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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

þ☑ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, ~~2019~~2020

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

For the Transition Period from _____ to _____

Commission File Number: 0-49807

WASHINGTON GAS LIGHT COMPANY

(Exact name of Registrant as Specified in Its Charter)

District of Columbia and Virginia

53-0162882

(State or Other Jurisdiction of
Incorporation)

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

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)


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


Securities registered pursuant to Section 12(g) of the Act:
Title of class
Common stock, $1.00 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ☐] No [ü☑]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ☐] No [ü☑]

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.

Large Accelerated Filer o☐ Accelerated Filer o☐ Non-Accelerated Filer ~~[ü]~~☑ Smaller Reporting Company o☐ Emerging growth company o☐

~~Indicate~~If an emerging growth company, indicate by check mark ~~whether~~if the registrant ishas aelected ~~shell~~not ~~company~~to ~~(as~~use ~~defined~~the inextended ~~Rule 12b-2~~transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act~~): Yes [ ] No [ü]~~. ☐

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether the ~~voting~~registrant ~~common~~has ~~equity~~filed ~~held~~a byreport ~~non-affiliates~~on and attestation to its management’s assessment of the ~~registrant~~effectiveness ~~was~~of $0its asinternal control over financial reporting under Section 404(b) of ~~June~~the ~~30,~~Sarbanes-Oxley ~~2019~~Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

AsIndicate ofby ~~January~~check ~~31,~~mark ~~2020,~~whether ~~there~~the ~~were 46,479,536 shares of~~ registrant ~~common~~is ~~stock,~~a $1shell ~~par~~company ~~value,~~(as ~~outstanding.~~defined ~~All~~in Rule 12b-2 of the ~~outstanding shares of common stock are held by Wrangler SPE LLC, an indirect wholly owned subsidiary of AltaGas Ltd.~~Act): Yes [☐] No [☑]

The aggregate market value of the voting common equity held by non-affiliates of the registrant was $0 as of June 30, 2020.

As of January 31, 2021, 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 I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

Washington Gas Light Company

Form 10-K

For the Fiscal Year Ended December 31, ~~2019~~2020

Table of Contents

PART I
Safe Harbor for Forward-Looking Statements		4		4
Glossary of Key Terms and Definitions		6		6
Item 1.	~~Business~~	9	Business	9
	Corporate Overview	9
Item 1A.			Risk Factors	13
	Products and Services	9
Item 1B.			Unresolved Staff Comments	22
	Environmental Matters	11
Item 2.			Properties	23
	Available Information	12
Item 3.			Legal Proceedings	24
Item 1A.	Risk Factors	13
Item 4.			Mine Safety Disclosures	25
Item 1B.	Unresolved Staff Comments	21
PART II
Item 2.	Properties	21
Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 3.	Legal Proceedings	21
Item 6.			Selected Financial Data	27
Item 4.	Mine Safety Disclosures	22
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
PART II
Item 7A.			Quantitative and Qualitative Disclosures about Market Risk	44
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 8.			Financial Statements and Supplementary Data	45
Item 6.	Selected Financial Data	24
			Notes to Financial Statements	50
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	116
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 9A.			Controls and Procedures	117
Item 8.	Financial Statements and Supplementary Data	39
Item 9B.			Other Information	118
	Notes to Financial Statements	44
PART III
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	96
Item 10.			Directors, Executive Officers and Corporate Governance of the Registrant	119
Item 9A.	Controls and Procedures	96
Item 11.			Executive Compensation	120
Item 9B.	Other Information	97
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
PART III
Item 13.			Certain Relationships and Related Transactions, and Director Independence	122
Item 10.	Directors, Executive Officers and Corporate Governance of the Registrant	98
Item 14.			Principal Accounting Fees and Services	123
Item 11.	Executive Compensation	98
PART IV
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	98
Item 15.			Exhibits and Financial Statement Schedules	125
Item 13.	Certain Relationships and Related Transactions, and Director Independence	98
Item 16.			Form 10-K Summary	129
Item 14.	Principal Accounting Fees and Services	99
Signatures				130
PART IV
Item 15.	Exhibits and Financial Statement Schedules	101
Item 16.	Form 10-K Summary	105
Signatures		106

(i)

Washington Gas Light Company

Part I

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

On December 28, 2018, our Board of Directors approved a change of Washington Gas Light Company's fiscal year from the period beginning on October 1 and ending on September 30 to the period beginning on January 1 and ending on December 31. This annual report on Form 10-K is for the twelve-month period from January 1, 2019 to December 31, 2019. References in this report to "calendar year" refer to the year ended December 31. References in this report to "transition period" refer to the three-month transition period from October 1, 2018 through December 31, 2018. References in this report to "fiscal year" refer to the twelve-month period ending on September 30. For comparison purposes, the unaudited data for twelve months ended December 31, 2018 and three months ended December 31, 2017 are presented.

Washington Gas Light Company (Washington Gas) is an indirect, 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 and may include, but are not limited to the following:

•Impacts ~~hazards~~related ~~involved~~to in the ~~storage,~~COVID-19 ~~transportation~~global health pandemic, ~~moving~~which poses challenges to the health and safety of ~~marketing~~the Company's personnel and the strength of ~~hydrocarbon~~communities ~~products~~it serves;

•increasing ~~leaks,~~levels ~~mechanical~~of ~~problems,~~political ~~incidents,~~insecurity orand ~~other~~civil ~~operational~~unrest ~~issues~~that could ~~affect~~threaten ~~public~~Company ~~safety~~property and ~~the reliability of Washington Gas’ distribution system~~personnel;

•hazards ~~the~~involved ~~availability~~in ofthe ~~natural~~storage, ~~gas~~transportation, ~~supply~~moving, orand anmarketing ~~inability to obtain an adequate supply~~ of ~~gas~~hydrocarbon ~~to satisfy present and future demands~~products;

•leaks, ~~challenges~~mechanical inproblems, ~~securing~~incidents, ~~the~~or ~~necessary~~other ~~transportation~~operational orissues ~~storage~~that ~~capacity~~could toaffect ~~deliver~~public orsafety ~~acquire~~and the ~~volume~~reliability of ~~gas~~Washington ~~necessary~~Gas’ todistribution ~~meet customer demands and future growth expectations~~system;

•the ~~cyberattacks,~~availability ~~including~~of ~~cyberterrorism,~~natural gas supply or ~~other~~an ~~information~~inability ~~technology~~to ~~security~~obtain ~~breaches~~an oradequate ~~failures~~supply of gas to satisfy present and future demands;

•challenges in securing the ~~inability~~necessary transportation or storage capacity to ~~meet~~deliver ~~commitments~~or ~~under~~acquire ~~various~~the ~~orders~~volume ~~and~~of ~~agreements~~gas ~~associated~~necessary ~~with~~to ~~regulatory~~meet ~~approvals~~customer ~~for~~demands ~~the~~and ~~Merger~~future growth expectations;

•cyberattacks, ~~the~~including ~~Merger~~cyberterrorism, ~~may~~or ~~not~~other ~~achieve~~information ~~its~~technology ~~expected~~security ~~results~~breaches ~~and~~or ~~Washington Gas may be unable to successfully integrate into the operations of AltaGas~~failures;

• the ~~occurrence~~outcome of ~~unexpected~~new ~~costs~~and inexisting ~~connection~~matters ~~with~~before ~~the~~courts, ~~Merger~~regulators, government agencies or arbitrators;

•concerns ~~securities~~involving ~~class~~climate ~~action~~change ~~suits~~ and ~~derivative~~the ~~suits~~movement for carbon neutral energy sources;

• the ~~loss~~extent ofto ~~certain~~which ~~administrative~~we are allowed to recover from our customers, through the regulatory process, costs and ~~management~~expenses ~~functions~~related to our operations and ~~services~~the ~~provided~~ability byof ~~AltaGas~~the Company to earn a reasonable rate of return on its invested capital;

•the ~~changes~~inability into ~~AltaGas'~~meet ~~strategy~~commitments orunder ~~relationship~~various orders and agreements associated with ~~Washington~~regulatory ~~Gas~~approvals ~~that~~for ~~could~~the ~~affect~~2018 ~~our~~merger ~~performance~~between orAltaGas ~~operations~~and WGL (the Merger);

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

•changes in AltaGas' strategy or relationship with Washington Gas that could affect our performance or operations;

•the ability to access capital and the costs at which Washington Gas is able to access capital and credit markets, including changes in the credit ratings of Washington Gas, WGL, and AltaGas;

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

•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;

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

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

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•an ~~the~~inability ~~ability~~ to ~~access~~attract ~~capital~~ and ~~the~~retain ~~costs~~key atmanagement ~~which Washington Gas is able to access capital~~ and ~~credit~~sufficiently ~~markets,~~skilled ~~including~~operational ~~changes in the credit ratings of Washington Gas, WGL, and AltaGas~~personnel;

•strikes ~~disruptions~~ or ~~decline~~work instoppages ~~the~~by ~~local~~unionized ~~economy in which Washington Gas operates~~employees;

•changes in the ~~credit-worthiness~~costs of ~~customers;~~providing ~~suppliers~~retirement ~~and~~plan ~~derivatives counterparties~~benefits;

• changes in energy commodity market conditions, including the ~~value~~relative prices of ~~derivative~~alternative ~~contracts~~forms ~~and~~of ~~the~~energy ~~availability~~such ofas ~~suitable~~electricity, ~~derivative~~fuel ~~counterparties~~oil and propane;

•physical ~~rules~~and ~~implementing~~financial ~~the~~risks ~~derivatives~~associated ~~transaction~~with ~~provisions~~climate ~~of the Dodd-Frank Act may impose costs on our derivatives activities~~change;

•unusual ~~failures~~weather ofconditions ~~Washington~~and ~~Gas~~changes ~~service~~in ~~providers~~natural ~~that~~gas ~~could~~consumption ~~negatively impact the Company’s business~~patterns;

•costs ~~compliance~~associated with ~~Section~~certain ~~404(a)~~legacy operations of ~~Sarbanes-Oxley~~Washington ~~Act~~Gas and environmental remediation efforts;

•changes ~~acts~~to ofgovernment ~~nature~~fiscal and ~~catastrophic~~trade ~~events, including terrorist acts~~policies;

•regulatory ~~an inability to attract~~ and ~~retain~~financial ~~key~~risks ~~management~~related ~~and~~to ~~sufficiently~~pipeline ~~skilled~~safety ~~operational personnel~~legislation;

•changes ~~strikes~~to orthe ~~work~~tax ~~stoppages~~code byand ~~unionized~~our ~~employees~~ability to quantify such changes and seek recovery for the manner in which corporate taxes are shared with customers;

•compliance ~~changes~~with inSection ~~the~~404(a) ~~costs~~ of ~~providing~~Sarbanes-Oxley ~~retirement plan benefits~~Act; and

•changes ~~the~~in ~~extent~~accounting toprinciples ~~which we are allowed to recover from our customers, through the regulatory process, costs~~ and ~~expenses related to our operations and~~ the ~~ability~~effect of ~~the~~accounting ~~Company~~pronouncements toissued ~~earn~~periodically aby ~~reasonable~~accounting ~~rate~~standard-setting ~~of return on its invested capital;~~bodies.

• 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;

• costs associated with certain legacy operations of Washington Gas and environmental remediation efforts;

• the outcome of new and existing matters before courts, regulators, government agencies or arbitrators;

• changes to government fiscal and trade 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 annual report on Form 10-K.

Washington Gas Light Company

Part I

GLOSSARY OF KEY TERMS AND DEFINITIONS

Accelerated Pipe Replacement Programs (APRPs): Programs focused on replacement activities, targeting specific piping materials, installed years and/or locations which are undertaken on an expedited basis in an effort to improve safety, system reliability and to reduce potential greenhouse gas (GHG) emissions. See below for APRPs relating to various jurisdictions (PROJECTpipes for the District of Columbia (DC), SAVE for Virginia (VA), and STRIDE for Maryland (MD)).

Accounting Standards Codification (ASC): The source of authoritative generally accepted accounting principles (GAAP).

Accounting Standards Update (ASU): An update issued to communicate changes to an ASC.

Active Customer Meters: Natural gas meters that are physically connected to a building structure within the Washington Gas distribution system that are receiving natural gas distribution service.

AltaGas Ltd. (AltaGas): AltaGas is a Canadian corporation that became the parent company of WGL Holdings, Inc. upon consummation of the Merger Agreement on July 6, 2018.

AltaGas Services (U.S.) Inc. (ASUS): ASUS is a wholly owned subsidiary of AltaGas. It is the parent company of ~~all~~certain AltaGas' U.S. subsidiaries, including Washington Gas and WGL.

Area-Wide Contract: A contract between Washington Gas and the General Services Administration for utility and energy-management services.

Asset Optimization Program: A program to optimize the value of Washington Gas’ long-term natural gas transportation and storage capacity resources during periods when these resources are not being used to physically serve customers.

Bundled Service: Service in which customers purchase both the natural gas commodity and the distribution or delivery of the commodity from the local regulated utility. When customers purchase bundled service from Washington Gas, no mark-up is applied to the cost of the natural gas commodity that is passed through to customers.

Business Process Outsourcing (BPO) Agreement: An agreement whereby a service provider performs certain ongoing support functions.

CARE Ratemaking Adjustment (CRA): A billing mechanism in the state of Virginia that is designed to minimize the effect of factors such as conservation on utility net revenues.

City Gate: A point or measuring station at which a gas distribution company, such as Washington Gas, receives natural gas from an unaffiliated pipeline or transmission system.

Competitive Service Provider (CSP): Unregulated companies that sell natural gas and electricity directly to retail customers. WGL Energy Services, an affiliate of Washington Gas, is a CSP. Also referred to as Third-~~Party~~party Marketer ~~(see definition below)~~.

Conservation and Ratemaking Efficiency (CARE Plan): Provides for the CRA as well as cost effective conservation and energy efficient programs.

~~Delivery Service~~COVID-19: ~~The~~ ~~regulated~~A ~~distribution~~novel orcoronavirus ~~delivery~~disease ofthat ~~natural~~has ~~gas~~caused toa ~~retail~~global ~~customers~~pandemic. ~~Washington Gas provides delivery service to retail customers in Washington, D.C. and parts of Maryland and Virginia.~~

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA): A non-GAAP performance measure that is used in assessing the results of Washington Gas' operations.

Federal Energy Regulatory Commission (FERC): An independent agency of the federal government that regulates the interstate transmission of electricity, natural gas, and oil. The FERC also reviews proposals to build liquefied natural gas terminals and interstate natural gas pipelines.

Financial Contract: A contract in which no commodity is transferred between parties and only cash payments are exchanged in amounts equal to the financial benefit of holding the contract.

Washington Gas Light Company

Part I

Firm Customers: Customers whose natural gas supply will not be disrupted by the regulated utility to meet the needs of other customers. Typically, this class of customer comprises residential customers and most commercial customers.

Generally Accepted Accounting Principles (GAAP): A standard framework of accounting rules used to prepare, present and report financial statements in the United States of America.

Hampshire: Hampshire Gas Company is a subsidiary of WGL that provides regulated interstate natural gas storage services to Washington Gas under a FERC approved interstate storage service tariff.

Washington Gas Light Company

Part I

Heating Degree Day (HDD): A measure of the variation in weather based on the extent to which the daily average temperature falls below 65 degrees Fahrenheit.

Heavy Hydrocarbons (HHCs): Compounds, such as hexane, that Washington Gas is injecting into its distribution system to treat vaporized liquefied natural gas or domestic sources of gas that have had such HHCs removed as a result of liquids processing.

Interruptible Customers: Large commercial customers whose service can be temporarily interrupted in order for the regulated utility to meet the needs of firm customers. These customers pay a lower delivery rate than firm customers and they must be able to readily substitute an alternate fuel for natural gas.

Lower-of-Cost or Net Realizable Value: The process of adjusting the value of inventory to reflect the lesser of its original cost or its net realizable value.

Mark-to-Market: The process of adjusting the carrying value of an asset or liability to reflect its current fair value.

Merger Agreement: A reference to the agreement, consummated July 6, 2018, governing the merger of WGL's into an indirect, wholly- owned AltaGas subsidiary, with WGL surviving as an indirect wholly- owned subsidiary of AltaGas (the Merger).

New Customer Meters Added: Natural gas meters that are newly connected to a building structure within the Washington Gas distribution system. Service may or may not have been activated.

Normal Weather: A forecast of expected HDDs based on historical HDD data.

PROJECTpipes: An accelerated pipe replacement program that provides a recovery mechanism for costs of eligible infrastructure replacements in the District of Columbia.

PSC of DC: The Public Service Commission of the District of Columbia, a three-member board that regulates Washington Gas’ distribution operations in the District of Columbia.

PSC of MD: The Maryland Public Service Commission, a five-member board that regulates Washington Gas’ distribution operations in Maryland.

Purchase of Receivables (POR): A program in Maryland and the District of Columbia, whereby Washington Gas purchases receivables from participating CSPs at approved discount rates.

Revenue Normalization Adjustment (RNA): A regulatory billing mechanism in the state of Maryland designed to stabilize the level of net revenues collected from customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels, and other factors such as conservation.

SCC of VA: The Commonwealth of Virginia State Corporation Commission is a three-member board that regulates Washington Gas’ distribution operations in Virginia.

Service Area: The region in which Washington Gas operates. The service area includes the District of Columbia, and the surrounding metropolitan areas in Maryland and Virginia.

Steps to Advance Virginia’s Energy Plan (SAVE Plan): An accelerated pipe replacement program that provides a recovery mechanism for costs of eligible infrastructure replacements in the state of Virginia.

Strategic Infrastructure Development and Enhancement Plan (STRIDE Plan): An accelerated pipe replacement program that provides a recovery mechanism for reasonable and prudent costs associated with infrastructure replacements in the state of Maryland.

Tariffs: Documents approved by the regulatory commission in each jurisdiction that set the prices Washington Gas may charge and the practices it must follow when providing utility service to its customers.

Therm: A natural gas unit of measurement that includes a standard measure for heating value. We report our natural gas sales and deliveries in therms. A therm of gas contains 100,000 British thermal units (BTUs) of heat, or the energy equivalent of burning approximately 100 cubic feet of natural gas under normal conditions. Ten million therms equal approximately one billion cubic feet of natural gas. A dekatherm is 10 therms and is abbreviated Dth.

Third-party Marketer: See definition under Competitive Service Provider (CSP).

Washington Gas Light Company

Part I

Therm: A natural gas unit of measurement that includes a standard measure for heating value. We report our natural gas sales and deliveries in therms. A therm of gas contains 100,000 British thermal units of heat, or the energy equivalent of burning approximately 100 cubic feet of natural gas under normal conditions. Ten million therms equal approximately one billion cubic feet of natural gas. A dekatherm is 10 therms and is abbreviated Dth.

Third-party Marketer: Unregulated companies that sell natural gas and electricity directly to retail customers. WGL Energy Services, an affiliate of Washington Gas, is a third-party marketer.

Unbundling: The separation of the delivery of natural gas or electricity from the sale of these commodities and related services that, in the past, were provided only by a regulated utility.

Utility Net Revenues: A non-GAAP measure calculated as operating revenues less the associated cost of gas and applicable revenue taxes. The cost of gas associated with sales to customers and revenue taxes are generally pass through amounts.

Washington Gas: Washington Gas Light Company (Washington Gas) is an indirect, wholly owned subsidiary of, among other entities, WGL.

Weather Normalization Adjustment (WNA): A billing adjustment mechanism in Virginia that is designed to minimize the effect of variations from normal weather on utility net revenues.

WGL: WGL Holdings, Inc. (WGL), a holding company that is the indirect parent company of Washington Gas Light Company and other affiliated subsidiaries of Washington Gas. It is an indirect wholly owned subsidiary of AltaGas.

WGL Energy Services: WGL Energy Services, Inc. is a subsidiary of WGL that sells natural gas and electricity to retail customers on an unregulated basis.

WGL Energy Systems: WGL Energy Systems, Inc. is a subsidiary of WGL that provides commercial energy efficient and sustainable solutions to government and commercial clients.

WGL Midstream: WGL Midstream, Inc. is a subsidiary of WGL that engages in acquiring and optimizing natural gas storage and transportation assets.

Wrangler SPE LLC (Wrangler): Wrangler SPE LLC is a bankruptcy remote special purpose entity that owns all the shares of the common stock of Washington Gas. It was established as a wholly owned subsidiary of WGL upon consummation of the Merger with AltaGas.

Washington Gas Light Company

Part I

Item 1. Business

ITEM 1. BUSINESS

Corporate Overview

Washington Gas, ~~an indirect wholly-owned subsidiary of AltaGas,~~ has been engaged in the natural gas distribution business since its incorporation by an Act of Congress in 1848. It was incorporated in Virginia in 1953 and in the District of Columbia in 1957. Washington Gas promotes the efficient use of clean natural gas to improve the environment for the benefit of customers, investors, employees, and the communities it serves.

~~Following the July 2018 merger pursuant to the Merger Agreement,~~ Washington Gas ~~became~~is an indirect, ~~majority~~wholly owned subsidiary of, among other entities, AltaGas and WGL. In ~~connection with the Merger, and at the command of Washington Gas’ regulators, WGL, the former parent entity of Washington Gas, formed a wholly owned subsidiary,~~ Wrangler SPE LLC (Wrangler), a bankruptcy remote, special purpose entity, todirectly ~~own~~owns the common stock of Washington Gas. Wrangler was formed for the purpose of “ring fencing” Washington Gas, that is removing Washington Gas from the bankruptcy estate of AltaGas and its affiliates in the event that any parent or affiliate entity becomes the subject of bankruptcy or insolvency proceedings. Wrangler is the wholly owned subsidiary of WGL and AltaGas.

On December 20, 2019, Washington Gas redeemed all the outstanding shares of its preferred stock. As a result, Washington Gas is now an indirect, wholly owned subsidiary of AltaGas and WGL. At December 31, 2019, we had 1,574 employees.

Products and Services

Washington Gas is a regulated public utility company that sells and delivers natural gas to customers in accordance with tariffs approved by regulatory commissions in the District of Columbia and the surrounding metropolitan areas in Maryland and Virginia. At December 31, ~~2019~~2020, Washington Gas’ service area had a population estimated at 5.9 million and included approximately 2.21 million households and commercial structures. Washington Gas operations are such that the loss of any one customer or group of customers would not have a significant adverse effect on its business.

Natural Gas Distribution

Washington Gas' core business is to provide regulated distribution of natural gas to retail customers under tariff rates designed to provide for a return on the investment used in providing that service. The rates are also designed to provide for recovery of operating expenses and federal and state income taxes incurred in providing that service. Washington Gas also sells natural gas at no margin to customers who have not elected to purchase natural gas from unregulated third-party marketers (refer to the section entitled “Natural Gas Unbundling”). Washington Gas recovers the cost of the natural gas purchased to serve firm customers through recovery mechanisms as approved in jurisdictional tariffs. Any difference between gas costs incurred on behalf of firm customers and the gas costs recovered from those customers is deferred on the balance sheet as an amount to be collected from or refunded to customers in future periods. Therefore, increases or decreases in the cost of gas associated with sales made to firm customers have no direct effect on Washington Gas’ net revenues and net income.

Rates and Regulatory Matters

Washington Gas is regulated by the PSC of DC, the PSC of MD and the SCC of VA which approve its terms of service and the billing rates that it charges to its customers. The rates charged to utility customers are designed to recover Washington Gas’ operating expenses and natural gas commodity costs and to provide a return on its invested capital, including the equity in the net assets used in its firm gas sales and delivery service. ~~For each jurisdiction in which Washington Gas operates, changes in customer usage profiles are reflected in rate case proceedings and rates are adjusted accordingly.~~

For a discussion of current rates and regulatory matters, refer to the section entitled “Rates and Regulatory Matters” in Management’s Discussion and Analysis.

Seasonality of Business Operations

Washington Gas’ business is weather-sensitive and seasonal because the majority of its business is derived from residential and small commercial customers who use natural gas for space heating. Excluding deliveries for electric generation, 7773% and 7577% of the total therms delivered in Washington Gas’ service area occurred during its first and fourth quarters for calendar years ~~2019~~2020 and ~~2018~~2019, respectively. Washington Gas’ earnings are typically generated during these two quarters, and Washington Gas typically incurs net losses in the second and third quarters. The seasonal nature of the business creates large variations in short-term cash requirements, primarily due to the season-to-season fluctuations in the level of customer accounts receivable, unbilled revenues and storage gas inventories. Washington Gas finances these seasonal requirements primarily through the sale of commercial paper backed by a revolving credit facility. For information on our management of weather risk, refer to the section entitled “Weather Risk” in Management’s Discussion and Analysis. For information about management of cash requirements, refer to the section entitled “Liquidity and Capital Resources” in Management’s Discussion and Analysis.

Natural gas supply requirements for the utility are also affected by changes in the non-weather related natural gas consumption patterns of our customers. Natural gas usage per customer may decline as customers change their consumption patterns for various reasons, including: (i) more volatile and higher natural gas prices; (ii) customer upgrades to more energy efficient appliances and building structures, (iii) the impacts of the COVID-19 pandemic; and (iv) a decline in the economy in the region in which we operate.

Washington Gas Light Company

Part I

Item 1. Business (continued)

ofIn ~~commercial~~certain ~~paper~~of ~~backed~~Washington byGas’ ajurisdictions ~~revolving~~(Maryland ~~credit~~and ~~facility.~~Virginia) ~~For~~there ~~information~~are onbilling ~~our~~mechanisms ~~management~~in ofplace ~~weather~~which ~~risk,~~are ~~refer~~designed to eliminate the ~~section~~effects ~~entitled~~of ~~“Weather~~variance ~~Risk”~~ in ~~Management’s~~customer ~~Discussion~~usage caused by weather and ~~Analysis.~~other ~~For~~factors ~~information~~such ~~about~~as ~~management~~conservation. In the District of ~~cash~~Columbia, ~~requirements~~there is no weather normalization billing mechanism, ~~refer~~nor does Washington Gas hedge to offset the ~~section~~effects ~~entitled~~of ~~“Liquidity~~weather. ~~and~~As ~~Capital~~a ~~Resources”~~result, colder or warmer weather will result in ~~Management’s~~variances ~~Discussion~~to ~~and~~financial ~~Analysis~~results.

Natural gas supply requirements for the utility are also affected by changes in the natural gas consumption patterns of our customers that are driven by factors other than weather. Natural gas usage per customer may decline as customers change their consumption patterns for various reasons, including: (i) more volatile and higher natural gas prices; (ii) customer upgrades to more energy efficient appliances and building structures and (iii) a decline in the economy in the region in which we operate.

In certain of Washington Gas’ jurisdictions (Maryland and Virginia) there are billing mechanisms in place which are designed to eliminate the effects of variance in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization billing mechanism, nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to financial results. On January 13, 2020, Washington Gas filed an application with the PSC of DC that requested approval for a weather normalization billing mechanism.

Natural Gas Supply and Capacity

Capacity and Supply Requirements

Washington Gas must contract for reliable and adequate natural gas supplies, interstate pipeline capacity and storage capacity to provide natural gas to its distribution system. Washington Gas has adopted a diversified portfolio approach designed to address constraints on supply by using multiple supply receipt points, dependable interstate pipeline transportation and storage arrangements, and its own storage and peak shaving capabilities. Washington Gas’ supply and pipeline capacity plan is based on forecasted system requirements, and takes into account estimated load growth, attrition, conservation, geographic location, interstate pipeline and storage capacity and contractual limitations and the forecasted movement of customers between bundled service and delivery service. Under reduced supply conditions, Washington Gas may implement contingency plans in order to maximize the number of customers served. Contingency plans include requests to the general population to conserve and target curtailments to specific sections of the system, consistent with curtailment tariffs approved by regulators in each of Washington Gas’ three jurisdictions.

Washington Gas obtains natural gas supplies that originate from multiple regions throughout the United States. At December 31, ~~2019~~2020, Washington Gas had multiple service agreements with ~~four~~five pipeline companies that provides firm transportation and/or storage services directly to Washington Gas’ city gates. These contracts have expiration dates ranging from calendar years ~~2020~~2021 to 2044. Additionally, Washington Gas has contracted with various interstate pipeline and storage companies to add to its storage and transportation capacity and continues to monitor other opportunities to acquire or participate in additional pipeline and storage capacity to support customer growth and improve or maintain the high level of service expected by its customer base. Energy-marketing companies that sell natural gas to customers located within Washington Gas’ service territory are responsible for acquiring natural gas for their customers; however, Washington Gas allocates certain storage and pipeline capacity related to these customers in accordance with regulatory requirements.

Natural Gas Unbundling

Customer choice programs for natural gas customers are available to all of Washington Gas’ regulated utility customers ~~in the District of Columbia, Maryland and Virginia~~. These programs allow customers to purchase their natural gas from unregulated third-party marketers, rather than purchasing this commodity as part of a bundled service from the local utility. When customers choose to purchase the natural gas commodity from unregulated retail marketers, Washington Gas’ net income is not affected because Washington Gas charges its customers the cost of gas without any mark-up. When customers select an unregulated third-party marketer as their gas supplier, Washington Gas continues to charge these customers to deliver natural gas through its distribution system at rates identical to the delivery portion of the bundled sales service customers. Of Washington Gas’ 1.2 million active customers at December 31, ~~2019~~2020, approximately ~~171~~178,000 customers purchased their natural gas commodity from unregulated third-party marketers.

Asset Optimization Contracts

Washington Gas, ~~under~~optimizes ~~its~~the ~~asset~~value ~~optimization~~of ~~program,~~its ~~makes~~long-term ~~use~~natural ofgas ~~storage~~transportation and ~~transportation~~storage capacity resources ~~when~~by ~~those~~entering ~~assets~~into ~~are not required to serve utility customers. The objective of this program is to derive a profit to be shared with its utility customers. Washington Gas executes commodity-related~~ physical and financial ~~contracts~~transactions in the form of forwards, futures and ~~options~~option ascontracts ~~part of an asset optimization program that is managed by its internal staff. These transactions are accounted~~ for asperiods ~~derivatives.~~when ~~Sharing~~these ~~mechanisms~~resources are ~~approved~~not bybeing ~~our~~used ~~regulators~~to inphysically ~~all~~serve ~~three~~utility ~~jurisdictions, accordingly, any changes in fair~~ customers.

Washington Gas, under its asset optimization program, makes use of storage and transportation capacity resources when those assets are not required to serve utility customers. The objective of this program is to derive a profit to be shared with its utility customers. Washington Gas executes commodity-related physical and financial contracts in the form of forwards, futures and options as part of an asset optimization program that is managed by its internal staff. These transactions are accounted for as derivatives. Sharing mechanisms are approved by our regulators in all three jurisdictions, accordingly, any changes in fair value of the derivatives are recorded either through earnings for margins that are retained by Washington Gas or as regulatory assets or liabilities for realized gains and losses that will be included in the rates charged to customers.

