(486		)	(401		)
Amortization of actuarial gain (loss)(a)(b)	392			112			1,198			1,172
Actuarial gain (loss) arising during the period (a)	—			4,625			1,250			4,625
Current-period other comprehensive income (loss)	229			4,882			1,962			5,396
Income tax expense (benefit) related to pension and other post-retirement benefit plans	(713		)	2,753			534			2,896
Ending Balance	$	(5,199	)	$	(1,830	)	$	(5,199	)	$	(1,830	)

NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION

~~(a)~~The ~~These~~following ~~accumulated~~table ~~other~~details ~~comprehensive~~the ~~income~~changes ~~(loss)~~in ~~components~~operating ~~are~~assets ~~included~~and inliabilities ~~the~~from ~~computation~~operating ofactivities, ~~net~~cash ~~periodic~~payments ~~benefit~~that ~~cost.~~have ~~Refer~~been toincluded ~~Note~~in ~~9—Pension~~the ~~and~~determination ~~other~~of ~~post-retirement~~earnings ~~benefit~~and ~~plans~~non-cash ~~for~~investing ~~additional~~and ~~details.~~financing activities:

3228

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

(b) Amortization of prior service cost and amortization of actuarial gain (loss) represent the amounts reclassified out of AOCI to “Other income (expense)” of Statements of Operations for the reporting periods.



	Three Months Ended March 31,
(In thousands)	2020			2019
CHANGES IN OPERATING ASSETS AND LIABILITIES
Receivables	$	53,278		$	(27,774	)
Receivables from associated companies	(1,621		)	249
Gas costs and other regulatory assets/liabilities—net	(43,613		)	6,683
Storage gas	56,430			65,885
Prepaid taxes	3,711			2,037
Accounts payable and other accrued liabilities	(59,144		)	(77,797		)
Payables to associated companies	13,270			(2,656		)
Customer deposits and advance payments	(6,949		)	(15,521		)
Accrued taxes	5,499			3,232
Other current assets	10,273			2,215
Other current liabilities	(243		)	(243		)
Deferred gas costs—net	24,874			50,086
Deferred assets—other	(1,014		)	14,027
Deferred liabilities—other	(1,463		)	(2,297		)
Pension and other post-retirement benefits	(4,245		)	(14,494		)
Changes in operating assets and liabilities	$	49,043		$	3,632
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded)—net	$	(3,880	)	$	(1,683	)
Interest paid	$	30,965		$	25,398
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	45,817		32,738

33The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within Washington Gas’ balance sheets that sums to the total of such amounts shown on the statements of cash flows



	March 31,
(in thousands)	2020		2019
Cash and cash equivalents	$	42,418	$	2,142
Restricted cash included in Current assets-Other	$	11,332	$	4,094
Restricted cash included in Deferred charges and other assets-Other	$	28,113	$	45,440
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	81,863	$	51,676

Restricted cash included in "Current assets—Other" and "Deferred charges and other assets—Other" on the balance sheets represents amount of investment in rabbi trusts to fund deferred compensation, pension and other post-retirement benefits for certain management personnel and directors. The funds in the rabbi trusts can only be used to pay for plan participant benefits and other plan expenses such as investment fees or trustee fees. The funds are invested in money market funds at end of March 31, 2020 and 2019. Refer to Note 10 — Pension and Other Post-Retirement Benefit Plans for further discussion of rabbi trusts.

Washington Gas Light Company

Part I-Financial Information

Item ~~1-Financial~~ ~~Statements~~2. ~~(continued)~~Management’s Discussion and Analysis of

Notes to Condensed Financial Statements (Unaudited)

NOTE 15. SUPPLEMENTAL CASH FLOW INFORMATION

	Nine Months Ended September 30,			Nine Months Ended September 30,
(In thousands)	2019			2018
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable and unbilled revenues	$	174,986		$	159,066
Receivables from associated companies	(3,981		)	24,783
Gas costs and other regulatory assets/liabilities—net	(8,253		)	(10,509		)
Storage gas	11,479			(16,419		)
Prepaid taxes	(3,791		)	14,167
Accounts payable and other accrued liabilities	(109,287		)	15,722
Payables to associated companies	10,383			(86,049		)
Customer deposits and advance payments	(11,511		)	28,947
Accrued taxes	6,830			(19,527		)
Other current assets	5,077			(4,701		)
Other current liabilities	(240		)	278
Deferred gas costs—net	49,379			17,717
Deferred assets—other	11,807			11,754
Deferred liabilities—other	(26,879		)	(22,038		)
Pension and other post-retirement benefits	(11,427		)	(14,079		)
Other—net	—			(798		)
Changes in operating assets and liabilities	$	94,572		$	98,314
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded)—net	$	5,253		$	(2,025	)
Interest paid	$	54,238		$	54,059
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Extinguishment of project debt financing	$	(15,460	)	$	(28,312	)
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	39,976		$	53,367

(in thousands)	September 30, 2019		September 30, 2018
Cash and cash equivalents	$	1	$	1
Restricted cash included in Current Assets-Other	$	4,225	$	20,207
Restricted cash included in Deferred Charges and Other Assets-Other	$	43,945	$	44,775
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	48,171	$	64,983

Restricted cash included in “Current assets—Other” and “Deferred charges and other assets—Other” on the balance sheet represents amount of investment in rabbi trusts to fund deferred compensation, pension and other post-retirement benefits for certain management personnel and directors. The rabbi trusts were funded pursuant to the agreement of merger with AltaGas. The funds in the rabbi trusts can only be used to pay for plan participant benefits and other plan expenses such as investment fees or trustee fees. The funds were invested in money market funds at September 30, 2019 and September 30, 2018. Refer to Note 9-Pension and Other Post-Retirement Benefit Plans for further discussion of rabbi trusts.

Washington Gas Light Company

Part I

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations

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

~~INTRODUCTION~~Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion and Analysis) analyzes the financial condition, results of operations and cash flows of Washington Gas. ItThis ~~also~~discussion follows the format permitted in accordance with General Instruction H(2) of Form 10-Q, in light of Washington Gas’ status as a wholly owned subsidiary of AltaGas as permitted under General Instruction H(1) of Form 10-Q. It includes management’s narrative analysis of results of operations and reasons for material changes. This narrative discusses past financial results and potential factors that may affect future results, potential future risks and approaches that may be used to manage them. Except where the content clearly indicates otherwise, “Washington Gas,” “we,” “us,” “our” or the “"Company,”" refers to Washington Gas Light Company.

Management’s Discussion and Analysis is designed to provide an understanding of our operations and financial performance and should be read in conjunction with the ~~Company~~company’s financial statements and the Notes to Condensed Financial Statements ~~in this quarterly report as well as Washington Gas’ Form 10-KT for the period ending December 31, 2018~~. ~~Our operations are seasonal and, accordingly, our operating results for the periods presented are not indicative of the results to be expected for the full year.~~

~~Washington~~Preliminary ~~Gas~~Observations ~~has~~on ~~one~~Effect ~~operating segment that engages in the delivery and sale~~ of ~~natural gas, whose operations are regulated by regulatory commissions in the District of Columbia, Maryland and Virginia.~~ COVID-19

~~RESULTS~~On OFMarch ~~OPERATIONS—Three~~11, ~~Months~~2020, ~~Ended~~the ~~September 30~~World Health Organization declared the outbreak of a strain of novel coronavirus disease, ~~2019~~COVID-19, vsa global pandemic. ~~September 30~~Governments in affected areas in which we operate have imposed a number of measures designed to contain the outbreak, ~~2018~~including business closures, travel restrictions, quarantines and cancellations of gatherings and events. The expected impacts on the global economy are anticipated to be far-reaching, however, due to the speed with which the situation is developing and the uncertainty of its magnitude, outcome and duration, it is not currently possible to accurately quantify the impact of the pandemic on Washington Gas’ operations or financial results. As of the date of issuance of the financial statements, the Company's operations have not been significantly impacted; however, the Company continues to monitor the situation. No impairments were recorded through the date of this report, as no triggering events or changes in circumstances had occurred. However, due to significant uncertainty surrounding the situation, management's judgment regarding the situation could change in the future. In addition, while the Company's results of operations, cash flows and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time. Refer to "Rates and Regulatory Matters" for discussion on COVID-19 related orders.

~~Summary~~ Results of Operations

AWashington ~~net~~Gas ~~loss~~has one operating segment that engages in its core business of ~~$65~~delivering and selling natural gas under tariffs approved by regulatory commissions in the District of Columbia, Maryland and Virginia.8 ~~million~~Net income was ~~reported~~$126.1 million for the three months ended ~~September 30~~March 31, ~~2019~~2020 compared to a net ~~loss~~income of $~~181~~113.20 million for the ~~same~~three ~~period~~months ended ~~September 30~~March 31, ~~2018~~2019. The increase ofin ~~$115.4~~net ~~million~~income was mainly ~~due~~from ~~higher~~a ~~expenses~~$14.0 ~~related~~million toincrease ~~Merger~~in ~~commitments~~net ~~and~~revenues ~~related~~driven ~~expenses~~by ~~recorded~~the inimpact ~~the~~of ~~prior~~rate ~~period,~~cases ~~offset~~and byaccelerated ~~lower~~pipe ~~net~~replacement ~~revenues~~programs, ~~associated~~and ~~with~~a ~~the~~$8.3 ~~impact~~million ofdecrease ~~rate~~in ~~cases,~~operation ~~including~~and ~~revised~~maintenance ~~amortizations~~mainly ofdue ~~excess~~to ~~deferred~~lower ~~taxes~~employee incentive costs.

Our chief operating decision maker utilizes ~~earnings~~the ~~before~~non-GAAP ~~interest~~measure, ~~tax~~EBITDA, ~~depreciation and amortization (EBITDA)~~ as the primary measure of profit and loss in assessing the results of operations. ~~EBITDA includes operating income and other income (expense).~~ We believe that our use of EBITDA enhances the ability to evaluate Washington Gas’' performance because it excludes interest and income tax expense, which are affected by corporate-wide strategies of AltaGas such as capital financing ~~and tax sharing allocations~~. It also excludes depreciation and amortization which do not affect cash ~~flow~~flows.

EBITDA should not be considered an alternative to, or a more meaningful indicator of our operating performance than, net income.

The following table reconciles EBITDA to net income for the three months ended ~~September 30~~March 31, ~~2019~~2020 and ~~2018~~2019.

	Three Months Ended September 30,
	Three Months Ended March 31,
(In millions)	~~2019~~2020			~~2018~~2019			Increase/(Decrease)
Net income (loss)	$	(65.8	)	$	(181.2	)	$	115.4
Net income	$	126.1		$	113.0		$	13.1
Interest expense	1516.67			14.49			1.28
Income tax expense (benefit)	(19.3		)	(69.1		)	49.8
Income tax expense	31.5			29.2			2.3
Depreciation and amortization	3435.49			3335.92			0.57
EBITDA	$	~~(35~~210.12	)	$	~~(202~~192.03	)	$	~~166~~17.9

35 The following table summarizes the Company’s financial data for the three months ended March 31, 2020 and 2019.

Washington Gas Light Company



	Three Months Ended March 31,
(In millions)	2020		2019		Increase/(Decrease)
Revenues:
Operating revenues	$	501.7	$	593.7	$	(92.0	)
Less: Cost of gas	142.0		242.3		(100.3		)
Less: Revenue taxes	27.0		32.7		(5.7		)
Total net revenues	332.7		318.7		14.0
Operation and maintenance	102.7		111.0		(8.3		)
General taxes and other assessments	23.0		19.9		3.1
Other income (expenses)-net	3.2		4.5		(1.3		)
EBITDA	$	210.2	$	192.3	$	17.9

~~Part II~~Revenues

~~Item~~Operating 2revenues decreased by $92.0 million in the three months ended March 31, 2020 compared to the three months ended March 31, 2019 mainly driven by the effects of weather and consumption patterns along with a reduction in gas cost. We also utilize the non-~~Management’s~~GAAP ~~Discussion~~measure of net revenues, calculated as revenues less the associated cost of energy and ~~Analysis~~applicable revenue taxes, to assist in the analysis of profitability. The cost of the natural gas commodity and revenue taxes are included in the rates that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in the cost of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues, operating income or net income. Net revenues should not be considered an alternative to, or a more meaningful indicator of our operating performance than, operating revenues. Additionally, net revenues may not be comparable to similarly titled measures of other companies. The table above reconciles net revenues to operating revenues for the reporting periods as part of the reconciliation of operating revenues to EBITDA. Net revenues increased by $14.0 million in the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

~~Financial~~The ~~Condition~~following ~~and~~is ~~Results~~the ofmain ~~Operations~~driver ~~(continued)~~noted above for the decrease in operating revenues, as well as the additional drivers for the increase in net revenues:

~~The~~Impact ~~higher~~of ~~EBITDA~~rate ~~for~~cases. ~~the~~$9.8 ~~quarter~~million ~~ended~~increase ~~September 30,~~due ~~2019 compared~~ to ~~the~~new ~~quarter~~base ~~ended~~rates ~~September 30~~in Maryland, ~~2018~~effective ~~reflects~~October ~~higher~~2019, ~~expenses related to Merger commitments~~ and ~~related~~a ~~expenses~~$7.5 ~~recorded~~million inincrease ~~the~~due ~~prior~~to ~~period,~~a ~~offset~~true-up byto ~~lower net revenues associated with~~ the ~~impact~~Virginia of rate ~~cases~~refund ~~and~~liability ~~lower~~after ~~unrealized~~incorporating ~~mark-to-market~~final ~~valuations~~commission approved rates.