Refer to the sections entitled “Results of Operations” and “Market Risk” in Management’s Discussion and Analysis for further discussion of the asset optimization program and its effect on earnings.

Washington Gas Light Company

Part I

Item 1. Business (continued)

value of the derivatives are recorded either through earnings for margins that are retained by Washington Gas or as regulatory assets or liabilities for realized gains and losses that will be included in the rates charged to customers.

Safety and Reliability of the Natural Gas Distribution System

Maintaining and improving the public safety and reliability of Washington Gas’ distribution system is our highest priority. Doing so allows Washington Gas to provide benefits to both customers and investors through improved customer service. Washington Gas continually monitors and reviews changes in requirements of the codes and regulations that govern the operation of the distribution system and refines its safety practices, with a particular focus on design, construction, maintenance, operation, replacement, inspection and monitoring practices to meet or exceed these requirements. Significant changes in regulations can impact the cost of operating and maintaining our distribution system.

Washington Gas has accelerated pipe and infrastructure replacement programs in place in the District of Columbia, Maryland, and Virginia. These are long-term programs subject to both changing conditions and regulatory review and approval ~~in five-year increments~~. Washington Gas is accelerating pipe and infrastructure replacement to further enhance the safety and reliability of the natural gas delivery system. Washington Gas is allowed to begin recovering the cost, including a return, for these investments immediately through approved surcharges for each accelerated pipe or infrastructure replacement program. Once new base rates are put into effect in a given jurisdiction, expenditures previously recovered through the surcharge will be collected through the new base rates.

Competition

The Natural Gas Delivery Function

The natural gas delivery function is regulated by local and state regulatory commissions. To support this function, Washington Gas has approximately $4.6 billion of invested assets at December 31, ~~2019~~2020, to serve customers through safe and reliable distribution system assets. Because of the high fixed costs and significant safety and environmental considerations associated with building, operating and maintaining a natural gas distribution system, Washington Gas expects to continue being the sole owner and operator in its current franchise areas for the foreseeable future. The nature of Washington Gas’ customer base and the distance of most customers from interstate pipelines mitigate the threat of bypassing its facilities by other potential delivery service providers.

Competition with Other Energy Products

Washington Gas faces competition based on customers’ preference for other energy products and the prices of those products compared to natural gas. In the residential market, which generates a significant portion of Washington Gas’ net income, the most significant product competition occurs between natural gas and electricity. Because the cost of electricity is affected by the ~~cost~~method ~~of fuel~~ used to generate electricity, such as natural gas or renewable energy sources, Washington Gas generally maintains a price advantage over competitive electricity supply in its service area for traditional residential uses of energy such as heating, water heating and cooking. In ~~2019~~2020, Washington Gas added 11,~~156~~685 residential customers and ~~742~~795 commercial, interruptible and group metered apartments. In the interruptible market, fuel oil is the prevalent energy alternative to natural gas. Washington Gas’ success in this market depends largely on the relationship between natural gas and oil prices. The supply of natural gas primarily is derived from domestic sources, and the relationship between supply and demand generally has the greatest impact on natural gas prices. Since the source of a large portion of oil comes from foreign countries, political events and foreign currency conversion rates can influence oil supplies and prices to domestic consumers.

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 an extended time frame to control environmental effects. Most 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. Estimates of liabilities for environmental response costs are difficult to determine with precision because of the various factors that can affect their ultimate level.

See Note 12 — Environmental Matters of the Notes to Financial Statements for further discussion of environmental response costs.

Washington Gas Light Company

Part I

Item 1. Business (continued)

Human Capital

At December 31, 2020, we had 1,539 employees. Our employees are critical to our success and are the reason we continue to execute at a high level. We believe our continued focus on making employee engagement a top priority will help us provide high quality services to our customers and communities. To facilitate talent attraction and retention, we strive to make Washington Gas a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by market-competitive compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their communities.

Health, Safety and Wellness. We are committed to the health, safety and wellness of our employees. We provide our employees and their families with flexible and convenient health and wellness programs, including health and life insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care and mental health resources. Washington Gas maintains a culture that is heavily focused on workplace safety, particularly for our field employees engaged in utility operations and construction.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having employees work from home and implementing additional safety measures for employees continuing critical on-site work.

Compensation and Benefits. We provide market-competitive compensation programs to facilitate retention of personnel. In addition to salaries, these programs include incentive compensation and retirement benefits.

Talent Development. We value ongoing development and continuous learning and we strive to support and provide learning opportunities to all Washington Gas employees and contractors. To ensure safe and reliable delivery of natural gas to our customers, we develop and deliver classroom and hands-on training programs to support our employees and contractors performing work for Washington Gas. These training programs include Qualification schools, Development programs for crew leaders and service technicians, CPR, Emergency response, etc. We have an internal learning management system that offers a fully indexed catalog of training opportunities to all Washington Gas employees and provide support for external training opportunities including Educational assistance program and tuition assistance.

Diversity and Inclusion. We strive to provide an inclusive and diverse environment for all of our employees. We believe that by recognizing and valuing our employees’ similarities, as well as their differences, we make our shared goals possible. We seek to foster an environment in which all employees are treated with dignity and respect, have the opportunity to contribute to meaningful work, and perform that work in an inclusive environment free from discrimination, harassment, and retaliation. We believe this commitment helps us attract and retain a skilled, diverse workforce.

Available Information

Washington Gas makes copies of its SEC filings available, free of charge, on its website (www.washingtongas.com) as reasonably practicable after they are filed with the SEC. Such filings are also available, free of charge, on the SEC’s website (www.sec.gov/edgar/).

Washington Gas Light Company

Part I

Item 1A. Risk Factors

ITEM 1A. RISK FACTORS

The risk factors described below should be read in conjunction with other information included or incorporated by reference in this annual report on Form 10-K. Based on current information, the ~~company~~Company believes that the following identifies the most significant risk factors that could affect its operations.

The COVID-19 global health pandemic poses challenges to the health and safety of the Company’s personnel and the strength of communities it serves. These challenges could negatively impact the Company’s cash flows and results of operations.

As the COVID-19 pandemic continues to unfold, governments in the jurisdictions in which Washington Gas operates have maintained measures designed to contain the outbreak, including business closures and restrictions, travel restrictions and border closings, quarantines and restrictions on gatherings and events. The magnitude, outcome and duration of the pandemic remain uncertain. As a result, it is not currently possible to accurately quantify the total potential impact of the pandemic on Washington Gas’ operations or financial results.

We have identified the following as potential direct or indirect impacts to our business and operations from the pandemic:

•key employees and personnel: Although the Company has been 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 result of COVID-19 outbreaks or quarantines. Employees who either contract or are exposed to the virus must isolate themselves from others, and combined with the health consequences of the virus, could be limited in their ability to perform key activities. Should there be a widespread inability of our workforce, or that of our contractors, to perform their duties, this would have an adverse 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 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;

•return to work: As Washington Gas reintegrates its personnel back into the workplace in response to the lifting of government stay-at-home orders, it may incur additional costs to adapt the workplace to meet applicable health and safety requirements. Shortages in PPE, occurrence of additional waves for the virus, or delays in the availability or rollout of vaccines may require the corporation to revise or delay such reintegration plans. To the extent that it is unable to effectively protect its workforce against the transmission of the virus, Washington Gas may face allegations of liability. Additionally, the Company must maintain flexibility in the event of new stay-at-home orders that could occur in the event infection rates increase.

•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. Each jurisdiction in which Washington Gas serves issued mandates prohibiting suspension and/or collection activities for nonpayment of customer accounts, all of which remain in place to varying degrees. 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.

•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. 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 I

Item 1A. Risk Factors (continued)

Increasing levels of political uncertainty and civil unrest have arisen in recent weeks, which could pose threats to the Company’s personnel.

There have been significant incidents of civil unrest across the country. As the Company’s operations are based in and around the nation’s capital, protests and demonstrations aimed at slowing business as usual pose risk to the Company’s operations and its ability to service its customers. Should any such protests turn violent or destructive Company personnel or property could be at risk. Furthermore, the impact of large protests during a global pandemic poses unknown public health risks that could increase the community spread of COVID-19.

The ownership and operation of Washington Gas’ business is subject to hazards of transporting, storing, and marketing hydrocarbon products.

These hazards include, without limitation, blowouts, fires, explosions, gaseous leaks, releases and migration of harmful substances, hydrocarbon spills, corrosion, and acts of vandalism and terrorism. Any of these hazards can interrupt operations, impact AltaGas’ reputation, cause loss of life or personal injury, result in loss of or damage to equipment, property, information technology systems, related data and control systems, and cause environmental damage that may include polluting water, land or air.

Further, such ownership and operations carry the potential for liability related to worker health and safety, including, without limitation, the risk of any or all of government imposed orders to remedy unsafe conditions, potential penalties for contravention of health and safety laws, licenses, permits and other approvals, and potential civil liability. Compliance with health and safety laws (and any future changes) and the requirements of licenses, permits and other approvals are expected to remain material to Washington Gas’ business.

No assurances can be given that the occurrence of any of the above listed events or the additional workers’ health and safety issues relating thereto will not require unanticipated expenditures, or result in fines, penalties or other consequences (including, without limitation, changes to operations) material to Washington Gas’ business and operations.

Leaks, mechanical problems, incidents or other operational issues could affect public safety and the reliability of Washington Gas’ distribution system, which could materially affect Washington Gas’ results of operations, financial condition and cash flows.

Washington Gas’ business is exposed to operational issues, hazards and risks inherent in storing and transporting natural gas that could affect the public safety and reliability of its distribution system. These issues, such as leaks, equipment failure, problems and incidents, including explosions and fire, could and have resulted in legal liability, repair and remediation costs, increased operating costs, significant increased capital expenditures, regulatory fines and penalties and other costs and a loss of customer confidence. Any liabilities resulting from the occurrence of any of these events may not be covered by insurance, or may not be fully covered by insurance (which typically only covers injuries or property loss), and Washington Gas may be unable to recover from customers through the regulatory process all of these repair, remediation and other costs and earn its authorized rate of return on these costs.

Washington Gas may be unable to obtain an adequate supply of gas to satisfy present and future customer demand and it may be unable to secure the necessary transportation or storage capacity to deliver or acquire the volume of gas necessary to meet its current obligations or growth demands.

In order to service customer demand, the Company must acquire an adequate supply of natural gas, have the appropriate capacity to store its gas supply, and have adequate pipeline transportation capacity to secure the transportation of its required gas supply. We purchase almost all of our natural gas supply from third party sources that must then be transported primarily through pipelines to our service territories. The Company depends on the ability of natural gas producers, pipeline gathers, natural gas processes, commodity storage facilities, and interstate pipelines to meet these requirements. In addition, the Company may construct transmission and distribution pipe to deliver additional capacity into growth areas within its service territory in order to meet customer demand. If the Company is unable to secure adequate supplies of gas in a timely manner because of a failure of its upstream suppliers or if it were unable to acquire adequate pipeline capacity or construct new infrastructure to transport our gas, the Company may be unable to meet the requirements of its customers.

13A significant disruption to or reduction in pipeline capacity may occur due to events such as operational failures or disruptions, hurricanes, tornadoes, floods, or other weather-related events, freeze off of natural gas wells, terrorist or cyberattacks or other acts of war, or legislative or regulatory actions or requirements, including remediation related to integrity

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

A significant disruption to or reduction in pipeline capacity may occur due to events such as operational failures or disruptions, hurricanes, tornadoes, floods, or other weather-related events, freeze off of natural gas wells, terrorist or cyberattacks or other acts of war, or legislative or regulatory actions or requirements, including remediation related to integrity inspections and future regulations related to climate change, could reduce the Company’s normal supply of gas, which may affect the Company’s ability to serve customer demand and may reduce the Company’s earnings. These factors may also cause the demands of our customers to fluctuate or increase, for example our customers may require additional natural gas during periods of sustained cold weather. Further, our ability to construct new infrastructure to transport our gas could be adversely affected by the timing of Washington Gas’ participation in new interstate pipeline construction projects, local permitting requirements, the ability to acquire necessary rights of way, and an increase in legal challenges facing large infrastructure projects designed to bring commodity supply to Washington Gas’ market.

Additionally, Washington Gas purchases almost all of its gas supply from sources that must then be transported to its service territory. There may be inadequate pipeline transportation or storage capacity to meet the Company’s current or future demands. Any inability to secure an adequate supply of gas or to secure or build adequate pipeline transportation capacity to satisfy customer demands could result in defaults under contracts with customers, penalties and financial damage payments, costs relating to procedures to recover from a disruption of service, the loss of key licenses and operating authorities, and the loss of customers, any of which could have a material adverse effect on the Company’s business and financial results.

Cyberattacks, including cyberterrorism or other information technology security breaches, or information security or technology failures may disrupt our business operations, increase our costs, lead to the disclosure of confidential information, and damage our reputation.

Washington Gas’ business processes are increasingly reliant upon information systems and automation provided by infrastructure, technologies, and data. A failure of these information systems could lead to the impairment of business processes, and there is a risk of cascading failure of information systems leading to the impairment of multiple business processes. Security breaches of our information technology infrastructure, including cyberattacks and cyberterrorism, or other failures of our information technology or operational technology infrastructure could lead to disruptions of our natural gas distribution operations and otherwise adversely impact our ability to safely and effectively operate our pipelines and serve our customers. Such security breaches of our information technology infrastructure could adversely affect our business reputation, diminish customer confidence, subject us to financial liability or increased regulation, increase our costs and expose us to material legal claims and liability and adversely affect our operations and financial results. Despite steps Washington Gas may take to detect, deter, mitigate, and respond to potential security threats, the techniques used by those who wish to obtain unauthorized access, disable or sabotage systems, or steal confidential information and data change frequently and there is no guarantee that the Company will be successful in protecting against cyberattacks. If any of Washington Gas' systems are damaged, fail to function properly or otherwise become unavailable, Washington Gas may incur substantial costs to repair or replace them. To the extent that the occurrence of any of these cyberattacks is not fully insured, it could adversely affect Washington Gas’ financial condition and results of operations.

In addition, the Company collects personally identifiable information (PII) regarding its customers and employees as part of its business processes and activities. An attack on or failure of our information technology systems could result in the unauthorized release of customer or employee PII or Company data that is crucial to our operational security or could adversely affect our ability to deliver and collect on customer bills. The federal and state legislative and regulatory environment surrounding PII, information security and data privacy is evolving and is likely to become increasingly demanding. Should the Company experience a breach, it could face substantial compliance costs, reputational damage, and uncertain litigation risks.

Washington Gas ~~may~~relies ~~encounter~~on ~~unexpected~~third ~~difficulties~~parties orand ~~costs~~managed inservice ~~meeting~~providers ~~commitments~~for ~~made~~various ~~under~~services. If ~~various~~these ~~orders~~third ~~and~~parties ~~agreements~~undergo ~~associated~~cyber attacks, the services they provide Washington Gas could be disrupted. This disruption could interfere with ~~regulatory~~Washington ~~approvals~~Gas’ ~~for~~ability to conduct its business, which in turn could negatively affect Washington Gas’ financial condition and reputation. Additionally, the ~~Merger~~theft, damage, or improper disclosure of sensitive data held by these third parties may subject Washington Gas to adverse consequences.

~~As a result of the process to obtain regulatory approvals required for the Merger,~~ Washington Gas is ~~committed~~subject to various ~~programs,~~legal ~~contributions~~proceedings and ~~investments~~management incannot ~~several~~predict ~~agreements and regulatory approval orders. It is possible that Washington Gas may encounter delays, unexpected difficulties or additional costs in meeting these commitments in compliance with~~ the ~~terms~~outcome of ~~the~~such ~~relevant agreements and orders~~proceedings. Failure to fulfill the commitments in accordance with their terms could result in increased costs or result in penalties or fines that could have a material adverse effect on Washington Gas’ business, financial condition, operating results and prospects.

~~The~~In ~~merger~~the course of ~~WGL~~its ~~with~~business, ~~AltaGas~~Washington ~~may~~Gas ~~not~~is ~~achieve~~subject ~~its~~to ~~anticipated~~lawsuits, ~~results~~regulatory proceedings, and ~~WGL,~~other ~~including~~claims ~~Washington~~arising ~~Gas,~~out ~~may~~of its operations. Defense and settlement costs associated with these proceedings can be ~~unable~~substantial, even with respect to ~~integrate~~matters that we believe have no merit. Due to the ~~operations~~inherent inuncertainty of the ~~manner~~litigation ~~expected~~process, contested regulatory proceedings, or the progress of other claims, the resolution of any particular matter could have a material adverse effect on the financial position or operating results of Washington Gas.

1415

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

~~WGL~~Climate ~~and~~change ~~AltaGas~~concerns ~~entered into the Merger Agreement expecting that the Merger to yield various benefits, including, among other things, cost savings~~ and ~~operating efficiencies. Achieving~~ the ~~anticipated~~movement ~~benefits~~for ofcarbon ~~the~~neutral ~~Merger~~energy issources ~~subject~~pose challenges to ~~a number of uncertainties, including whether~~ the businesses of WGL and AltaGas can be integrated in an efficient, effective and timely manner. The combination of two independent businesses is complex, costly, and time-consuming; and may divert significant management attention and resources, including those of Washington Gas, to combining WGLCompany’s ~~and~~operating ~~AltaGas’ business practices and operations, which could otherwise have been devoted to business opportunities of WGL and, specifically, Washington Gas~~model. ~~This process may disrupt Washington Gas’ business.~~

InClimate ~~addition,~~change itand isthe ~~possible~~costs that ~~the~~may ~~integration~~be ~~process~~associated ~~could~~with ~~take~~its ~~longer~~impacts ~~than~~have ~~anticipated and could result in~~ the ~~disruption~~potential ofto ~~Washington~~affect ~~Gas’~~our business, ~~processes, and systems; or inconsistencies~~ in ~~standards,~~many ~~controls~~ways, ~~procedures,~~including ~~practices,~~increasing ~~and~~the ~~policies,~~costs ~~any~~we ofincur ~~which~~in ~~could~~providing ~~adversely~~our ~~affect~~products ~~the~~and ~~combined~~services, ~~company’s~~impacting ~~ability to achieve~~ the ~~anticipated~~demand ~~benefits~~for ~~of the Merger as~~ and ~~when~~consumption ~~expected. The overall combination~~ of ~~WGL’s~~our products and ~~AltaGas’~~services ~~businesses~~(due ~~may~~to ~~also~~change ~~result~~ in ~~material~~both ~~unanticipated~~costs ~~problems,~~and ~~expenses,~~weather ~~liabilities~~patterns), ~~competitive responses,~~ and ~~loss~~affecting ofthe ~~customer~~economic ~~and~~health ~~other~~of ~~business relationships. Failure to achieve these anticipated benefits or~~ the ~~incurrence~~regions ofin ~~unanticipated~~which ~~expenses~~we ~~and~~operate. ~~liabilities~~Energy ~~could~~customers ~~have~~are aalso ~~material~~increasingly ~~adverse~~indicating ~~effect~~preferences onfor ~~Washington~~carbon-neutral ~~Gas’~~and ~~business,~~renewable ~~financial~~sources ~~condition,~~of ~~operating results and prospects~~energy.

Regulatory and legislative responses to climate change have been mixed, and the politics of the matter has created much uncertainty about how governing bodies will respond, which could impact long-term corporate planning around climate change issues owing to the shifting landscape. We believe existing laws and regulations will continue to evolve and may require expenditures. Failure to comply with these laws and regulations may expose Washington Gas ~~may~~to ~~incur~~fines, ~~unexpected~~penalties ~~costs~~and operational interruptions that could adversely affect its financial results. Moreover, new environmental requirements, revisions and reinterpretations of existing environmental requirements and changes in ~~connection~~environmental ~~with~~enforcement ~~the~~policies ~~Merger~~and practices may stretch Washington Gas’ operational resources and adversely affect its financial results.

Certain jurisdictions within Washington Gas’ ~~expects~~operating toterritory ~~continue~~have adopted initiatives to ~~incur~~address ~~non-recurring~~climate ~~expenses~~change ~~associated~~that ~~with~~include ~~the~~setting ~~Merger,~~targets asto ~~well~~reduce asGHG ~~continuing~~(often ~~expenses~~expressed ~~related~~in tomeasures ~~combining~~of carbon dioxide equivalent emissions), requiring the ~~operations~~use of ~~the~~varying ~~two~~amounts ~~companies.~~of ~~Washington~~renewable ~~Gas~~electricity, ~~may~~and ~~incur~~banning ~~additional~~fossil ~~costs~~fuel use, including natural gas, in ~~the~~new ~~integration~~construction. Carbon oftaxes, ~~the~~which ~~businesses~~would ofinclude ~~Washington~~a ~~Gas~~tax ~~and~~on ~~AltaGas~~natural gas emissions also continue to be considered. Such ~~Although~~actions have multiple implications and risks for Washington Gas, ~~expects~~including ~~that~~supply ~~the~~availability ~~elimination~~and ofsourcing ~~certain~~risks, ~~duplicative~~and ~~costs,~~higher asproduct ~~well~~costs as the ~~realization~~company investigates new sources of ~~other~~non-traditional ~~efficiencies~~carbon ~~related~~neutral togaseous fuels. Related risks include the ~~integration~~ability of the ~~two~~existing ~~businesses,~~infrastructure ~~will~~to ~~offset~~access ~~any~~and ~~Merger-related~~safely ~~costs~~deliver ~~over~~these ~~time,~~new ~~the~~fuels. Other ~~combined~~risks ~~company~~include ~~may~~lower ~~not~~revenue ~~achieve~~from ~~this~~reduced ~~net~~gas ~~benefit~~deliveries as customer demand declines in ~~the~~response ~~near~~to ~~term~~company-initiated efficiency programs, orpenetration athigh-efficiency ~~all~~appliances and technologies, new building standards, and external forces, including potential government sponsored policy initiatives that promote electrification.

~~WGL~~Additional risks include securing regulatory and ~~AltaGas~~policy ~~may~~support ~~become~~for ~~targets~~changes in the Company’s business operations and pricing model that allow recovery of ~~securities~~associated ~~class~~costs ~~action~~and ~~suits~~offer returns sufficient to attract and ~~derivative~~maintain ~~suits,~~capital. Erosion ~~which~~of ~~could~~investor ~~result~~confidence in ~~substantial~~fossil ~~costs~~fuel-based companies is leading some to divest from the sector completely. Maintaining investor confidence and ~~divert~~attracting ~~management~~capital ~~attention~~will be dependent on successfully demonstrating our ability to reduce emissions associated with the use of our products, and ~~resources~~the failure to do so may materially and adversely affect our business, reputation, and financial results.

~~Securities~~Changes class action suits and derivative suits are often brought against companies who have entered into mergers and acquisition transactions. There can be no assurance that WGL or AltaGas will not be targets of such suits in the ~~future,~~regulatory ~~and~~environment ~~no guarantee that WGL~~ or ~~AltaGas~~unfavorable ~~can~~rate ~~successfully~~regulation ~~defend~~may ~~against~~restrict ~~any~~or ~~such~~delay ~~actions.~~Washington ~~Defending~~Gas’ ~~against~~ability ~~these~~to ~~claims,~~earn ~~even~~a ifreasonable ~~meritless,~~rate ~~could~~of ~~result~~return inon ~~substantial~~its ~~costs~~capital invested to ~~WGL~~provide ~~and~~utility ~~AltaGas~~service and ~~could~~to ~~divert~~recover ~~the~~fully ~~attention~~its ofoperating ~~management~~costs.

AsWashington anGas ~~indirect,~~is ~~wholly-owned~~regulated ~~subsidiary~~by several regulatory commissions and agencies. These regulatory commissions generally have authority over many of ~~AltaGas,~~ the activities of Washington Gas’ isbusiness ~~dependent~~including, onbut ~~AltaGas~~not ~~for~~limited ~~certain~~to, ~~services~~the ~~under~~rates ait ~~services~~charges ~~agreement.~~to ~~Loss~~its customers, the amount and type of ~~such~~securities it can issue, the nature of investments it can make, the nature and quality of services it provides, ifsafety ~~any~~standards, ~~could~~collection ~~have~~practices aand ~~material~~other ~~impact~~matters. onThese regulators also may modify Washington Gas’ ~~business~~rates to change the level, ~~financial~~type ~~condition~~and methods that it utilizes to recover its costs, ~~results~~including the costs to acquire, store, transport and deliver natural gas. In addition, the regulatory environment and rate regulation can be affected by new laws and political considerations. Most significantly, we incur both planned and unplanned costs to operate, improve, maintain and repair our operational assets. The amount of ~~operations~~these costs may vary from our expectations due to significant unanticipated repairs, maintenance and ~~cash~~remediation ~~flows~~of our assets, changes in legal and regulatory requirements, natural disasters, terrorism, changes in interest rates of our indebtedness and other events. To the extent these costs are not included in approved rates or tariffs, we seek our recovery through rate cases; however, the regulatory process may be lengthy and costs may be disallowed, causing us to suffer the negative financial effects of costs incurred without the benefit of rate relief. Additionally, the actions of regulatory commissions may restrict or delay Washington Gas’ ability to earn a reasonable rate of return on invested capital.

Washington Gas receives general corporate services from AltaGas under a service agreement approved by the SCC of VA. Under the agreement, Washington Gas relies on AltaGas for certain administrative and management functions and services, including human resources, employee benefits, finance, legal, accounting, tax, information technology, and office services. Should AltaGas not be able to provide such services to Washington Gas for any reason, Washington Gas will need to use its own resources for such services or otherwise find a substitute provider for such services. Washington Gas, however, may not have sufficient internal resources to effectively provide such services or may not be able to contract with a substitute service provider on similar terms or at all. Moreover, the costs of obtaining a substitute service provider, if found, may be substantial and overly burdensome for Washington Gas. Washington Gas may also experience an interruption in the provision of such services to it. In addition, in light of AltaGas' familiarity with Washington Gas, a substitute service provider, if any, may not be able to provide the same level of service due to lack of preexisting synergies. If Washington Gas cannot support necessary services from its internal resources or otherwise locate providers that are able to provide it with substantially similar services, Washington Gas’ business, financial condition, results of operations and cash flows could be adversely affected.16

As an indirect, wholly-owned subsidiary of AltaGas, Washington Gas is affected by AltaGas' strategic decisions and performance.

As an indirect, wholly-owned subsidiary of AltaGas, Washington Gas’ business, operations, and financial performance (including its ability to access capital, receive equity, and ability to spend capital) can be affected by a wide range of strategic

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

~~decisions~~Washington ~~that~~Gas ~~AltaGas~~ may ~~make~~encounter ~~from~~unexpected ~~time~~difficulties toor ~~time.~~costs ~~Significant changes~~ in ~~AltaGas’~~meeting ~~strategy,~~commitments ~~its~~made ~~relationship~~under ~~with~~various ~~Washington~~orders ~~Gas,~~and asagreements ~~well~~associated aswith ~~material~~regulatory ~~adverse~~approvals ~~changes~~for in the ~~performance of AltaGas, could have a material adverse effect on Washington Gas’ business, financial condition, operating results and prospects~~Merger.

As a result of the process to obtain regulatory approvals required for the Merger, Washington Gas is committed to various programs, contributions and investments in several agreements and regulatory approval orders. It is possible that Washington Gas may encounter delays, unexpected difficulties or additional costs in meeting these commitments in compliance with the terms of the relevant agreements and orders. Failure to fulfill the commitments in accordance with their terms could result in increased costs or result in penalties or fines that could have a material adverse effect on Washington Gas’ business, financial condition, operating results and prospects.

As an indirect, wholly owned subsidiary of AltaGas, Washington Gas is dependent on AltaGas for certain services under a services agreement. Loss of such services, if any, could have a material impact on Washington Gas’ business, financial condition, results of operations and cash flows.

As an indirect, wholly owned subsidiary of AltaGas, Washington Gas is affected by AltaGas' strategic decisions and performance.

As an indirect, wholly owned subsidiary of AltaGas, Washington Gas’ business, operations, and financial performance (including its ability to access capital, receive equity, and ability to spend capital) can be affected by a wide range of strategic decisions that AltaGas may make from time to time. Significant changes in AltaGas’ strategy, its relationship with Washington Gas, as well as material adverse changes in the performance of AltaGas, could have a material adverse effect on Washington Gas’ business, financial condition, operating results and prospects.

Washington Gas may be unable to access capital or the cost of capital may significantly increase.

Washington Gas’ ability to obtain adequate and cost-effective financing depends on the liquidity of the financial markets, its credit ratings, and the ability of it and AltaGas to access the financial markets. Disruptions in the capital and credit markets could adversely affect Washington Gas’ ability to access short-term and long-term capital. Washington Gas’ access to funds under its commercial paper program is dependent on investor demand for its commercial paper. Disruptions and volatility in the global credit markets could limit the demand for Washington Gas’ commercial paper borrowings or result in the need to offer higher interest rates to investors, which would result in higher expense and could adversely impact liquidity. The Company’s credit ratings, as well as the ratings of WGL and AltaGas impact the Company’s ability to access credit markets and the costs of borrowing under available credit lines. A negative change in the Company’s (or its affiliates’) ratings outlook or any downgrade in current investment-grade credit ratings, particularly below investment grade, could adversely affect Washington Gas’ costs of borrowing and/or access to sources of liquidity and capital. An increase in borrowing costs without the ability to recover those higher costs in the rates charged to Washington Gas’ customers, which would be impacted by the merger-related commitment that prohibits Washington Gas from recovering any incremental financing costs due to a credit downgrade, would adversely affect earnings or cash flows by limiting Washington Gas’ ability to earn its allowed rate of return. Additionally, disruptions in the credit market, including as a result of natural disasters, catastrophic events (including terrorist acts and health and safety epidemics), could adversely affect Washington Gas’ access to sources of liquidity and increase its borrowing costs

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

A decline in the local economy in which Washington Gas operates may reduce net revenue growth and reduce future earnings and cash flows.

Substantially all of our natural gas utility customers are located in Virginia, Maryland and the District of Columbia. A general decline in the economy of the region in which Washington Gas operates or a change in the usage patterns and financial condition of customers in the region due to factors beyond Washington Gas' control may adversely affect Washington Gas’ ability to grow its customer base and collect revenues from existing customers, which may negatively affect net revenue growth and increase costs.

We are exposed to counterparty and contract-related risks that could adversely affect our results of operations, cash flows and financial condition.

We may extend credit to counterparties, including other utilities, holding companies, banks, gas exploration and production companies, government-backed utilities and other participants in the energy industry relating to the sale, purchase and delivery of commodities. In addition, certain of our outstanding debt, including our medium-term notes, may accrue interest at variable rates based on the London Interbank Offered Rate (LIBOR). In July 2017, the United Kingdom Financial Conduct Authority (FCA), which regulates LIBOR, announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom or elsewhere. Although we believe we have prudent policies in place to manage our credit risk, we may not be able to collect amounts owed to us, which could adversely affect our liquidity and results of operations.

Our risk management strategies and related hedging activities may not be effective in managing risks and may cause increased volatility in our earnings and may result in costs and losses for which rate recovery may be disallowed.

We are exposed to commodity price, weather, and interest rate risks. For gas purchases to serve utility customers, Washington Gas attempts to manage its exposure to these risks, in part, through regulatory recovery mechanisms. In addition, we attempt to mitigate risks by hedging, setting risk limits and employing other risk management tools and procedures. These risk management activities may not be effective and cannot eliminate these risks in their entirety. If these tools and procedures are ineffective, we could incur significant losses, which could have a material adverse effect on our financial results and liquidity. In addition, although Washington Gas generally anticipates rate recovery of its costs or losses incurred in connection with these risk management activities, a regulator could subsequently disallow these costs or losses from the determination of revenues, which could adversely affect our financial results and increase the volatility of our earnings.

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

Rules implementing the derivatives transaction provisions of the Dodd-Frank Act could have an adverse impact on our ability to hedge risks associated with our business.

The Dodd-Frank Act regulates derivatives transactions, which include certain instruments, such as interest rate swaps, and commodity options, financial and other contracts, used in our risk management activities. The Dodd-Frank Act requires that a registered clearing facility clear most swaps and that the swaps trade on a designated exchange or swap execution facility, with certain exceptions for entities that use swaps to hedge or mitigate commercial risk. The Dodd-Frank requirements relating to derivative transactions have not been fully implemented by the SEC and the Commodity Futures Trading Commission. When fully implemented, the law and any new regulations could increase the operational and transactional cost of derivatives contracts and affect the number and/or creditworthiness of available counterparties.

Failure of our service providers could negatively impact our business, results of operations and financial condition.

Certain of our information technology, customer service, supply chain, pipeline and infrastructure installation and maintenance, engineering, payroll, and human resources functions that we rely on are provided by third-party vendors. Some of these services may be provided by vendors from centers located outside of the United States. Services provided pursuant to these agreements could be disrupted due to events and circumstances beyond our control, including natural disasters, catastrophic events (including terrorist acts and health and safety epidemics) and uncertain economic and political conditions. Our reliance on these service providers could have an adverse effect on our business, results of operations and financial condition.

Failure of the Company’s internal controls and procedures for financial reporting could adversely affect investor confidence and expose the Company to additional risks.

Beginning in 2019, the Company’s internal control over financial reporting were required to be in compliance with the requirements of Section 404(a) of Sarbanes-Oxley, and the related rules of the Securities Exchange Commission and the Public Company Accounting Oversight Board. Washington Gas’ failure to satisfy the requirements of Section 404(a) on an ongoing basis, or any failure of its internal controls could adversely affect investor confidence, cause reputational damage, and expose the Company to monetary penalties. Any such effects of non-compliance could have an adverse effect on Washington Gas’ results of operations, financial conditions and cash flows.

Natural disasters and catastrophic events, including terrorist acts, may adversely affect our business.

Natural disasters and catastrophic events such as fires, earthquakes, explosions, floods, tornados, terrorist acts, health and safety epidemics, and other similar occurrences, could damage our operational assets, including our utility facilities, and information technology infrastructure, and could reduce employee productivity. Such events could likewise damage the operational assets of our suppliers or customers. These events could disrupt our ability to meet customer requirements, significantly increase our response costs, and significantly decrease our revenues. Unanticipated events or a combination of events, failure in resources needed to respond to events, or a slow or inadequate response to events may have an adverse impact on our operations, financial condition, and results of operations. The availability of insurance covering catastrophic events, sabotage and terrorism may be limited or may result in higher deductibles, higher premiums, and more restrictive policy terms. 18

Washington Gas may be unable to retain key management and to attract and compensate sufficient skilled employees and contractors to meet its needs in field operations and construction activities.

Washington Gas depends on the experience and industry knowledge of its officers and other key employees to execute its business plans. The success of the company depends in part upon its ability to attract retain key management personnel and other employees, including its highly skilled operational employees. In addition, Washington Gas relies on its field employees and contractors to perform maintenance, construction and other operational activities to maintain and enhance its distribution system. These activities require specific skills and experience to meet internal and external standards and procedures and there is no guarantee that the Company will be able to recruit and train such personnel. Certain events, such as an aging workforce without appropriate replacements, mismatch of skillsets to future needs, or the unavailability of contract resources may lead to operating challenges and increased costs. If we are unable to attract, train, and retain, and appropriately qualified workforce our operations could be negatively affected.

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

Washington Gas may be unable to retain key management and to attract and compensate sufficient skilled employees and contractors to meet its needs in field operations and construction activities.

Washington Gas depends on the experience and industry knowledge of its officers and other key employees to execute its business plans. The success of the company depends in part upon its ability to attract retain key management personnel and other employees, including its highly skilled operational employees. In addition, Washington Gas relies on its field employees and contractors to perform maintenance, construction and other operational activities to maintain and enhance its distribution system. These activities require specific skills and experience to meet internal and external standards and procedures and there is no guarantee that the Company will be able to recruit and train such personnel. Certain events, such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, or the unavailability of contract resources may lead to operating challenges and increased costs. If we are unable to attract, train, and retain, and appropriately qualified workforce our operations could be negatively affected.

Washington Gas’ business and financial condition could be adversely impacted by strikes or work stoppages by its unionized employees.

Washington Gas’ business is dependent upon employees who are represented by unions and are covered by collective bargaining agreements. Disputes with the unions could result in work stoppages that could impact the delivery of natural gas and other services, which could affect our relationships with customers, vendors and regulators and adversely affect Washington Gas’ business and financial condition.

The cost of providing retirement plan benefits to eligible current and former employees is subject to changes in the performance of investments, demographics, and other factors and assumptions. These changes may have a material adverse effect on us.

The cost of providing retirement plan benefits to eligible current and former employees is subject to changes in the market value of our retirement plan assets, changing bond yields, changing demographics and changing assumptions. Any sustained declines in equity markets, reductions in bond yields, increases in health care cost trends, or increases in life expectancy of beneficiaries may have an adverse effect on our retirement plan liabilities, assets and benefit costs. Additionally, Washington Gas may be required to increase our contributions in future periods in order to preserve the current level of benefits under the plans and/or due to federal funding requirements.

Changes in the regulatory environment or unfavorable rate regulation may restrict or delay Washington Gas’ ability to earn a reasonable rate of return on its capital invested to provide utility service and to recover fully its operating costs.

Washington Gas is regulated by several regulatory commissions and agencies. These regulatory commissions generally have authority over many of the activities of Washington Gas’ business including, but not limited to, the rates it charges to its customers, the amount and type of securities it can issue, the nature of investments it can make, the nature and quality of services it provides, safety standards, collection practices and other matters. These regulators also may modify Washington Gas’ rates to change the level, type and methods that it utilizes to recover its costs, including the costs to acquire, store, transport and deliver natural gas. In addition, the regulatory environment and rate regulation can be affected by new laws and political considerations. Most significantly, we incur both planned and unplanned costs to operate, improve, maintain and repair our operational assets. The amount of these costs may vary from our expectations due to significant unanticipated repairs, maintenance and remediation of our assets, changes in legal and regulatory requirements, natural disasters, terrorism, changes in interest rates of our indebtedness and other events. To the extent these costs are not included in approved rates or tariffs, we seek our recovery through rate cases; however, the regulatory process may be lengthy and costs may be disallowed, causing us to suffer the negative financial effects of costs incurred without the benefit of rate relief. Additionally, the actions of regulatory commissions may restrict or delay Washington Gas’ ability to earn a reasonable rate of return on invested capital.

Climate change concerns and the movement for carbon neutral energy sources pose challenges to the Company’s operating model.

Climate change and the costs that may be associated with its impacts have the potential to affect our business in many ways, including increasing the costs we incur in providing our products and services, impacting the demand for and consumption of our products and services (due to change in both costs and weather patterns), and affecting the economic health of the regions in which we operate. Energy customers are also increasingly indicating preferences for carbon-neutral and renewable sources of energy.

Regulatory and legislative responses to climate change have been mixed, and the politics of the matter has created much uncertainty about how governing bodies will respond, making long-term corporate planning around climate change issues difficult owing to the shifting landscape. We believe existing laws and regulations will continue to evolve and may require expenditures over a long timeframe. Failure to comply with these laws and regulations may expose Washington Gas to fines, penalties and operational interruptions that could adversely affect its financial results. Moreover, new environmental requirements, revisions and reinterpretations of existing environmental requirements and changes in environmental enforcement policies and practices may stretch Washington Gas’ operational resources and adversely affect its financial results.

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

Certain jurisdictions within Washington Gas’ operating territory have adopted initiatives to address climate change that include setting targets to reduce GHG (often expressed in measures of carbon dioxide equivalent emissions), requiring the use of varying amounts of renewable electricity, and banning fossil fuel use, including natural gas, in new construction. Carbon taxes, which would include a tax on natural gas emissions also continue to be considered. Such actions have multiple implications and risks for Washington Gas, including supply availability and sourcing risks, and higher product costs as the company investigates new sources of non-traditional carbon neutral gaseous fuels. Related risks include the ability of the existing infrastructure to access and safely deliver these new fuels. Other risks include lower revenue from reduced gas deliveries as customer demand declines in response to company-initiated efficiency programs, penetration high-efficiency appliances and technologies, new building standards, and external forces, including potential government sponsored policy initiatives that promote electrification.

Additional risks include securing regulatory and policy support for changes in the Company’s business operations and pricing model that allow recovery of associated costs and offer returns sufficient to attract and maintain capital. Erosion of investor confidence in fossil fuel-based companies is leading some to divest from the sector completely. Maintaining investor confidence and attracting capital will be dependent depend on successfully demonstrating our ability to reduce emissions associated with the use of our products, and the failure to do so may materially and adversely affect our business, reputation, and financial results.

Changes in the relative prices of alternative forms of energy may weaken the competitive position of Washington Gas’ delivery service, which could reduce growth in natural gas customers, reduce the volume of natural gas delivered and negatively affect Washington Gas’ cash flows and earnings.

The price of natural gas delivery service that Washington Gas provides competes with the price of other forms of energy such as electricity, heating oil and propane. An increase in the price of natural gas compared to other sources of energy may cause the competitive position of our natural gas delivery service to decline. A decline in the competitive position of natural gas service may lead to fewer natural gas customers, lower volumes of natural gas delivered, lower cash flows and lower earnings.

Washington Gas is subject to physical and financial risks associated with climate change.

Changing weather patterns that may be attributable to climate change make it harder for the Company to predict weather patterns and plan for winter heating seasons. Increased or decreased energy use due to weather changes may require the Company to invest in additional gathering, storage, or other infrastructure and warmer weather could lead to decreased demand for natural gas, which would negatively impact the Company’s financial results. Extreme weather conditions can contribute to increased stress on Company systems, which could include service interruptions. From an operational perspective, increasingly severe and variable weather could affect our ability to secure and deliver our product and perform system replacement, repair, and maintenance work, while also potentially disrupting our supply chain. Interferences of this sort are likely to drive up the cost of system operations. To the extent climate change negatively impacts a region’s economic health, through rising sea levels, increases in number of and/or severity of weather events, displacement or other means, any such impact could have a negative effect on the Company’s customer base, and correspondingly, on revenues. Additionally, climate change activism could lead to business interruptions for the Company as citizen engagement on this issue has in the past targeted Washington, DC for business disruption and may do so in the future.

Our business, earnings and cash requirements are highly weather sensitive and seasonal.

The earnings of Washington Gas can vary from year to year depending, in part, on weather conditions. Forecasts of sales are based on “normal” weather, which represents a long-term historical average. Warmer-than-normal weather can reduce our utility margins as customer consumption declines. In Maryland and Virginia, we currently have in place regulatory mechanisms and rate designs intended to stabilize the level of net revenues that we collect from customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels, and other factors such as conservation. If our rates and tariffs are modified to eliminate these provisions, then we would be exposed to significant risk associated with weather. Weather can also impact our operating costs related to system maintenance which is not covered by regulatory mechanisms.

Certain legacy operations of the Company have exposed it to potential liabilities in connection with environmental remediation efforts.

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

severe and variable weather could affect our ability to secure and deliver our product and perform system replacement, repair, and maintenance work, while also potentially disrupting our supply chain. Interferences of this sort are likely to drive up the cost of system operations. To the extent climate change negatively impacts a region’s economic health, through rising sea levels, increases in number of and/or severity of weather events, displacement or other means, any such impact could have a negative effect on the Company’s customer base, and correspondingly, on revenues. Additionally, climate change activism could lead to business interruptions for the Company as citizen engagement on this issue has in the past targeted Washington, DC for business disruption and may do so in the future.

Our business, earnings and cash requirements are highly weather sensitive and seasonal.

Certain legacy operations of the Company have exposed it to potential liabilities in connection with environmental remediation efforts.

Washington Gas has identified up to ten sites where it or its predecessors may have operated manufactured gas plants (MGPs). Though Washington Gas ceased all such operations and last used any such plant in 1984, it is aware of the presence of coal tar and certain other by-products of gas manufacturing processes at certain sites and its potential presence at others. The Company is currently remediating certain properties, and is involved in remediation negotiations and planning for certain other properties both in its individual capacity and collectively with other parties. Environmental remediation efforts typically have a long time frame, are costly, and are subject to the unexpected, making such efforts difficult to plan and budget for. Company management and personnel may have to devote significant time and resources to these efforts and there is no guarantee that the costs associated with any remediation efforts would not have a negative impact on the Company’s earnings.

Washington Gas is subject to various legal proceedings and management cannot predict the outcome of such proceedings.

In the course of its business, Washington Gas is subject to lawsuits, regulatory proceedings, and other claims arising out of its operations. Defense and settlement costs associated with these proceedings can be substantial, even with respect to matters that we believe have no merit. Due to the inherent uncertainty of the litigation process, contested regulatory proceedings, or the progress of other claims, the resolution of any particular matter could have a material adverse effect on the financial position or operating results of Washington Gas.

Changes to government fiscal and trade policies could adversely affect Washington Gas’ strategic decisions and operating performance.

Any changes in the US trade policy could trigger retaliatory actions by affected companies resulting in increased costs for goods used in our normal course of business, such as steel pipe. Higher than expected inflation or tariffs may increase costs of construction and operations.

Washington Gas may face regulatory and financial risks related to pipeline safety legislation.

A number of proposals to require increased oversight of pipeline operations and increased investment in and inspections of pipeline facilities are pending or have been proposed in the United States Congress. Additional operating expenses and capital expenditures may be necessary to remain in compliance with the increased federal oversight resulting from such proposals. While we cannot predict with certainty the extent of these expenses and expenditures or when they will become effective, the adoption of such proposals could result in significant additional costs to Washington Gas’ business. Washington Gas may be unable to recover from customers through the regulatory process all or some of these costs and may be unable to earn its authorized rate of return on these costs.

Changes in taxation and the ability to quantify such changes could adversely affect our financial results.

We are subject to taxation by the various taxing authorities at the federal, state and local levels where we do business. Legislation or regulation which could affect our tax burden could be enacted by any of these governmental authorities. The outcome of regulatory proceedings regarding how corporate taxes are shared with customers and the period over which it will be shared could significantly impact future earnings and cash flows. Separately, a challenge by a taxing authority or a change in our ability to use tax benefits such as carryforwards or tax credits may impact our financial results.

Washington Gas Light Company

Part I

Item 1A. Risk Factors (continued)

Failure of the Company’s internal controls and procedures for financial reporting could adversely affect investor confidence and expose the Company to additional risks.

The Company’s internal control over financial reporting are required to be in compliance with the requirements of Section 404(a) of Sarbanes-Oxley, and the related rules of the Securities Exchange Commission and the Public Company Accounting Oversight Board. Washington Gas’ failure to satisfy the requirements of Section 404(a) on an ongoing basis, or any failure of its internal controls could adversely affect investor confidence, cause reputational damage, and expose the Company to monetary penalties. Any such effects of non-compliance could have an adverse effect on Washington Gas’ results of operations, financial conditions and cash flows.

Washington Gas Light Company

Part I

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

Washington Gas Light Company

Part I

ITEM 2. PROPERTIES

At December 31, ~~2019~~2020, Washington Gas provided services in various areas of the District of Columbia, Maryland and Virginia, and held certificates of convenience and necessity, licenses and permits necessary to maintain and operate its properties and businesses.

At December 31, ~~2019~~2020, Washington Gas had approximately ~~588~~593 miles of transmission mains, 13,~~293~~409 miles of distribution mains and 1213,~~964~~148 miles of distribution services.

Washington Gas owns approximately 20 acres of land and two buildings at 6801 and 6803 Industrial Road in Springfield, Virginia. The Springfield site houses both operating and certain administrative functions of the utility. Washington Gas also holds title to land and buildings used ~~as substations~~ for ~~its utility operations. Washington Gas holds title to land and buildings used for utility~~ operational functions, such as substations and gate stations ~~or substations~~ throughout its service territory in the District of Columbia, Maryland and Virginia.

Washington Gas also has peak shaving facilities in Springfield, Virginia (Ravensworth Plant) and Rockville, Maryland (Rockville Plant).

Washington Gas Light Company

Part I

ITEM 3. LEGAL PROCEEDINGS

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 13 — Commitments and Contingencies of the Notes to Financial Statements.

~~Silver Spring, Maryland Incident~~ 24

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 were filed against WGL and Washington Gas in the Circuit Court for Montgomery County, Maryland. All of these suits sought unspecified damages for personal injury and/or property damage.

All personal injury and property damage claims asserted by residents at the Flower Branch Apartments have been settled and paid. The Company has been reimbursed by its insurers for the amounts paid in the settlements.

Also, in connection with the incident, 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 PSC of MD should not impose a civil penalty on the Company. (Show-Cause Order).

On November 18, 2019 the Technical Staff of the PSC of MD, the Maryland Office of People’s Counsel (OPC), Montgomery County, MD and the Apartment and Office Building Association of Metropolitan Washington (AOBA) filed written comments on the Company’s Response to the Show-Cause Order. Technical Staff commented that the PSC of MD may impose a civil

Washington Gas Light Company

Part I

penalty but did not expressly recommend same. Montgomery County, MD, OPC and AOBA requested that the PSC of MD impose a civil penalty on the Company.

On December 17, 2019 the PSC of MD held a public hearing near the apartment complex at Arliss Street, at which some residents requested that the Company accelerate and complete its mercury service regulator program and that the Company absorb the cost of same.

The Company intends to file comments with the PSC of MD responding to all written comments and resident testimony.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

2225

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Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

All of the outstanding shares of Washington Gas' common stock are owned by Wrangler, an indirect wholly owned subsidiary of AltaGas Ltd. Washington Gas' common stock is not publicly traded.

On December 17, 2018, we voluntarily registered Washington Gas' common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended, effective on such date.

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Part II

Item 6. Selected Financial Data

ITEM 6. SELECTED FINANCIAL DATA

Washington Gas meets the conditions set forth in General Instruction I(1) of Form 10-K and has omitted the information called for by this Item pursuant to General Instruction I(2) of Form 10-K.

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Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. This discussion follows the format permitted in accordance with General Instruction I(2) of Form 10-K, in light of Washington Gas’ status as a wholly- owned subsidiary of AltaGas as permitted under General Instruction I(1) of Form 10-K. 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’s financial statements and the Notes to Financial Statements.

Executive Overview

Washington Gas has one operating segment that engages in its core business of delivering and selling natural gas under tariffs approved by regulatory commissions in the District of Columbia, Maryland and Virginia. Net income was $99131.89 million for ~~the~~ calendar year ~~ended~~2020 ~~December 31, 2019~~ compared to ~~a net loss of~~ $3597.41 million for ~~the~~calendar ~~same~~year ~~period ended December 31, 2018~~2019. The increase in net income was mainly from ~~$58.0~~an ~~million~~ increase in ~~operating~~net revenues driven by the impact of rate cases, accelerated pipe replacement programs, ~~and~~our ~~customer~~asset ~~growth~~optimization program, and achange ~~$159.5~~of ~~million~~accounting ~~decrease~~principle inrelate ~~operation~~to ~~and~~pension ~~maintenance~~cost, ~~due~~partially tooffset ~~the~~by ~~lower~~negative ~~merger~~impacts ~~commitments~~from warmer weather and ~~related~~the ~~costs~~COVID-19 pandemic.

Factors critical to the success of Washington Gas include: (i) operating a safe and reliable natural gas distribution system; (ii) having sufficient natural gas supplies to meet customer demands; (iii) being competitive with other sources of energy such as electricity, fuel oil and propane; (iv) having access to sources of liquidity; (v) recovering the costs and expenses of this business in the rates charged to customers, and (vi) earning a fair, just and reasonable rate of return on invested capital.

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic. Governments in affected areas in which we operate have imposed a number of measures designed to contain the outbreak, including business closures, travel restrictions, quarantines and cancellations of gatherings and events. Washington Gas activated a pandemic response team to monitor COVID-19 developments closely. The pandemic response team has led Company efforts to mitigate the impacts to our business, and has implemented pandemic and business continuity plans to protect our employees, customers and communities. To date, Washington Gas has been able to respond to pandemic-related challenges with minimal disruption to its operations and business and it has not experienced unavailability of a significant portion of its personnel as a result of COVID-19.

As a result of regulatory orders, we temporarily suspended customer disconnections for non-payment, temporarily suspended collection activities and temporarily waived assessing and billing late payment fees. While the suspension of disconnections has been lifted in Maryland for non-residential customers in the fourth quarter of 2020, the suspension in District of Columbia and Virginia continues. We resumed assessing late payment fees in Maryland in October 2020 following a regulatory order.

The suspension of collection activities has caused our overall accounts receivable portfolio to age more than historical levels for 2020. However, we do not expect the increase in credit losses to have a significant impact on net income. The PSC of DC, PSC of MD, and SCC of VA each have issued an Order authorizing Washington Gas to establish a regulatory asset to capture and track the prudently incurred incremental COVID-19 related costs, including incremental credit losses, which allows for assessment of recovery of those costs in future base rate cases. As of December 31, 2020, we have recorded $7.9 million of incremental COVID-19 related costs to regulatory assets across all jurisdictions, comprised of bad debt expense and supplies. Additionally, we waived late payment fees of $5.7 million for the year ended December 31, 2020.

In December 2020, Washington Gas received $7.7 million of Coronavirus Relief Funds from SCC of VA to provide direct assistance to Virginia customers with balances over 30 days in arrears, to the extent the customers meet the qualification requirements. The amount was recorded as "Gas costs due to customer" on Washington Gas' balance sheets at December 31, 2020. We considered the benefits under government COVID-19 relief programs into the credit losses evaluations.

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Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Unfavorable economic conditions due to COVID-19 have reduced demand for natural gas. Compared to prior period, the lower commercial and residential usage, waived late fees, and lower service initiation fees have resulted in a decrease to net revenue. As the number of COVID-19 cases has climbed during the winter months, Washington Gas expects lower commercial usage due to COVID-19 that could negatively impact our financial results in 2021. However, due to significant uncertainty related to the pandemic and its economic impact, management's judgment and estimates regarding the situation could change in the future, and current expected outcomes and actual results may differ.

No material impairments of our long-lived assets were recorded through the date of this report, as no triggering events or changes in circumstances had occurred.

Refer to "Rates and Regulatory Matters" for updates on COVID-19 related orders.

Results of Operations

Our chief operating decision maker utilizes the non-GAAP measure, EBITDA, as the primary measure of profit and loss in assessing the results of operations. 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. It also excludes depreciation and amortization which do not affect cash flows.

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

The following table reconciles EBITDA to net income for the calendar years ended December 31, 2019 and 2018, three months ended December 31, 2018 and 2017, and fiscal years ended September 30, 2018 and 2017.



	Calendar Years Ended December 31,						Increase (Decrease)
(In millions)	2020		2019		2018 (unaudited)		2020 vs. 2019		2019 vs. 2018
Net income	$	131.9	$	97.1	$	(34.6)	$	34.8	$	131.7
Interest expense	65.4		62.6		59.2		2.8		3.4
Income tax expense	32.8		18.1		(42.6)		14.7		60.7
Depreciation and amortization	145.6		142.6		136.4		3.0		6.2
EBITDA	$	375.7	$	320.4	$	118.4	$	55.3	$	202.0

	Calendar Years Ended December 31,					Three Months Ended December 31,				Fiscal Years Ended September 30,					Increase (Decrease)
(In millions)	2019		2018(unaudited)			2018		2017 (unaudited)		2018			2017		Calendar Year		Three Months			Fiscal Year
															2019vs. 2018		2018vs. 2017			2018vs. 2017
Net income (loss)	$	99.8	$	(35.4	)	$	49.2	$	57.9	$	(26.6	)	$	131.8	$	135.2	$	(8.7	)	$	(158.4	)
Interest expense	62.6		59.2			15.7		15.0		58.5			52.2		3.4		0.7			6.3
Income tax expense (benefit)	19.0		(42.9		)	7.8		24.9		(25.9		)	79.8		61.9		(17.1		)	(105.7		)
Depreciation and amortization	142.6		136.4			34.9		33.6		135.1			129.4		6.2		1.3			5.7
EBITDA	$	324.0	$	117.3		$	107.6	$	131.4	$	141.1		$	393.2	$	206.7	$	(23.8	)	$	(252.1	)

The following table summarizes the Company’s financial information for the calendar years ended December 31, 2020, 2019 and 2018.

Summary Financial Results



	Calendar Years Ended December 31,						Increase (Decrease)
(In millions)	2020		2019		2018 (unaudited)		2020 vs. 2019		2019 vs. 2018
Net revenues:
Operating revenues	$	1,234.3	$	1,330.7	$	1,272.7	$	(96.4)	$	58.0
Less: Cost of gas	328.2		461.6		438.9		(133.4)		22.7
Less: Revenue taxes	77.5		81.8		82.7		(4.3)		(0.9)
Total net revenues	828.6		787.3		751.1		41.3		36.2
Operation and maintenance	399.5		405.0		564.5		(5.5)		(159.5)
General taxes and other assessments	75.1		67.8		64.0		7.3		3.8
Other income (expenses)-net	21.7		5.9		(4.2)		15.8		10.1
EBITDA	$	375.7	$	320.4	$	118.4	$	55.3	$	202.0

The following table summarizes the Company’s financial data for the calendar year ended December 31, 2019 and 2018, three months ended December 31, 2018 and 2017, and fiscal years ended September 30, 2018 and 2017.

	Calendar Year Ended December 31,					Three Months Ended December 31,				Fiscal Years Ended September 30,						Increase (Decrease)
(In millions)	2019		2018(unaudited)			2018		2017 (unaudited)		2018			2017			CalendarYear			Three Months			Fiscal Year
																2019vs. 2018			2018vs. 2017			2018vs. 2017
Net revenues:
Operating revenues	$	1,330.7	$	1,272.7		$	402.1	$	377.5	$	1,248.1		$	1,167.0		$	58.0		$	24.6		$	81.1
Less: Cost of gas	461.6		438.9			156.6		124.8		407.0			297.9			22.7			31.8			109.1
Less: Revenue taxes	81.8		82.7			24.2		24.0		82.5			75.1			(0.9		)	0.2			7.4
Total net revenues	787.3		751.1			221.3		228.7		758.6			794.0			36.2			(7.4		)	(35.4		)
Operation and maintenance	405.0		564.5			102.7		82.4		544.2			340.6			(159.5		)	20.3			203.6
General taxes and other assessments	67.8		64.0			14.4		16.0		65.6			59.6			3.8			(1.6		)	6.0
Other income (expenses)-net	9.5		(5.1		)	3.4		1.1		(7.7		)	(0.6		)	14.6			2.3			(7.1		)
EBITDA	$	324.0	$	117.5		$	107.6	$	131.4	$	141.1		$	393.2		$	206.5		$	(23.8	)	$	(252.1	)

Revenues

Operating revenues ~~increased~~decreased by $5896.04 million in ~~the~~ calendar year ~~ended~~2020 ~~December 31, 2019~~ compared to calendar year ~~2018~~2019 mainly driven by the ~~impact~~reduction ofin ~~rate~~gas ~~cases, accelerated pipe replacement programs, customer growth and other increases from conservation programs, recovery of various~~ costs, ~~and~~effects ~~increases from interruptible and special contracts. We also utilize the non-GAAP measure~~ of ~~net~~weather ~~revenues, calculated as revenues less the associated cost of energy~~ and ~~applicable~~consumption ~~revenue~~patterns ~~taxes, to assist in the analysis of profitability. The cost of the natural gas commodity (as adjusted for Asset Optimization sharing)~~ and ~~revenue~~a ~~taxes~~negative ~~are~~impact ~~included~~on incustomer ~~the~~usage ~~rates~~from ~~that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in~~ the ~~cost~~COVID-19 ~~of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues~~pandemic, ~~operating~~partially ~~income~~offset 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 ~~$36.2 million in~~ the ~~calendar~~impact ~~year~~from ~~ended~~rate ~~December~~cases ~~31,~~and ~~2019~~accelerated ~~compared~~replacement ~~to calendar year 2018~~programs.

~~The~~We ~~following~~also ~~are~~utilize the ~~main~~non-GAAP ~~drivers~~measure ~~noted~~of ~~above~~net ~~for~~revenues, calculated as revenues less the ~~increase~~associated incost ~~operating~~of ~~revenues~~energy and applicable revenue taxes, asto ~~well~~assist asin the ~~additional~~analysis ~~drivers~~of ~~for~~profitability. The cost of the ~~increase~~natural gas commodity (as adjusted for Asset Optimization sharing) and revenue taxes are included in ~~net~~the ~~revenues:~~rates that Washington Gas charges to customers as reflected in

~~Impact~~operating revenues. Accordingly, changes in the cost of ~~rate~~gas ~~cases.~~and ~~$16.2~~revenue ~~million~~taxes ~~increase~~associated ~~due~~with sales made to ~~new~~customers ~~base~~generally ~~rates~~have inno ~~Maryland~~direct effect on utility net revenues, ~~effective~~operating ~~December~~income ~~2018~~or net income. ~~Refer~~Net revenues should not be considered an alternative to, ~~“Rates~~or ~~and~~a ~~Regulatory~~more ~~Matters”~~meaningful ~~for~~indicator ~~further~~of ~~discussion~~our operating performance than, operating revenues. Additionally, net revenues may not be comparable to similarly titled measures of ~~these~~other ~~matters~~companies.