~~Summary~~Accelerated ~~Financial~~replacement ~~Results~~programs. $5.0 million increase due to approved accelerated replacement programs that were in place with an associated surcharge mechanism to recover the cost, including a return, on those capital investments.

~~The~~Estimated ~~following~~effects ~~table~~of ~~summarizes~~weather ~~the~~and ~~Company’s~~consumption ~~financial~~patterns. ~~data~~Weather, ~~for~~when ~~the~~measured ~~three~~by ~~months~~Heating ~~ended~~Degree ~~September 30~~Days, ~~2019~~was 22.2% and 3.8% warmer than normal for the three months ended ~~September 30~~March 31, ~~2018~~2020 and 2019, ~~reconciling~~respectively, ~~operating~~driving lower firm net revenues of $9.7 million. In the District of Columbia, where Washington Gas does not have a billing mechanism to ~~EBITDA~~offset the effects of weather, the comparatively warmer weather for the three months ended ~~September 30~~March 31, ~~2019~~2020 primarily drove this negative variance to net revenues. Natural gas consumption patterns may be affected by shifts in weather patterns and ~~2018~~non-weather related factors such as customer conservation.

	Three Months Ended September 30,
(In millions)	2019			2018			Increase/(Decrease)
Net revenues
Operating revenues	$	122.3		$	139.0		$	(16.7	)
Less: Cost of gas	$	33.4		20.9			12.5
Revenue taxes	11.6			11.7			(0.1		)
Total net revenues	77.3			106.4			(29.1		)
Operation and maintenance	101.2			282.8			(181.6		)
General taxes and other assessments	14.7			15.2			(0.5		)
Other income (expense)	3.5			(10.4		)	13.9
EBITDA	$	(35.1	)	$	(202.0	)	$	166.9

Net Revenues

We also utilize net revenues, calculated as revenues less the associated cost of energy and applicable revenue taxes, to assist in the analysis of profitability. The cost of the natural gas commodity (as adjusted for Asset Optimization sharing) and revenue taxes are included in the rates that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in the cost of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues, operating income or net income. Net revenues should not be considered an alternative to, or a more meaningful indicator of our operating performance than, operating revenues. Additionally, net revenues may not be comparable to similarly titled measures of other companies. The table above reconciles net revenues to operating revenues for the three months ended September 30, 2019 and 2018 as part of the reconciliation of operating revenues to EBITDA.

The following table provides the key factors contributing to the change in the net revenues between three months ended September 30, 2019 and 2018.

Composition of Changes in Net Revenues
(In millions)	Increase/(Decrease)
Accelerated replacement programs	$	3.1
Impact of rate cases
Tax Act refund adjustment	(13.3		)
Reserve for rate refund	(7.0		)
Other impact of rate cases	(3.6		)
Asset optimization:
Realized margins	0.8
Unrealized mark-to-market valuations	(9.8		)
Other	0.7
Total	$	(29.1	)

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Accelerated replacement programs — Approved accelerated replacement programs are in place with an associated surcharge mechanism to recover the cost, including a return, on those capital investments.

Impact of rate cases — The decrease in net revenues primarily reflects the impact of the HE’s report regarding the Company’s pending Virginia rate case. The report recommends a shorter amortization period of both excess deferred taxes and revenues collected based on the previous federal tax rate. The report also recommends no increase to base rates, and accordingly net revenues reflect a higher reserve recorded against new base rates put in effect January 1, 2019. Refer to “Rates and Regulatory Matters” for further discussion of these matters.

Asset optimization — We recorded a net loss of $1.3 million including an unrealized loss of $6.5 million associated with our energy-related derivatives for the quarter ended September 30, 2019, compared to a net gain of $7.7 million including an unrealized gain of $3.3 million for the quarter ended September 30, 2018. When these derivatives settle, any unrealized amounts will ultimately reverse and Washington Gas expects to realize margins in combination with related transactions that these derivatives economically hedge. The large swings in the valuations are partially due to movements in unobservable inputs used in the valuation of long-dated forward contracts. We believe that these values are not reflective of our ultimate cash flows as these purchases are utilized in the optimization of our long-term natural gas transportation and storage capacity resources, the value of which is not reflected at fair value. Refer to the section entitled “Market Risk—Price Risk” for further discussion of our asset optimization program.

Operation and Maintenance Expenses

~~The~~Operating ~~following~~and ~~table~~maintenance ~~provides~~expenses decreased $8.3 million in the ~~key~~three ~~factors~~months ~~contributing~~ended March 31, 2020 compared to the ~~changes~~three inmonths ~~operation~~ended ~~and~~March ~~maintenance~~31, ~~expenses~~2019. ~~between~~The ~~reporting~~decrease ~~periods.~~was mainly driven by lower employee incentive costs.

Composition of Changes in Operation and Maintenance Expenses
(In millions)	Increase/(Decrease)
Merger commitments and related expenses	$	(190.4	)
Employee labor costs	5.5
Other	3.3
Total	$	(181.6	)

General taxes and other assessments

~~Merger~~The ~~commitments~~increase in general taxes and ~~related~~other ~~expenses— During~~assessments between the three months ended ~~September 30,~~March ~~2018~~31, we2020 ~~recorded costs for accrued bill credits to customers, an accrual for our commitment of community support, employee benefits related severance, retention~~ and ~~acceleration~~2019 ~~of incentive plans, and an impairment that~~ was ~~booked as part of the Merger with AltaGas~~$3.1 ~~See~~million ~~Note~~associated ~~20 - Merger~~ with ~~AltaGas,~~clean ~~Ltd.~~energy ~~to the Consolidated Financial Statements in our Form 10-K for the fiscal year ended September 30, 2018 for further information on these expenses~~programs.

Employee labor costs — The quarter-over-quarter variance is primarily due to an increase in employees and higher salaries.

Other income (expense)

The ~~increase~~decrease in other income (~~expense~~expenses) between ~~periods~~the ~~reflects~~three ~~increased~~months ~~costs~~ended inMarch ~~the~~31, ~~prior~~2020 ~~year~~and ~~due~~2019 towas ~~the~~$1.3 ~~commitment~~million, ~~for~~related ~~charitable~~to ~~contributions~~lower pension costs.

Income Taxes

The ~~following~~effective ~~table~~income ~~shows~~tax ~~Washington~~rate ~~Gas’~~for ~~income~~the ~~tax~~three ~~expense~~months ~~and~~ended ~~effective~~March ~~income~~31, ~~tax~~2020 ~~rate~~was 20.0% compared to 20.5% for the three months ended ~~September 30~~March 31, 2019 ~~and 2018~~.

Income Taxes
	Three Months Ended September 30,				Increase/
(In millions)	2019		2018		(Decrease)
Income (loss) before income taxes	(85.1	)	(250.3	)	$	165.2
Income tax expense (benefit)	(19.3	)	(69.1	)	49.8
Effective income tax rate	22.7	%	27.6	%	(4.9		)

Statistical Information

37Key gas volumes, weather and meter statistics are shown in the table below for the three months ended March 31, 2020 and 2019.

Washington Gas Light Company



Gas Volumes, Weather and Meter Statistics
	Three Months Ended March 31,
	2020		2019		Increase/(Decrease)
Base Gas Volumes (millions of therms)
Firm	546.1		677.8		(131.7	)
Interruptible	76.7		94.4		(17.7	)
Other	14.1		12.9		1.2
Total gas volumes	636.9		785.1		(148.2	)
Degree Days
Actual	1,666		2,048		(382	)
Normal	2,141		2,129		12
Percent colder (warmer) than normal	(22.2	)%	(3.8	)%	n/a
Average active customer meters	1,196,000		1,187,000		9,000
Ending active customer meters	1,198,036		1,188,263		9,773
New customer meters added	2,927		2,667		260

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

We use an estimated annual effective income tax rate for purposes of determining the income tax provision during interim reporting periods. Therefore, the effective income tax rate for the quarter may include forecasted information that is expected to occur later in the year. The current period effective income tax rate reflects the impact of the HE’s report regarding the Company’s pending Virginia rate case

. Refer to “Rates and Regulatory Matters” for further discussion of these matters.

RESULTS OF OPERATIONS—Nine Months Ended September 30, 2019 vs. September 30, 2018

Summary Results

Net income was $26.6 million for the nine months ended September 30, 2019 compared to net loss of $84.6 million for the same period ended September 30, 2018. The increase of $111.2 million was mainly due to higher expenses related to Merger commitments and related expenses recorded in the prior year.

The following table reconciles EBITDA to net income for the nine months ended September 30, 2019 and 2018.

	Nine Months Ended September 30,
(In millions)	2019		2018			Increase/(Decrease)
Net income (loss)	$	26.6	$	(84.6	)	$	111.2
Interest expense	45.1		43.5			1.6
Income tax expense (benefit)	5.0		(50.7		)	55.7
Depreciation and amortization	106.6		101.4			5.2
EBITDA	$	183.3	$	9.6		$	173.7

The higher EBITDA for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 primarily

reflects higher expenses related to Merger commitments and related expenses recorded in the prior period, offset by lower net revenues due to lower realized margins and lower unrealized mark-to-market gains associated with our asset optimization program.

Summary Financial Results

The following table summarizes the Company’s financial data for the nine months ended September 30, 2019 and nine months ended September 30, 2018, reconciling operating revenues to EBITDA for the nine months ended September 30, 2019 and 2018.

	Nine Months Ended September 30,
(In millions)	2019		2018			Increase/(Decrease)
Net revenues
Operating revenues	$	914.4	$	870.6		$	43.8
Less: Cost of gas	331.3		282.3			49.0
Revenue taxes	57.7		58.6			(0.9		)
Total net revenues	525.4		529.7			(4.3		)
Operation and maintenance	300.4		461.8			(161.4		)
General taxes and other assessments	49.0		49.7			(0.7		)
Other income (expenses)	7.3		(8.6		)	15.9
EBITDA	$	183.3	$	9.6		$	173.7

Net Revenues

The table above reconciles net revenues to operating revenues for the nine months ended September 30, 2019 and 2018 as part of the reconciliation of operating revenues to EBITDA.

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The following table provides the key factors contributing to the change in the net revenues between the nine months ended September 30, 2019 and 2018.

Composition of Changes in Net Revenues
(In millions)	Increase/(Decrease)
Accelerated replacement programs	$	6.4
Customer growth	4.9
Interruptible revenue (net of sharing)	2.3
Asset optimization:
Realized margins	(5.5		)
Unrealized mark-to-market valuations	(11.7		)
Loss related to Antero Contract	(3.0		)
Impact of rate cases
Net Tax Act refund adjustment	(9.5		)
Maryland rate case	6.8
Other impact of rate cases	0.7
Other	4.3
Total	$	(4.3	)

Customer growth — Average active customer meters increased by approximately 13,000 at the nine months ended September 30, 2019, over the number of average active customer meters at the end of the same period of 2018. Washington Gas added 8,290 and 8,759 new customers in the nine months ended September 30, 2019 and 2018, respectively, supported by additional capital and rate base. Adding new customers directly drives earnings growth through additional distribution revenues.

Interruptible revenue (net of sharing) — The increase in Interruptible revenue, net of sharing, is due to higher rates in Maryland and lower margin sharing in District of Columbia.

Asset optimization — We recorded a net gain of $8.3 million including an unrealized gain of $0.1 million associated with our energy-related derivatives for the nine months ended September 30, 2019, compared to a net gain of $28.5 million including an unrealized gain of $11.8 million for the nine months ended September 30, 2018.

Loss related to Antero Contract under Asset optimization— We recorded the net pre-tax loss of $3.0 million in “Utility cost of gas” on the statements of operations for the nine months ended September 30, 2019 due to the litigation related to the Antero Contract. Refer to Note 10 - Commitments and Contingency for further discussion.

Impact of rate cases — The decrease in net revenues primarily reflects the impact of the HE’s report regarding the Company’s pending Virginia rate case. The report recommends a shorter amortization period of both excess deferred taxes and revenues collected based on the previous federal tax rate, as well as no incremental base revenues. Partially offsetting these adjustments are new base rates in Maryland, effective December 2018. Refer to “Rates and Regulatory Matters” for further discussion of these matters.

Operation and Maintenance Expenses

The following table provides the key factors contributing to the changes in operation and maintenance expenses between reporting periods.

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Composition of Changes in Operation and Maintenance Expenses
(In millions)	Increase/(Decrease)
Merger commitments and related expenses	$	(185.6	)
Employee labor costs	12.1
Corporate allocated services	8.5
System safety and integrity	6.4
Other	(2.8		)
Total	$	(161.4	)

Merger commitments and related expenses— During the nine months ended September 30, 2018, we recorded costs for accrued bill credits to customers, an accrual for our commitment of community support, employee benefits related severance, retention and acceleration of incentive plans, and an impairment that was booked as part of the Merger with AltaGas.

Employee labor costs — The year-over-year variance is primarily due to an increase in employees and higher salaries.

Corporate allocated services— The increase in the current year over the prior year period is due to corporate shared services provided by AltaGas after the Merger close in July 2018. Over time, such costs are expected to be offset by reductions in other functional areas.

System safety and integrity — The increase in expense for the nine months ended September 30, 2019 over the same period of 2018 reflects increased safety and reliability activities including leak repair and mitigation.

Other income (expense)

The increase in other income (expenses) between periods reflects the commitment for charitable contributions in the prior year.

Depreciation and Amortization

The increase in depreciation and amortization between periods represents higher depreciation expense on capital additions.

Income Taxes

The following table shows Washington Gas’ income tax expense and effective income tax rate for the nine months ended September 30, 2019 and 2018.

Income Taxes
	Nine Months Ended September 30,				Increase/
(In millions)	2019		2018		(Decrease)
Income (loss) before income taxes	31.6		(135.3	)	$	166.9
Income tax expense (benefit)	5.0		(50.7	)	55.7
Effective income tax rate	15.8	%	37.5	%	(21.7		)

We use an estimated annual effective income tax rate for purposes of determining the income tax provision during interim reporting periods. Therefore, the effective income tax rate for the nine months ended September 30, 2019 may include forecasted information that is expected to occur later in the year. The current period effective income tax rate reflects the impact of the HE’s report regarding the Company’s pending Virginia rate case. Refer to “Rates and Regulatory Matters” for further discussion of these matters.

Key Operating Statistics

Key gas delivery, weather and meter statistics are shown in the table below for the three and nine months ended September 30, 2019 and 2018.

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Gas Deliveries, Weather and Meter Statistics
	Three Months Ended September 30,						Increase/		Nine Months Ended September 30,						Increase/
	2019			2018			(Decrease)		2019			2018			(Decrease)
Gas Sales and Deliveries (millions of therms)
Firm	114.1			113.6			0.5		954.9			992.0			(37.1	)
Interruptible	40.8			46.3			(5.5	)	189.3			178.3			11.0
Electric generation	21.0			40.2			(19.2	)	47.1			148.5			(101.4	)
Other	12.7			13.8			(1.1	)	27.6			30.3			(2.7	)
Total deliveries	188.6			213.9			(25.3	)	1,218.9			1,349.1			(130.2	)
Degree Days
Actual	—			1			(1	)	2,205			2,422			(217	)
Normal	16			17			(1	)	2,463			2,525			(62	)
Percent colder (warmer) than normal	(100.0	)	%	(94.1	)	%	n/a		(10.5	)	%	(4.1	)	%	n/a
Average active customer meters	1,190,000			1,177,000			13,000		1,189,000			1,176,000			13,000
Ending active customer meters	1,188,909			1,177,977			10,932		1,188,909			1,177,977			10,932
New customer meters added	3,000			2,852			148		8,290			8,759			(469	)

Gas Service to Firm Customers

The volume of gas delivered to firm customers is highly sensitive to weather variability as a large portion of the natural gas delivered by Washington Gas is used for space heating. Washington Gas’ rates are ~~established~~ based on an assumption of normal weather. The tariffs in the Maryland and Virginia jurisdictions include provisions that consider the effects of the RNA and the WNA/CRA mechanisms, respectively, that are designed to, among other things, ~~eliminate~~mitigate the ~~effects~~effect ofon ~~weather~~net revenues of variations onin ~~net~~weather ~~revenues.~~from normal levels (refer to the section entitled “Weather Risk” ~~for~~in athe ~~further~~Form ~~discussion~~10-K offor ~~these~~year ~~mechanisms~~ended ~~and~~December ~~other~~31, ~~weather-related~~2019 ~~instruments~~for ~~included~~a infurther ~~our weather protection strategy~~discussion).

Gas Service to Interruptible Customers

~~Washington~~Customers ~~Gas~~whose ~~may~~service ~~curtail~~can orbe ~~interrupt~~temporarily ~~service~~interrupted toin ~~this~~order ~~class~~for ofthe ~~customer~~regulated ~~when~~utility to meet the ~~demand~~needs byof firm customers ~~exceeds~~pay ~~specified~~a ~~levels.~~lower ~~Per~~delivery ~~approved~~rate ~~tariffs,~~than ~~Washington~~firm ~~Gas~~customers ~~has~~and ~~sharing~~they ~~mechanisms~~must inbe ~~all~~able ~~three~~to ~~jurisdictions~~readily ~~where~~substitute itan ~~shares~~alternate afuel ~~portion~~for ofnatural ~~interruptible~~gas. ~~margins~~Per ~~with firm customers.~~

~~Gas Service for Electric Generation~~30

Washington Gas delivers natural gas for use at two electric generation facilities in Maryland that are each owned by independent companies. Washington Gas shares with firm customers a significant majority of the margins earned from natural gas deliveries to these customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not materially affect either net revenues or net income.

LIQUIDITY AND CAPITAL RESOURCES

General Factors Affecting Liquidity

Washington Gas generally meets its liquidity and capital needs through cash on hand, retained earnings, the issuance of commercial paper and long-term debt, and equity infusions from its parent holding companies, routed through Wrangler. Access to short-term debt markets is necessary for funding our short-term liquidity requirements, the most significant of which include buying natural gas and pipeline capacity, and financing both accounts receivable and storage gas inventory. We have accessed long-term capital markets primarily to fund capital expenditures and retire long-term debt.

Our ability to access debt capital markets depends on our credit ratings, general market liquidity, and demand for our credit securities. In addition, under Merger commitments agreed to by Washington Gas during the Merger and other rules imposed by regulatory commissions or state laws in Washington Gas’ service territory, the Company is prohibited and/or restricted in its ability to make advances or issue loans to an affiliate or parent holding company without prior regulatory commission approval.

Washington Gas Light Company

Part III-Financial Information

Item 2-. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Our~~approved ~~credit~~tariffs, ~~ratings~~Washington ~~depend~~Gas ~~largely~~retains ona ~~our~~majority ~~financial performance and the ratings~~ of ~~our parent companies, WGL and AltaGas. A ratings downgrade could both increase our borrowing costs and trigger~~ the ~~need~~margins ~~for~~earned uson tointerruptible ~~post~~gas additional collateral with our wholesale counterparties or other creditors. Further, a negative change in WGL’s or AltaGas’ ratings outlook or any downgrade in their credit ratings could negatively impact our ratings outlook or downgrade our credit ratings. Such downgrades could limit our access to the credit markets and ~~increase~~delivery ~~the costs of borrowing under available credit lines~~sales. Washington Gas has ~~ring~~sharing ~~fencing~~mechanisms ~~measures~~ in ~~place that were further expanded during~~ the ~~Merger~~District ~~regulatory approval process. The ring-fencing measures financially separate Washington Gas from WGL, AltaGas and its non-utility affiliates as a way to protect consumers~~ of ~~regulated~~Columbia ~~utility services from financial instability or bankruptcy~~ that ~~may~~shares bemost ~~experienced~~of bythese ~~its~~margins ~~parent~~with orfirm ~~affiliates~~customers.

OnLiquidity ~~September 13, 2019, Washington Gas issued an aggregate principal amount of $300 million~~ and ~~3.65%~~Capital fixed interest rate, medium-term notes that are due in September 2049. The proceeds from these notes will be used for general corporate purposes, including the retirement of short-term debt and $50 million long-term debt due in November 2019, capital expenditures, acquisition of property and working capital needs.Resources

AsGeneral ofFactors ~~September 30,~~Affecting ~~2019,~~Liquidity total consolidated capitalization, including current maturities of long-term debt and notes payable and project financing, comprised 50.2% common equity, 0.9% preferred stock and 48.9% long and short-term debt. This capitalization ratio varies during the year primarily due to the seasonal nature of Washington Gas’ business. See discussion regarding seasonal impacts on working capital in Short-Term Cash Requirements and Related Financing below.

~~Our~~Washington ~~plans~~Gas ~~provide~~generally ~~for~~meets ~~sufficient~~its liquidity toand ~~satisfy~~capital ~~our~~needs ~~financial~~through ~~obligations.~~cash ~~Generally~~on hand, ~~pursuant~~retained toearnings, ~~its~~the ~~Merger~~issuance ~~commitments,~~of ~~Washington~~commercial ~~Gas~~paper ~~can~~and ~~make~~long-term ~~dividend~~debt, ~~payments~~and inequity ~~the~~contributions ~~ordinary~~from ~~course~~its ofparent ~~business~~holding ~~unless~~companies, ~~any~~routed ofthrough ~~the~~Wrangler ~~following~~SPE. Access ~~regulatory~~to ~~limitations~~short-term ~~apply:~~debt ~~(i)~~markets ~~Washington~~provides ~~Gas~~funding ~~will~~to ~~not~~our ~~pay~~short-term ~~extraordinary~~liquidity ~~dividends~~requirements, tothe ~~its~~most ~~parent~~significant ~~for~~of ~~three~~which ~~years~~include ~~from~~buying ~~the~~natural ~~date~~gas ofand ~~the~~pipeline ~~Merger close~~capacity, ~~(ii)~~and ~~Washington~~financing ~~Gas~~both ~~will~~accounts ~~not~~receivable ~~pay~~and ~~dividends~~storage togas ~~its~~inventory. ~~parent~~We ~~company~~have ifaccessed ~~Washington~~long-term ~~Gas’~~capital ~~senior~~markets ~~unsecured~~primarily ~~debt~~to ~~rating~~fund iscapital ~~below~~expenditures ~~investment~~and ~~grade~~retire ormatured ~~(iii)~~long-term ~~Washington~~debt. ~~Gas~~Under ~~will~~the ~~not~~Merger ~~make~~commitments aagreed ~~dividend payment~~ to ~~its~~by ~~parent~~AltaGas ~~company~~and ifWashington ~~the~~Gas, ~~payment~~including ~~would~~other ~~result~~rules inimposed ~~its~~by ~~equity~~regulatory ~~level~~commissions toor ~~drop~~laws ~~below~~in ~~48%.~~Washington AtGas’ ~~September 30,~~service ~~2019~~territory, wethe ~~had~~Company nois ~~significant~~prohibited ~~restrictions~~to onmake ~~our~~advances ~~cash~~or ~~balances~~issue orloans ~~retained~~to ~~earnings~~an ~~that~~affiliate ~~would~~or ~~affect~~parent ~~the~~holding ~~payment~~company ofwithout ~~dividends.~~prior regulatory commission approval.

Generally, pursuant to its Merger commitments, Washington Gas can make dividend payments in the ordinary course of business unless any of the following regulatory limitations apply: (i) Washington Gas will not pay extraordinary dividends to its parent for three years from the date of the Merger close, (ii) Washington Gas will not pay dividends to its parent company if Washington Gas’ senior unsecured debt rating is below investment grade or (iii) Washington Gas will not make a dividend payment to its parent company if the payment would result in its equity level to drop below 48%. At March 31, 2020, we had no significant restrictions on our cash balances or retained earnings that would affect the payment of dividends.

On March 31, 2020, Washington Gas received a $125.0 million cash capital contribution from Wrangler SPE. The proceeds will be used to support the Company's construction program, to repay its short-term debt and for other corporate purposes.

We believe that our cash flows from operations and sources of funding will provide sufficient liquidity to satisfy our financial obligations. However, as the impact of the COVID-19 pandemic on the economy and operations evolves, we will continue to assess our liquidity needs, the ability to access capital markets for commercial paper or long-term debt financing, and potential impacts due to the ability of our customers to pay for services. Should the Company’s cash flow be materially impacted owing to virus-driven circumstances, the Company may find itself without adequate cash flow to fund its operations, and we may need additional liquidity.

Short-Term Cash Requirements and Related Financing

Washington Gas has seasonal short-term cash requirements to fund the purchase of storage gas inventory in advance of the winter heating season. AtThe ~~September 30,~~Company ~~2019 and December 31, 2018, Washington Gas had balances in gas storage of $92.5 million and $103.9 million, respectively. Washington Gas~~ collects the cost of gas under cost recovery mechanisms approved by ~~its~~our regulators. Additionally, Washington Gas may be required to post cash collateral for certain purchases. Washington Gas is also subject to the collateral requirements of its counterparties. At September 30, 2019, Washington Gas was not required to post any cash collateral to counterparties.

In the first and fourth quarters of each calendar year, Washington Gas’ large sales volumes cause its cash requirements to peak when combined storage inventory, accounts receivable, and unbilled revenues are at their highest levels. In the second and third quarters of each calendar year, after the heating season, Washington Gas typically experiences a seasonal net loss due to reduced demand for natural gas. During this period, large amounts of Washington Gas’ current assets are converted to cash~~, which Washington Gas generally uses to reduce and usually eliminate short-term debt and acquire storage gas for the next heating season~~.