~~Accelerated~~The ~~replacement~~table ~~programs~~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 $1141.73 million ~~increase~~in ~~due~~calendar toyear ~~approved~~2020 ~~accelerated~~compared ~~replacement~~to ~~programs~~calendar ~~that~~year ~~were~~2019. inThe ~~place~~following ~~with~~explains anthe ~~associated~~main ~~surcharge~~drivers ~~mechanism~~noted toabove ~~recover~~for the ~~cost,~~decrease ~~including~~in aoperating ~~return~~revenues, onas ~~those~~well ~~capital~~as ~~investments.~~the additional drivers for the increase in net revenues.

~~Customer~~Impact ~~growth. $6.3 million increase due to customer growth. At the calendar year ended December 31, 2019, average active customer meters increased by approximately 12,000 over the number~~ of ~~average~~rate ~~active~~cases ~~customer meters for the same period of 2018, contributing to the increase. Adding new customers directly drives earnings growth through additional distribution revenues.~~

~~Asset~~The ~~optimization~~$44.5 million increase included an increase of $1120.01 million ~~decrease~~owing ~~due~~ to ~~asset~~new ~~optimization.~~base Werates ~~recorded~~in aMaryland, ~~net~~effective ~~gain~~October 2019, and an increase of $1824.54 million ~~including~~related anto ~~unrealized~~the ~~gain~~Virginia ofrate case. The change for the Virginia rate case included a $516.49 million ~~associated~~adjustment ~~with~~to ~~our~~reduce ~~energy-related~~operating ~~derivatives~~revenue ~~for~~in 2019 following the ~~calendar~~SCC ~~year~~final ~~ended~~orders ~~December 31,~~and ~~2019,~~Hearing ~~compared~~Examiner's toreport afor ~~net~~Virginia ~~gain~~2018 ofrate case, and a $297.5 million ~~including~~true-up anto ~~unrealized~~increase ~~gain~~operating ofrevenue ~~$7.6~~recorded ~~million~~in ~~for~~the first quarter of 2020 to the ~~calendar~~Virginia ~~year~~rate ~~ended~~refund ~~December 31,~~liability ~~2018.~~after incorporating final SCC-approved rates.

Estimated effects of weather and consumption patterns. Weather, when measured by HDDs, was 7.9% and 2.5% warmer than normal for the calendar years ended December 31, 2019 and 2018, respectively, driving lower net revenues of $3.0 million. In the District of Columbia, where Washington Gas does not have a billing mechanism or financial instruments to offset the effects of weather, the comparatively warmer weather for the calendar year ended December 31, 2019 resulted in a negative variance to net revenues. Natural gas consumption patterns may be affected by shifts in weather patterns in which customer heating usage may not correlate highly with average historical levels of usage per heating degree days that occur. Natural gas consumption patterns may also be affected by non-weather related factors such as customer conservation. Refer to the section entitled "Weather Risk" for a discussion of billing mechanisms in Maryland and Virginia, which are designed to eliminate the net revenue effects of variations in customer usage caused by weather and other factors such as conservation.APRPs

~~Other.~~The $1613.04 million increase ~~from~~was ~~conservation~~due to the accelerated pipe replacement programs, ~~recovery~~approved by regulatory authorities in each of ~~various~~the ~~costs~~Company's operating jurisdictions that were in place with an associated surcharge mechanism to recover the cost, ~~and~~including ~~increases~~a ~~from~~return, ~~interruptible~~on ~~and~~those ~~special~~capital ~~contracts~~investments.

Asset optimization

The $5.8 million increase was associated with our energy-related derivatives. Refer to Note 14-Derivatives for detail discussion.

Estimated effects of weather and consumption patterns

In the District of Columbia, where Washington Gas does not have a billing mechanism to offset the effects of weather on revenues, the comparatively warmer weather caused a negative variance to net revenues. Natural gas consumption patterns may be affected by shifts in weather patterns and non-weather related factors such as customer conservation.

Weather was 15.4% and 7.9% warmer than normal for calendar years 2020 and 2019, respectively, driving lower net revenue of approximately $8.3 million.

COVID-19

The COVID -19 pandemic has caused lower commercial usage in District of Columbia and Virginia, lower residential usage in District of Columbia, and lower service initiation fees, with the waived late payment fees, driving lower net revenues of approximately $16.0 million in 2020.

Operation and Maintenance Expenses

Operating and maintenance expenses decreased $~~159~~5.5 million infor calendar year ~~2019~~2020 compared to calendar year ~~2018~~2019. The decrease was mainly driven by lower ~~Merger~~general ~~commitments~~operating and related costs, offset by higher employee labor costs and benefits, corporate shared service cost paid to AltaGas after the Merger, and higher cost on safety and reliability activities including leak repair and mitigationexpenses.

~~Depreciation~~General taxes and ~~Amortization~~other assessments

The ~~$6.2 million~~ increase ~~between~~in ~~calendar~~general ~~year~~taxes ~~2019~~ and ~~2018~~other ~~represented~~assessments ~~higher~~was ~~depreciation~~associated ~~expense~~with onclean ~~capital~~energy ~~additions~~programs.

Other income (expense)

The $1415.68 million increase in other income (~~expenses~~expense) ~~for~~was ~~the~~due ~~calendar~~to ~~year~~lower ~~2019~~pension ~~compared~~costs, toincluding the ~~calendar~~impact ~~year~~from ~~2018~~the ~~was~~change ~~mainly~~in ~~driven~~accounting ~~by $13~~principle.5 ~~million~~Refer ~~expense~~to ~~for~~Note ~~charitable~~1— ~~contributions~~Accounting asPolicies ~~part~~for offurther ~~the Merger commitments that were recorded in 2018~~discussion.

Income Taxes

The effective income tax rate for calendar year ~~2019~~2020 was 1619.09% compared to 5415.87% for calendar year ~~2018~~2019. The change in the effective income tax rate is primarily due to ~~adjustments related to~~ the amortization of excess deferred taxes. Refer to Note 9 — Income Taxes of the Notes to Financial Statements for details.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Statistical Information

Key gas delivery, weather and meter statistics are shown in the table below for the calendar years ended December 31, ~~2019 and 2018~~2020, ~~three~~2019 ~~months ended December 31, 2018~~ and ~~2017, and fiscal years ended September 30,~~ 2018 ~~and 2017~~.

Gas Deliveries, Weather and Meter Statistics
	~~Calendar Years Ended December 31,~~		Calendar Years Ended December 31,		~~Three Months Ended December 31,~~				~~Fiscal Years Ended September 30,~~			Increase (decrease)	~~Increase (decrease)~~
	2019		2018		2018		2017		2018		2017		CalendarYear 2019 vs. 2018		Three Months 2018 vs. 2017		Fiscal Year 2018vs. 2017
			2020			2019			2018			2020 vs. 2019			2019 vs. 2018
Gas Sales and Deliveries (millions of therms)
Firm	~~1,410.0~~		1,~~461~~267.68		~~473.7~~	1,410.0	~~441.2~~		1,~~455~~461.6		~~1,269.8~~	(142.2)	~~(51.6~~	)	32(51.56)		~~185.8~~
Interruptible	~~259.4~~		~~245~~244.59		~~67.2~~	259.4	~~72.2~~		~~250~~245.75		~~245.1~~	(14.5)	~~13.9~~		(513.09	)	~~5.6~~
Electric generation	67.0		172.8		24.3		32.1		180.6		87.6		(105.8	)	(7.8	)	93.0
Other			96.7			103.8			210.2			(7.1)			(106.4)
Other	36.8		37.4		—		—		—		—		(0.6	)	—		—
Total deliveries			1,609.4			1,773.2			1,917.3			(163.8)			(144.1)
Total deliveries	1,773.2		1,917.3		565.2		545.5		1,886.9		1,602.5		(144.1	)	19.7		284.4
Degree Days
Degree Days
Actual			3,269			3,552			3,820			(283)			(268)
Actual	3,552		3,820		1,398		1,335		3,759		3,127		(268	)	63		632
Normal			3,866			3,855			3,917			11			(62)
Normal	3,855		3,917		1,392		1,419		3,944		3,970		(62	)	(27	)	(26	)
Percent colder (warmer) than normal			(15.4)		%	(7.9)		%	(2.5)		%	n/a			n/a
Percent colder (warmer) than normal	(7.9	)%	(2.5	)%	0.4	%	(5.9	)%	(4.7	)%	(21.2	)%	n/a		n/a		n/a
Average active customer meters			1,201,000			1,189,000			1,177,000			12,000			12,000
Average active customer meters	1,189,000		1,177,000		1,181,000		1,167,000		1,173,000		1,155,000		12,000		14,000		18,000
Ending active customer meters			1,205,529			1,192,462			1,184,830			13,067			7,632
Ending active customer meters	1,192,462		1,184,830		1,184,830		1,169,294		1,177,976		1,163,655		7,632		15,536		14,321
New customer meters added			12,480			11,898			11,975			582			(77)
New customer meters added	11,898		11,975		3,216		3,673		12,581		12,488		(77	)	(457	)	93

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 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 the effect on net revenues of variations in weather from normal levels (refer to the section entitled “Weather Risk” for a further discussion of these mechanisms and other weather-related instruments included in our weather protection strategy).

During the calendar year ~~ended December 31~~2020, ~~2019,~~ the comparison in natural gas deliveries to firm customers ~~primarily~~ reflects 715.94% warmer than normal weather when measured by HDDs, compared to 27.59% warmer than normal weather for ~~the~~calendar ~~prior~~ year 2019. We also had an increase in average active customer meters of approximately 12,000 during ~~the~~ calendar year ~~ended~~2020, ~~December~~when ~~31,~~compared to calendar year 2019. In addition to the weather, ~~when~~lower ~~compared~~deliveries in 2020 were partially attributable to the ~~prior~~COVID-19 ~~year~~pandemic.

Many customers choose to buy the natural gas commodity from unregulated third-party marketers, rather than purchase the natural gas commodity and delivery service from Washington Gas on a bundled basis. This does not affect Washington Gas' net income because Washington Gas charges its customers the cost of gas without any mark-up. Of Washington Gas’ 1.2 million active customers at December 31, 2020, approximately 178,000 customers purchased their natural gas commodity from unregulated third-party marketers.

25Gas Service to Interruptible Customers

Washington Gas must curtail or interrupt service to this class of customer when the demand by firm customers exceeds specified levels. Therm deliveries to interruptible customers decreased by 14.5 million therms during calendar year 2020 compared to calendar year 2019 primarily due to decreased demand in 2020 attributable to the COVID-19 pandemic.

In the District of Columbia, the effect on net income of any changes in delivered volumes and prices to interruptible customers is limited by margin-sharing arrangements that are included in Washington Gas’ firm rate designs. Rates for interruptible customers in Maryland and Virginia are based on a traditional cost of service approach. In Virginia, Washington Gas retains a majority of the margins earned on interruptible gas and delivery sales. Washington Gas shares actual non-gas margins from interruptible sales service customers that are in excess of delivery service rates. In Maryland, Washington Gas retains a defined amount of revenues based on a set threshold. Effective December 2018, Washington Gas no longer shares interruptible margins in Maryland.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

active customers at December 31, 2019, approximately 171,000 customers purchased their natural gas commodity from unregulated third-party marketers.

Gas Service to Interruptible Customers

Washington Gas must curtail or interrupt service to this class of customer when the demand by firm customers exceeds specified levels. Therm deliveries to interruptible customers increased by 13.9 million therms during the calendar year ended December 31, 2019 compared to the prior year primarily due to increased demand in 2019.

Gas Service for Electric Generation

Washington Gas delivers natural gas for use at two electric generation facilities in Maryland that are each owned by companies independent of WGL. During the calendar year ended December 31, 2019, deliveries to these customers decreased by 105.8 million therms from the calendar year 2018. 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.

Cost of Gas

Washington Gas’ cost of natural gas purchased includes ~~both~~ fixed ~~and variable components. Washington Gas pays fixed~~ costs ~~or “demand charges” to pipeline companies~~ for system capacity needed to transport and store natural gas. ~~Washington~~and ~~Gas pays~~ variable costs, orfor ~~the cost of the~~ natural gas ~~commodity itself, to natural gas producers and suppliers~~. Variations in the utility’s cost of gas expense result from changes in gas sales volumes, the price of the gas purchased and the level of gas costs collected through the operation of firm gas cost recovery mechanisms. Under these regulated recovery mechanisms, Washington Gas records cost of gas expense in revenues equal to the cost of gas recovered from customers ~~and included in revenues~~. The difference between the firm gas costs incurred and the gas costs recovered from customers is deferred on the balance sheet as an amount to be collected from or refunded to customers in future periods. Therefore, increases or decreases in the cost of gas associated with sales made to firm customers have no direct effect on Washington Gas’ net revenues and net income. Changes in the cost of gas can cause significant variations in Washington Gas’ cash provided by or used in operating activities. Washington Gas receives from or pays to its customers in the District of Columbia and Virginia, carrying costs associated with under-collected or over-collected gas costs recovered from its customers using short-term interest rates. Additionally, included in “Utility cost of gas” for Washington Gas are the net margins associated with our asset optimization program. To the extent these amounts are shared with customers, they are a reduction to the cost of gas invoiced to customers. Refer to the section entitled “Market Risk” for a further discussion of Washington Gas’ optimization program.

The average commodity cost of gas invoiced to Washington Gas (excluding the cost and related volumes applicable to asset optimization) were $0.2819, $0.3728, $0.3037, and $0.2730 per therm for the calendar ~~year~~years ended December 31, 2020 and 2019, the three months ended December 31, 2018, and the fiscal ~~years~~year ended September 30, 2018 ~~and 2017~~, respectively.

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~~contributions from its parent ~~holding~~ companies~~, routed through Wrangler~~. Access to short-term debt markets isprovides ~~necessary for~~ funding to 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 matured long-term debt. Under the Merger commitments agreed to by AltaGas and Washington Gas, ~~during~~including ~~the Merger and~~ other rules imposed by regulatory commissions or 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.

~~Our plans provide sufficient liquidity to satisfy our financial obligations.~~ 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 December 31, 2020, we had no significant restrictions on our cash balances or retained earnings that would affect the payment of dividends.

26As of December 31, 2020, we believe that our cash flows from operations and sources of funding will provide sufficient liquidity to satisfy our operating activities, capital expenditures, financial obligations, and the effects of COVID-19. Depending on the duration and severity of economic impacts caused by the pandemic, 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.

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. The Company collects the cost of gas under cost recovery mechanisms approved by our regulators.

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.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~limitations apply: (i)~~ Washington Gas ~~will~~uses ~~not~~short-term ~~pay~~debt ~~extraordinary~~in ~~dividends~~the toform ~~its~~of ~~parent~~commercial ~~for~~paper ~~three~~or ~~years~~unsecured ~~from~~short-term ~~the~~bank ~~date~~loans ofto ~~the~~fund ~~Merger~~seasonal ~~close,~~cash ~~(ii)~~requirements. ~~Washington~~Our ~~Gas~~policy ~~will~~is ~~not~~to ~~pay~~maintain ~~dividends~~back-up tobank ~~its~~credit ~~parent~~facilities ~~company~~in ifan ~~Washington~~amount ~~Gas’~~equal ~~senior~~to ~~unsecured~~or ~~debt~~greater ~~rating~~than isour ~~below~~expected ~~investment~~maximum ~~grade~~commercial orpaper ~~(iii)~~position. Washington Gas ~~will~~classifies ~~not~~certain ~~make~~commercial apaper ~~dividend~~balances ~~payment~~as to"Long-term ~~its~~debt" ~~parent~~on ~~company if~~ the ~~payment~~balance ~~would~~sheets ~~result~~based inon its ~~equity~~ability ~~level~~and intent to ~~drop~~refinance ~~below~~these ~~48%~~balances on a long-term basis. At both December 31, 2020 and 2019, we$100.0 million ~~had~~of noour ~~significant~~commercial ~~restrictions~~paper balance was classified as long term debt on ~~our~~Washington ~~cash~~Gas' ~~balances~~balance orsheets. ~~retained~~Bank ~~earnings~~credit ~~that~~balances ~~would~~available ~~affect~~to Washington Gas under the ~~payment~~existing credit facility, net of ~~dividends~~commercial paper balances, were $165.0 million and $50.0 million at December 31, 2020 and 2019, respectively.

Short-Term Cash Requirements and Related Financing

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. In December 2019, we classified $100.0 million commercial paper balance as "Long-term debt" on Washington Gas' balance sheets due to its ability and intent to refinance these balances on a long-term basis.

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 (the 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. 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. Bank credit balances available to Washington Gas under the existing credit facility, net of commercial paper balances were $50.0 million and $54.0 million at December 31, 2019 and 2018, respectively.

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.

During the year ended December 31, 2020, Washington Gas received a total amount of $225.0 million equity contribution from Wrangler. On December 10, 2020, Washington Gas issued medium-term notes with an aggregate principal amount of $100 million and 3.65% fixed interest rate that are due in September 2049. The proceeds are used by the Company primarily for general corporate purposes, including the retirement of short-term debt, capital expenditures, acquisition of property and working capital.

Security Ratings

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 rating is not a recommendation to buy, sell or hold securities. Credit ratings are subject to revision or withdrawal at any time by the assigning rating organization and each rating should be evaluated independently of any other rating.

On December 11, 2019, Standard & Poor’s Rating Services (S&P) revised its outlook on AltaGas from negative to stable, and raised the senior unsecured debt credit rating for Washington Gas from BBB+ to A- and its outlook from negative to stable. Washington Gas has ring fencing measures in place that financially separate Washington Gas from WGL, AltaGas and its affiliates as a way to protect its consumers from financial instability or bankruptcy that may be experienced by Washington Gas' parents or affiliates. S&P views the ring-fencing provisions sufficient to insulate Washington Gas from AltaGas and its other subsidiaries to warrant three-notches of ratings separation between Washington Gas and AltaGas. The credit rating for Washington Gas' commercial paper remained at A-2.

On January 30, 2020, Moody's Investors Service (Moody's) downgraded the ratings of Washington Gas' senior unsecured debt credit rating to A3 from A2 and its commercial paper rating to P-2 from P-1. The outlook for Washington Gas is stable. Moody's affirmed the ratings of WGL's Baa1 for senior unsecured rating and P-2 commercial paper rating and changed its outlook to stable from negative.

Rating Service

Senior Unsecured

Commercial Paper

Fitch Ratings(a)

Moody’s Investors Service

P-2

Standard & Poor’s Ratings Services

A-

A-2

(a) ~~The credit ratings by~~ Fitch ~~Ratings~~affirmed ~~for~~ Washington Gas' ~~were revised on July 10, 2018 and the~~ long-term debt ratings outlook ~~was~~as ~~adjusted~~stable toin ~~stable~~April 2020.

(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

27Under 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 December 31, 2020 and 2019, Washington Gas' ratios of consolidated financial indebtedness to consolidated total capitalization were 48% and 52%, respectively. In addition, Washington Gas is required to inform lenders of changes that might have a material effect on debt ratings. The failure to inform the lenders’ agent of material changes 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 obligations becoming immediately due and payable. In addition, certain of the credit facilities of Washington Gas contain cross-default provisions, that would declare Washington Gas in default on its credit facility if it were to default on certain of its other indebtedness. At December 31, 2020 and 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 table summarizes Washington Gas' net cash provided by (used in) operating, investing and financing activities for calendar years ended December 31, 2020, 2019 and 2018.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

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 December 31, 2019 and 2018, Washington Gas' ratios of consolidated financial indebtedness to consolidated total capitalization were 52% and 47%, 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 December 31, 2019 and 2018, we were in compliance with all of the covenants under our revolving credit facilities, term loan facility, and private placement notes.


	Calendar Years Ended December 31,						Increase (decrease)
(In millions)	2020		2019		2018 (Unaudited)		2020 vs. 2019		2019 vs. 2018
Cash provided by (used in):
Operating activities	$	224.8	$	203.3	$	56.3	$	21.5	$	147.0
Financing activities	$	125.8	$	219.4	$	448.8	$	(93.6)	$	(229.4)
Investing activities	$	(389.8)	$	(433.0)	$	(440.3)	$	43.2	$	7.3

Historical Cash Flows

The following table summarizes Washington Gas' net cash provided by (used in) operating, investing and financing activities for calendar years ended December 31, 2019 and 2018, three months ended December 31, 2018 and 2017, and fiscal years ended September 30, 2018 and 2017:

	Calendar Years EndedDecember 31,						Three Months Ended December 31,						Fiscal Years Ended September 30,						Increase / (Decrease)
(In millions)	2019			2018(Unaudited)			2018			2017(Unaudited)			2018			2017			Calendar year			Three Months			Fiscal year
																			2019 vs. 2018			2018 vs. 2017			2018 vs. 2017
Cash provided by (used in):																									.
Operating activities	$	203.3		$	56.3		$	(94.5	)	$	(28.5	)	$	122.3		$	207.3		$	147.0		$	(66.0	)	$	(85.0	)
Financing activities	$	219.4		$	448.8		$	226.9		$	110.4		$	332.3		$	196.1		$	(229.4	)	$	116.5		$	136.2
Investing activities	$	(433.0	)	$	(440.3	)	$	(126.0	)	$	(75.3	)	$	(389.6	)	$	(403.4	)	$	7.3		$	(50.7	)	$	13.8

Cash Flows Provided by Operating Activities

Washington Gas' cash flows from operating activities principally reflect gas sales and deliveries and the cost of operations. Cash ~~flow~~flows provided by operating activities ~~was~~were $~~203~~224.38 million for the calendar year ~~2019~~2020, acompared to $~~147~~203.0 3 million ~~increase~~for ~~from~~the calendar year ~~2018~~2019. The increase was mainly from increased cash flows from account payable and other accrued liabilities driven by decreased ~~cash~~cost ~~payments~~of ~~for~~gas ~~Merger~~purchased, ~~commitments~~deceased income tax payments, and ~~related~~Coronavirus ~~costs due~~Relief Funds received from SCC of VA in 2020. The increase was partially offset by refunds of regulatory liabilities related to the ~~Merger~~Virginia rate case in ~~2018~~2020.

Cash Flows Provided by Financing Activities

Net cash flows provided by financing activities was $~~219~~125.48 million in the calendar year ~~2019~~2020 compared to $~~448~~219.84 million in ~~2018~~2019. The $~~219~~125.48 million of cash flows from financing activities in ~~2019~~2020 was mainly driven by $~~298~~225.50 million ~~proceeds~~in ~~from~~capital ~~issuance~~contributions offrom ~~medium-term~~our ~~note~~parent ~~in September 2019~~company, $~~103~~116.5 6 million ~~net~~in proceeds from ~~commercial~~the ~~paper~~issuance ~~borrowings,~~of ~~offset~~medium-term bynotes ~~$50.0~~in ~~million~~December ~~long-term~~2020, ~~debt~~offset ~~repayment~~by ~~and~~a $~~100~~114.75 million innet ~~dividend~~repayment ~~payments~~of oncommercial ~~preferred~~paper ~~and common stocks. Additionally~~borrowings, weand ~~paid~~ $28100.70 million ~~to redeem three outstanding series of preferred stock~~ in ~~December~~dividend ~~2019~~payments. The $~~448~~219.84 million of cash flows from financing activities in ~~2018~~2019 was mainly driven by $~~402~~298.7 5 million ~~capital~~in ~~infusion~~proceeds from ~~our~~the ~~parent~~issuance ~~company~~of medium-term notes in September 2019, $~~134~~103.0 5 million in net proceeds from ~~short-term~~commercial paper borrowings, offset by a $50 .0 million long-term debt repayment and $90100.8 7 million in dividend payments. onAdditionally, ~~preferred~~we ~~and~~paid ~~common~~$28.7 million ~~stocks~~to redeem three outstanding series of preferred stock in ~~2018~~December 2019.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Cash Flows Used in Investing Activities

Net cash flows used in investing activities totaled $~~433~~389.08 million and $~~440~~433.30 million for the calendar years ended December 31, ~~2019~~2020 and ~~2018~~2019, respectively, which primarily consists of capital expenditures ~~made by Washington Gas~~.

The following table depicts our actual capital expenditures for calendar years ended December 31, ~~2019 and 2018~~2020, ~~three months ended December 31~~2019, ~~2018,~~ and ~~for the fiscal years ended September 30,~~ 2018 ~~and 2017~~. Our capital outlays include expenditures to extend service to new areas, and to ensure safe, reliable and improved service for our ~~utility~~customers.

Capital Expenditures
	Calendar Years EndedDecember 31,						Three Months Ended December 31					Fiscal Years Ended September 30,
(In millions)			Calendar Years Ended December 31,
(In millions)	2019			2018			2018			2017		2018			2017
			2020			2019			2018
New business(a)	$	~~135.1~~	$	$96.9	~~149.3~~	$	$135.1	~~33.2~~	$	$149.3	~~24.2~~	$	~~141.3~~		$	~~129.4~~
Replacements:
Accelerated Replacement Programs(b)	~~167.1~~		167.8	~~124.3~~		167.1	~~31.8~~		124.3	~~24.4~~		~~111.7~~			~~131.0~~
Other	~~87.8~~		97.9	~~92.9~~		87.8	~~22.6~~		92.9	~~10.4~~		~~70.5~~			~~68.1~~
Customer information system	—			—			—			—		—			28.1
Other utility			27.2			43.0			77.0
Other utility	43.0			77.0			16.8			4.5		72.3			40.4
Total (c)			$	389.8		$	433.0		$	443.5
Cash basis adjustments	—			—			21.6			11.8		(3.0		)	6.4
Total (c)	$	433.0		$	443.5		$	126.0		$	75.3	$	392.8		$	403.4

(a) Includes certain projects that support the existing distribution system.

(b)Represents capital expenditures (excluding cost of removal), ~~both~~ approved, ~~and expected to be approved,~~ under our Accelerated Pipeline Replacement Programs in all jurisdictions. Refer to the section entitled "Accelerated Pipeline Replacement Programs" below for a further discussion.

(c)Excludes Allowance for Funds Used During Construction and cost of removal.

Accelerated Pipe Replacement Programs (APRPs). APRPs 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 the pipeline system. Each regulatory commission having jurisdiction over Washington Gas’ retail rates has APRPs with an associated surcharge mechanism to recover the cost, including a return, on those capital investments between base rate cases. In contrast to the traditional rate-making approach to capital investments, for the APRPs, Washington Gas is receiving recovery for these investments through the approved surcharges for each program and is authorized to invest in each of these programs over a five-year period. The following table summarizes the status of our current accelerated pipe replacement programs in three of 33

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Jurisdiction	Estimated Cost	Status	Expected in-service date
District of Columbia	Estimated $305 million over the five-year period from April 2020 to December 2024, plus additional expenditures in subsequent periods.	Washington Gas has submitted an application for the second phase of PROJECT pipes to the Public ServiceCommission of the District of Columbia (PSC of DC). In the interim, Phase 1 has been extended to March 31, 2020 for an amount not to exceed $12.5 million.	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.	The second phase of the acceleratedutility pipe replacement programs inMaryland (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.	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.

APRPs. APRPs are in place in all three of our jurisdictions with an associated surcharge mechanism to recover the cost, including a return, on those capital investments between base rate cases. The following table summarizes the current status of our accelerated pipe replacement programs in three of our jurisdictions.

Jurisdiction

Estimated Cost

Expenditure to Date (a)

Status

Expected
in-service date

District of Columbia

Estimated $150 million over the period from January 2021 to December 2023.

$nil

Washington Gas has submitted an application for the second phase of PROJECTpipes to the PSC of DC. A decision on the second phase of PROJECTpipes was issued on December 11, 2020, continuing the PROJECTpipes surcharge and approving a three-year accelerated pipe replacement plan with a $150.0 million total spending cap.

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.

$125.0 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.

$275.1 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.

(a) The utility accelerated replacement programs are long-term projects with multiple phases for which expenditures are approved by the regulators and typically managed in multi-year increments. Expenditures to date only include amounts for the current programs described above, and exclude any expenditures made under prior increments of the programs. Actual regulatory filings may differ from reported amounts.

Refer 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.

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

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, unconditional purchase obligations for pipeline capacity, transportation and storage services, certain natural gas commodity commitments and our commitments related to the business process outsourcing program. In addition, Washington Gas ~~has~~ made certain commitments related to the Merger with AltaGas.

The total contractual obligations and commitments for Washington Gas at December 31, ~~2019~~2020 for future calendar years are shown below.

Estimated Contractual Obligations and Commitments(g)
	Years Ended December 31,
(In millions)	2020		2021		2022		2023		2024		Thereafter		Total
Pipeline and storage contracts(a)	$	272.7	$	259.5	$	254.4	$	245.2	$	212.8	$	791.4	$	2,036.0
Long-term debt(b)	—		—		—		20.0		100.0		1,326.0		1,446.0
Interest expense(c)	60.8		60.8		60.8		59.8		59.5		965.9		1,267.6
Gas purchase commitments(d)	314.4		356.6		340.6		317.9		321.0		1,969.8		3,620.3
Operating leases	6.0		5.6		5.5		5.5		5.6		46.3		74.5
Business process outsourcing(e)	21.9		12.7		4.0		0.5		—		—		39.1
Environmental(f)	5.0		3.3		0.8		0.8		0.5		0.3		10.7
Merger commitments(g)	6.3		2.9		1.5		1.5		1.5		3.3		17.0
Total	$	687.1	$	701.4	$	667.6	$	651.2	$	700.9	$	5,103.0	$	8,511.2

(a)Represents minimum payments for natural gas transportation, storage and peaking contracts.

(b)Represents scheduled repayment of principal.

(c)Represents the scheduled interest payments associated with long-term debt.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

(d)Includes known and reasonably likely commitments to purchase fixed volumes of natural gas. Cost estimates are based on forward market prices at December 31, 2019. Certain of our gas purchase agreements have optionality, which may cause increases in these commitments.


Estimated Contractual Obligations and Commitments(g)
	Years Ended December 31,
(In millions)	2021		2022		2023		2024		2025		Thereafter		Total
Pipeline and storage contracts(a)	$	259.4	$	254.0	$	244.6	$	212.7	$	197.2	$	641.2	$	1,809.1
Long-term debt(b)	—		—		20.0		100.0		40.5		1,385.5		1,546.0
Interest expense(c)	64.5		64.5		63.4		63.2		62.3		993.8		1,311.7
Gas purchase commitments(d)	349.7		359.9		318.1		323.4		328.9		1,645.4		3,325.4
Operating leases	5.8		5.7		5.8		5.9		5.4		41.2		69.8
Finance leases	0.1		0.1		0.1		0.1		0.1		—		0.5
Business process outsourcing(e)	15.8		7.4		3.2		3.2		2.6		0.4		32.6
Environmental(f)	5.4		2.6		0.8		0.6		0.7		0.2		10.3
Merger commitments(g)	4.1		1.5		1.5		1.2		1.2		2.4		11.9
Total	$	704.8	$	695.7	$	657.5	$	710.3	$	638.9	$	4,710.1	$	8,117.3

(a)Represents minimum payments for natural gas transportation, storage and peaking contracts.