~~Variations~~Washington inGas ~~the~~uses ~~timing~~short-term ofdebt ~~customer~~in ~~collections~~the ~~under~~form ~~Washington~~of ~~Gas’~~commercial ~~gas~~paper ~~cost~~or ~~recovery~~unsecured ~~mechanisms~~short-term ~~can~~bank ~~significantly~~loans ~~affect~~to ~~its~~fund ~~short-term~~seasonal cash requirements. AtOur ~~September 30,~~policy ~~2019~~is ~~and~~to ~~December 31,~~maintain ~~2018,~~back-up ~~Washington~~bank ~~Gas~~credit ~~had~~facilities ~~$5.0~~in ~~million~~an ~~and~~amount ~~$2.2~~equal ~~million~~to inor ~~net~~greater ~~under-collections~~than ~~from~~our ~~customers,~~expected ~~respectively,~~maximum ~~reflected~~commercial inpaper ~~current~~position. ~~assets~~Washington asGas ~~gas~~classifies ~~costs~~commercial ~~due~~paper ~~from~~balances ~~customers.~~as ~~Amounts under~~"Long-~~collected~~term ordebt" ~~over-collected~~on ~~from customers during~~ the ~~current~~balance ~~gas~~sheets ~~cost~~based ~~recovery~~on ~~cycle~~its ~~are~~ability ~~deferred~~and asintent ato ~~regulatory~~refinance ~~asset~~these orbalances ~~liability~~ on ~~the~~a ~~balance~~long-term ~~sheet~~basis. ~~until~~At ~~September~~March 131, of2020 ~~each~~and ~~year~~December 31, at2019, ~~which~~$100.0 ~~time~~million ~~the~~of ~~accumulated~~our ~~amount~~commercial ispaper ~~transferred~~balance towas ~~gas~~classified ~~costs~~as ~~due~~long ~~from/to~~term ~~customers~~debt ason ~~appropriate.~~Washington AtGas's ~~September 30~~balance sheets, ~~2019~~respectively. ~~and~~Bank ~~December 31,~~credit ~~2018,~~balances available to Washington Gas ~~had~~under athe ~~net~~existing ~~regulatory~~credit ~~asset~~facility, net of commercial paper balances, were $12304.4 million and $2650.40 million, ~~respectively~~at March 31, ~~related~~2020 toand ~~under-collections~~December 31, ~~from~~2019, ~~customers related to each current gas recovery cycle~~respectively.

Washington Gas uses short-term debt in the form of commercial paper or unsecured short-term bank loans to fund seasonal cash requirements. Our policy is to maintain back-up bank credit facilities in an amount equal to or greater than our expected maximum commercial paper position.

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

s available to Washington Gas under the existing credit facility, net of commercial paper balances were $333.0 million and $54.0 million, at September 30, 2019 and December 31, 2018, respectively.

To manage credit risk, Washington Gas may require certain customers and suppliers to provide deposits, including collateral from wholesale counterparties. At September 30, 2019 and December 31, 2018, the total of these deposits and collateral reported as current liabilities in “Customer deposits and advance payments” were $42.9 million and $54.4 million, respectively. The majority of these balances are customer deposits and customer credit balances. Deposits from customers may be refunded at various times throughout the year based on customer payment habits. At the same time, other customers make new deposits that cause the balance of customer deposits to remain relatively steady. There are no restrictions on Washington Gas’ use of these customer deposits. Washington Gas pays interest to its customers on these deposits in accordance with the requirements of its regulatory commissions. In addition, customers may have credit balances due to budget credits, over payments and Company provided credits. Budget credits, which is the most frequent type of credit, occurs only for customers on the budget bill program and happens normally in the warmer months when customers’ actual bill is less than the budget bill amount. Refer to the section entitled “Credit Risk” for further discussion of our management of credit risk.

Project Financing

Washington Gas previously obtained third-party project financing on behalf of the federal government to provide funds during the construction of certain energy management services projects entered into under Washington Gas’ area-wide contract. The construction work is performed by WGL Energy Systems on behalf of Washington Gas. Washington Gas recorded a contract asset in “Unbilled revenues” representing the government’s obligation to remit principal and interest and financing obligation in “Notes payable and project financing”.

As of September 30, 2019, Washington Gas had no energy management services projects that were financed through Washington Gas and not yet complete. As of December 31, 2018, Washington Gas had $69.7 million in “Unbilled revenues” on the condensed balance sheet and $15.5 million in “Notes payable and project financing,” for energy management services projects that were financed through Washington Gas and not yet complete.

See Note 5-Short-Term Debt of the Notes to Condensed Financial Statements for a further discussion of project financing.

Long-Term Cash Requirements and Related Financing

The primary drivers of our long-term cash requirements are capital expenditures and long-term debt maturities. Our capital expenditures primarily relate to adding new utility customers and system supply and maintaining the safety and reliability of Washington Gas’ distribution system.

Security Ratings

	Washington Gas
Rating Service	Senior Unsecured	Commercial Paper
Fitch Ratings(a)	A	F2
Moody’s Investors Service(b)	A2	P-1
Standard & Poor’s Ratings Services(c)	BBB+	A-2

The table below reflects the current credit ratings for the outstanding debt instruments of Washington Gas. Changes in credit ratings may affect Washington Gas’ cost of short-term and long-term debt and our access to the capital markets. A security

~~(a) The credit ratings by Fitch Ratings for Washington Gas were revised on July 10, 2018 and the long-term debt ratings outlook was adjusted to stable.~~31

(b) The credit ratings by Moody’s Investors Service for Washington Gas were revised on July 9, 2018 and the long-term debt ratings outlook remained negative.

(c) The credit ratings by Standard & Poor’s Rating Services for Washington Gas were revised on December 19, 2018 and the long-term debt ratings outlook remained negative.

Ratings Triggers and Certain Debt Covenants

Under the terms of Washington Gas’ revolving credit agreements, term loan facility and private placement notes, the ratio of consolidated financial indebtedness to consolidated total capitalization cannot exceed 0.65 to 1.0 (65.0%). As of September 30, 2019, Washington Gas’ ratio of consolidated financial indebtedness to consolidated total capitalization was 49%. In addition, Washington Gas is required to inform lenders of changes in corporate existence, financial conditions, litigation and

Washington Gas Light Company

Part III-Financial Information

Item 2-. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~environmental~~rating ~~warranties~~is ~~that~~not ~~might have~~ a ~~material~~recommendation ~~effect on debt ratings. The failure~~ to ~~inform the lenders’ agent of material changes in these areas might constitute default under the agreements. Additionally~~buy, ~~failure~~sell ~~to pay principal~~ or ~~interest~~hold ~~on any other indebtedness may be deemed a default under our credit agreements~~securities. ACredit ~~default,~~ratings ifare ~~not~~subject ~~remedied, may lead~~ to arevision ~~suspension of further loans and/~~or ~~acceleration~~withdrawal inat ~~which~~any ~~obligations~~time ~~become~~by ~~immediately due and payable. In addition, certain of~~ the ~~credit~~assigning ~~facilities~~rating oforganization ~~Washington~~and ~~Gas~~each ~~contain~~rating ~~cross-default~~should ~~provisions.~~be Atevaluated ~~September 30,~~independently ~~2019, we were in compliance with all~~ of ~~the~~any ~~covenants~~other ~~under our revolving credit facilities, term loan facility, and private placement notes~~rating.

For certain of Washington Gas’ natural gas purchase and pipeline capacity agreements, the counterparty may withhold service or deliveries or may require additional credit support if the long-term debt of Washington Gas is downgraded below the lower of a BBB- rating by Standard & Poor’s or a Baa3 rating by Moody’s Investors Service, or if Washington Gas is deemed by a counterparty not to be creditworthy. For certain other agreements, the counterparty may require additional credit support if the counterparty’s credit exposure to Washington Gas exceeds a contractually defined threshold amount, or if Washington Gas’ credit rating declines by a certain rating level. Based on its current credit ratings, Washington Gas would not be required to provide additional credit support to its counterparties for these agreements if its long-term credit rating was to be downgraded by one rating level.



Rating Service	Senior Unsecured	Commercial Paper
Fitch Ratings^(a)	A	F2
Moody’s Investors Service^(b)	A3	P-2
Standard & Poor’s Ratings Services^(c)	A-	A-2

^(a) On July 10, 2018, Fitch downgraded Washington Gas' senior unsecured debt credit rating from A+ to A, and adjusted its long-term debt ratings outlook to stable.

^(b)On January 30, 2020, Moody's downgraded Washington Gas' senior unsecured debt credit rating from A2 to A3, and its commercial paper rating from P-1 to P-2, and adjusted its long-term debt rating outlook from negative to stable.

^(c) On December 11, 2019, Standard & Poor raised Washington Gas' senior unsecured debt credit rating from BBB+ to A-, and adjusted its outlook from negative to stable. Its commercial paper rating remained A-2.

Ratings Triggers and Certain Debt Covenants

Under the terms of Washington Gas' revolving credit agreements and private placement notes, the ratio of consolidated financial indebtedness to consolidated total capitalization cannot exceed 0.65 to 1.0 (65.0%). At March 31, 2020 and December 31, 2019, Washington Gas' ratios of consolidated financial indebtedness to consolidated total capitalization were 45% and 52%, respectively. In addition, Washington Gas is required to inform lenders of changes in corporate existence, financial conditions, litigation and environmental warranties that might have a material effect on debt ratings. The failure to inform the lenders’ agent of material changes in these areas might constitute default under the agreements. Additionally, failure to pay principal or interest on any other indebtedness may be deemed a default under our credit agreements. A default, if not remedied, may lead to a suspension of further loans and/or acceleration in which obligations become immediately due and payable. In addition, certain of the credit facilities of Washington Gas contain cross-default provisions. At March 31, 2020 and December 31, 2019, we were in compliance with all of the covenants under our revolving credit facilities, term loan facility, and private placement notes.

Historical Cash Flows

~~The~~ ~~following~~Cash ~~table~~Flows ~~summarizes~~Provided ~~Washington~~by ~~Gas’~~Operating ~~net cash from operating, investing and financing activities for the nine months ended September 30, 2019 and 2018.~~Activities

	Nine months ended September 30,						Increase / (Decrease)
(In millions)	2019			2018			2019 vs. 2018
Cash from:
Operating activities	$	254.1		$	150.8		$	103.3
Financing activities	$	41.5		$	221.9		$	(180.4	)
Investing activities	$	(318.9	)	$	(314.3	)	$	(4.6	)

Washington Gas' cash flows from operating activities principally reflect gas sales and deliveries and the cost of operations. Cash flows provided by operating activities were $245.7 million for the three months ended March 31, 2020, a $56.9 million increase from the three months ended March 31, 2019. The increase was mainly driven by a $16.1 million lump-sum settlement payment in 2019 funded through the associated rabbi trust, and lower account receivable from sale of gas due to warmer weather in three months ended March 31, 2020 compared to same period in 2019.

Cash Flows ~~From~~Used ~~Operating~~in Financing Activities

~~Washington~~ ~~Gas’~~Net cash flows ~~from~~used ~~operating~~in financing activities ~~principally~~were ~~reflect~~$154.0 ~~gas~~million ~~sales~~ and ~~deliveries and the cost of operations~~$115.8 ~~The~~million ~~volume~~for ~~of gas sales and deliveries is dependent primarily on factors external to~~ the ~~utility,~~three ~~such~~months asended ~~growth~~March ~~of customer demand~~31, ~~weather,~~2020 ~~market prices for energy, economic conditions~~ and ~~measures that promote energy efficiency. Unbilled revenue and weather normalization~~2019, ~~ratemaking adjustments and decoupling mechanisms in place~~respectively, ~~changes~~which inconsists ~~delivery~~of ~~volumes~~net ~~from~~repayments ~~levels assumed when rates were approved may affect the timing~~ of ~~cash~~short ~~flows~~term ~~but~~borrowings ~~not~~and ~~net~~dividend ~~income~~payments. The ~~price~~three atmonths ~~which~~ended ~~the~~March ~~utility provides energy to customers is determined in accordance with regulatory-approved tariffs. In general~~31, ~~changes~~2020 infinancing ~~the~~activities ~~utility’s~~include ~~cost~~a ofcapital ~~gas~~contribution ~~may~~from ~~affect~~its ~~the~~parent ~~timing of cash flows but not net income because the costs are recovered in accordance with rate agreements~~company. ~~In addition, Washington Gas’ cash flow is impacted by the timing of derivative settlements.~~

~~Net~~Cash ~~income~~Flows isUsed the result of cash and non-cash (or accrual) transactions. Only cash transactions affect Washington Gas’ cash flows from operating activities. Principal non-cash charges include depreciation, accrued or deferred pension and other post-retirement benefit costs and deferred income tax expense. Non-cash charges or credits may also be accrued under the revenue decoupling and cost reconciliation mechanisms in ~~the~~Investing ~~utilities’ rate plans.~~Activities

~~Net~~Cash ~~cash~~ flows ~~provided~~used byin ~~operating~~investing activities ~~for~~totaled ~~nine months ended September 30, 2019 was~~ $~~254~~71.10 million ~~compared~~and ~~to net cash provided by operating activities of~~ $~~150~~92.87 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2018.~~2020 ~~The~~and ~~increase~~2019, inrespectively, ~~cash~~which ~~flows~~consists ~~provided~~of bycapital ~~operating~~expenditures ~~activities~~made ~~was primarily driven~~ by ~~cash~~Washington ~~payment of merger commitments and related expenses in the prior period~~Gas.

~~Cash~~Accelerated ~~Flows~~Pipe ~~From~~Replacement ~~Financing~~Programs ~~Activities~~(APRPs)

~~Cash~~APRPs ~~flows~~are ~~provided~~in byplace ~~financing~~in ~~activities~~all ~~for~~three ~~the~~of ~~nine~~our ~~months~~jurisdictions ~~ended~~with ~~September~~an 30associated surcharge mechanism to recover the cost, ~~2019~~including ~~totaled~~a ~~$41.5~~return, ~~million~~on ~~compared~~those tocapital ~~$221~~investments between base rate cases.9 ~~million~~The ~~for~~following ~~the~~table ~~nine~~summarizes ~~months~~the ~~ended~~current ~~September~~status ~~30,~~of ~~2018~~our ~~mainly~~accelerated ~~due~~pipe toreplacement ~~increased~~programs ~~payments~~in three of ~~short-term~~our ~~debts~~jurisdictions.

In September 2019, Washington Gas issued $300 million medium-term note to fund its general corporate needs. For the nine months ended September 30, 2018, Washington Gas received $303 million capital infusion from its parent company.32

Washington Gas Light Company

Part III-Financial Information

Item 2-. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Cash Flows From Investing Activities



Jurisdiction	Estimated Cost	Expenditure to Date ^(a)	Status	Expected in-service date
District of Columbia	Estimated $374 million over the period from October 2020 to December 2025, plus additional expenditures in subsequent periods.		Washington Gas has submitted an application for the second phase of PROJECTpipes to the PSC of DC. In the interim, in March 2020, the PSC of DC approved an additional extension of the first phase of the plan for the six month period from April 1, 2020 to September 30, 2020 for an amount not to exceed $12.5 million. On April 23, 2020, the Commission established a procedural schedule for the case, with hearings scheduled for August 18-19, 2020 and a decision expected in October 2020.	Individual assets are placed into service throughout the program.
Maryland	Estimated $350 million over the five-year period from January 2019 to December 2023, plus additional expenditures in subsequent periods.	$66 million	The second phase of the accelerated utility pipe replacement programs in Maryland (STRIDE 2.0) began in January 2019.	Individual assets are placed into service throughout the program.
Virginia	Estimated $500 million over the five-year period from January 2018 to December 2022, including cost of removal, plus additional expenditures in subsequent periods.	$189 million	The second phase of the accelerated pipe replacement programs in Virginia (SAVE 2.0) began in January 2018.	Individual assets are placed into service throughout the program.

~~Net~~(a) ~~cash~~The ~~flows~~utility ~~used~~accelerated inreplacement ~~investing~~programs ~~activities~~are ~~totaled~~long-term ~~$318.9~~projects ~~million~~with multiple phases for which expenditures are approved by the regulators and ~~$314~~managed in five year increments.3 ~~million~~Expenditures to date only include amounts for ~~nine~~the ~~months~~current ~~ended~~programs ~~September~~described 30above, ~~2019~~ and ~~2018,~~exclude ~~respectively,~~any ~~which~~expenditures ~~primarily~~made ~~consists~~under prior increments of ~~utility~~the ~~capital~~programs. ~~expenditures~~Actual ~~made~~regulatory byfilings ~~Washington~~may ~~Gas~~differ from reported amounts.

~~Capital~~Refer ~~Investments~~to "Rates and Regulatory Matters" for a further discussion on rate case decisions during the periods including the transfer of costs from surcharge to base rate recovery.

~~New~~Contractual ~~Business~~Obligations, Off-Balance Sheet Arrangements and Other Commitments.

The Company’s utility service areas have a population estimated at 5.9 million and include approximately 2.2 million households and commercial structures. Washington Gas actively markets and adds new customers through both capital expenditures and different rate mechanisms aimed at bringing the benefits of natural gas, including lower energy bills and reduced carbon emissions to more residents in its territories. Washington Gas added 8,290 and 8,759 new customers in the nine months ended September 30, 2019 and 2018, respectively, supported by additional capital and rate base. Adding new customers directly drives earnings growth through additional distribution revenues.

Replacements, Regulatory Plans - Accelerated Pipe Replacement Plans

Accelerated pipe replacement programs are in place in all three of our jurisdictions. Washington Gas is accelerating pipe replacement in order to reduce risk and further enhance the safety and reliability of its pipeline system. Each regulatory commission with jurisdiction over Washington Gas’ retail rates has approved accelerated replacement programs with an associated surcharge mechanism to recover the cost, including a return, on those capital investments. Capital Expenditures excluding cost of removal for the accelerated pipe replacement programs during the nine months ended September 30, 2019 and 2018 was $119.6 million and $92.2 million respectively. Refer to Rates and Regulatory Matters for a further discussion on rate case decisions during the periods.

District of Columbia Jurisdiction. In 2013, Washington Gas filed a Revised Accelerated Pipe Replacement Plan (PROJECTpipes) in which Washington Gas proposed to replace bare and/or unprotected steel services, bare and targeted unprotected steel main, and cast iron main in its distribution system in the District of Columbia. On January 29, 2015, the PSC of DC issued an order approving the settlement agreement and approving recovery through the surcharge of total project costs up to $110 million through September 30, 2019. On December 7, 2018, Washington Gas filed a request with the PSC of DC for approval of a Project Pipes 2 (PIPES 2 Plan) for the period of October 1, 2019 through December 31, 2024. As of September 5, 2019, the PSC of DC had not made final ruling on PIPES 2 Plan, and issued an order extending PROJECT pipes an additional six months through March 31, 2020, in an amount not to exceed $12.5 million and directed the parties to schedule a settlement conference within 15 days of the order. The parties have until December 13, 2019 to submit a settlement conference report.

Maryland Jurisdiction. In 2014, pursuant to the STRIDE law in Maryland, the PSC of MD approved Washington Gas’ initial STRIDE Plan to recover the reasonable and prudent costs associated with qualifying infrastructure replacements through monthly surcharges. In 2015, the PSC of MD approved one additional program applicable to gas distribution and transmission system replacements and three of the four requested additional programs applicable to gas transmission system replacements at an incremental cost of $218.5 million, including cost of removal, in eligible infrastructure replacements over the remaining four years of the initial STRIDE Plan. In December 2018, the Commission approved a 5-year extension of the Company’s STRIDE Plan. Washington Gas is authorized, under the extension, to invest $350.5 million, including cost of removal over the five-year calendar period through 2023. Minor adjustments were made to the STRIDE Plan in the second quarter of 2019.

Virginia Jurisdiction. On April 21, 2011, the SCC of VA approved, pursuant to the SAVE Act, Washington Gas’s initial plan under the SAVE Act for accelerated replacement of infrastructure facilities and a rider that would allow the Company to recover eligible costs associated with those replacement programs. On November 21, 2017, the Commission approved the Company’s application to amend and extend its SAVE Act plan. Washington Gas is authorized to invest $500 million, including cost of removal over the five-year calendar period through 2022.

CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMERCIAL COMMITMENTS

Contractual Obligations

~~Washington~~Refer ~~Gas~~to ~~has~~the “Contractual ~~certain~~Obligations, ~~contractual~~Off-Balance ~~obligations~~Sheet ~~incurred~~Arrangements inand ~~the~~Other ~~normal~~Commercial ~~course~~Commitments” section of ~~business~~“Management’s ~~that~~Discussion ~~require~~and ~~fixed~~Analysis” and ~~determinable~~Note ~~payments~~13- inCommitments ~~the~~and ~~future.~~Contingencies ~~These~~to ~~commitments~~the ~~include~~Financial ~~long-term~~Statements ~~debt,~~in ~~lease~~Form ~~obligations,~~10-K ~~unconditional purchase obligations~~ for ~~pipeline~~the ~~capacity,~~year ~~transportation~~ended ~~and storage services~~December 31, ~~certain~~2019 ~~natural~~for ~~gas~~contractual ~~and our commitments related to the business process outsourcing program~~obligations.

45There were no other significant changes to contractual obligations that are out of the normal course of business during the three months ended March 31, 2020.

~~Washington~~Credit ~~Gas~~Risk ~~Light Company~~

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Refer to the “Contractual Obligations, Off-Balance Sheet Arrangements and Other Commercial Commitments” section of “Management’s Discussion and Analysis” and Note 12- Commitments and Contingencies to the Financial Statements in Form 10-KT for the Transition Period from October 1, 2018 to December 31, 2018 for contractual obligations.

Refer to Note 6- Long-term Debt of the Notes to Condensed Financial Statements for long term debt issued during the current period.

There were no other significant changes to contractual obligations that are out of the normal course of business during the nine months ended September 30, 2019.

Merger Commitments

In connection with the Merger, Washington Gas and AltaGas have made commitments related to the terms of the PSC of DC settlement agreement and the conditions of approval from the PSC of MD and the SCC of VA. Among other things, these commitments include rate credits distributable to both residential and non-residential customers, gas expansion and other programs, various public interest commitments, and safety programs. The cumulative amount expensed related to the Merger commitments as of September 30, 2019 was $136.6 million, of which $118.7 million has been paid, including $1.1 million and $7.6 million paid in the three months and nine months ended September 30, 2019, respectively. In March 2019, the PSC of MD directed that the $3.9 million Most Favored Nation adjustment, originally recorded as a commitment expense, should be used to offset future rates under Washington Gas’ natural gas expansion program in Maryland. As a result, Washington Gas reversed the commitment expense during the three months ended March 31, 2019. In addition, there are certain additional regulatory commitments that will be recorded when the costs are incurred in the future, including the hiring of damage prevention trainers in each jurisdiction for a total of $2.4 million over 5 years; investing up to $70.0 million over a 10 year period to further extend natural gas service; and spending $7.5 million for leak mitigation within 3 years after the Merger close.

Refer to the Note 18- Merger with AltaGas Ltd. of the Notes to Financial Statements of Washington Gas’ Form 10-KT for a detailed discussion of Merger related commitments.

Financial Guarantees

At September 30, 2019 and December 31, 2018, there were no guarantees to external parties.

Antero Contract

In June 2019, a jury trial was held in the County Court for Denver, Colorado to consider a contractual dispute relating to gas pricing between Washington Gas and WGL Midstream (together, the Companies) and Antero Resources Corporation (Antero). Following the trial, the jury returned a verdict in favor of Antero for $95.9 million, of which, $11.2 million was against Washington Gas, and $84.7 million against WGL Midstream. Following the official entry of the judgment, the Company filed an appeal on August 16, 2019.

For financial statement impact from Antero Contract, Refer to Note 10- Commitments and Contingencies of the Notes to Condensed Financial Statements.

CREDIT RISK

Wholesale Credit Risk

Washington Gas enters into transactions with wholesale counterparties for the purpose of meeting firm ratepayer commitments, to optimize the value of its long-term capacity assets, and for hedging natural gas costs. Certain wholesale suppliers that sell natural gas to Washington Gas may have relatively low credit ratings or may not be rated by major credit rating agencies. In the event of a counterparty’s failure to deliver contracted volumes of gas or fulfill its payment obligations, Washington Gas may incur losses that would typically be passed through to its sales customers under the purchased gas cost adjustment mechanisms; however, Washington Gas may be at risk for financial loss to the extent these losses are not passed through to its customers.

Washington Gas operates under an existing wholesale counterparty credit policy that is designed to mitigate credit risks through requirements for credit enhancements including, but not limited to, letters of credit, parent guarantees and cash collateral when deemed necessary. In accordance with this policy, Washington Gas has obtained credit enhancements from certain of its counterparties. If certain counterparties or their guarantors meet the policy’s creditworthiness criteria, Washington Gas may grant unsecured credit to those counterparties or their guarantors. The creditworthiness of all counterparties is continuously monitored.

The following table provides information on our credit exposure, net of collateral, to wholesale counterparties as of September 30, 2019.

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Credit Exposure to Wholesale Counterparties (In millions)
Rating(a)	ExposureBefore CreditCollateral(b)		Offsetting CreditCollateral Held(c)		NetExposure		Number ofCounterpartiesGreater Than10%(d)	Net Exposure ofCounterpartiesGreater Than 10%
Investment Grade	$	25.3	$	—	$	25.3	1	$	13.4
Non-Investment Grade	—		—		—		—	—
No External Ratings	7.4		4.0		3.4		1	1.3

(a) Investment grade is primarily determined using publicly available credit ratings of the counterparty. If the counterparty has provided a guarantee by a higher-rated entity (e.g., its parent), it is determined based upon the rating of its guarantor. Included in “Investment grade” are counterparties with a minimum Standard & Poor’s or Moody’s Investor Service rating of BBB- or Baa3, respectively.