(b)Represents scheduled repayment of principal.

(c)Represents the scheduled interest payments associated with long-term debt.

(d)Includes known and reasonably likely commitments to purchase fixed volumes of natural gas. Cost estimates are based on forward market prices at December 31, 2020. Certain of our gas purchase agreements have optionality, which may cause increases in these commitments.

(e) Represents fixed costs to service providers related to various contracts for business process outsourcing.

(f) Includes committed payments related to certain environmental response costs.

(g)Represents the estimated future payments of Merger commitments that has been accrued but not paid. AtRefer ~~December~~to ~~31,~~Note 13 ~~2019,~~— ~~the~~Commitments ~~cumulative amount of merger commitments that has been expensed was $136.6 million, of which $17.0 million has not been paid. In addition, there are certain regulatory commitments that were~~ and ~~will~~Contingencies ~~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~~discussion ~~natural~~on ~~gas service; and spending $8.0 million for leak mitigation within 3 years after~~ the Merger ~~close~~commitments.

The table above reflects fixed and variable obligations. Certain of these estimates reflect likely purchases under various contracts and may differ from minimum future contractual commitments disclosed in Note 13 — Commitments and Contingencies of the Notes to Financial Statements.

For commitments related to Washington Gas’ pension and post-retirement benefit plans, refer to Note 10 — Pension and Other Post-Retirement Benefit Plans of the Notes to Financial Statements.

Off-Balance Sheet Arrangements

Washington Gas did not have any material off-balance sheet arrangements as of December 31, 2020 or subsequent to, or upon the filing of our financial statements in our annual reports as defined under SEC rules.

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 December 31, 2019.~~35

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	$	36.0	$	—	$	36.0	2	$	20.3
Non-Investment Grade	—		—		—		—	—
No External Ratings	9.3		2.4		6.9		1	5.4

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The following table provides information on our credit exposure, net of collateral, to wholesale counterparties as of December 31, 2020.


Credit Exposure to Wholesale Counterparties (In millions)
Rating(a)	Exposure Before Credit Collateral(b)		Offsetting Credit Collateral Held(c)		Net Exposure		Number of Counterparties Greater Than 10%(d)	Net Exposure of Counterparties Greater Than 10%
Investment Grade	$	35.3	$	4.0	$	31.3	1	$	17.4
Non-Investment Grade	2.4		—		2.4		—	—
No External Ratings	3.5		0.8		2.7		—	—

(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. Base rates include a provision for recovery of uncollectible accounts based on historical levels of charge offs of accounts receivable. Washington Gas also has a provision in its Gas Administrative Charge mechanism that includes an allowance for commodity amounts included in uncollectible accounts. In addition, Washington Gas has a POR program in Maryland and the District of Columbia, whereby it purchases receivables from participating energy marketers at approved discount rates, which incorporates the risk of non-payment by the retail customers for these receivables.

31COVID-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 temporarily suspended customer disconnections for non-payment, temporarily suspended collection activities and temporarily waived assessing and billing late payment fees. While the suspension of disconnections has been lifted in Maryland for non-residential customers in the fourth quarter of 2020, the suspension in District of Columbia and Virginia continues. We have provided payment assistance programs to help customers deal with the impact of COVID-19. Following regulatory orders, Washington Gas established a regulatory asset to capture and track the prudently incurred incremental COVID-19 related costs, including incremental credit losses, which allows for assessment of recovery of those costs in future base rate cases. In December 2020, Washington Gas received $7.7 million of Coronavirus Relief Funds from SCC of VA to provide direct assistance to Virginia customers with balances over 30 days in arrears, to the extent the customers meet the qualification requirements. We continue to monitor the credit risk with the utility customers. We expect to reinstate our common credit mitigation practices upon expiration of the state specific moratoriums. Refer to "Executive Overview" and Note 2 — Credit Losses for further discussions on COVID-19 impact.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

allowance for commodity amounts included in uncollectible accounts. In addition, Washington Gas has a POR program in Maryland and the District of Columbia, whereby it purchases receivables from participating energy marketers at approved discount rates, which incorporates the risk of non-payment by the retail customers for these receivables.

Market Risk

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.36

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the energy-related derivatives during the calendar year ended December 31, 2019.

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	(8.4		)
Other changes in net fair value	27.9
Realized net settlement of derivatives	(4.2		)
Net assets (liabilities) at December 31, 2019	$	(91.0	)

Roll Forward of Energy-Related Derivatives
(In millions)
Net assets (liabilities) at January 1, 2019	$	(106.3	)
Recorded to income	5.5
Recorded to regulatory assets/liabilities	14.0
Realized net settlement of derivatives	(4.2		)
Net assets (liabilities) at December 31, 2019	$	(91.0	)

The maturity dates in calendar years of our net assets (liabilities) associated with the energy-related derivatives recorded at fair value at December 31, 2019, is summarized in the following table based on the level of the fair value calculation under Accounting Standards Codification (ASC) Topic 820.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives
(In millions)	2020			2021		2022			2023			2024			Thereafter			Total
Level 1 — Quoted prices in active markets	$	—		$	—	$	—		$	—		$	—		$	—		$	—
Level 2 — Significant other observable inputs	(6.7		)	0.5		—			—			—			—			(6.2		)
Level 3 — Significant unobservable inputs	2.9			2.8		(0.3		)	(2.2		)	(3.4		)	(84.6		)	(84.8		)
Total net assets (liabilities) associated with our energy-related derivatives	$	(3.8	)	$	3.3	$	(0.3	)	$	(2.2	)	$	(3.4	)	$	(84.6	)	$	(91.0	)

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the energy-related derivatives and their impact on the financial statements for the calendar year ended December 31, 2020.


Changes in Fair Value of Energy-Related Derivatives
(In millions)
Net assets (liabilities) at January 1, 2020	$	(91.0)
Net fair value of contracts entered into during the period	(1.7)
Other changes in net fair value	7.5
Realized net settlement of derivatives	4.2
Net assets (liabilities) at December 31, 2020	$	(81.0)


The Effects of Derivative Instruments on the Financial Statements
(In millions)
Net assets (liabilities) at January 1, 2020	$	(91.0)
Recorded to income	5.5
Recorded to regulatory assets	0.3
Realized net settlement of derivatives	4.2
Net assets (liabilities) at December 31, 2020	$	(81.0)

The maturity dates in calendar years of our net assets (liabilities) associated with the energy-related derivatives recorded at fair value at December 31, 2020, is summarized in the following table based on the level of the fair value calculation under Accounting Standards Codification (ASC) Topic 820.


Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives
(In millions)	2020		2021		2022		2023		2024		Thereafter		Total

Level 2 — Significant other observable inputs	(0.3)		(0.7)		—		—		—		—		(1.0)
Level 3 — Significant unobservable inputs	(3.4)		0.9		0.2		0.5		(0.7)		(77.5)		(80.0)
Total net assets (liabilities) associated with our energy-related derivatives	$	(3.7)	$	0.2	$	0.2	$	0.5	$	(0.7)	$	(77.5)	$	(81.0)

Refer to Note 14 — Derivatives and Note 15 — Fair Value Measurements of the Notes to Financial Statements for a further discussion of our derivative activities and fair value measurements.

Weather Risk

The Company is exposed to various forms of weather risk due to seasonal operations, 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. "Shoulder" months are those months in which Washington Gas is going into or coming out of the 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. 37

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 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.

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.

At December 31, 2019 and 2018, Washington Gas had outstanding commercial paper and project financing of $399.5 million and $311.5 million, respectively. The carrying amount of commercial paper and project financing approximates their fair value. At December 31, 2019, 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 $2.3 million.

At December 31, 2019 and 2018, Washington Gas had outstanding fixed-rate MTNs and other long-term debt of $1,330.9 million and $1,035.0 million, respectively, excluding current maturities and commercial paper. At December 31, 2019, the fair value of Washington Gas’ fixed-rate debt was $1,480.8 million. Our sensitivity analysis indicates that fair value would increase by approximately $77.3 million or decrease by approximately $71.6 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.

At December 31, 2019, 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 and commercial paper, have make-whole call options which would require us to pay a premium over the face amount if we were to exercise them.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Refer~~Washington toGas ~~Note~~does 14not —have ~~Derivatives~~a ofweather-related instrument or billing adjustment mechanism in the ~~Notes~~District toof ~~Financial~~Columbia ~~Statements~~and ~~for~~as a ~~further~~result, ~~discussion~~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 ~~interest-rate~~earnings ~~risk~~to ~~management~~increase ~~activity~~or decrease depending on the weather pattern.

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 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.

At December 31, 2020 and 2019, Washington Gas had outstanding commercial paper of $285.0 million and $399.5 million, respectively. The carrying amount of commercial paper approximates their fair value. At December 31, 2020, 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 $2.3 million.

At December 31, 2020 and 2019, Washington Gas had outstanding fixed-rate MTNs and other long-term debt of $1,446.9 million and $1,330.9 million, respectively, excluding current maturities and commercial paper. At December 31, 2020, the fair value of Washington Gas’ fixed-rate debt was $1,779.8 million. Our sensitivity analysis indicates that fair value would increase by approximately $72.0 million or decrease by approximately $67.9 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.

At December 31, 2020, a total of $1,302.5 million, or approximately 90.1% of the face amount of Washington Gas’ outstanding long-term debt, excluding current maturities and commercial paper, have make-whole call options which would require us to pay a premium over the face amount if we were to exercise them.

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.

Summary of Major Rate Increase Applications and Results
Jurisdiction	~~Application Filed~~	~~EffectiveDate~~	~~Test~~Application ~~Year 12 MonthsEnded~~Filed	~~Increase in Annual Revenues (Millions)~~		EffectiveDate			Test Year 12 MonthsEnded		Increase in Annual Revenues (Millions)		~~Allowed Rate of Return~~								Allowed Rate of Return
				~~Requested~~					~~Granted~~		Requested		~~Overall~~		~~Equity~~		Granted				Overall		Equity
District of Columbia	~~1/13/2020~~		121/3113/~~2019~~2020	$	~~35.2~~		~~14.70~~	%	12/31/2019		$	35.2	~~7.56%(a)~~	14.70 %	~~10.4%(a)~~						7.56%(a)		10.4%(a)
District of Columbia	~~2/26/2016~~	~~3/24/2017~~	92/3026/~~2015~~2016	$	~~17.3~~	3/24/2017	~~7.60~~	%	$9/30/2015	~~8.5~~	~~3.70~~$	%17.3	~~7.57~~	%7.60	~~9.25~~	%	$	8.5	3.70	%	7.57	%	9.25	%
Maryland	~~4/22/2019~~	~~10/15/2019~~	38/3128/~~2019~~2020	$	~~35.9~~		~~6.64~~	%	$3/31/2020	~~27.0~~	~~5.04~~$	%28.4	~~7.24~~	%7.80	~~9.70~~	%					7.73%(a)		10.45%(a)
Maryland	~~5/15/2018~~	~~12/11/2018~~	34/3122/~~2018~~2019	$	~~56.3~~	10/15/2019	~~10.96~~	%	$3/31/2019	~~28.6~~	~~5.69~~$	%35.9	~~7.30~~	6.64 %	~~9.70~~	%	$	27.0	4.10 %		7.42 %		9.70 %
Virginia	7/31/2018	1/2/2019	12/31/2017	$	37.6		7.18	%	$	13.2	2.52	%	7.22	%	9.20	%
Maryland			5/15/2018			12/11/2018			3/31/2018		$	56.3		10.96		%	$	28.6	5.69	%	7.30	%	9.70	%
Virginia	~~6/30/2016~~	~~11/28/2016~~	97/3031/~~2015~~2018	$	~~45.6~~	1/2/2019	~~9.30~~	%	$12/31/2017	~~34.0~~	~~6.93~~$	%37.6	~~— %(b)~~	7.94	~~9.50~~	%	$	13.2	2.60 %		7.22	%	9.20	%

(a) The overall rate of return and return on equity are rates requested by Washington Gas in its most recent rate case.

~~(b) The Virginia order did not specify an overall allowed rate of return.~~38

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The following is a discussion of significant current regulatory matters. Refer to the section "Accelerated Pipe Replacement Programs" above for a discussion of regulatory matters associated with those programs.

District of Columbia Jurisdiction

PROJECTpipes 2 Plan. On December 7, 2018, Washington Gas filed a request with the PSC of DC for approval of the PROJECTpipes 2 Plan, the second phase of Washington Gas' APRP, to cover the period from October 1, 2019 through December 31, 2024. The 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’ system, with an estimated total cost of $305.3 million. OnIn ~~September~~its 5supplemental direct case, the Company revised its plan and estimated expenditures of $374.0 million over the next five years. From September 2019 to December 2020, the PSC of DC issued anmultiples ~~order~~orders extending the original PROJECTpipes an additional ~~six~~fifteen months through ~~March~~December 3130, 2020, infor ana total amount not to exceed $1231.525 million. On ~~September~~December 1311, ~~2019~~2020, ~~Washington~~the ~~Gas~~PSC ~~submitted~~of aDC ~~revised~~issued ~~five~~a ~~year~~decision ~~final~~on ~~annual~~the ~~project~~second ~~list.~~phase ~~The~~of ~~parties are engaged in settlement negotiations~~PROJECTpipes, ascontinuing ~~directed by~~ the ~~PSC~~PROJECTpipes ofsurcharge ~~DC.~~and Onapproving ~~February~~a ~~14,~~three-year ~~2020,~~accelerated apipe ~~final~~replacement ~~settlement~~plan ~~conference~~with ~~report~~a ~~was~~$150.0 ~~submitted,~~million ~~and~~total ~~the~~spending ~~PSC~~cap offrom DCJanuary ~~continues~~2021 to ~~review~~December ~~the PROJECTpipes 2 Plan~~2023.

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 requesting a 10.4% Ofrate ~~the~~of ~~approximate~~return ~~$35~~on equity.2 ~~million~~Of the requested revenue increase ~~requested~~, $9.1 million represents costs currently collected through the PROJECTpipes surcharge; therefore, the incremental amount of the base rate increase is approximately $26.1 million. A procedural schedule was established with hearings scheduled for November 2020. On December 8, 2020, Washington Gas filed, for PSC of DC approval, a non-unanimous settlement agreement to resolve all issues in the case. The settling parties agreed to a $19.5 million increase in base rates including PROJECTpipes surcharges previously collected as a rider and return on equity of 9.25%. The settling parties agree that this settlement is limited to resolving PROJECTpipes costs that are completed and in service, as of the date of the Company’s filed rebuttal testimony (i.e., September 14, 2020). The Company’s rebuttal testimony included an amount of up to $99.5 million of PROJECTpipes plant in service being transferred to base rates. This settlement does not set any precedent with respect to any future requests for PROJECTpipes cost recovery. Washington Gas agrees it will not file for a distribution rate increase or request any new rate or tariff mechanisms that have a related customer rate increase in the District of Columbia before August 31, 2021. The PSC of DC held a public interest hearing on January 27, 2021 to address the settlement agreement. The public comments were due on February 8. On February 24, 2021, the PSC of DC approved the $19.5 million increase in base rates recommended in the settlement agreement. The new rates bewill ~~implemented~~become byeffective ~~January~~on April 1, 2021.

Maryland Jurisdiction

Maryland 2020 Rate Case ~~2019~~. On ~~April~~August 2228, ~~2019~~2020, Washington Gas filed ana rate increase application ~~with~~in ~~the~~Maryland. ~~PSC~~The ofrequested MDrates are designed to ~~increase~~collect ~~its~~approximately ~~base~~$28.4 million ~~rates~~in ~~for~~total ~~natural~~annual ~~gas~~revenues ~~service,~~requesting ~~generating~~a ~~$30~~10.845% ~~million~~rate inof ~~additional~~return ~~annual~~on ~~revenue~~equity. ~~The~~Of the requested revenue increase, ~~represented~~$5.8 million anrepresents ~~increase~~costs incurrently ~~base~~collected ~~rates~~through ofthe ~~$35.9~~STRIDE ~~million~~surcharge; therefore, the incremental amount of ~~which~~the base rate increase is approximately $522.06 million. ~~relates~~On toAugust ~~costs~~31, ~~being~~2020 ~~collected~~the ~~through~~PSC of MD docketed the ~~monthly~~application ~~STRIDE~~and ~~surcharges~~assigned ~~for~~the ~~system~~case ~~upgrades.~~to ~~The~~the ~~filing~~Public ~~also~~Utility ~~requested~~Law anJudge ~~increase~~(PULJ) to division. On September 28, 2020 the ~~Company’s~~PULJ ~~return~~division held a prehearing conference and established a procedural schedule which anticipates a final decision on ~~equity~~or ~~from~~about ~~9.7%~~March to26, 102021.~~4%.~~ ~~The~~On ~~Company~~December ~~also~~8, ~~proposed~~2020, athe ~~Safety~~Company ~~Response~~updated ~~Tracker~~its requested rates to ~~reconcile~~collect ~~leak~~approximately ~~management~~$26.8 ~~expenses~~million, ~~above~~$5.4 ormillion ~~below~~represents ~~the~~costs ~~test~~currently ~~year~~collected ~~level~~through onthe anSTRIDE ~~annual~~surcharge; ~~basis~~therefore, ~~outside~~the incremental amount of athe base rate ~~case~~increase is approximately $21.4 million. On ~~August~~February 3012, ~~2019 Washington Gas~~2021, the ~~Staff~~PULJ ofissued ~~the~~a ~~PSC~~proposed oforder ~~MD,~~in the ~~Maryland~~case ~~Office~~and ofan ~~People’s~~ERRATA ~~Counsel~~filing ~~and~~correcting of the ~~Apartment~~proposed &order ~~Office~~on ~~Building~~February ~~Association~~19, of2021. ~~Metropolitan~~The ~~Washington~~proposed ~~submitted~~order, aas ~~Stipulation~~corrected, ~~and~~authorizes ~~Settlement~~Washington ~~designed~~Gas to ~~generate~~increase anits ~~additional~~Maryland ~~$27.0~~natural ~~million~~gas indistribution ~~base~~ rates. ~~The~~by ~~Stipulation~~$13.0 ~~stated~~million an(including ~~overall~~$5.0 ~~rate~~million offor ~~return~~the ofSTRIDE ~~7.42%~~surcharge), ~~established~~reflecting a return onof equity of 9.70%,. ~~and~~Appeals ~~stated~~are adue ~~common~~on ~~equity~~February ~~ratio~~26, of2021, ~~53.5%~~with ~~for~~an ~~the~~order ~~Company’s hypothetical capital structure~~following. The ~~Stipulation~~Company ~~and~~expects ~~Settlement~~new ~~did~~rates ~~not~~to ~~adopt~~be ~~the~~implemented ~~proposed~~in ~~Safety~~late ~~Response~~March ~~Tracker.~~of ~~On October~~ 2021.

3439

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

15Maryland Show-Cause Order. Following the National Transportation and Safety Board (NTSB) hearing that examined the August 10, 2016, explosion and fire at an apartment complex in Silver Spring, Maryland, on September 5, 2019, the PSC of MD ~~issued~~ordered ~~Final~~the ~~Order~~Company Noto (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. ~~89303~~Following ~~which~~several ~~accepted~~hearings throughout the ~~Stipulation~~course of 2019 and ~~Settlement~~2020, ~~without~~on ~~change~~December 18, 2020, the PSC of MD found that the Company failed to file annual reports informing the PSC of MD of the status of the Company’s program and imposed a $750,000 penalty on the Company for reporting violations. ~~Pursuant~~The PSC of MD ruled that the NTSB probable cause finding constituted hearsay and could not be admitted into the record of the case and did not undertake its own inquiry into the source of the explosion. The PSC of MD did not make any safety-related findings in the case but did find that the Company made an enforceable regulatory commitment to ~~Order~~replace Noall mercury regulators. ~~89303~~The Company paid the $750,000 penalty in January 2021 and management believes that there is no additional liability as a result of the ruling from the PSC of MD. In its December 18, 2020 order, the PSC of MD also found that Washington Gas’s' ~~revised~~proposed ~~base~~implementation ~~rates~~plan ~~went~~to ~~into~~replace ~~effect~~all ~~for~~remaining ~~service~~mercury ~~rendered~~regulators onwithin orfive ~~after~~years ~~October~~of 15completing a mercury regulator survey adequately addresses the need to replace all remaining mercury regulators in Maryland, ~~2019~~and is in the public interest. The costs of the proposed implementation program are not yet known, and the recovery of these costs must be deferred until a future rate case.

~~Maryland~~COVID-19 ~~Rate~~Related ~~Case~~Orders 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.

~~Maryland~~District ~~Show-Cause~~of ~~Order~~Columbia. ~~Following~~ ~~the~~On ~~NTSB~~March ~~hearing~~16, ~~that~~2020, ~~examined~~ the ~~August~~Council ~~10,~~of ~~2016,~~the ~~explosion~~District ~~and~~of ~~fire~~Columbia at(DC anCouncil) ~~apartment~~passed ~~complex~~legislation inprohibiting ~~Silver~~the ~~Spring,~~disconnection ~~Maryland,~~of onelectric ~~September~~and 5,gas ~~2019,~~services ~~the~~for ~~PSC~~non-payment of MDfees ~~ordered~~during ~~the~~a ~~Company,~~public ~~within~~health 30emergency. ~~days,~~The toMayor ~~(i)~~of ~~provide~~the aDistrict ~~detailed~~of ~~response to the NTSB~~Columbia’s ~~probable~~public ~~cause~~health ~~findings,~~emergency declaration and ~~(ii)~~all ~~provide~~related ~~evidence~~orders ~~regarding~~have ~~the~~been ~~status~~further ofextended ato ~~2003~~March ~~mercury~~31, ~~regulator replacement program~~2021, and if the ~~program~~prohibition ~~was~~on ~~not~~disconnection ~~completed,~~is toeffective ~~show~~for ~~cause~~15 ~~why~~days following the ~~Commission~~end ~~should~~of ~~not~~the ~~impose~~public ahealth ~~civil~~emergency. On ~~penalty~~April on15, 2020, the ~~Company.~~PSC ~~See~~of ~~Item~~DC 3issued -an ~~Legal~~order ~~Proceedings~~authorizing ~~and~~Washington ~~Note~~Gas 13to -establish ~~Commitments~~a ~~and~~regulatory ~~Contingencies~~asset ofto capture and track the ~~Notes~~incremental costs related to ~~Financial~~COVID-19 ~~Statements~~that ~~for~~were ~~additional~~prudently ~~information~~incurred beginning March 11, 2020.

~~Virginia~~ Maryland. On ~~Jurisdiction~~March 16, 2020, the Governor of MD issued an executive order directing regulated utilities to cease disconnections and billing of late fees for residential customers through May 1, 2020, which was subsequently amended to extend the order through August 31, 2020. On September 22, 2020, the PSC of MD took an action that had the effect of extending the moratorium on service disconnections through November 15, 2020. Due to the winter moratorium on disconnections (November 1 to March 31), this has the effect of delaying residential terminations until April 1, 2021. 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.

~~Application~~On ~~for~~August ~~the~~27 ~~SAVE~~and ~~Act Plan Rider. On September 3~~28, ~~2019,~~2020 ~~Washington Gas filed with~~ the ~~SCC~~PSC of VAMD anheld ~~application~~Public ~~for~~Conference ~~approval~~(PC) of53 ~~the~~to ~~SAVE~~review ~~Plan~~the ~~Rider~~impact ~~for Calendar Year 2020~~ of ~~its annual adjustment of its Commission-approved SAVE Act under which~~ the ~~Company's~~executive ~~2020~~order ~~SAVE Plan Rider is reconciled and adjusted. Washington Gas proposed to invest approximately $132 million over calendar year 2020 to continue work~~ on ~~previously~~utilities ~~approved distribution~~ and ~~transmission~~the ~~system~~service ~~accelerated~~they ~~replacement programs~~provide. ~~Public~~On ~~comments~~August ~~were due by October~~ 31, ~~2019. The SCC of VA issued an Order on November 26, 2019, approving a SAVE Rider for~~ 2020 in the ~~amount~~PSC of ~~approximately~~MD ~~$13.8~~issued ~~million. The SAVE Rider rates approved by the Commission reflect~~ an ~~investment~~order ofdirecting ~~approximately~~that ~~$127 million over the 12-month period beginning on January 1, 2020.~~

~~Virginia~~(1) ~~Rate~~utilities ~~Case~~may -not ~~2018.~~engage Onin ~~July 31, 2018, Washington Gas filed an application with the SCC of VA to increase its base rates for natural gas~~ service byterminations ~~$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~~or bycharge ~~customers~~late ~~through~~fees auntil ~~monthly~~October ~~rider. Additionally~~1, ~~the~~2020 ~~requested~~and ~~revenue~~any ~~increase~~notices ~~incorporated the effects~~ of ~~the~~termination ~~Tax Cuts and Jobs Act (the Tax Act). Interim rates became effective, subject to refund,~~ for ~~usage~~residential inaccounts ~~the~~sent ~~January~~before ~~2019 billing cycle. On September 16, 2019, the HE issued a report that made certain recommendations, to which the Company responded on~~ October 211, ~~2019.~~2020 ~~Thereafter,~~are on December 20, 2019, the SCC of VA issued a Final Order that accepted some of the HE’s findings and either rejected or made adjustments to others. The Final Order included approval of (i) an increase in base rates of $13.2 million to reflect the transfer of $101.9 million of SAVE investment from the SAVE Rider to rate base (no additional revenue increase)invalid; ~~and (ii) amortization of unprotected plant-related and non-plant-related excess deferred income tax over 8 years.~~

~~For the calendar year ended December 31, 2019, Washington Gas made the following pre-tax adjustments based on the HE’s recommendations and Commission's Final Order:~~ (i2) ~~reduced~~a ~~“Operating~~Public ~~revenues-Utility”~~Service by $7.9 million to accrue additional amounts of liability subject to refund; (ii) reduced “Operating revenues-Utility” by $9.0 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~~must ~~income~~give ~~tax~~notice ~~expense~~at byleast ~~$8.5~~45 ~~million~~days related to the amortization of excess deferred income tax, and recorded $5.5 million after-tax impairment of a tax regulatory asset related to flow through income taxes. The total impact from the adjustments for the calendar year 2019 was a $18.9 million reduction in "Income before ~~income~~terminating ~~taxes"~~service ~~and~~on a ~~$10.9~~residential ~~million~~account; ~~reductions in "Net Income" on Washington Gas' statements of operations.~~

On(3) ~~January~~structured 9,payment ~~2020,~~plans ~~Washington~~offered ~~Gas~~by ~~filed~~Public aService ~~petition~~Companies ~~for~~to ~~reconsideration~~residential ~~regarding~~customers ~~the~~in ~~Commission’s~~arrears ~~decision~~or unable to ~~disallow~~pay ~~recovery~~must ~~through~~allow ~~base~~a ~~rates~~minimum of ~~the~~12 ~~$7.1~~months ~~million regulatory asset related~~ to ~~previously flowed through income taxes. On January 30~~repay, ~~2020,~~with ~~the~~that ~~Commission~~period ~~issued~~extending ~~its Order on Reconsideration denying the Company’s petition, and directing the Company~~ to ~~issue~~24 ~~rate~~months ~~refunds,~~for ascustomers ~~well~~certified as tolow ~~begin~~income; ~~return of regulatory liabilities over a twelve-month period, within 90 days of the date of the Order on Reconsideration.~~

~~Critical~~(4) ~~Accounting~~prohibited ~~Policies~~any Public Service Company from collecting or requiring down payments or deposits as a condition of beginning a payment plan by any residential customer; and

35(5) prohibited any Public Service Company from refusing to negotiate or denying a payment plan to a residential customer receiving service because the customer failed to meet the terms and conditions of an alternate payment plan during the past 18 months.

On September 4, 2020 the PSC of MD issued a second notice in PC 53 requesting filings by Maryland’s investor-owned utilities proposing arrearage forgiveness and/or arrearage management programs. As requested by the PSC of MD, investor-owned utilities in Maryland filed a joint proposed Arrearage Management Program (AMP) plan on October 7, 2020, followed by a legislative-style hearing on November 9 - 10, 2020. The PSC of MD has issued an order rejecting the AMP.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Preparation~~ Virginia. On March 16, 2020, the SCC of ~~financial~~VA ~~statements~~issued ~~and~~an ~~related~~order ~~disclosures~~which inprohibited ~~compliance~~disconnections ~~with~~of ~~GAAP~~electricity, ~~requires~~gas, water and sewer utility services during the ~~selection~~coronavirus public health emergency and established certain consumer protection measures. While the ~~application~~SCC of ~~appropriate~~VA ~~technical~~order ~~accounting~~was ~~guidance~~extended, tothe disconnection order, but not the ~~relevant~~consumer ~~facts~~protections ~~and~~expired ~~circumstances~~on October 5, 2020. However, following the expiration of ~~our~~the ~~operations~~disconnection order, asthe ~~well~~Virginia asGeneral ~~our~~assembly, ~~use~~on October 16, 2020, approved legislation that would extend the disconnection prohibition for residential customers for non-payment of ~~estimates~~bills or fees until the Governor determines the prohibition does not need to ~~compile~~remain in place or until at least 60 days after the ~~consolidated~~state ~~financial~~of ~~statements~~emergency declared on March 12, 2020 ends, whichever is sooner. The ~~application~~legislation ofalso ~~these~~codified ~~accounting~~the ~~policies~~consumer ~~involves~~protection ~~judgment~~plans, ~~regarding~~requiring ~~estimates~~utilities ~~and~~to ~~projected~~offer ~~outcomes~~customers ofin ~~future~~arrears ~~events,~~fee-free ~~including~~repayment plans without deposit or eligibility requirements. The legislation took effect following the ~~likelihood~~Assembly’s consideration of ~~success~~any ofgubernatorial ~~particular~~amendments ~~regulatory~~in ~~initiatives~~November 2020. On April 29, 2020, the ~~likelihood~~SCC of ~~realizing~~VA ~~estimates~~issued ~~for~~an ~~legal~~order ~~and~~approving ~~environmental~~a ~~contingencies,~~request from Washington Gas and ~~the~~other ~~probability~~Virginia ofutilities ~~recovering~~to create a regulatory asset to record incremental prudently incurred costs and ~~investments~~suspended inlate ~~both~~payment fees attributable to the ~~regulated~~COVID-19 ~~utility~~pandemic. The October 16, 2020 legislation approved by the general assembly established certain reporting requirements for utilities to report bad debt information and ~~non-regulated~~provides ~~business~~utilities ~~segments~~with certain exemptions from such requirements based on utilities’ particular facts and circumstances.