(b) Includes the net of all open positions on energy-related derivatives subject to mark-to-market accounting requirements and the net receivable/payable for the realized transactions. Amounts due from counterparties are offset by liabilities payable to those counterparties to the extent that contractual netting arrangements are in place.

(c) Represents cash deposits and letters of credit received from counterparties, not adjusted for probability of default.

(d) Using a percentage of the net exposure.

Retail Credit Risk

Washington Gas is at risk of non-payment of utility bills by customers. To manage this customer credit risk, Washington Gas may require cash deposits from high risk customers to cover payment of their bills until the requirements for the deposit refunds are met. InBase ~~addition,~~rates ~~Washington~~include ~~Gas has~~ a ~~POR~~provision ~~program~~for inrecovery ~~Maryland and the District~~ of ~~Columbia,~~uncollectible ~~whereby~~accounts itbased ~~purchases~~on ~~receivables~~historical ~~from~~levels ~~participating~~of ~~energy~~charge ~~marketers~~offs atof ~~approved~~accounts ~~discount rates~~receivable. ~~Under the program,~~ Washington Gas isalso ~~exposed~~has toa ~~the~~provision ~~risk~~in ofits ~~non-payment~~Gas byAdministrative ~~the~~Charge ~~retail~~mechanism ~~customers~~that ~~for~~includes ~~these~~an ~~receivables.~~allowance ~~This~~for ~~risk~~commodity isamounts ~~factored~~included ~~into~~in ~~the~~uncollectible ~~approved~~accounts. ~~discount~~In ~~rate~~addition, ~~at which~~ Washington Gas ~~purchases~~has ~~the~~a ~~receivables.~~POR ~~Base~~program ~~rates~~in ~~include~~Maryland aand ~~provision~~the ~~for~~District ~~recovery~~ of ~~uncollectible~~Columbia, ~~accounts~~whereby ~~based~~it onpurchases ~~historical~~receivables ~~levels~~from ofparticipating ~~charge~~energy ~~offs~~marketers ofat ~~accounts~~approved ~~receivable.~~discount ~~Washington~~rates, ~~Gas~~which ~~also~~incorporates ~~has~~the arisk ~~provision~~of innon-payment ~~its~~by ~~Gas~~the ~~Administrative~~retail ~~Charge~~customers ~~mechanism that includes an allowance~~ for ~~commodity~~these ~~amounts included in uncollectible accounts~~receivables.

~~MARKET RISK~~33

We are exposed to various forms of market risk including commodity price risk, weather risk and interest-rate risk. The following discussion describes these risks and our management of them.

Price Risk

Washington Gas faces price risk associated with the purchase and sale of natural gas. Washington Gas generally recovers the cost of the natural gas to serve customers through gas cost recovery mechanisms as approved in jurisdictional tariffs; therefore, a change in the price of natural gas generally has no direct effect on Washington Gas’ net income. However, Washington Gas is responsible for following competitive and reasonable practices in purchasing natural gas for its customers.

To manage price risk associated with its natural gas supply to its firm customers, Washington Gas: (i) actively manages its gas supply portfolio to balance sales and delivery obligations; (ii) injects natural gas into storage during the summer months when prices are generally lower, and withdraws that gas during the winter heating season when prices are generally higher and (iii) enters into hedging contracts and other contracts that may qualify as derivative instruments related to the sale and purchase of natural gas.

Washington Gas executes commodity-related physical and financial contracts in the form of forward, futures and option contracts as part of an asset optimization program that is managed by its internal staff. Under this program, Washington Gas realizes value from its long-term natural gas transportation and storage capacity resources when they are not being fully used to serve utility customers. Regulatory sharing mechanisms in all three jurisdictions allow the profit from these transactions to be shared between Washington Gas’ customers and shareholders.

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the energy-related derivatives during the nine months ended September 30, 2019.

Washington Gas Light Company

Part III-Financial Information

Item 2-. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Changes in Fair Value of Energy-Related Derivatives
(In millions)
Net assets (liabilities) at January 1, 2019	$	(106.3	)
Net fair value of contracts entered into during the period	(0.6		)
Other changes in net fair value	5.3
Realized net settlement of derivatives	(4.2		)
Net assets (liabilities) at September 30, 2019	$	(105.8	)

COVID-19 has created widespread challenges in the job market that have resulted in increased unemployment rates, which could impact the ability of the Company’s customers to pay for services. To assist the communities it serves, Washington Gas has temporarily suspended shut-off and collection activities for non-payment, which is compliant with orders issued by governing authorities in the jurisdictions it serves.

Roll Forward of Energy-Related Derivatives
(In millions)
Net assets (liabilities) at January 1, 2019	$	(106.3	)
Recorded to income	(0.1		)
Recorded to regulatory assets/liabilities	4.8
Realized net settlement of derivatives	(4.2		)
Net assets (liabilities) at September 30, 2019	$	(105.8	)

Rates and Regulatory Matters

~~The~~Washington ~~maturity~~Gas ~~dates~~makes inits ~~calendar~~requests ~~years~~to ofmodify ~~our~~existing ~~net~~rates ~~assets~~based ~~(liabilities)~~on ~~associated~~its ~~with~~determination of the ~~energy-related~~level ~~derivatives~~of ~~recorded~~net atinvestment ~~fair~~in ~~value~~plant atand ~~September 30~~equipment, ~~2019~~operating expenses, isand ~~summarized~~a inlevel ~~the~~of ~~following~~return ~~table~~on ~~based~~invested oncapital ~~the~~that ~~level~~is just and reasonable. The following is an update of ~~the~~significant ~~fair~~current ~~value~~regulatory ~~calculation~~matters ~~under~~in ~~ASC~~Washington ~~Topic~~Gas' ~~820~~jurisdictions.

Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives
(In millions)	2019		2020			2021		2022			2023			Thereafter			Total
Level 1 — Quoted prices in active markets	$	—	$	—		$	—	$	—		$	—		$	—		$	—
Level 2 — Significant other observable inputs	0.3		0.2			—		—			—			—			0.5
Level 3 — Significant unobservable inputs	0.2		(8.9		)	0.5		(1.6		)	(1.5		)	(95.0		)	(106.3		)
Total net assets (liabilities) associated with our energy-related derivatives	$	0.5	$	(8.7	)	$	0.5	$	(1.6	)	$	(1.5	)	$	(95.0	)	$	(105.8	)

Refer to Note 11-Derivatives and Note 12-Fair Value Measurements of the Notes to Condensed Financial Statements for a further discussion of our derivative activities and fair value measurements.

Weather Risk

We are exposed to various forms of weather risk. Washington Gas’ operations are seasonal, with a significant portion of its revenues derived from the delivery of natural gas to residential and commercial heating customers during the winter heating season. Weather conditions directly influence the volume of natural gas delivered by Washington Gas. Weather patterns tend to be more volatile during “shoulder” months within our calendar year in which Washington Gas is going into or coming out of the primary portion of its winter heating season. During the shoulder months within quarters ending June 30 (particularly in April and May) and December 31 (particularly in October and November), customer heating usage may not highly correlate with historical levels or with the level of heating degree days that occur, particularly when weather patterns experienced are not consistently cold or warm.

Washington Gas does not have a weather related instrument or billing adjustment mechanism in the District of Columbia and as a result, its revenues are volume driven and current rates are based upon an assumption of normal weather. Without weather protection strategies, variations from normal weather will cause our earnings to increase or decrease depending on the weather pattern.

Billing Adjustment Mechanisms. In Maryland, Washington Gas has an RNA billing mechanism that is designed to stabilize the level of net revenues collected from Maryland customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels and other factors such as conservation. In Virginia, Washington Gas has a WNA billing adjustment mechanism that is designed to eliminate the effect of variations in weather from normal levels on utility net

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

revenues for residential, commercial and industrial and group metered apartment customers. Additionally, in Virginia, as part of the CARE plan, Washington Gas has a CRA mechanism that eliminates the effect of conservation for residential customers.

For the RNA, WNA and CRA mechanisms, periods of colder-than-normal weather generally would cause Washington Gas to record a reduction to its revenues and establish a refund liability to customers, while the opposite would generally result during periods of warmer-than-normal weather. However, factors such as volatile weather patterns and customer conservation may cause the RNA and the CRA mechanisms to function conversely because they adjust billed revenues to provide a designed level of net revenue per meter.

Interest-Rate Risk

We are exposed to interest-rate risk associated with our short-term and long-term financing. Washington Gas has previously utilized derivative instruments in order to reduce its exposure to the risk of interest-rate volatility, with resulting gains and losses typically being recovered through each jurisdiction’s overall allowed rate of return.

Short-Term Debt. At September 30, 2019 and December 31, 2018, Washington Gas had outstanding notes payable, including commercial paper and project financing of $117.0 million, and $311.5 million, respectively. The carrying amount of our short-term debt approximates fair value. A change of 100 basis points in the underlying average interest rate for our commercial paper would have caused a change in interest expense of approximately $2.2 million.

Long-Term Debt. At September 30, 2019 and December 31, 2018, Washington Gas had outstanding fixed-rate MTNs and other long-term debt of $1,331.1 million and $1,035.0 million, respectively, excluding current maturities. As of September 30, 2019, the fair value of Washington Gas’ fixed-rate debt was $1,501.5 million. Our sensitivity analysis indicates that fair value would increase by approximately $77.4 million or decrease by approximately $71.8 million if interest rates were to decline or increase by 10%, respectively, from current market levels. In general, such an increase or decrease in fair value would impact earnings and cash flows only if Washington Gas were to reacquire some or all of these instruments in the open market prior to their maturity.

A total of $1,202.5 million, or approximately 89.3% of the face amount of Washington Gas’ outstanding long-term debt, excluding current maturities, have make-whole call options which would require us to pay a premium over the face amount if we were to exercise them.

Refer to Note 11-Derivatives of the Notes to Condensed Financial Statements for a further discussion of our interest-rate risk management activity.

RATES AND REGULATORY MATTERS

Washington Gas makes its requests to modify existing rates based on its determination of the level of net investment in plant and equipment, operating expenses, and a level of return on invested capital that is just and reasonable. The following is an update of significant current regulatory matters in Washington Gas’ jurisdictions.

For a more detailed discussion of the matters below, refer to Washington Gas’ Form 10-KT for the three months ended December 31, 2018.

District of Columbia Jurisdiction

~~Project~~PROJECTpipes ~~Pipes~~ 2 Plan. - On December 7, 2018, Washington Gas filed a request with the PSC of DC for approval of the ~~PIPES~~PROJECTpipes 2 Plan, ~~extension~~the ~~plan~~second ~~for~~phase of Washington Gas' APRP, to cover the period offrom October 1, 2019 through December 31, 2024. The ~~PIPES~~PROJECTpipes 2 Plan seeks to address relatively higher risk pipe associated with an aging infrastructure by replacing pipe materials and components, as well as adding new features to enhance the safety of Washington Gas’s system, with an estimated total cost of $305.3 million. OnIn ~~March~~September ~~22,~~ 2019, ~~comments were filed by OPC,~~ the ~~Apartment~~PSC ~~and~~of ~~Office~~DC ~~Building~~issued ~~Association~~an oforder ~~Metropolitan~~extending ~~Washington,~~ the ~~District~~original ~~Department~~PROJECTpipes ofan ~~Energy~~additional ~~and~~six ~~Environment,~~months ~~and~~through DCMarch ~~Climate~~31, ~~Action.~~2020, ~~Washington~~in ~~Gas~~an ~~and~~amount ~~OPC~~not ~~filed~~to ~~reply~~exceed ~~comments~~$12.5 ~~on April 8, 2019~~million. On ~~September~~March 526, ~~2019~~2020, the PSC of DC ~~issued~~approved an ~~order~~additional ~~extending~~extension ~~PROJECT~~of ~~pipes~~the anplan, ~~additional six months~~ through ~~March~~September 3130, 2020, infor an amount not to exceed $12.5 million. On ~~September~~April 1323, ~~2019~~2020, ~~Washington~~the ~~Gas~~PSC ~~submitted~~of DC established a ~~revised~~procedural ~~year~~schedule 5for ~~final~~the ~~annual~~case, ~~project~~with ~~list.~~hearings ~~Reply~~scheduled ~~comments~~for ~~were~~August ~~due~~18-19, by2020 ~~October~~and ~~15,~~a ~~2019~~decision expected in October 2020.

District of Columbia 2020 Rate Case. On January 13, 2020, Washington Gas filed an application for authority to increase charges for gas service in the District of Columbia. The requested rates are designed to collect approximately $35.2 million in total annual revenues. Of the requested revenue increase, $9.1 million represents costs collected through the PROJECTpipes surcharge; therefore, the incremental amount of the base rate increase is approximately $26.1 million. A procedural schedule has been established with hearings scheduled for October 2020. The Company expects new rates to be implemented in the first quarter of 2021.