On December 8, 2020, Washington Gas was awarded $7.7 million of Coronavirus Relief Funds from the SCC of VA to use for customer arrearages. Virginia customers need to meet the criteria established by the program to get the fund. Any unused funds will be returned to SCC by December 10, 2021.

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 consolidated 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 discussed below that require our judgment and estimation, where the resulting estimates have a material effect on our net income.

Accounting for Revenue

Revenue from contracts with customers is recognized in the period in which customers obtain control of promised goods or services and performance obligations are satisfied in an amount ~~equal~~that toreflects the consideration into which the Company is entitled ~~to receive~~ in exchange for ~~the~~those ~~promised~~ goods ~~and~~or services. Generally, control of the promised goods or services is transferred to the customer when the natural gas is delivered ~~to the customer~~.

For regulated deliveries of natural gas, Washington Gas reads meters and bills customers on a monthly cycle basis. The billing cycles for customers do not coincide with the accounting periods used for financial reporting purposes. Washington Gas accrues estimated unbilled revenues for gas that has been delivered but not yet billed at the end of an accounting period by jurisdiction and customer class, including the estimated effects of billing adjustment mechanisms.

See Note 1 — Accounting Policies and Note 23 — Revenue from Contracts with Customers of the Notes to Financial Statements for additional information.

Accounting for Regulatory Operations—Regulatory Assets and Liabilities

Washington Gas accounts for its regulated operations in accordance with FASB ~~Accounting Standards Codification (~~ASC) Topic 980, Regulated Operations (ASC Topic 980), which results in differences in the application of GAAP between regulated and unregulated businesses. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates. Regulatory liabilities are recorded when it is probable that a regulator will require the Company to make refunds to customers or reduce rates to customers for previous collections or deferred revenue for costs that have yet to be incurred.

~~Washington~~Future ~~Gas’~~regulatory ~~jurisdictional~~changes ~~tariffs~~or ~~contain~~changes ~~mechanisms~~in ~~that~~the ~~provide~~competitive ~~for~~environment could result in WGL discontinuing the ~~recovery~~application of ~~the~~ASC ~~cost~~Topic 980 for some of ~~gas~~its ~~consumed~~business byand ~~firm~~require ~~customers.~~the ~~Under~~write-off ~~these~~of ~~mechanisms,~~the ~~Washington~~portion ~~Gas~~of ~~periodically~~any ~~adjusts~~regulatory ~~its~~asset ~~firm~~or ~~customers’~~liability ~~rates~~for towhich ~~reflect~~recovery ~~fluctuations~~or inrefund ~~the~~is ~~cost~~no oflonger ~~gas~~probable. ~~Annually,~~If Washington Gas ~~reconciles~~were ~~the~~required ~~difference~~to ~~between~~discontinue the ~~gas~~application ~~costs~~of ~~collected~~ASC ~~from~~Topic ~~firm~~980 ~~customers~~for ~~and~~any ~~the cost~~ of ~~gas~~its ~~incurred~~operations, ~~defers~~it ~~any~~would ~~difference~~record ~~and~~a ~~either~~non-cash ~~recovers~~charge ~~deficiencies from,~~ or ~~refunds~~credit ~~excess~~to ~~recoveries~~income ~~to,~~for ~~customers~~the ~~over~~net abook ~~period~~value of ~~time~~its ~~authorized~~regulatory byassets ~~its~~and ~~regulators~~liabilities. Other adjustments might also be required.

The current regulatory environment and Washington Gas’ specific facts and circumstances support both the continued application of ASC Topic 980 for our regulatory activities and the conclusion that all of our regulatory assets and liabilities as of December 31, 2019 are recoverable or refundable through rates charged to customers. See Note 3 — Regulated Operations of the Notes to Financial Statements for further discussion of our regulated operations.41

Accounting for 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. For a discussion of contingencies, see Note 13 — Commitments and Contingencies of the Notes to Financial Statements.

Accounting for Derivatives

We enter into both physical and financial contracts for the purchase and sale of natural gas and apply the fair value requirements of ASC Topic 815, Derivatives and Hedging. The financial and physical contracts that qualify as derivative instruments and are subject to the mark-to-market accounting requirements are recorded on the balance sheet at fair value. Changes in the fair value of derivative instruments which are recoverable or refundable to customers when they settle are subject to ASC Topic 980 and are recorded as regulatory assets or liabilities while changes in the fair value of derivative instruments not affected by rate regulation are reflected in earnings.

Washington Gas Light Company

Part II

Item 7. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~(iii) derive~~As required by regulated accounting rules, significant judgment can be required to determine if an otherwise recognizable incurred cost qualifies to be deferred for future recovery as a regulatory asset. Significant judgment can also be required to determine if revenues previously recognized are for entity specific costs that are no longer expected to be incurred or have not yet been incurred and are therefore a regulatory liability. The current regulatory environment and Washington Gas’ specific facts and circumstances support both the ~~estimated~~continued ~~fair~~application ~~value~~of ASC Topic 980 for our regulatory activities and the conclusion that all of our ~~derivative~~regulatory ~~instruments~~assets and liabilities as of December 31, 2020 are recoverable or refundable through rates charged to customers. See Note 145 — ~~Derivatives~~Regulated Operations of the Notes to Financial Statements for afurther discussion of our ~~derivatives~~regulated operations.

Accounting for ~~Fair Value Instruments~~Derivatives

~~Fair~~We ~~value~~enter isinto ~~based~~both onphysical ~~actively~~and ~~quoted~~financial ~~market~~contracts ~~prices~~for ~~when~~the ~~they~~purchase ~~are~~and ~~available.~~sale ~~In the absence~~ of ~~actively~~natural ~~quoted~~gas ~~market~~and ~~prices,~~apply wethe ~~seek~~fair ~~indicative~~value ~~price~~requirements ~~information~~of ~~from~~ASC ~~external~~Topic ~~sources~~815, ~~including~~Derivatives ~~broker quotes~~ and ~~industry publications~~Hedging. IfThe ~~pricing~~financial ~~information~~and ~~from~~physical ~~external~~contracts ~~sources~~that isqualify ~~not~~as ~~available,~~derivative ~~internal~~instruments ~~models~~and are ~~used~~subject to ~~estimate~~the ~~prices~~mark-to-market ~~based~~accounting requirements are recorded on ~~available~~the ~~historical~~balance ~~and~~sheet ~~near-term~~at ~~future~~fair ~~price~~value. ~~information~~Changes ~~and/or~~in the ~~use~~fair value of ~~statistical~~derivative ~~methods.~~instruments which ~~These~~are recoverable ~~inputs~~or ~~are~~refundable ~~used~~to ~~with~~customers when ~~industry~~they ~~standard~~settle are subject ~~valuation~~to ~~methodologies.~~ASC ~~See~~Topic ~~Note~~980 and are 15recorded —as ~~Fair~~regulatory ~~Value~~assets ~~Measurements~~or ofliabilities while changes in the ~~Notes~~fair tovalue ~~Financial~~of ~~Statements~~derivative ~~for~~instruments anot ~~discussion~~affected ofby ~~our~~rate ~~valuation~~regulation ~~methodologies~~are reflected in earnings.

Judgment is required in determining the appropriate accounting treatment for our derivative instruments, including our ability to: (i) evaluate contracts and other activities as derivative instruments subject to the accounting guidelines of ASC Topic 815; (ii) determine whether or not our derivative instruments are recoverable from or refundable to customers in future periods and (iii) derive the estimated fair value of our derivative instruments. See Note 14 — Derivatives of the Notes to Financial Statements for a discussion of our derivatives.

Accounting for Pension and Other Post-Retirement Benefit Plans

Washington Gas maintains defined benefit pension plans and other post-retirement benefit plans for eligible employees (the "Plans"). The measurement of the Plans’ obligations and costs is dependent on a variety of factors, such as employee demographics, the level of contributions made to the Plans, earnings on the Plans’ assets and mortality rates. The following assumptions are also critical to this measurement. These assumptions are derived on an annual basis with the assistance of a third-party actuarial firm:

• Discount rate,

• Expected long-term return on plan assets,

• Rate of compensation increase,

• Healthcare cost trend rate and

• Projected increases to the Health Reimbursement Account (HRA) plan stipend.

The following table illustrates the effect of changing these actuarial assumptions, while holding all other assumptions constant:

Effect of Changing Critical Actuarial Assumptions

(In millions)

~~Pension Benefits~~

~~Health and Life Benefits~~

Pension Benefits

Health and Life Benefits

Actuarial Assumptions

~~Percentage-PointChange inAssumption~~

~~Increase(Decrease)~~Percentage-PointChange ~~inEndingObligation~~inAssumption

~~Increase(Decrease) inAnnual Cost~~

~~Increase(Decrease) inEndingObligation~~

Increase (Decrease) ~~inAnnual Cost~~inEndingObligation

Increase(Decrease) inAnnual Cost

Increase(Decrease) inEndingObligation

Increase (Decrease) inAnnual Cost

Expected long-term return on plan assets

~~+/- 1.00 pt.~~

n+/a- 1.00 pt.

~~$(7.5) / $7.5~~

~~n/a~~

~~$(5.2)~~ n/ ~~$5.2~~a

$(8.1) / $8.1

n/a

$(5.9) / $5.9

Discount rate

~~+/- 0.25 pt.~~

~~$(33.1)~~ +/- ~~$35~~0.825 pt.

~~$(2.7) / $2.8~~

~~$(8.5) / $9.0~~

$(037.01) / $037.01

$(3.2) / $3.3

$(10.0) / $10.5

$(0.6) / $0.6

Rate of compensation increase

~~+/- 0.25 pt.~~

~~$5.5~~ +/- ~~$(4~~0.5)25 pt.

~~$0.8 / $(0.8)~~

~~n/a~~

n$3.6 /a $(5.5)

$0.9 / $(0.8)

n/a

Healthcare cost trend rate

~~+/- 1.00 pt.~~

n+/a- 1.00 pt.

~~n/a~~

~~$5.8 / $(5.1)~~

~~$0.6~~ n/ ~~$(0.5)~~a

n/a

$6.8 / $(5.9)

$1.1 / $(0.9)

Projected increases to the HRA plan stipend

~~+/- 1.00 pt.~~

n+/a- 1.00 pt.

~~n/a~~

~~$22.6 / $(18.8)~~

~~$2.8~~ n/ ~~$(2.2)~~a

n/a

$28.5 / $(23.4)

$3.8 / $(3.0)

See Note 10 — Pension and Other Post-retirement Benefits of the Notes to Financial Statements for additional discussion of the Plans.

3742

Washington Gas Light Company

Part II

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following issues related to our market risks are included under Item 7 of this report and are incorporated by reference into this discussion.

• Price Risk

• Weather Risk

• Interest-Rate Risk

3843

Washington Gas Light Company

Part II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Balance Sheets

(In thousands)	~~December 31, 2019~~		December 31, 2020		~~December 31, 2018~~			December 31, 2019
ASSETS
								As Adjusted
Property, Plant and Equipment
ASSETS
At original cost	$	5,962,866			$	5,702,927
Property, Plant and Equipment
Accumulated depreciation and amortization	(1,579,718		)		(1,513,590		)
At original cost			$	6,363,392				$	5,962,866
Net property, plant and equipment	4,383,148				4,189,337
Accumulated depreciation and amortization			(1,668,491)					(1,579,718)
Current Assets
Net property, plant and equipment			4,694,901					4,383,148
Cash and cash equivalents	17,069				6,082
Current Assets
Receivables
Cash and cash equivalents			1					17,069
Accounts receivable	259,053				292,871
Receivables (net of allowance for doubtful accounts of $27,283 and $18,708, respectively)			339,759					400,891
Gas costs and other regulatory assets	~~9,894~~		31,376		~~6,020~~			9,894
Unbilled revenues	160,546				189,497
Materials and supplies—principally at average cost			20,389					20,184
Allowance for doubtful accounts	(18,708		)		(29,461		)
Storage gas			70,582					87,977
Net receivables	410,785				458,927
Prepaid taxes			23,547					34,576
Materials and supplies—principally at average cost	20,184				19,727
Other prepayments			30,980					33,867
Storage gas	87,977				103,929
Receivables from associated companies			128,254					12,421
Prepaid taxes	34,576				27,193
Derivatives			5,049					6,553
Other prepayments	33,867				28,232
Other			6,836					19,619
Receivables from associated companies	12,421				4,819
Total current assets			656,773					643,051
Derivatives	6,553				19,488
Deferred Charges and Other Assets
Other	19,619				20,347
Regulatory assets
Total current assets	643,051				688,744
Gas costs			109,034					98,717
Deferred Charges and Other Assets
Pension and other post-retirement benefits			3,880					44,078
Regulatory assets
Other			99,793					84,886
Gas costs	98,717				141,636
Prepaid post-retirement benefits			433,319					366,508
Pension and other post-retirement benefits	39,435				86,493
Operating lease right of use asset			38,097					40,004
Other	84,886				99,105
Derivatives			11,263					10,370
Prepaid post-retirement benefits	366,508				249,462
Other			22,637					30,620
Right of use asset	40,004				—
Total deferred charges and other assets			718,023					675,183
Derivatives	10,370				11,318
Total Assets			$	6,069,697				$	5,701,382
Other	30,620				50,490
CAPITALIZATION AND LIABILITIES
Total deferred charges and other assets	670,540				638,504
Capitalization
Total Assets	$	5,696,739			$	5,516,585
Common shareholder’s equity			$	1,855,925				$	1,578,592
CAPITALIZATION AND LIABILITIES
Long-term debt			1,547,202					1,430,949
Capitalization
Total capitalization			3,403,127					3,009,541
Common shareholder’s equity	$	1,572,196			$	1,562,573
Current Liabilities
Preferred stock	—				28,173
Notes payable			184,953					299,483
Long-term debt	1,430,949				1,035,033
Accounts payable and other accrued liabilities			292,454					267,408
Total capitalization	3,003,145				2,625,779
Customer deposits and advance payments			38,743					40,052
Current Liabilities
Gas costs and other regulatory liabilities			72,197					105,399
Current maturities of long-term debt	—				50,000
Accrued taxes			26,637					23,781
Notes payable and project financing	299,483				311,460
Payables to associated companies			29,526					57,923
Accounts payable and other accrued liabilities	267,408				325,509
Operating lease liability			5,734					5,850
Customer deposits and advance payments	40,052				54,370
Derivatives			7,053					4,069
Gas costs and other regulatory liabilities	105,399				75,151
Other			6,543					30,032
Accrued taxes	23,781				28,451
Total current liabilities			663,840					833,997
Payables to associated companies	57,923				95,228
Deferred Credits
Operating lease liability	5,850				—
Deferred income taxes			656,876					464,717
Derivatives	4,069				20,295
Accrued pensions and benefits			65,276					115,837
Other	30,032				32,074
Asset retirement obligations			212,161					206,820
Total current liabilities	833,997				992,538
Regulatory liabilities
Deferred Credits
Accrued asset removal costs			239,259					254,429
Unamortized investment tax credits	2,575				3,233
Pension and other post-retirement benefits			262,411					195,670
Deferred income taxes	462,475				454,248
Excess deferred taxes and other			376,975					404,700
Accrued pensions and benefits	115,837				156,210
Operating lease liability			50,894					53,642
Asset retirement obligations	206,820				300,769
Derivatives			88,559					97,695
Regulatory liabilities
Other			50,319					64,334
Accrued asset removal costs	254,429				264,556
Total deferred credits			2,002,730					1,857,844
Other post-retirement benefits	199,665				121,345
Commitments and Contingencies (Note 13)
Excess deferred taxes and other	404,700				431,913
Total Capitalization and Liabilities			$	6,069,697				$	5,701,382
Operating lease liability	53,642				—
Derivatives	97,695				116,847
Other	61,759				49,147
Total deferred credits	1,859,597				1,898,268
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities	$	5,696,739			$	5,516,585

The accompanying notes are an integral part of these statements.

3944

Washington Gas Light Company

Statements of Operations

Part II

Item 8. Financial Statements and Supplementary Data (continued)

	Calendar Year Ended December 31,				Three Months Ended December 31,		Fiscal Years Ended September 30,
			Calendar Years Ended December 31,									Three Months EndedDecember 31,		Fiscal Year Ended September 30,
(In thousands)	~~2019~~		2020		~~2018~~		~~2018~~2019			~~2017~~		2018		2018
OPERATING REVENUES	$	1,330,651			$	402,101	$	1,248,063		$	1,166,968
							As Adjusted					As Adjusted		As Adjusted
OPERATING EXPENSES
OPERATING REVENUES			$	1,234,315			$	1,330,651				$	402,101	$	1,248,063
Utility cost of gas	461,574				156,641		407,043			297,856
OPERATING EXPENSES
Operation and maintenance	404,961				102,728		544,180			340,604
Utility cost of gas			328,244				461,574					156,641		407,043
Depreciation and amortization	142,565				34,948		135,071			129,428
Operation and maintenance			399,498				404,961					102,728		544,180
General taxes and other assessments	149,618				38,552		148,178			134,696
Depreciation and amortization			145,585				142,565					34,948		135,071
Total Operating Expenses	1,158,718				332,869		1,234,472			902,584
General taxes and other assessments			152,654				149,618					38,552		148,178
OPERATING INCOME	171,933				69,232		13,591			264,384
Total Operating Expenses			1,025,981				1,158,718					332,869		1,234,472
Other income (expense) — net	9,478				3,494		(7,592		)	(545		)
OPERATING INCOME			208,334				171,933					69,232		13,591
Interest expense	62,567				15,706		58,504			52,207
Other income (expense) — net			21,737				5,822					2,045		(4,226)
INCOME (LOSS) BEFORE INCOME TAXES	118,844				57,020		(52,505		)	211,632
Interest expense			65,352				62,567					15,706		58,504
INCOME TAX EXPENSE (BENEFIT)	19,032				7,847		(25,863		)	79,840
INCOME (LOSS) BEFORE INCOME TAXES			164,719				115,188					55,571		(49,139)
NET INCOME (LOSS)	$	99,812			$	49,173	$	(26,642	)	$	131,792
INCOME TAX EXPENSE (BENEFIT)			32,844				18,083					7,471		(24,989)
Loss on preferred stock extinguishment	556				—		—			—
NET INCOME (LOSS)			$	131,875			$	97,105				$	48,100	$	(24,150)
Dividends on preferred stock	1,169				330		1,320			1,320
Loss on preferred stock extinguishment			—				556					—		—
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	98,087			$	48,843	$	(27,962	)	$	130,472
Dividends on preferred stock			—				1,169					330		1,320
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK			$	131,875			$	95,380				$	47,770	$	(25,470)

The accompanying notes are an integral part of these statements.

4045

Washington Gas Light Company

Statements of Comprehensive Income

Part II

Item 8. Financial Statements and Supplementary Data (continued)

	Calendar Year Ended December 31,			Three MonthsEnded December 31,				Fiscal Years Ended September 30,
			Calendar Years Ended December 31,								Three Months Ended December 31,			Fiscal Year Ended September 30,
(In thousands)	~~2019~~		2020	~~2018~~		2019		~~2018~~			~~2017~~2018			2018
NET INCOME (LOSS)	$	99,812		$	49,173			$	(26,642	)	$	131,792
						As Adjusted					As Adjusted			As Adjusted
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE INCOME TAXES:
NET INCOME (LOSS)			$	131,875		$	97,105				$	48,100		$	(24,150)
Pension and other post-retirement benefit plans
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE INCOME TAXES:
Change in prior service cost	(649		)	(226		)		(675		)	(767		)
Pension and other post-retirement benefit plans
Change in actuarial net gain (loss)	16,262			(6,246		)		6,324			6,232
Change in prior service cost			$	(1,493)		$	(649)				$	(226)		$	(675)
Total pension and other post-retirement benefit plans	$	15,613		$	(6,472	)		$	5,649		$	5,465
Change in actuarial net gain (loss)			$	(2,607)		$	16,459				$	(6,150)		$	6,107
INCOME TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME (LOSS)	4,077			(1,675		)		2,957			2,157
Total pension and other post-retirement benefit plans			$	(4,100)		$	15,810				$	(6,376)		$	5,432
OTHER COMPREHENSIVE INCOME (LOSS)	$	11,536		$	(4,797	)		$	2,692		$	3,308
INCOME TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME (LOSS)			$	(1,101)		$	4,128				$	(1,650)		$	2,901
COMPREHENSIVE INCOME (LOSS)	$	111,348		$	44,376			$	(23,950	)	$	135,100
OTHER COMPREHENSIVE INCOME (LOSS)			$	(2,999)		$	11,682				$	(4,726)		$	2,531
COMPREHENSIVE INCOME (LOSS)			$	128,876		$	108,787				$	43,374		$	(21,619)

The accompanying notes are an integral part of these statements.

4146

Washington Gas Light Company

Statements of Cash Flows

Part II

Item 8. Financial Statements and Supplementary Data (continued)

	Calendar Year Ended December 31,			Three Months Ended December 31,				Fiscal Years Ended September 30,
(In thousands)			Calendar Years Ended December 31,						Three Months Ended December 31,		Fiscal YearEndedSeptember 30,
(In thousands)	2019			2018				2018			2017
			2020			2019			2018		2018
						As Adjusted			As Adjusted		As Adjusted
OPERATING ACTIVITIES
Net income (loss)	$	~~99,812~~	$	$131,875	~~49,173~~	$	97,105	$	~~(26,642~~$	)48,100	$	~~131~~(24,~~792~~150)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization	~~142,565~~		145,585	~~34,948~~		142,565		~~135,071~~	34,948		~~129~~135,~~428~~071
Amortization of:
Other regulatory assets and liabilities—net	8,491			1,859				6,917			6,422
Other regulatory assets and liabilities — net			9,761			8,491			1,859		6,917
Debt related costs	~~1,501~~		1,405	~~382~~		1,501		~~1,580~~	382		1,~~448~~580
Deferred income taxes—net	19,690			8,012				(26,435		)	77,586
Deferred income taxes — net			41,525			18,741			7,636		(25,561)
Accrued/deferred pension and other post-retirement benefit cost	(1,466		)	(330		)		11,127			22,547
Accrued/deferred pension and other post-retirement benefit cost (benefit)			(8,400)			2,190			1,119		7,761
Compensation expense related to stock-based awards	~~3,626~~		2,826	~~1,353~~		3,626		~~19,067~~	1,353		1619,~~153~~067
Provision for doubtful accounts	~~17,266~~		15,958	~~5,940~~		17,266		~~20,224~~	5,940		1420,~~484~~224
Impairment loss	~~2,042~~		—	~~2,453~~		2,042		~~37,969~~	2,453		—37,969
Unrealized (gain) loss on derivative contracts	~~(5,429~~		(3,579)	~~4,200~~		(5,429)		~~(10,379~~	4,200	)	(4810,~~950~~379)		)
Amortization of investment tax credits	~~(658~~		(551)	~~(165~~		(658)		~~(702~~	(165)	)	(~~751~~702)		)
Other non-cash charges (credits)—net	2,436			(453		)		(2,450		)	(1,592		)
Other non-cash charges (credits) — net			283			2,436			(453)		(2,450)
Changes in operating assets and liabilities (Note 18)	~~(86,547~~		(111,930)	~~(201,840~~		(86,547)		~~(43,050~~	(201,840)	)	(~~141~~43,~~238~~050)		)
Net Cash Provided by (Used In) Operating Activities	~~203,329~~		$	~~(94~~224,~~468~~758		)$	203,329	~~122,297~~	$	(94,468)	~~207,329~~$	122,297
FINANCING ACTIVITIES
Capital contributions from parent	—		225,000	~~100,000~~		—		~~402,728~~	100,000		—402,728
Long-term debt issued	~~298,482~~		116,606	—		298,482		—	—		~~195,556~~—
Long-term debt retired	(50,000		)	(50,000		)		—			—
Repayment of long-term debt and finance lease			(10)			(50,000)			(50,000)		—
Debt issuance costs	~~(3,130~~		(1,252)	—		(3,130)		~~(366~~	—	)	(~~661~~366)		)
Long-term commercial paper issued (retired)—net	100,000			—				—			—
Long-term commercial paper issued			—			100,000			—		—
Notes payable issued (retired)—net	3,483			200,999				(27,998		)	81,000
Notes payable issued (retired) — net			(114,530)			3,483			200,999		(27,998)
Project financing	—		—	—		—		~~53,018~~	—		953,~~314~~018
Dividends on common stock and preferred stock	~~(100,736~~		(100,000)	~~(24,078~~		(100,736)		~~(88,908~~	(24,078)	)	(8788,~~118~~908)		)
Payment for preferred stock extinguishment	~~(28,729~~		)—	—		(28,729)		—	—		—
Other financing activities—net	—			—				(6,197		)	(1,982		)
Other financing activities — net			—			—			—		(6,197)
Net Cash Provided by Financing Activities	~~219,370~~		$	~~226~~125,~~921~~814		$	219,370	~~332,277~~	$	226,921	~~196,109~~$	332,277
INVESTING ACTIVITIES
Capital expenditures (excluding AFUDC)	(432,974		)	(126,013		)		(392,830		)	(403,438		)
Capital expenditures			(389,758)			(432,974)			(126,013)		(392,830)
Insurance proceeds related to investing properties	—		—	—		—		~~3,238~~	—		—3,238
Net Cash Used in Investing Activities	~~(432,974~~		)$	(~~126~~389,~~013~~758)		)$	(432,974)	~~(389,592~~	$	(126,013)	~~(403,438~~$	(389,592)	)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	~~(10,275~~		(39,186)	~~6,440~~		(10,275)		~~64,982~~	6,440		—64,982
Cash, Cash Equivalents, and Restricted Cash at Beginning of the Year	~~71,423~~		61,148	~~64,983~~		71,423		1	64,983		1
Cash, Cash equivalents and Restricted Cash at End of the Year	$	~~61,148~~	$	$21,962	~~71,423~~	$	61,148	$	~~64,983~~$	71,423	$	164,983
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 18)

The accompanying notes are an integral part of these statements.

~~The accompanying notes are an integral part of these statements.~~47

Washington Gas Light Company

Statements of Common Shareholder’s Equity

Part II

Item 8. Financial Statements and Supplementary Data (continued)

	~~Common Stock~~	Common Stock			~~Paid-In Capital~~			~~Retained Earnings~~			Paid-In Capital	~~Accumulated Other Comprehensive Loss, Net of Taxes~~				Retained Earnings (e)		Accumulated Other Comprehensive Income (Loss), Net of Taxes (e)
(In thousands, except shares)	~~Shares~~		~~Amount~~												~~Total~~					Total (e)
Balance, September 30, 2016	46,479,536		46,479		488,135			586,662				(7,830		)	1,113,446
		Shares				Amount
Net income	—		—		—			131,792				—			131,792
Balance, September 30, 2017		46,479,536				$	46,479				$	492,101				$	638,708	$	(4,911)	$	1,172,377
Other comprehensive income	—		—		—			—				3,308			3,308
Net loss		—				—					—					(24,150)		—		(24,150)
Stock-based compensation(a)	—		—		3,966			—				—			3,966
Other comprehensive income		—				—					—					—		4,015		4,015
Dividends declared:
Stock-based compensation (a)		—				—					(15,556)					4,197		—		(11,359)
Common stock	—		—		—			(86,443		)		—			(86,443		)
Capital contribution from parent		—				—					402,728					—		—		402,728
Preferred stock	—		—		—			(1,320		)		—			(1,320		)
ASU 2018-02 adoption impact (b)		—				—					—					1,484		(1,484)		—
Balance, September 30, 2017	46,479,536		46,479		492,101			630,691				(4,522		)	1,164,749
Dividends declared:
Net income (loss)	—		—		—			(26,642		)		—			(26,642		)
Common stock		—				—					—					(89,568)		—		(89,568)
Other comprehensive income	—		—		—			—				4,176			4,176
Preferred stock		—				—					—					(1,320)		—		(1,320)
Stock-based compensation(a)	—		—		(15,556		)	4,197				—			(11,359		)
Balance, September 30, 2018		46,479,536				$	46,479				$	879,273				$	529,351	$	(2,380)	$	1,452,723
Capital contribution from parent	—		—		402,728			—				—			402,728
Net income		—				—					—					48,100		—		48,100
ASU 2018-02 adoption impact (b)	—		—		—			1,484				(1,484		)	—
Other comprehensive loss		—				—					—					—		(4,726)		(4,726)
Dividends declared:
Capital contribution from parent		—				—					100,000					—		—		100,000
Common stock	—		—		—			(89,568		)		—			(89,568		)
Dividends declared:
Preferred stock	—		—		—			(1,320		)		—			(1,320		)
Common stock		—				—					—					(24,237)		—		(24,237)
Balance, September 30, 2018	46,479,536		$	46,479	$	879,273		$	518,842			$	(1,830	)	$	1,442,764
Preferred stock		—				—					—					(330)		—		(330)
Net income	—		—		—			49,173				—			49,173
Balance, December 31, 2018		46,479,536				$	46,479				$	979,273				$	552,884	$	(7,106)	$	1,571,530
Other comprehensive income	—		—		—			—				(4,797		)	(4,797		)
Net income		—				—					—					97,105		—		97,105
Capital contribution from parent	—		—		100,000			—				—			100,000
Other comprehensive income		—				—					—					—		11,682		11,682
Dividends declared:
Loss on preferred stock extinguishment (c)		—				—					—					(556)		—		(556)
Common stock	—		—		—			(24,237		)		—			(24,237		)
Dividends declared:
Preferred stock	—		—		—			(330		)		—			(330		)
Common stock		—				—					—					(100,000)		—		(100,000)
Balance, December 31, 2018	46,479,536		46,479		979,273			543,448				(6,627		)	1,562,573
Preferred stock (c)		—				—					—					(1,169)		—		(1,169)
Net income	—		—		—			99,812				—			99,812
Balance, December 31, 2019		46,479,536				$	46,479				$	979,273				$	548,264	$	4,576	$	1,578,592
Other comprehensive income	—		—		—			—				11,536			11,536
Net income		—				—					—					131,875		—		131,875
Loss on preferred stock extinguishment	—		—		—			(556		)		—			(556		)
Other comprehensive loss		—				—					—					—		(2,999)		(2,999)
Dividends declared:
Capital contribution from parent		—				—					225,000					—		—		225,000
Common stock	—		—					(100,000		)		—			(100,000		)
ASU 2016-13 implementation (d)		—				—					—					(1,543)		—		(1,543)
Preferred stock	—		—		—			(1,169		)		—			(1,169		)
Dividends declared:
Balance, December 31, 2019	46,479,536		46,479		979,273			541,535				4,909			1,572,196
Common stock		—				—					—					(75,000)		—		(75,000)
Balance, December 31, 2020		46,479,536				$	46,479				$	1,204,273				$	603,596	$	1,577	$	1,855,925

(a) Stock-based compensation is based on the stock awards of WGL that are allocated to Washington Gas for its pro-rata share. We recorded $4.2 million accumulative adjustments to retained earnings for the fiscal year 2018 due to the adoption of Accounting Standards Update (ASU) 2016-09. We accelerated the vesting of stock-based awards upon the consummation of the Merger with AltaGas during the fourth quarter of fiscal year ended September 2018, which reduced the paid-in capital. See Note 11 — Stock-Based Compensation for a further discussion.