Maryland Jurisdiction

Maryland ~~Rate~~Show-Cause ~~Case 2019~~Order. Following Onthe ~~April~~NTSB 22hearing that examined the August 10, ~~2019~~2016, ~~Washington~~explosion ~~Gas~~and ~~filed~~fire at an ~~application~~apartment ~~with~~complex in Silver Spring, Maryland, on September 5, 2019, the PSC of MD toordered ~~increase~~the ~~its~~Company ~~base~~to ~~rates~~(i) ~~for~~provide ~~natural~~a ~~gas~~detailed ~~service,~~response ~~generating~~to ~~$30.8~~the ~~million~~NTSB’s inprobable ~~additional~~cause ~~annual~~findings, ~~revenue.~~and ~~The~~(ii) ~~revenue~~provide ~~increase~~evidence ~~represents~~regarding anthe ~~increase~~status inof ~~base~~a ~~rates~~2003 ofmercury ~~$35.9~~regulator ~~million~~replacement program, ofand ~~which~~if ~~approximately~~the ~~$5.0~~program ~~million~~was ~~relates~~not completed, to ~~costs~~show ~~being~~cause ~~collected~~why ~~through~~ the ~~monthly~~Commission ~~STRIDE~~should ~~surcharges~~not ~~for~~impose ~~system~~a ~~upgrades~~civil penalty on the Company. The ~~filing~~Company ~~also~~filed ~~requested~~its anrejoinder ~~increase~~comments to and the ~~Company’s~~Show-Cause ~~return~~Order onis ~~equity~~working ~~from~~its 9way through the regulatory proceeding process with the PSC of MD.7% A hearing is expected to ~~10.4%.~~occur ~~The~~later ~~Company~~this ~~also~~year. isSee ~~proposing~~Item a1 ~~Safety~~- ~~Response~~Legal ~~Tracker~~Proceedings toand ~~reconcile~~Note ~~leak~~11 ~~management~~- ~~expenses~~Commitments ~~above~~and orContingencies ~~below~~of the ~~test~~Notes ~~year~~to lFinancial Statements for additional information.

49COVID-19 Related Orders

On March 16, 2020, the Council of the District of Columbia (DC Council) passed legislation prohibiting the disconnection of electric and gas services for non-payment of fees during a public health emergency. The Mayor of the District of Columbia’s public health emergency declaration was originally through April 24, 2020, and the prohibition on disconnection is effective for 15 days following the end of the public health emergency. On April 15, 2020, the PSC of DC issued an Order authorizing Washington Gas to establish a regulatory asset to capture and track the incremental costs related to COVID-19 that were prudently incurred beginning March 11, 2020. On April 15, 2020, the Mayor issued an order that further extends the public health emergency in the District of Columbia through May 15, 2020.

On March 16, 2020, the Governor of MD issued an Executive Order which ordered regulated utilities to cease disconnections and billing of late fees for residential customers through May 1, 2020. On April 29, 2020, this was extended to June 1, 2020. On April 9, 2020, the PSC of MD issued an order and authorized each utility company to establish a regulatory asset to record the effects of incremental collection and other costs related to COVID-19 prudently incurred beginning on March 16, 2020.

On March 16, 2020, the SCC of VA issued an order which prohibited disconnections of electricity, gas, water and sewer utility services during the coronavirus public health emergency through May 15, 2020. On April 9, 2020, the SCC of VA issued another order that extends the suspension of utility service disconnections by an additional 30 days to June 14, 2020. The SCC

Washington Gas Light Company

Part III-Financial Information

Item 2-. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~evel~~of onVA anfurther ~~annual~~supplemented ~~basis~~its ~~outside~~March of16, a2020 ~~base~~order ~~rate~~by ~~case.~~directing Onthat ~~August~~for ~~30,~~customers ~~2019~~whose ~~Washington~~payment ~~Gas,~~arrearages ~~the~~are ~~Staff~~due ofto the ~~PSC~~coronavirus ~~of MD~~emergency, ~~the~~late ~~Maryland~~payment ~~Office~~fees ofshall ~~People’s~~not ~~Counsel~~be ~~and~~assessed. ~~the~~The ~~Apartment~~SCC ~~& Office Building Association~~ of ~~Metropolitan~~VA ~~Washington~~also ~~submitted~~urged autilities ~~Stipulation and Settlement designed~~ to ~~generate~~waive anreconnection ~~additional~~fees ~~$27~~for customers.0 ~~million~~On inApril ~~base~~21, ~~rates.~~2020, ~~The~~Washington ~~Stipulation~~Gas, ~~stated~~together anwith ~~overall~~several ~~rate~~other ofVirginia ~~return~~utility ~~of 7.42%~~companies, ~~established~~filed a ~~return~~request onwith ~~equity~~the SCC of ~~9.70%,~~VA ~~and~~for ~~stated~~approval ato ~~common~~create ~~equity~~a ~~ratio~~regulatory ofasset ~~53.5%~~to ~~for~~record ~~the~~incremental ~~Company’s~~prudently ~~hypothetical~~incurred ~~capital~~costs ~~structure.~~and ~~The~~suspended ~~Stipulation~~late ~~and~~payment ~~Settlement~~fees ~~did~~attributable ~~not~~to ~~adopt~~ the ~~proposed~~COVID-19 ~~Safety Response Tracker~~pandemic. On ~~October~~April 1529, ~~2019~~2020, the ~~PSC~~SCC of MDVA issued ~~Final~~an ~~Order~~order ~~No.~~approving ~~89303~~this ~~which accepted the Stipulation and Settlement without change~~request. ~~Pursuant to Order No. 89303 Washington Gas’s revised base rates went into effect for service rendered on or after October 15, 2019.~~

~~Maryland~~Critical ~~Rate~~Accounting Case 2018. On May 15, 2018, Washington Gas filed an application with the PSC of MD to increase its base rates for natural gas service, generating $41.3 million in additional annual revenue. The PSC of MD granted the Company $28.6 million in new revenues and increased the Company’s return on equity to 9.7%. On January 10, 2019, Washington Gas filed an application for rehearing with the PSC of MD, alleging two errors in the agency’s final order. On June 25, 2019, the PSC of MD issued an order granting in part and denying in part Washington Gas’ application for a rehearing, resulting in an additional $0.5 million increase in annual distribution revenues. Policies

~~Maryland~~For ~~Show-Cause~~a ~~Order. On~~description ~~September 5, 2019, the PSC~~ of MDour ~~ordered~~critical ~~the~~accounting ~~Company~~policies, ~~within~~refer ~~30 days,~~ to ~~(i) provide a detailed response to the NTSB’~~Management's ~~probable~~Discussion ~~cause findings,~~ and ~~(ii)~~Analysis ~~provide~~within ~~evidence~~our ~~regarding~~Form the status of a 2003 mercury regulator replacement program, and if the program was not completed, to show cause why the Commission should not impose a civil penalty on the Company. On September 16, 2019, the PSC of MD granted the Company a 1410-~~day~~K ~~extension~~for ~~to file its Response to~~ the ~~Show-Cause~~year ~~Order.~~ended OnDecember ~~October 18~~31, 2019, the Company filed its Response to the Show-Cause Order, (i) providing a detailed response to the NTSB’s probable cause findings and (ii) providing evidence regarding the status of a 2003 mercury regulator replacement program and why the Commission should not impose a civil penalty on the Company. There ~~The~~were ~~PSC~~no ofnew MDcritical ~~has~~accounting ~~not~~policies ~~adopted~~or achanges ~~procedural schedule with respect~~ to ~~this~~our ~~matter~~critical ~~but~~accounting ~~has~~policies ~~indicated~~during ~~that it will schedule one public hearing near~~ the ~~apartment~~three ~~complex~~months atended ~~Arliss~~March ~~Street. Given the early stage of the Show-Cause proceeding~~31, ~~the outcome is not yet determinable and management is unable to predict the likelihood of a civil penalty, or make an estimate of any potential civil penalty or range of potential civil penalty~~2020.

~~Virginia Jurisdiction~~ 35

Application for the SAVE Act Plan Rider. On September 3, 2019, Washington Gas filed with the SCC of VA an application for approval of the SAVE Plan Rider for Calendar Year 2020 of its annual adjustment of its Commission-approved SAVE Act under which the Company's 2020 SAVE Plan Rider is reconciled and adjusted. Washington Gas proposes to invest approximately $132 million over calendar year 2020 to continue work on previously approved distribution and transmission system accelerated replacement programs.

Public comments are due by October 31, 2019. A decision is expected by the end of the year.

Service Agreement with AltaGas Entities. On April 1, 2019, Washington Gas filed an application with the SCC of VA, requesting approval of a revised service agreement between WGL and SEMCO Energy, Inc. (“SEMCO”), a U.S. affiliate of AltaGas and a new affiliate service agreement between WGL and AltaGas. In addition, WGL requested interim authority to provide specific services to SEMCO and AltaGas, pending Commission review of the application. On June 27, 2019 the SCC of VA issued a final order approving the revised service agreement and the new affiliate agreement (“service agreements”). The service agreements are limited to five years from the date of the order. Additionally, the service agreements are subject to certain administrative requirements which Washington Gas did not oppose. On September 25, 2019 as directed by the SCC of VA, Washington Gas submitted signed and executed copies of the agreements between SEMCO and AltaGas.

Virginia Rate Case - 2018. On July 31, 2018, Washington Gas filed an application with the SCC of VA to increase its base rates for natural gas service by $37.6 million, which includes $14.7 million of revenue associated with natural gas pipeline replacement initiatives previously approved by the SCC of VA and paid by customers through a monthly rider. Additionally, the requested revenue increase incorporated the effects of The Tax Act. Interim rates became effective, subject to refund, for usage in the January 2019 billing cycle. On April 12, 2019, Washington Gas filed rebuttal testimony and revised its original return on equity down from 10.6% to 10.3% and its overall rate of return down from 7.94% to 7.81%. Evidentiary hearings were held on April 30 and May 1, 2019. Post hearing briefs were filed on July 3, 2019. On September 16, 2019, the HE issued a report to the SCC of VA which recommended among other things: (i) no increase in base rate revenue; (ii) a return on equity of 9.2% compared to the current authorized return on equity rate of 9.5%; (iii) unprotected plant-related and non-plant-related excess deferred income tax should be amortized as a reduction in rates over 5 years compared to amortizing using Average Rate Assumption Method (ARAM) and over 15 years, respectively; (iv) refund $5.6 million to customers for tax savings related to the October 2017 to December 2017 period as part of the Tax Act savings owed to customer, and (v) write off $7.1 million re

Washington Gas Light Company

Part II

Item 2-Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

gulatory asset related to flowthrough income taxes that the company had recovered previously flowed through depreciation income tax deductions via the SAVE rider. For the nine months ended September 30, 2019, Washington Gas made the following pre-tax adjustments based on the HE’s recommendations: (i) reduced “Operating revenues-Utility” by $7.6 million to accrue additional amounts of liability subject to refund; (ii) reduced “Operating revenues-Utility” by $13.3 million associated with the revised amortization of the Tax Act liability; and (iii) wrote off $2.0 million in “Regulatory Assets - Other” and charged to “Operation and maintenance” expense. Additionally, the Company reduced income tax expense by $11.8 million related to the amortization of excess deferred income tax, and recorded $5.5 million after-tax impairment of a tax regulatory asset related to flowthrough income taxes. Reply comments on the HE’s report were filed by Washington Gas on October 21, 2019.

Washington Gas filed reply comments challenging eleven recommendations contained in the HE’s report, including some of the items highlighted above, where the bases for the findings either disregard or are contrary to the substantial evidentiary record.

CRITICAL ACCOUNTING POLICIES

Preparation of financial statements and related disclosures in compliance with GAAP requires the selection and the application of appropriate technical accounting guidance to the relevant facts and circumstances of our operations, as well as our use of estimates to compile the financial statements. The application of these accounting policies involves judgment regarding estimates and projected outcomes of future events, including the likelihood of success of particular regulatory initiatives, the likelihood of realizing estimates for legal and environmental contingencies, and the probability of recovering costs and investments.

We have identified the following critical accounting policies that require our judgment and estimation, where the resulting estimates may have a material effect on the financial statements:

• revenue from contracts with customers;

• accounting for unbilled revenue;

• accounting for regulatory operations — regulatory assets and liabilities;

• accounting for income taxes;

• accounting for contingencies;

• accounting for derivatives;

• accounting for fair value instruments;

• impairment of long-lived assets; and

• accounting for pension and other post-retirement benefit plans.

For a description of these critical accounting policies, refer to Management’s Discussion and Analysis within our Form 10-KT. There were no new critical accounting policies or changes to our critical accounting policies during the three month period ended September 30, 2019.

Washington Gas Light Company

Part I-Financial Information

Item 3. Quantitative and Qualitative Disclosures about Market Risk

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The~~Washington ~~following~~Gas ~~issues~~meets ~~related~~the toconditions ~~our~~set ~~market~~forth ~~risks~~in ~~are~~General ~~included~~Instruction ~~under~~H(1) ~~Item 2,~~of ~~Management’s~~Form ~~Discussion~~10-Q and ~~Analysis~~has ofomitted ~~Financial~~the ~~Condition~~information ~~and~~called ~~Results~~for ofby ~~Operations,~~this ~~and~~Item ~~are~~pursuant ~~incorporated~~to byGeneral ~~reference~~Instruction ~~into~~H(2) ~~this~~of ~~discussion~~Form 10-Q.

~~• Price Risk~~36

•Washington ~~Weather~~Gas ~~Risk~~Light Company

~~• Interest~~Part I-~~Rate~~Financial ~~Risk~~Information

Item 4. Controls and Procedures

ITEM 4. CONTROLS AND PROCEDURES

~~Senior~~Evaluation ~~management, including the President and Chief Executive Officer and the Senior Vice President, Chief Financial Officer and Treasurer~~ of ~~Washington~~Disclosure ~~Gas,~~Controls ~~evaluated the effectiveness of Washington Gas’ disclosure controls~~ and procedures as of September 30, 2019. Based on this evaluation, the President and Chief Executive Officer and the Senior Vice President, Chief Financial Officer and Treasurer have concluded that Washington Gas’ disclosure controls and procedures were effective as of September 30, 2019. There have been no changes in the internal control over financial reporting of Washington Gas during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Washington Gas.Procedures

52Senior management, including the President and the Senior Vice President, Chief Financial Officer and Treasurer of Washington Gas, evaluated the effectiveness of Washington Gas’ disclosure controls and procedures as of March 31, 2020. Based on this evaluation, the President and the Senior Vice President, Chief Financial Officer and Treasurer have concluded that Washington Gas’ disclosure controls and procedures were effective as of March 31, 2020. There have been no changes in the internal control over financial reporting of Washington Gas during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Washington Gas.

Washington Gas Light Company

Part II-Other Information

ITEM 1. LEGAL PROCEEDINGS

~~The~~From time to time the Company is involved in various litigation matters arising out of the normal course of business. In particular, the nature of our business ordinarily results in periodic regulatory proceedings before various state and federal authorities. For information regarding pending federal and state regulatory matters, see Note ~~10-~~11 — Commitments and Contingencies of the Notes to Condensed Financial Statements.

~~Silver~~Maryland ~~Spring,~~Show-Cause ~~Maryland~~Order ~~Incident~~

InOn ~~connection~~September ~~with~~5, ~~the incident~~2019, athe ~~total~~ PSC of 37MD ordered ~~civil~~the ~~actions~~Company ~~related~~ to ~~the~~(i) ~~incident~~provide ~~have~~a ~~been~~detailed ~~filed~~response ~~and~~to ~~are pending against WGL and Washington Gas in~~ the ~~Circuit~~NTSB’s ~~Court~~probable ~~for~~cause ~~Montgomery~~findings ~~County,~~and ~~Maryland.~~(ii) ~~All~~provide ~~cases~~evidence ~~have~~regarding ~~been~~the ~~consolidated~~status ~~for discovery purposes. All~~ of ~~these~~a ~~suits~~2003 ~~seek~~mercury ~~unspecified~~regulator ~~damages~~replacement ~~for~~program ~~personal injury~~ and~~/or~~, ~~property~~if ~~damage.~~the Aprogram ~~trial~~was ~~date~~not ~~for eight bellwether civil actions has been scheduled for December 2~~completed, ~~2019. In addition, two suits were recently filed related~~ to ~~the~~show ~~incident,~~cause ~~one~~why ~~each in~~ the PSC of ~~Superior~~MD should ~~Court~~not ~~for~~impose ~~the~~a ~~District~~civil ofpenalty ~~Columbia~~on ~~and one in~~ the ~~Circuit~~Company. ~~Court~~(Show-Cause ~~of Montgomery County, Maryland~~Order).

AtThe ~~this~~Company ~~stage~~timely ofresponded to the ~~litigation~~PSC of MD’s Show-Cause Order, ~~the~~providing ~~outcome~~a isdetailed ~~not~~response ~~yet~~to ~~determinable~~the ~~and~~NTSB’s ~~management~~probable iscause ~~unable~~findings, toproviding ~~make~~evidence anregarding ~~estimate~~the status of ~~any~~its ~~potential~~2003 ~~loss~~mercury orregulator ~~range~~replacement ofprogram ~~potential~~and ~~losses~~demonstrating ~~that~~cause ~~are~~why ~~reasonably~~the ~~possible~~PSC of ~~occurring.~~MD Asshould not impose a ~~result~~civil penalty on the Company. Following the Company’s response, ~~management~~certain ~~has~~intervenors ~~only~~filed ~~recorded~~written comments and a ~~reserve~~public ~~for~~hearing awas ~~few~~held ofon the ~~actions~~matter, ~~for~~with ~~which~~some aintervenors ~~settlement~~and ~~offer~~members ~~was~~of ~~made.~~the ~~Washington~~public ~~Gas~~advocating ~~maintains~~for ~~excess~~penalties ~~liability~~against ~~insurance~~the ~~coverage~~Company. ~~from~~The ~~highly-rated~~Company ~~insurers,~~filed ~~subject~~its torejoinder acomments ~~nominal~~and ~~self~~the Show-~~insured~~Cause ~~retention.~~Order ~~Washington~~is ~~Gas~~working ~~believes~~its ~~that~~way ~~this~~through ~~coverage~~the ~~will~~regulatory beproceeding ~~sufficient~~process towith ~~cover~~the ~~any~~PSC ~~significant~~of ~~liability~~MD. ~~that~~A ~~may~~hearing ~~result~~is ~~from~~expected to occur later this ~~incident~~year.

ITEM 1A. RISK FACTORS

InThe ~~connection~~COVID-19 ~~with~~global ~~the~~health ~~incident,~~pandemic onposes ~~September~~challenges 5,to ~~2019,~~ the ~~PSC~~health ofand MDsafety ~~ordered~~of the Company~~, within 30 days, to (i) provide a detailed response to the NTSB~~’s ~~probable~~personnel ~~cause findings~~ and ~~(ii) provide evidence regarding~~ the ~~status~~strength of acommunities ~~2003~~it ~~mercury~~serves. These ~~regulator~~challenges ~~replacement~~could ~~program~~negatively ~~and,~~impact if the ~~program~~Company’s ~~was~~cash ~~not~~flow ~~completed,~~and toresults ~~show cause why the PSC~~ of ~~MD should not impose a civil penalty on the Company~~operations.

On ~~September~~March 1611, ~~2019~~2020, the ~~PSC~~World ofHealth MDOrganization ~~granted~~declared the ~~Company~~outbreak of a 14strain of novel coronavirus disease, COVID-~~day~~19, ~~extension~~a global pandemic. Governments in affected areas in which we operate have imposed a number of measures designed to ~~file~~contain the outbreak, including business closures, travel restrictions, quarantines and cancellations of gatherings and events. The expected impacts on the global economy are anticipated to be far-reaching, however, due to the speed with which the situation is developing and the uncertainty of its ~~Response~~magnitude, outcome and duration, it is not currently possible to accurately quantify the ~~Show-Cause~~impact ~~Order~~of the pandemic on Washington Gas’ operations or financial results.

OnWe ~~October~~have ~~18,~~identified ~~2019,~~ the ~~Company~~following ~~filed~~as ~~its~~potential ~~Response~~direct toor ~~the~~indirect ~~Show-Cause~~impacts ~~Order, (i) providing a detailed response~~ to ~~the~~our ~~NTSB’s~~business ~~probable cause findings~~ and ~~(ii)~~operations ~~providing~~from ~~evidence regarding~~ the ~~status of a 2003 mercury regulator replacement program and why the PSC of MD should not impose a civil penalty on the Company.~~pandemic:

~~The~~• ~~PSC~~key ofemployees MDand personnel: Although the Company has ~~not~~been ~~adopted~~designated an essential service provider and its essential employees and operations are exempt from government mandated closures and stay-at-home orders, our ability to keep essential operating personnel in place may be challenged as a ~~procedural~~result ~~schedule~~of COVID-19 outbreaks or quarantines. Employees who either contract or are exposed to the virus must isolate themselves from others, and combined with ~~respect~~the health consequences of the virus, could be limited in their ability to ~~this~~perform ~~matter~~key ~~but~~activities. ~~has~~Should ~~indicated~~there be a widespread inability of our workforce, or that itof ~~will~~our ~~schedule~~contractors, ~~one~~to ~~public~~perform ~~hearing~~their ~~near~~duties, ~~the~~this ~~apartment~~would ~~complex~~have atan ~~Arliss~~adverse ~~Street~~impact on our ability to continue normal operations. In addition, unavailability of personnel could impact the Company’s ability to expand its business by decreasing construction activities and slowing the pace of the Company’s

Given the early stage of the Show-Cause proceeding, the outcome is not yet determinable and management is unable to predict the likelihood of a civil penalty, or make an estimate of any potential civil penalty or range of potential civil penalty.38

~~ITEM 1A. RISK~~Washington ~~FACTORS~~Gas Light Company

~~Not~~Part II-Other ~~Applicable.~~Information

Item 1A. Risk Factors (continued)

accelerated pipeline replacement programs. Also, we may face allegations of liability to the extent that we are unable to effectively protect our workforce against the transmission of the virus;

•

adverse impacts on cash flows: COVID-19 could impact gas demand through business closures or other impacts. Additionally, widespread challenges to various businesses and to the job market as a result of the virus have resulted in increased business closures and unemployment rates, which could impact the ability of the Company’s customers to pay for services. To assist the communities it serves, Washington Gas has elected to temporarily suspend shut-off and collection activities for non-payment; and, as an essential utility provider, the Company’s ability to take action to collect on delinquent payments has been limited by governing authorities in the jurisdictions it serves. Should the Company’s cash flow be materially impacted owing to virus-driven circumstances, the Company may find itself without adequate cash flow to fund its operations;


•	counterparty and supplier risk: There is increased exposure that certain of our contract counterparties and suppliers could fail to meet their obligations to us. Such increased non-performance by a significant counterparty or supplier could adversely affect our operations and financial results.


•	privacy and cybersecurity: There has been an observed increase in volume and sophistication of targeted cyberattacks since the declaration of the global pandemic. Further, Pandemic-adjusted operations, such as work from home arrangements and remote access to the company’s systems, may pose heightened risk of cybersecurity and privacy breaches.


•	access to capital: The uncertainty in the global financial markets could make capital increasingly hard to access.


•	IT infrastructure: Pandemic-adjusted operations, such as work from home arrangements, have put additional stress on the company’s IT infrastructure as a result of remote access demands and online meetings. A failure of such infrastructure could severely limit the ability of the company to conduct ordinary operations.

These risks may adversely impact the Company’s ability to carry out its business plans for 2020. Washington Gas is closely monitoring developments related to COVID-19, including the existing and potential impact on global and local economies in the jurisdictions where we operate.

Washington Gas Light Company

Part II-Other Information

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

5340

Washington Gas Light Company

Part II-Other Information

ITEM 6. EXHIBITS

Exhibits:

Schedule/Exhibit		Description
(a)(3)		Exhibits
		Exhibits Incorporated by Reference:
4.1		Terms Agreement, dated September 10, 2019, between Washington Gas Light Company, MUFG Securities Americas Inc. and TD Securities (USA) LLC, as representatives of the agents (incorporated by reference to Exhibit 1.2 to Washington Gas Light Company’s Form 8-K filed September 16, 2019).
10.1		Agent Accession Letter, dated September 10, 2019, between Washington Gas Light Company, MUFG Securities Americas Inc., TD Securities (USA) LLC, CIBC World Markets Corp., RBC Capital Markets, LLC, U.S. Bancorp Investments, Inc. and The Williams Capital Group, L.P. (incorporated by reference to Exhibit 1.1 to Washington Gas Light Company’s Form 8-K filed September 16, 2019).
10.2		Amended and Restated Credit Agreement, dated as of July 19, 2019 among Washington Gas Light Company, and the lenders parties thereto, Wells Fargo Bank, National Association, as administrative agent; Branch Banking and Trust Company, MUFG Bank, Ltd. and TD Bank, N.A., as co-syndication agents; and Wells Fargo Securities LLC, BB&T Capital Markets, MUFG Bank, Ltd. and TD Securities (USA) LLC, as joint lead arrangers and joint book runners (incorporated by reference to Exhibit 10.1 to Washington Gas Light Company’s Form 8-K filed July 25, 2019).
		Exhibits Filed Herewith:
31.1		Certification of ~~Adrian~~Donald PM. ~~Chapman~~Jenkins, ~~the~~ President ~~and Chief Executive Officer~~ of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Douglas I. Bonawitz, the Senior Vice President, Chief Financial Officer and Treasurer of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of ~~Adrian~~Donald PM. ~~Chapman~~Jenkins, the President ~~and Chief Executive Officer~~, and Douglas I. Bonawitz, the Senior Vice President, Chief Financial Officer and Treasurer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.LAB		XBRL Labels Linkbase Document
101.PRE		XBRL Presentation Linkbase Document
101.DEF		XBRL Definition Linkbase Document

5441

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WASHINGTON GAS LIGHT COMPANY

(Registrant)

/s/ Gunnar J. Gode

Gunnar J. Gode

Vice President and Controller

(signing on behalf of the Registrant and as

Principal Accounting Officer of the Registrant)

Date: ~~October~~ April 30, ~~2019~~2020

5542

District of Columbia and Virginia

(State or Other Jurisdiction of
Incorporation)

(I.R.S. Employer Identification No.)

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