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

(c) On December 20, 2019, Washington Gas redeemed all outstanding shares of its preferred stock for the respective call price per share for a total amount of $28.7 million, plus all accrued and unpaid dividends. A loss of $0.6 million was recorded in "Loss on preferred stock extinguishment" on Washington Gas' statements of operations. Following the redemption, Washington Gas no longer pays quarterly preferred stock dividends. Since Washington Gas’ preferred shares had voting rights, as a result of this redemption, Washington Gas became an indirect wholly owned subsidiary of AltaGas.

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

(e) In the third quarter of 2020, Washington Gas made a voluntary change in accounting principle for calculating the market-related value of assets used in the determination of net periodic pension and other post-retirement benefit plan costs. We retrospectively applied this change in accounting principle to all applicable prior period financial information presented herein as required. Refer to Note 1 — Accounting Policies for further discussion.

The accompanying notes are an integral part of these statements.

4349

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 1. ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

Following the 2018 Merger Agreement, Washington Gas became an indirect, majority owned subsidiary of, among other entities, AltaGas and WGL. In connection with the Merger and at the command of Washington Gas’ regulators, WGL formed a wholly owned subsidiary, Wrangler, a bankruptcy remote, special purpose entity to own the common stock of Washington Gas. In addition, WGL owns all of the shares of common stock of certain affiliated non-utility subsidiaries, some of which provide services to Washington Gas, and some of which own interests in other entities. On December 20, 2019, Washington Gas redeemed all the outstanding shares of its preferred stock. As a result, as of December 20, 2019, Washington Gas is ~~now~~a ~~an indirect,~~ wholly owned subsidiary of AltaGas and WGL. As a public utility company, Washington Gas sells and delivers natural gas to more than one million customers primarily in the District of Columbia and the surrounding metropolitan areas in Maryland and Virginia.

The Financial Statements of Washington Gas ~~has~~have been prepared in conformity with GAAP and under the rules of the Securities and Exchange Commission (SEC).

The Merger with AltaGas was recorded using the acquisition method of accounting. Under SEC regulations, Washington Gas elected to not apply push down accounting to its stand-alone financial statements. The acquisition adjustments were recorded by AltaGas.

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

Change of Fiscal Year End

On December 28, 2018, our Board of Directors approved a change of Washington Gas's fiscal year from the period beginning on October 1 and ending on September 30 to the period beginning on January 1 and ending on December 31. This annual report on Form 10-K is for the twelve-month period from January 1, 2019 to December 31, 2019. References in this report to "calendar year" refer to the year ended December 31. References in this report to "transition period" refer to the three-month transition period from October 1, 2018 through December 31, 2018. References in this report to "fiscal year" refer to the twelve-month period ending on September 30.

Use of Estimates in the Preparation of Financial Statements

In accordance with GAAP, we make certain estimates and assumptions regarding: (i) reported assets and liabilities; (ii) disclosed contingent assets and liabilities at the date of the financial statements and (iii) reported revenues, revenues subject to refund, and expenses during the reporting period. Actual results could differ from those estimates.

Change of Fiscal Year End

On December 28, 2018, our Board of Directors approved a change of Washington Gas' fiscal year from the period beginning on October 1 and ending on September 30 to the period beginning on January 1 and ending on December 31. This annual report on Form 10-K is for the twelve-month period from January 1, 2020 to December 31, 2020. References in this report to "calendar year" refer to the year ended December 31. References in this report to "fiscal year" refer to the twelve-month period ending on September 30.

Change in Accounting Principle

During the third quarter of 2020, Washington Gas made a voluntary change in accounting principle for calculating the market-related value of assets (MRVA) used in the determination of net periodic pension and other post-retirement benefit plan costs. The change uses the fair value approach for the fixed income investments and related derivatives, which represent a separate asset class of the plan assets, compared to the prior method that utilized a calculated value for all investments where gains and losses arising from changes in fair value were deferred and amortized into the calculation of the MRVA over a period of five years. The MRVA is used in the calculation of the expected return on assets and the recognized actuarial gain or loss components of net periodic benefit cost. The gains and losses for other plan assets will continue to be deferred and amortized into the MRVA over a five-year period.

We believe that using the fair value approach for the fixed income investments and related derivatives in our plan assets is preferable because the Company will immediately recognize the gains and losses of the fixed income investments and derivatives in MRVA rather than deferring them over a five-year period, which results in a better matching of the change in fixed income investments and the related pension obligations.

We retrospectively applied this change in accounting principle to all applicable prior period financial information presented herein as required. The change in accounting principle increased retained earnings $8.0 million and decreased accumulated other comprehensive income (loss), net of taxes, $0.4 million, with a net increase of $7.6 million in common shareholder’s equity at October 1, 2017. The following tables summarize the effect of the change in accounting principle on the primary financial statement line items on Washington Gas' balance sheets, statements of operations, statements of comprehensive income, statements of common shareholder's equity, and statements of cash flows. The following Notes have been impacted by the change: Note 5 — Regulated Operations, Note 9 — Income Taxes, Note 10 — Pension and Other Post — Retirement Benefit Plans, Note 17 — Accumulated Other Comprehensive Income (Loss), Note 19 — Comparative Data, and Note 20 — Quarterly Financial Information.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements


	December 31, 2020						December 31, 2019
(In thousands)	Without Change		Adjustment		As Reported (with change)		As Previously Reported		Adjustment		As Adjusted
Balance Sheets
Regulatory assets — Pension and other post-retirement benefits	$	(6,539)	$	10,419	$	3,880	$	39,435	$	4,643	$	44,078
Common shareholder’s equity	$	1,843,211	$	12,714	$	1,855,925	$	1,572,196	$	6,396	$	1,578,592
Regulatory liabilities — Pension and other post-retirement benefits	$	269,181	$	(6,770)	$	262,411	$	199,665	$	(3,995)	$	195,670
Deferred income taxes	$	652,401	$	4,475	$	656,876	$	462,475	$	2,242	$	464,717


	Calendar Year Ended December 31, 2020						Calendar Year Ended December 31, 2019
(In thousands)	Without Change		Adjustment		As Reported (with change)		As Previously Reported		Adjustment		As Adjusted
Statements of Operations
Other income (expense) — net	$	12,195	$	9,542	$	21,737	$	9,478	$	(3,656)	$	5,822
Income tax expense (benefit)	$	30,367	$	2,477	$	32,844	$	19,032	$	(949)	$	18,083
Net income	$	124,810	$	7,065	$	131,875	$	99,812	$	(2,707)	$	97,105
Statements of Comprehensive Income
Other comprehensive income (loss), net of taxes	$	(2,252)	$	(747)	$	(2,999)	$	11,536	$	146	$	11,682
Comprehensive income	$	122,558	$	6,318	$	128,876	$	111,348	$	(2,561)	$	108,787
Condensed Statements of Cash Flows
Net income	$	124,810	$	7,065	$	131,875	$	99,812	$	(2,707)	$	97,105
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Accrued/deferred pension and other post-retirement benefit cost (benefit)	$	1,142	$	(9,542)	$	(8,400)	$	(1,466)	$	3,656	$	2,190
Deferred income taxes — net	$	39,048	$	2,477	$	41,525	$	19,690	$	(949)	$	18,741


	Three Months Ended December 31, 2018						Fiscal Year Ended September 30, 2018
(In thousands)	As Previously Reported		Adjustment		As Adjusted		As Previously Reported		Adjustment		As Adjusted
Statements of Operations
Other income (expense) — net	$	3,494	$	(1,449)	$	2,045	$	(7,592)	$	3,366	$	(4,226)
Income tax expense (benefit)	$	7,847	$	(376)	$	7,471	$	(25,863)	$	874	$	(24,989)
Net income (loss)	$	49,173	$	(1,073)	$	48,100	$	(26,642)	$	2,492	$	(24,150)
Statements of Comprehensive Income
Other comprehensive income (loss), net of taxes	$	(4,797)	$	71	$	(4,726)	$	2,692	$	(161)	$	2,531
Comprehensive income (loss)	$	44,376	$	(1,002)	$	43,374	$	(23,950)	$	2,331	$	(21,619)
Condensed Statements of Cash Flows
Net income	$	49,173	$	(1,073)	$	48,100	$	(26,642)	$	2,492	$	(24,150)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Accrued/deferred pension and other post-retirement benefit cost (benefit)	$	(330)	$	1,449	$	1,119	$	11,127	$	(3,366)	$	7,761
Deferred income taxes — net	$	8,012	$	(376)	$	7,636	$	(26,435)	$	874	$	(25,561)

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements


Statements of Common Shareholder's Equity	Retained Earnings						Accumulated Other Comprehensive Income (Loss), Net of Taxes
(In thousands)	As Previously Reported		Adjustment		As Adjusted		As Previously Reported		Adjustment		As Adjusted
Balance, September 30, 2017	$	630,691	8,017		$	638,708	$	(4,522)	(389)		(4,911)
Net income (loss)	(26,642)		2,492		(24,150)		—
Other comprehensive income							4,176		(161)		4,015
Stock-based compensation	4,197				4,197		—
ASU 2018-02 adoption impact	1,484				1,484		(1,484)				(1,484)
Dividends declared:
Common stock	(89,568)				(89,568)
Preferred stock	(1,320)				(1,320)
Balance, September 30, 2018	$	518,842	$	10,509	$	529,351	$	(1,830)	$	(550)	$	(2,380)
Net income	49,173		(1,073)		48,100
Other comprehensive loss							(4,797)		71		(4,726)
Dividends declared:
Common stock	(24,237)				(24,237)
Preferred stock	(330)				(330)
Balance, December 31, 2018	$	543,448	$	9,436	$	552,884	$	(6,627)	$	(479)	$	(7,106)
Net income	99,812		(2,707)		97,105
Other comprehensive income							11,536		146		11,682
Loss on preferred stock extinguishment	(556)				(556)
Dividends declared:
Common stock	(100,000)				(100,000)
Preferred stock	(1,169)				(1,169)
Balance, December 31, 2019	$	541,535	$	6,729	$	548,264	$	4,909	$	(333)	$	4,576
	Without Change		Adjustment		As Reported (With change)		Without Change		Adjustment		As Reported (With change)

Net income	124,810		7,065		131,875
Other comprehensive loss							(2,252)		(747)		(2,999)
ASU 2016-13 implementation	(1,543)				(1,543)
Dividends declared:
Common stock	(75,000)				(75,000)
Balance, December 31, 2020	$	589,802	$	13,794	$	603,596	$	2,657	$	(1,080)	$	1,577

Property, Plant and Equipment

Property, plant and equipment are stated at original cost, including labor, materials, taxes and overhead costs incurred during the construction period. The cost of utility plant of Washington Gas includes an allowance for funds used during construction (AFUDC) that is calculated under a formula prescribed by our regulators in Maryland and the District of Columbia. AFUDC equity is reported on the statements of operations as non-cash income in "Other income (expense)". AFUDC debt is reported as a non-cash offset to interest expense. After construction is completed, the ~~company~~Company ~~are~~is permitted to recover these costs through inclusion in rate base and the corresponding subsequent ~~deprecation~~depreciation or amortization of those regulated assets. The rates for AFUDC for the calendar ~~year~~years ended December 31, 2020 and 2019, the three months ended December 31, 2018, and fiscal ~~years~~year ended September 30, 2018 ~~and~~were ~~2017~~2.33%, ~~was~~ 3.48%, 5.84%, ~~2.42%~~ and 2.7342%, respectively.

Costs of replacement and betterments that extend the useful life of property, plant, and equipment are also capitalized. The cost of maintenance and repairs, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation applicable to ~~its~~ utility gas plant in service primarily uses a straight-line method over the estimated remaining life of the plant. The composite annual depreciation and amortization rate was 2.9680%, 2.7896%, 2.7778%, and 2.8077% for the calendar ~~year~~years ended December 31, 2020 and 2019, the three months ended December 31, 2018, and fiscal ~~years~~year ended September 30, 2018 ~~and 2017~~, respectively. In accordance with regulatory requirements, such rates include a component related to asset removal costs for Washington Gas. Washington Gas periodically reviews the adequacy of its depreciation rates by considering estimated remaining lives and other factors.

4452

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

The following table represents the components of Washington Gas' Property, Plant and Equipment at original cost.

	December 31,
($ In millions)			December 31,
($ In millions)	2019				2018
			2020							2019
Distribution, transmission and storage	$	~~5,148.1~~	~~86.3~~$	%5,502.6	$	~~4,888.4~~	86.5	~~85.7~~	%	$	5,148.1	86.3	%
General, miscellaneous and intangibles	543.2		9.1	%	542.9			9.5	%
General, miscellaneous, intangibles and finance leases			547.9				8.6		%	543.2		9.1	%
Construction work in progress (CWIP)	~~271.6~~		4312.69	%	~~271.6~~		4.9	~~4.8~~	%	271.6		4.6	%
Total	~~5,962.9~~		~~100~~6,363.04	%	~~5,702.9~~		100.0	~~100.0~~	%	5,962.9		100.0	%

Impairment of Long-Lived Assets

Management regularly reviews property and equipment and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

For ~~our~~property ~~properties~~ and equipment, the indicators of potential impairment may include a deteriorating business or legal climate, a significant adverse change in asset condition, specific regulatory disallowance, advances in technology or plans to dispose of an asset significantly before the end of its useful life, among others. Management performs a recoverability test whenever the indicators show a possible impairment. The amount used to test recoverability is determined based on an estimate of undiscounted cash flows, and measurement of an impairment loss is determined based on the fair value of the asset, using assumptions about future cash inflows and outflows over the life of an asset.

During the fiscal year ended September 30, 2018, Washington Gas recorded a $38.0 million impairment to Property, Plant and Equipment in connection with an agreement ancillary to the merger proceeding not to seek recovery of certain costs incurred under the Formal Case 1027 mechanical coupling program.

During the calendar ~~year~~years ended December 31, 2020 and 2019, and the three months ended December 31, 2018, ~~and fiscal year ended September 30, 2017,~~ Washington Gas did not record any impairments related to our long-lived assets.

Refer to Note 15 — Fair Value Measurements of the Notes to Financial Statements for further discussion of these assets.

Cash, Cash Equivalents, and Restricted Cash and Cash Equivalents

We consider all investments with original maturities of three months or less to be cash equivalents.

Restricted ~~Cash~~cash and ~~Cash~~cash ~~Equivalents~~equivalents represent funds that are restricted and are not available for general use by the Company. Restricted cash and cash equivalents available to satisfy designated current liabilities are classified as current assets. Restricted cash and cash equivalents expected to satisfy non-current liabilities are classified as non-current assets. Pursuant to the Merger Agreement with AltaGas, rabbi trust funds were funded to satisfy certain executives and outside director retirement benefit plan obligations. The rabbi trust funds are invested in money market funds which are considered cash equivalents. The rabbi trust funds that are used for the settlement of benefit plans in long-term liabilities are classified in “Deferred charges and other assets-other” and current liabilities are classified in “Current Assets-Other” on Washington Gas’ balance sheets. Refer to Note 10 — Pension and Other Post-Retirement Benefits for a further discussion of the rabbi trusts.

~~Restricted~~Receivables ~~cash~~ and ~~cash~~Allowance equivalents represent funds that are restricted to satisfy designated liabilities. Restricted cash and cash equivalents available to satisfy designated current liabilities are classified as current assets. Restricted cash and cash equivalents expected to satisfy non-current liabilities are classified as non-current assets. Pursuant to the Merger Agreement with AltaGas, we funded rabbi trusts of retirement benefits for ~~executives~~Doubtful and select management employees and deferred compensation benefits for outside directors in the fiscal year ended September 30, 2018. At December 31, 2019 and 2018, the rabbi trust funds are invested in money market funds which are considered as cash equivalents. The rabbi trust funds that are used for the settlement of benefit plans in long-term liabilities are classified in “Deferred charges and other assets-other”. The rabbi trust funds to settle benefit plans in current liabilities are classified in “Current Assets-Other” on Washington Gas’ balance sheet. Refer to Note 10 — Pension and Other Post-Retirement Benefits for a further discussion of the rabbi trusts and Note 18 — Supplemental Cash Flow Information for a further discussion of restricted cash and cash equivalents.Accounts

~~Allowance~~Receivables ~~for~~on ~~Doubtful~~the ~~Accounts~~balance sheets include account receivables and unbilled revenues, including contract assets. Account receivables from contracts with customers, which consist of services to residential, commercial, industrial and other customers, were $238.2 million and $259.1 million at December 31, 2020 and 2019, respectively.

~~The allowance for doubtful accounts reflects~~ Washington Gas' ~~estimate~~accrues ofunbilled ~~losses~~revenues ~~inherent~~for ingas ~~its~~delivered, ~~account~~but ~~receivable~~not ~~balances.~~yet ~~Washington~~billed ~~Gas~~at ~~estimates~~the ~~its~~end ~~bad~~of ~~debt~~each ~~expense~~accounting ~~based~~period ondue ~~current~~to ~~sales~~our ~~and~~customer ~~establishes~~billing ~~the allowance~~cycles. ~~Periodically,~~ ~~Washington~~Unbilled ~~Gas~~revenues ~~evaluates~~represent ~~the~~performance ~~reasonableness~~obligations ofthat ~~the~~have ~~allowance~~been ~~utilizing~~satisfied aand ~~variety~~to ofwhich ~~factors~~Washington ~~including~~Gas ~~the~~has ~~length~~an ofunconditional ~~time~~right ~~receivables~~to ~~are past due~~payment, ~~the~~except ~~financial~~for ~~health~~contract ofassets ~~its~~related ~~customers,~~to ~~unusual~~Washington ~~macroeconomic~~Gas’ ~~conditions~~area-wide contract, ~~and~~which ~~historical~~requires ~~payment~~project ~~and~~acceptance ~~collection~~by ~~experience.~~the Iffederal ~~the~~government ~~financial~~for ~~condition~~the ofright ~~its~~to ~~customers~~payment ~~deteriorates~~to oroccur. ~~other~~Total ~~circumstances~~unbilled ~~occur~~revenues ~~that~~and ~~impact~~contract ~~the~~assets ~~customers’~~were ~~ability~~$128.8 million orand ~~desire~~$160.5 million toat ~~make~~December ~~payments~~31, ~~Washington~~2020 ~~Gas~~and ~~considers~~2019, ~~these~~respectively, ~~factors~~were included in ~~its~~"Receivables" ~~evaluation~~on ofWashington ~~the~~Gas' ~~adequacy~~balance ofsheets. ~~the~~Refer ~~allowance.~~to ~~Accounts~~Note ~~are~~3 ~~written~~— ~~off~~Revenue tofrom ~~the~~Contracts ~~allowance~~with ~~when~~Customers ~~collection~~for ~~efforts~~further ~~are~~discussion ~~complete~~on ~~and~~unbilled ~~future~~revenue ~~recovery~~and iscontract ~~unlikely~~assets.

~~Leases~~ 53

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

~~Lessee.~~Receivables ~~We determine if an arrangement is a lease and the lease classification at inception. For the operating leases in which we~~ are ~~the~~recorded ~~lessee,~~net ~~a right-~~of~~-use~~ ~~(ROU)~~allowance ~~asset~~for ~~and~~doubtful aaccounts. ~~lease~~Washington ~~liability~~Gas isestimates ~~recognized~~its atbad ~~the~~debt ~~commencement~~expense ~~date~~ based on ~~the~~current ~~present~~sales ~~value~~and ofestablishes ~~lease payments over~~ the ~~lease term~~allowance. Periodically, WeWashington ~~use~~Gas ~~the~~evaluates ~~rate implicit in~~ the ~~lease~~reasonableness ~~to determine the present value~~ of the ~~lease~~allowance ~~payments~~utilizing ~~when~~a ~~the~~variety ~~rate~~of isfactors ~~readily~~including ~~determinable~~historical orpayment weand ~~use~~collection ~~our~~experience, ~~incremental~~current ~~borrowing~~economic ~~rate. Our ROU assets are adjusted for lease incentives~~conditions, ~~any~~receivable ~~lease payments made in advance~~aging, and ~~initial~~the ~~direct~~financial ~~costs~~health ~~incurred.~~of ~~Lease~~its ~~expenses~~customers. ~~are~~If ~~recognized on a straight-line basis over~~ the ~~lease~~financial ~~term.~~condition ~~The~~of ~~estimated~~its ~~lease~~customers ~~terms~~deteriorates ~~may~~or ~~include~~other ~~options~~circumstances tooccur ~~extend~~that orimpact ~~terminate~~ the ~~lease~~customers’ ~~when~~ability itor isdesire ~~reasonably~~to ~~certain~~make ~~that~~payments, weWashington ~~will~~Gas ~~exercise~~considers ~~that~~these ~~option.~~factors ~~For~~in ~~our~~its ~~lessee~~evaluation ~~building~~of ~~and~~the ~~certain~~adequacy ~~equipment~~of ~~leases, we do not separate~~ the ~~lease and non-lease components~~allowance. ~~Variable~~Accounts ~~lease payments~~ are ~~recognized~~written asoff ~~lease~~to ~~expense~~the allowance when ~~the~~collection ~~related~~efforts ~~facts~~are complete and ~~circumstances~~future ~~occur,~~recovery ~~and~~is ~~are~~unlikely. ~~dependent~~Refer onto ~~various~~Note ~~external~~2 ~~factors,~~— ~~including~~Credit ~~real~~Losses ~~estate~~for ~~taxes,~~further ~~common~~discussion ~~area~~of ~~maintenance~~allowance ~~and~~for ~~usage~~doubtful ~~charges~~accounts.

Regulatory Assets and Liabilities

Washington Gas accounts for its regulated operations in accordance with ASC Topic 980, Regulated Operations (ASC Topic 980), which results in differences in the application of GAAP between regulated and unregulated businesses. ASC Topic 980 requires recording regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue in unregulated businesses. Washington Gas defers the recognition of an incurred cost and records a regulatory asset when it is probable that these costs will be recovered in future rates. Washington Gas defers the recognition of revenue and records a regulatory liability when it is probable that it will refund an amount previously collected from customers or refund a gain to customers. Additionally, Washington Gas records a regulatory liability when a regulator provides current rates intended to recover costs that will be incurred in the future. Future regulatory changes or changes in the competitive environment could result in WGL discontinuing the application of ASC Topic 980 for some of its business and require the write-off of the portion of any regulatory asset or liability for which recovery or refund is no longer probable. If Washington Gas were required to discontinue the application of ASC Topic 980 for any of its operations, it would record a non-cash charge or credit to income for the net book value of its regulatory assets and liabilities. Other adjustments might also be required.

The current regulatory environment and Washington Gas’ specific facts and circumstances support both the continued application of ASC Topic 980 for our regulatory activities and the conclusion that all of our regulatory assets and liabilities as of December 31, 2020 are recoverable or refundable through rates charged to customers. See Note 5 — Regulated Operations for further discussion of our regulated operations.

Leases

We determine if an arrangement is a lease and the lease classification at inception. Washington Gas has operating leases for our corporate headquarters and other corporate offices, communication tower space, and certain office equipment. Operating leases are included in "Operating lease right-of-use (ROU) assets", "Current liabilities-Operating lease liability", and "Deferred credits-Operating lease liability". The Company also has leases of vehicles which are classified as finance leases. Finance leases are included in "Property, Plant and Equipment", "Current liabilities-Other", and "Long -term debt" on the balance sheets.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. For the operating leases in which we are the lessee, a ROU asset and lease liabilities are 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. The Company 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 or less at the commencement date, including extension options that are reasonably certain of being exercised, and do not include an option to purchase the underlying asset.

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.~~The WeCompany ~~determine~~also ifhas anlessor ~~arrangement~~leases isfor aland, ~~lease~~office space and ~~the~~communication ~~lease~~tower ~~classification~~space atthat ~~inception~~are classified as operating leases. 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 II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

Revenue and Cost of Gas Recognition

Revenues. Washington Gas generally recognizes revenue from contracts with customers when natural gas is delivered. Washington Gas reads meters and bills customers on a 19-day monthly cycle basis. The billing cycles for customers do not coincide with the accounting periods used for financial reporting purposes; therefore, Washington Gas accrues unbilled revenues for gas delivered, but not yet billed, at the end of each accounting period. Refer to Note 23 — Revenue from Contracts with Customers for further discussion of the Utility’s revenue from contracts with customers.

Alternative Revenue Programs. Certain ratemaking mechanisms of Washington Gas qualify as alternative revenue programs in accordance with ASC Topic 980, ~~Regulated Operations,~~ if (i) the program is established by an order from a regulatory commission and allows for automatic adjustment of future rates, (ii) additional program revenues (above those amounts currently reflected in base rates) are objectively determinable and probable of recovery, and (iii) the collection of the additional revenues is allowed within 24 months of the end of the period in which they were recognized. The Company has determined that its RNA, WNA and CRA billing adjustment mechanisms and APRPs are alternative revenue programs. Alternative revenue program revenues represent the initial recognition of revenue related to these programs. When amounts are billed and collected from customers through rates, the amounts are recorded as a recovery of the associated regulatory asset or liability.

Cost of Gas. Washington Gas’ jurisdictional tariffs contain mechanisms that provide for the recovery of the cost of gas incurred on behalf of firm customers, including related pipeline transportation and storage capacity charges. Under these mechanisms, Washington Gas periodically adjusts its firm customers’ rates to reflect increases and decreases in these costs. Under or over-collections of gas costs in the current cycle are charged or credited to deferred charges or credits on the balance sheet as non-current regulatory assets or liabilities. Amounts deferred at the end of the cycle, August 31 of each year, are fully reconciled and transferred to current assets or liabilities under the balance sheet captions “Gas costs and other regulatory assets” and “Gas costs and other regulatory liabilities.” These balances are recovered or refunded to customers over the subsequent 12 month period.

Revenue Taxes. Revenue taxes such as gross receipts taxes, regulatory fees, franchise fees and energy taxes are reported gross in operating revenues. During the calendar ~~year~~years ended December 31, 2020 and 2019, the three months ended December 31, 2018, and ~~for~~ fiscal ~~years~~year ended September 30, 2018, ~~and~~$77.5 ~~2017~~million, $81.8 million, $24.2 million, and $82.5 million, ~~and $75.1 million,~~ respectively, were recorded to "Operating revenues" of Washington Gas' statements of operations.

Transportation Gas Imbalance. Interruptible shippers and third-party marketer shippers transport gas to Washington Gas’ distribution system as part of the unbundled services offered. The delivered volumes of gas from third-party shippers into Washington Gas’ distribution system rarely equal the volumes billed to third-party marketer customers, resulting in transportation gas imbalances. These imbalances are usually short-term in duration, and Washington Gas monitors the activity and regularly notifies the shippers when their accounts have an imbalance. In accordance with regulatory treatment, Washington Gas does not record a receivable from or liability to third-party marketers associated with gas volumes related to these transportation imbalances but, rather, reflects the financial impact as a regulatory asset or liability related to its gas cost adjustment mechanism, thereby eliminating any profit or loss that would occur because of the imbalance. The regulatory treatment combines the imbalance for all marketers, including our affiliate WGL Energy Services, into a single “net” adjustment to the regulatory asset or liability. Refer to Note 16 — Related Party Transactions for further discussion of the accounting for these imbalance transactions.

46Asset Optimization Program. Washington Gas optimizes the value of its long-term natural gas transportation and storage capacity resources by entering into physical and financial transactions in the form of forwards, futures and option contracts for periods when these resources are not being used to physically serve utility customers. Refer to “Derivative Activities” below for further discussion of the accounting for derivative transactions entered into under this program. Regulatory sharing mechanisms in all three jurisdictions outline how the profits from these transactions should be shared with Washington Gas’ customers.

All unrealized fair value gains and losses, and margins generated from the physical and financial settlement of these asset optimization contracts are recorded in "Utility cost of gas" on the statements of operations or, in the case of amounts to be shared with rate payers, regulatory assets/liabilities on the balance sheets.

Materials, Supplies and Storage Gas

Washington Gas values materials, supplies and storage gas using a weighted-average cost method. These materials, supplies and storage gas are carried at the lower of weighted-average cost or net realizable value. Interim period inventory losses attributable to lower of cost or net realizable value adjustments may be reversed if the net realizable value of the inventory is recovered by the end of the same year. In general, commodity costs and variable transportation costs are capitalized as gas in underground storage. Fixed costs, primarily pipeline demand charges and storage charges, are expensed as incurred through the cost of gas.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

~~adjustment~~Washington toGas ~~the~~did ~~regulatory~~not ~~asset~~record a material lower-of-cost or ~~liability.~~net ~~Refer~~realizable value adjustment to ~~Note~~net 16income —for ~~Related~~the ~~Party~~calendar ~~Transactions~~years ~~for~~ended ~~further~~December 31, ~~discussion~~2020 ofand 2019, the ~~accounting~~three ~~for~~months ~~these~~ended ~~imbalance~~December ~~transactions~~31, 2018, and fiscal year ended September 30, 2018.

Asset Optimization Program. Washington Gas optimizes the value of its long-term natural gas transportation and storage capacity resources by entering into physical and financial transactions in the form of forwards, futures and option contracts for periods when these resources are not being used to physically serve utility customers. Refer to “Derivative Activities” below for further discussion of the accounting for derivative transactions entered into under this program. Regulatory sharing mechanisms in all three jurisdictions outline how the profits from these transactions should be shared with Washington Gas’ customers.

All unrealized fair value gains and losses, and margins generated from the physical and financial settlement of these asset optimization contracts are recorded in "Utility cost of gas" on the income statement or, in the case of amounts to be shared with rate payers, regulatory assets/liabilities on the balance sheet.

Storage Gas

Prior to September 30, 2017, Washington Gas accounted for storage gas inventories using the first-in, first-out method under which the oldest inventory items were recorded as being sold first. Starting in October 1, 2017, Washington Gas implemented a voluntary change in the application of an accounting principle with respect to accounting for natural gas, propane, and odorant inventories. Washington Gas now applies the average cost methodology under which the cost of units carried in inventory is based on the weighted average cost per unit of inventory. Washington Gas implemented the change in accounting principle on a prospective basis in accordance with ASC Topic 980.

On October 1, 2017, Washington Gas adopted ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory. As a result of the new standard, beginning October 1, 2017, our inventory balances are stated at the lower of cost or net realizable value. Prior to October 1, 2017, our inventory balances were stated at the lower of cost or market. Interim period inventory losses attributable to lower of cost or net realizable value adjustments may be reversed if the net realizable value of the inventory is recovered by the end of the same year. In general, commodity costs and variable transportation costs are capitalized as gas in underground storage. Fixed costs, primarily pipeline demand charges and storage charges, are expensed as incurred through the cost of gas.

Washington Gas did not record a material lower-of-cost or net realizable value adjustment to net income for the calendar year ended December 31, 2019, three months ended December 31, 2018, and fiscal year September 30, 2018, or a lower-of-cost or market adjustment to net income for the fiscal year ended September 30, 2017.

Derivative Activities

Washington Gas enters into both physical and financial derivative contracts for the purchase and sale of natural gas that are subject to mark-to-market accounting. Changes in the fair value of derivative instruments which are recoverable or refundable to customers when they settle are subject to ASC Topic 980 and are recorded as regulatory assets or liabilities while changes in the fair value of derivative instruments not affected by rate regulation are reflected in earnings.

As part of its asset optimization program, Washington Gas enters into derivative contracts related to the sale and purchase of natural gas at a future price with the primary objective of securing operating margins that Washington Gas expects to ultimately realize. The fair value changes of derivatives used under this program may cause significant period-to-period volatility in earnings for the portion of net profits retained for shareholders; however, this earnings volatility will not change the realized margins that Washington Gas expects to earn. In accordance with ASC Topic 815, all financially and physically settled contracts under our asset optimization program are reported on a net basis in the statements of operations in “Utility cost of gas”.

Washington Gas historically utilized derivative instruments that are designed to minimize the risk of interest-rate volatility associated with planned issuances of long-term debt. Gains or losses associated with these derivative transactions are deferred as regulatory assets or liabilities and amortized to interest expense in accordance with regulatory accounting requirements. Refer to Note 14 — Derivatives for further discussion of our derivative activities.

Income Taxes

We recognize deferred income tax assets and liabilities for all temporary differences between the financial statement basis and the tax basis of assets and liabilities computed on a separate company basis. ~~Our deferred income taxes include those that are currently excluded for ratemaking purposes of Washington Gas.~~ Regulatory assets or liabilities, corresponding to such additional deferred income tax assets or liabilities, may be recorded to the extent recoverable from or payable to customers through the ratemaking process in future periods. Refer to Note 45 — Regulated Operations for Washington Gas’ regulatory assets and liabilities associated with income taxes due from and due to customers. Amounts applicable to income taxes due from and due to customers primarily represent differences between the financial statement basis and tax basis of net utility plant in service. Refer to Note 9 — Income Taxes which provides detailed financial information related to our income taxes.

47Stock-Based Compensation

We account for stock-based compensation expense in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC Topic 710, Compensation - General for certain awards that do not meet the definition of a stock-based award under ASC 718. All outstanding awards at December 31, 2020 and 2019 are liability-classified share-based awards.

We recognize stock-based compensation expense based on their fair value at the end of each reporting period. Compensation expense for awards subject to ASC 710 is recognized based on the probable outcome of the award at the end of each reporting period. For all awards, we estimate forfeitures over the requisite service period when recognizing compensation expense; these estimates are periodically adjusted to the extent to which actual forfeitures differ from such estimates. Refer to Note 11 — Stock-Based Compensation for further discussion of the accounting for our stock-based compensation plans.

Asset Retirement Obligations

Washington Gas accounts for its AROs in accordance with ASC Subtopic 410-20, Asset Retirement and Environmental Obligations—Asset Retirement Obligations. Our AROs include the costs to cut, purge and cap Washington Gas' distribution and transmission system. These standards require recording the estimated retirement cost over the life of the related asset by depreciating the present value of the retirement obligation, measured at the time of the asset’s acquisition, and accreting the liability until it is settled. There are timing differences between the ARO-related accretion and depreciation amounts being recorded pursuant to GAAP and the recognition of depreciation expense for legal asset removal costs that we are currently recovering in rates. These timing differences are recorded as a reduction to “Regulatory liabilities — Accrued asset removal costs” in accordance with ASC Topic 980. We do not have any assets that are legally restricted related to the settlement of asset retirement obligations.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

from and due to customers primarily represent differences between the financial statement basis and tax basis of net utility plant in service. Refer to Note 9 — Income Taxes which provides detailed financial information related to our income taxes.


Changes in Asset Retirement Obligations
(In millions)	Calendar Years Ended December 31,				Three Months Ended December 31,		Fiscal Year Ended September 30,
	2020		2019		2018		2018
Asset retirement obligations at beginning of the period	$	211.6	$	308.1	$	305.5	$	298.9
Liabilities incurred in the period	1.7		1.7		—		1.4
Revaluation of asset retirement obligation	—		(101.0)		—		—
Liabilities settled in the period	(4.8)		(7.4)		—		(7.3)
Accretion expense	8.7		10.2		2.6		12.5

Asset retirement obligations at the end of the period(a)	$	217.2	$	211.6	$	308.1	$	305.5

~~Stock~~(a) Includes short-~~Based~~term ~~Compensation~~asset retirement obligations of $5.0 million, $4.8 million, $7.3 million and $7.3 million for calendar years ended December 31, 2020 and 2019, the three months ended December 31, 2018, and fiscal year ended September 30, 2018, respectively.

WeDividend account for stock-based compensation expense in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC Topic 710, Compensation - General for certain awards that do not meet the definition of a stock-based award under ASC 718. All outstanding awards at December 31, 2019 and 2018 are liability-classified share-based awards.Restrictions

WeGenerally, ~~recognize~~Washington ~~stock-based~~Gas ~~compensation~~can ~~expense~~make ~~based~~dividend onpayments ~~their~~in ~~fair~~the ~~value~~ordinary atcourse ~~the~~of ~~end~~business unless any of ~~each~~the ~~reporting~~following ~~period.~~regulatory ~~Compensation~~limitations ~~expense~~apply: ~~for~~(i) ~~awards~~Washington ~~subject~~Gas will not pay extraordinary dividends to ~~ASC~~its ~~710~~parent isfor ~~recognized~~three ~~based~~years onafter the ~~probable~~Merger ~~outcome~~Close, of(ii) ~~the~~Washington ~~award~~Gas atwill ~~the~~not ~~end~~pay ofdividends ~~each~~to ~~reporting~~its ~~period.~~parent ~~For~~company ~~all~~if ~~awards,~~Washington weGas' ~~estimate~~senior ~~forfeitures~~unsecured ~~over~~debt ~~the~~rating ~~requisite~~is ~~service~~below ~~period~~investment ~~when~~grade ~~recognizing~~or ~~compensation~~(iii) ~~expense;~~Washington ~~these~~Gas ~~estimates~~will ~~are~~not ~~periodically~~make ~~adjusted~~a dividend payment to its parent company if the ~~extent~~payment would result in its equity level to ~~which~~drop ~~actual~~below ~~forfeitures~~48%, ~~differ~~We ~~from~~had ~~such~~no ~~estimates.~~significant ~~Refer~~restrictions toon ~~Note~~our 11cash —balances ~~Stock-Based~~or ~~Compensation~~retained ~~for~~earnings ~~further~~that ~~discussion~~would ofaffect the ~~accounting~~payment ~~for~~of ~~our~~dividends ~~stock-based~~during ~~compensation~~the ~~plans~~reported periods.

~~Asset Retirement Obligations~~57

Washington Gas accounts for its AROs in accordance with ASC Subtopic 410-20, Asset Retirement and Environmental Obligations—Asset Retirement Obligations. Our AROs include the costs to cut, purge and cap Washington Gas' distribution and transmission system. These standards require recording the estimated retirement cost over the life of the related asset by depreciating the present value of the retirement obligation, measured at the time of the asset’s acquisition, and accreting the liability until it is settled. There are timing differences between the ARO-related accretion and depreciation amounts being recorded pursuant to GAAP and the recognition of depreciation expense for legal asset removal costs that we are currently recovering in rates. These timing differences are recorded as a reduction to “Regulatory liabilities—Accrued asset removal costs” in accordance with ASC Topic 980. We do not have any assets that are legally restricted related to the settlement of asset retirement obligations.

Changes in Asset Retirement Obligations
	Calendar Year Ended December 31,			Three MonthsEnded December 31,		Fiscal Year Ended September 30,
(In millions)	2019			2018		2018			2017
Asset retirement obligations at beginning of the period	$	308.1		$	305.5	$	298.9		$	206.6
Liabilities incurred in the period	1.7			—		1.4			2.0
Revaluation of asset retirement obligation	(101.0		)	—		—			89.5
Liabilities settled in the period	(7.4		)	—		(7.3		)	(7.2		)
Accretion expense	10.2			2.6		12.5			8.0
Asset retirement obligations at the end of the period(a)	$	211.6		$	308.1	$	305.5		$	298.9

(a)Includes short-term asset retirement obligations of $4.8 million, $7.3 million, $7.3 million and $7.1 million for calendar year ended December 31, 2019, three months ended December 31, 2018, and fiscal years ended September 30, 2018 and 2017, respectively.

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 calendar year ended December 31, 2019, and other newly issued accounting standards that will be adopted by Washington Gas in the future.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

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 Topic 840, Leases. Washington Gas has also elected to present prior comparative information under ASC Topic 840. See Note 3 — Leases for further information and the new required lease disclosures.

Accounting Standards Adopted in the Calendar Year 2020 and Other Newly Issued Accounting Standards

The following tables represent accounting standards adopted by Washington Gas during the calendar year ended December 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.

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 doubtful accounts 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.

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.

ASU 2019-04, Codification Improvements to Topic 326, Financial
Instruments—Credit Losses, Topic 815, Derivatives and
Hedging, 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 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.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

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 adoption of this ASU did not have an impact to our financial statements. 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.

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 have updated certain disclosures following the requirements in Note 10 - Pension and Other Post- retirement Benefit Plans.

OTHER NEWLY ISSUED ACCOUNTING STANDARDS

Standard

Description

Required date of adoption

Effect on the financial statements or other significant matters

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

It is not expected that the adoption of this standard will have a material effect 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 have not yet elected to adopt this ASU as of December 31, 2020 and are assessing the impact the adoption of this standard will have on our financial statements.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 2. CREDIT LOSSES

OTHER NEWLY ISSUED ACCOUNTING STANDARDS
Standard	Description	Required 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, trade accounts receivable, unbilled revenue, and contract assets are within the scope of the new standard. We will make a one-time election to measure our cash equivalents at fair value. We analyzed our current methodology to recognize estimated credit losses and we will be making adjustments to our current methodology at adoption to meet the requirements of the new standard. These changes are not expected to 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 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	It is not expected that the 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	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.	January 1, 2021	We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.

On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) model. The measurement of expected credit losses under the CECL model is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures. The CECL model requires the expected credit losses to consider past events, including historical experience, current conditions and reasonable and supportable forecasts. When measuring credit losses, financial assets with similar risk characteristics should be pooled, and credit losses should be recognized over the contractual term of the financial asset. 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.

51Our assessment concluded that our cash equivalents, accounts receivables, unbilled revenue, contract assets, and a long term receivable from one of our trading partners that is part of a collaborative arrangement are within scope of the new standard. We adopted the standard using a modified-retrospective approach through a cumulative-effect adjustment to retained earnings at January 1, 2020. Prior periods presented for comparative purposes are not adjusted. Upon implementation of ASU 2016-13, we recorded a $1.5 million increase to the Company's allowance for doubtful accounts and a decrease to retained earnings, including a $1.4 million increase to allowance for doubtful account associated with utility customer receivables and a $0.1 million reduction to “Deferred charges and other assets-Other” associated with a long-term receivable from a trading partner under Washington Gas' asset optimization programs. Washington Gas also elected to account for its cash equivalents at fair value.

Customer Receivables: Washington Gas is exposed to customer credit risk resulting from the non-payment of utility bills. To manage this customer credit risk, Washington Gas customers are offered budget billing options or higher risk customers may be required to provide a cash deposit until the requirement for deposit refunds are met. Washington Gas can recover a portion of non-payments from customers in future periods through the rate-setting process. For accounts receivable and unbilled revenue generated by the utility business, an allowance for doubtful accounts is recognized using a historical loss-rate based on historical payment and collection experience. This rate may be adjusted based on management’s expectations of unusual macroeconomic conditions and other factors. Washington Gas regularly evaluates the reasonableness of the allowance based on a combination of factors, such as the length of time receivables are past due, historical expected payment, collection experience, financial condition of customers, and other circumstances that could impact customers' ability or desire to make payments.

Based on previous collection experience, Washington Gas has not recorded an allowance for doubtful accounts for its contract assets associated with our energy management services projects with the federal government. Refer to Note 16 — Related Party Transactions for further information.

Washington Gas Asset Optimization: Washington Gas 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 credit, 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 Washington Gas 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.

Washington Gas also has a long-term receivable from a trading partner totaling $1.5 million in “Deferred charges and other assets — Other”, of which no portion of the balance is past due. The trading partner was evaluated and assigned an internal credit rating in accordance with our credit policy. An allowance for doubtful accounts is 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. Estimated credit loss reserve was recorded as a reduction to “Deferred charges and other assets — Other”.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

COVID-19: The COVID-19 pandemic has resulted in widespread challenges to businesses and the job market in 2020. The increased unemployment rates has impacted the ability of the Company’s ~~adopted~~customers ~~ASU~~to ~~2014~~pay for services. As a result of regulatory orders, we temporarily suspended customer disconnections for non-09payment, ~~Revenue~~temporarily ~~from~~suspended ~~Contracts~~collection ~~with~~activities ~~Customers~~and ~~(ASC~~temporarily ~~606)~~waived assessing and ~~subsequent~~billing ~~ASUs~~late ~~clarifying~~payment fees. While the ~~guidance~~suspension onof ~~October~~disconnections 1,has ~~2018,~~been ~~using~~lifted in Maryland for non-residential customers in the ~~modified~~fourth ~~retrospective~~quarter ~~method~~of 2020, the suspension in District of ~~adoption~~Columbia and Virginia continues. ~~Under~~We ~~this~~resumed ~~approach,~~assessing ~~prior~~late ~~year~~payment ~~results~~fees ~~are~~in ~~not~~Maryland ~~required~~in toOctober be2020 ~~restated~~following a regulatory order. ~~Adoption~~ The suspension of ~~this~~collection ~~standard~~activities ~~did~~has caused our overall accounts receivable portfolio to age more than historical levels. However, we do not ~~change~~expect the ~~timing~~increase orin ~~pattern~~credit losses to have a significant impact on net income. In addition, the PSC of ~~revenue~~DC, ~~recognition~~the PSC of MD and the SCC of VA each issued an Order authorizing Washington Gas to establish a ~~cumulative-effect~~regulatory ~~adjustment~~asset ~~was~~to ~~not~~capture ~~recorded~~and ~~upon~~track ~~adoption~~the incremental COVID-19 related costs. AsIn aDecember ~~result~~2020, ~~comparative~~Washington ~~disclosures~~Gas ~~for~~received ~~operating~~$7.7 ~~results~~million ~~for~~of ~~calendar~~Coronavirus ~~year~~Relief ~~2018~~Funds isfrom ~~not~~SCC ~~applicable~~of ~~because~~VA ~~implementing~~to provide direct assistance to Virginia customers with balances over 30 days in arrears. Virginia customers need to meet the ~~new~~criteria ~~standard~~established ~~did~~by ~~not~~the ~~change~~program to get the ~~timing~~fund. orAny ~~pattern~~unused offunds ~~revenue~~will ~~recognition~~be returned to SCC. Considering the Virginia Coronavirus Relief Funds, Washington Gas has recorded a total of $6.3 million in deferrals of incremental bad debt expense to COVID-19 regulatory assets across all three jurisdictions at December 31, 2020.

~~The~~As ~~Company~~of ~~recognizes~~December ~~revenue~~31, ~~from~~2020, ~~contracts~~we ~~with~~have ~~customers~~evaluated ~~to depict~~ the ~~transfer~~adequacy of ~~goods~~our orallowance ~~services~~for tocredit ~~customers~~losses atin anlight ~~amount~~of itthe ~~expects~~suspension toof beshut-offs ~~entitled to in exchange~~ for ~~those~~nonpayment ~~goods~~due ~~or services. Washington Gas sells natural gas and distribution services~~ to ~~residential,~~COVID-19 ~~commercial, industrial~~ and ~~governmental customers through regulated tariff rates approved by regulatory commissions in~~ the ~~jurisdictions~~economic ~~where it operates~~downturn. ~~Customers~~Our ~~are~~evaluation ~~billed~~included ~~monthly~~an ~~based~~analysis onof ~~regular~~customer ~~meter~~payment ~~readings.~~trends ~~Customer~~in ~~billings~~2020, ~~are~~economic ~~based~~conditions, onreceivables ~~two~~aging, ~~main components: (i) a fixed service fee~~ and ~~(ii)~~considerations aof ~~variable~~past ~~fee~~economic ~~based on usage. For customers who choose to purchase their natural gas from Washington Gas~~downturns, the ~~bill~~actions ~~will include a usage based charge for~~ the ~~cost~~company ~~of the commodity. Revenue~~ is ~~recognized~~taking ~~over~~to ~~time~~assist ascustomers ~~the~~with ~~natural~~past ~~gas~~due isbalances, ~~delivered~~and ~~or as~~ the ~~service~~corresponding isallowance ~~performed. As meter readings are performed on a cycle basis, Washington Gas recognizes accrued revenue~~ for ~~any~~credit ~~services~~losses ~~rendered~~and tocustomer ~~its~~account ~~customers but not billed at month~~write-~~end~~offs. ~~The~~In ~~tariff~~addition, ~~sales~~we ~~are~~considered ~~generally~~benefits ~~considered~~available ~~daily~~under orgovernment ~~“at~~COVID-~~will”~~19 ~~contracts~~relief asprograms. ~~customers~~Based ~~may~~on ~~cancel~~this ~~their~~evaluation, ~~service~~we athave ~~any~~concluded ~~time~~that ~~(subject to notification requirements in~~ the ~~tariff),~~allowance ~~and~~for ~~revenue~~credit ~~generally~~losses ~~represents~~as ~~the~~of ~~amount~~December ~~Washington~~31, ~~Gas~~2020 isadequately ~~entitled~~reflected tothe ~~invoice.~~collection ~~There~~risk ~~are~~and ~~certain~~net ~~contracts~~realizable ~~that~~value ~~have~~for ~~terms~~our ofreceivables. ~~one~~We ~~year~~will orcontinue ~~longer.~~to ~~For~~monitor ~~these~~changing ~~contracts,~~circumstances ~~revenue~~and iswill ~~recognized~~adjust ~~based~~our onallowance ~~the~~for ~~amount~~credit ~~Washington~~losses ~~Gas~~as isadditional ~~entitled~~information tobecomes ~~bill the customer~~available.

The following table presents the activity of allowance for doubtful accounts by types.



(In millions)	Calendar Year Ended December 31, 2020
		Account Receivables and Unbilled Revenue		Asset Optimization
Balance, beginning of period		$	18.7	$	—
Provision		15.7		—
Recorded to regulatory asset due to COVID-19		6.3		—
Write offs		(16.9)		—
Recoveries		2.1		—
Adjustment upon adoption of ASC 326		1.4		0.1
Balance, end of period		$	27.3	$	0.1

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company recognizes revenue from contracts with customers to depict the transfer 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, commercial, industrial and governmental customers through regulated tariff rates approved by regulatory commissions in the jurisdictions where it operates. Customers are billed monthly based on regular meter readings. Customer billings are based on two main components: (i) a fixed service fee and (ii) a variable fee based on usage. For customers who choose to purchase their natural gas from Washington Gas, the bill will include a usage-based charge for the cost of the commodity. Revenue is recognized over time as natural gas is delivered or as service is performed. Since meter readings are performed on a cycle basis, Washington Gas recognizes accrued revenue for any services rendered to its customers but not billed at month-end. 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 is entitled to invoice. There are certain contracts that have terms of one year or longer. For these contracts, revenue is recognized based on the amount Washington Gas is entitled to bill the customer.

Customers 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.

WeThe ~~disaggregate~~following table disaggregates revenue by type of service. ~~The following table disaggregates revenue~~ for the ~~calendar year ended December 31, 2019 and three months ended December 31, 2018:~~periods.

Disaggregated Revenue by Type of Service
Disaggregated Revenue by Type of Service (c)
(In millions)	~~Calendar Year Ended December 31, 2019~~		~~Three~~Calendar ~~Months~~Years Ended December 31, ~~2018~~				Three Months Ended December 31,
Revenue from contracts with customers
			2020		2019		2018
Gas and transportation sales
Revenue from contracts with customers
Gas sold and delivered	$	975.8	$	303.2
Gas and transportation sales
Gas delivered for others	270.7		74.3
Gas sold and delivered			$	856.0	$	975.8	$	303.2
Other	46.5		12.5
Gas delivered for others			265.0		270.7		74.3
Other revenues	5.6		1.5
Other			35.0		46.5		12.5
Total revenue from contracts with customers	$	1,298.6	$	391.5
Other revenues			3.4		5.6		1.5
Other sources of revenue
Total revenue from contracts with customers			$	1,159.4	$	1,298.6	$	391.5
Revenue from alternative revenue programs (a)	$	19.6	$	9.1
Other sources of revenue
Leasing revenue (b)	0.7		0.2
Revenue from alternative revenue programs (a)			$	69.8	$	19.6	$	9.1
Other	11.8		1.3
Other (b)			5.1		12.5		1.5
Total revenue from other sources	~~32.1~~		1074.69		32.1		10.6
Total Operating Revenue	$	~~1,330.7~~	$	~~402.~~1,234.3	$	1,330.7	$	402.1

(a) Washington Gas has determined that ~~the~~its ~~Utility's~~ RNA, WNA, and CRA billing adjustment mechanisms and ~~APRPs~~accelerated pipe replacement programs are alternative revenue programs and accounted for under ASC Topic 980.

(b) The ~~For~~amount ~~the~~includes ~~calendar~~late ~~year~~fees ~~ended December 31, 2019, revenue generated from Washington Gas lessor operating leases was accounted for under ASC Topic 842, Leases~~billed. ~~For~~The ~~the~~decreases ~~three months ended December 31, 2018, revenue generated~~ from ~~Washington~~prior ~~Gas~~periods ~~lessor~~were ~~operating~~primarily ~~leases~~caused ~~was~~by ~~accounted~~not ~~for~~billing ~~under~~of ~~ASC~~late ~~Topic~~payment ~~840,~~fees ~~Leases.~~due ~~See~~to ~~Note~~COVID-19 3as —required ~~Leases~~by ~~for~~regulatory ~~further information on leases~~orders.

52c) The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606), on October 1, 2018, using the modified retrospective method of adoption. Under this approach, prior year results are not required to be restated.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

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 of $112.7 “million and $116.3 million are included within "Receivables" on Washington Gas' balance sheets at December 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 the federal government for the right to payment to occur. ~~At December 31, 2019 and 2018, contract assets of $44.2 million and $85.3 million, respectively, have been recorded for financed projects within “Unbilled revenues” on the balance sheets.~~ Washington Gas did not have any contract liabilities at December 31, ~~2019~~2020 and ~~2018~~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.

OnThe ~~January 1, 2019, the Company adopted ASU 2016-02, Leases (ASC Topic 842) and the~~ following ~~subsequent~~table ~~ASUs~~shows ~~which amended~~ the ~~guidance:~~opening ~~ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-10, Codification Improvements,~~ and ~~ASU 2018-11,~~closing ~~Leases~~balances ~~Targeted~~of ~~Improvements,~~contract ~~and~~assets ~~ASU~~from ~~2018-20,~~contracts ~~Narrow-Scope~~with ~~Improvements~~customers for ~~Lessors. The new leasing standard requires lessees to recognize a ROU asset and lease liability for leases classified as an operating lease. The significant effects of adopting this standard and~~ the ~~qualitative~~reporting ~~and quantitative disclosures required to enable users of the financial statements to assess the amount~~periods, ~~timing,~~which ~~and~~were ~~uncertainty of cash flows arising from leases are~~ included inwithin ~~Note~~"Receivables" 1on —Washington ~~Accounting~~Gas' ~~Policies~~balance ~~and below~~sheets.

Adoption of the new standard had a material impact on our balance sheets but did not have a material impact on our statements of operations. On January 1, 2019, the Company recorded ROU assets of $43.2 million (net of lease incentives and prepaid or deferred rent of $15.7 million), current lease liability of $2.8 million and non-current lease liability of $56.1 million related to our operating leases. The Company currently does not have finance leases. We elected to implement the new leasing standard retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. Under this approach, prior year results are not required to be restated and disclosures associated with prior periods are reported under ASC Topic 840.


(In millions)	2020		2019
Contract assets at January 1	$	44.2	$	85.3
Contract assets at December 31	16.1		$	44.2
Increase (decrease) in contract assets (a)	$	(28.1)	$	(41.1)

(a) Decrease in 2020 reflected projects accepted by federal government, offset to the contact asset was a reduction to "Payable to associated companies"; Decrease in 2019 was due to the sale of the contract asset. Refer to "Project financing" in Note 16 — Related party transactions for detail discussion.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 4. LEASES

We adopted ASU 2016-02, Leases (ASC 842) and associated standards on January 1, 2019 and elected to implement this new lease standard retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. Under this approach, prior year results are not required to be restated and disclosures associated with prior periods are reported under ASC 840.

Lessee Leases

~~The~~Washington ~~Company~~Gas ~~elected~~has tooperating ~~use~~leases ~~the~~for ~~transition~~our ~~practical~~corporate ~~expedient~~headquarters ~~which~~and ~~allows~~other ancorporate ~~entity~~offices, ~~not~~communication totower ~~reassess~~space, ~~whether~~and ~~any~~certain ~~expired~~office orequipment. ~~existing~~The ~~contracts~~Company ~~are,~~also orhas ~~contain,~~finance leases; ~~the lease classification~~ for ~~any~~vehicles. ~~expired~~Our ~~or existing~~ leases; ~~and~~have ~~the~~remaining ~~initial~~lease ~~direct~~terms ~~costs~~from ~~for~~1 ~~any~~to ~~existing~~21 ~~leases~~years. ~~The~~Some ~~practical~~of ~~expedient~~the ~~also~~leases ~~allows~~include anoptions ~~entity not~~ to ~~reassess~~extend ~~whether~~the ~~existing~~lease orterms ~~expired~~for ~~land~~1 ~~easements~~to ~~that~~5 ~~were~~years ~~not~~with ~~previously~~prior ~~accounted~~written ~~for~~notice asor aautomatically ~~lease~~renew ~~under~~if ~~ASC~~either ~~Topic~~party ~~840~~does ~~was also elected. The Company elected~~ not toprovide ~~separate~~intent ~~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~~terminate. ~~Short-term~~The leases ~~are~~generally ~~defined~~have asoptions ~~leases~~to terminate with anotice ~~term~~prior ofto ~~12 months or less at~~ the ~~commencement~~end ~~date, including extension options that are reasonably certain~~ of ~~being~~the ~~exercised,~~lease ~~and~~term dobased ~~not~~on ~~include~~the ancontract ~~option~~terms. Refer to ~~purchase~~Note ~~the~~16 ~~underlying~~— ~~asset.~~Related ~~Short-term~~Party ~~lease~~Transactions ~~costs~~ for ~~the~~discussion ~~period~~of ~~were~~leases ~~not~~with ~~material~~associated companies.

The following table provides our expected operating and finance lease payments at December 31, 2020.

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 16 — Related Party Transactions for discussion of leases with associated companies.


Maturity of Operating and Finance Lease Liabilities
(In millions)	Operating Leases		Finance Leases
2021	$	5.8	$	0.1
2022	5.7		0.1
2023	5.8		0.1
2024	5.9		0.1
2025	5.4		0.1
Thereafter	41.2		—
Total lease payments	$	69.8	$	0.5
Less: Interest	(13.2)		—
Present Value of Lease Liabilities	$	56.6	$	0.5

The following table provides the components of lease expense.

Maturity of Operating Lease Liabilities
Components of Lease Expense (b)
(In millions)	~~December 31, 2019~~		Calendar Years Ended December 31,
~~2020~~	$	~~6.0~~	2020		2019
2021	5.6
Operating lease cost (a)
2022	5.5
Rent expense			$	5.3	$	5.2
2023	5.5
Variable lease cost			$	1.9	$	1.9
2024	5.6
Total Operating lease cost			$	7.2	$	7.1
Thereafter	46.3
Total lease payments	$	74.5
Less: Interest	(15.0		)
Present Value of Lease Liabilities	$	59.5

(a) Short-term lease cost for the periods was insignificant.

~~Rent~~(b) ~~expense~~Finance ~~for~~lease ~~the~~cost ~~calendar year ended December 31, 2019, three months ended December 31, 2018, and fiscal years ended September 30, 2018 and 2017~~ was $5insignificant.~~2 million, $0.6 million, $5.8 million and $5.3 million, respectively.~~

~~The~~Rent ~~following~~expense ~~table~~for ~~provides~~the ~~supplemental~~three ~~cash~~months ~~flow~~ended ~~information~~December ~~related~~31, to2018, ~~operating~~and ~~leases~~fiscal ~~for~~year ~~the~~ended ~~calendar~~September ~~year~~30, ~~ended~~2018 ~~December 31~~was $0.6 million and $5.8 million, ~~2019~~respectively.

5364

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

Supplemental Cash Flow Information Related to Operating Leases
($ in millions)	Calendar Year Ended December 31, 2019
Cash paid for amounts included in the lease liabilities in the operating cash flows	$	2.9
Operating lease cost (including variable lease costs of $1.9 million)	$	7.1
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1.5

The following table provides supplemental cash flow information related to operating and finance leases.

At December 31, 2019, the weighted average remaining lease term for operating leases was 13.3 years, and the weighted average discount rate was 3.32%.


Supplemental Cash Flow Information
	Calendar Years Ended December 31,
($ in millions)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities (a)
Operating cash flows from operating leases	$	6.2	$	2.9


Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	1.6	$	1.5
Finance leases	$	0.4	n/a

(a) Operating and financing cash flows from finance leases were insignificant.

The following table provides balance sheet location and amounts for finance leases, weighted average remaining lease term and weighted average discount rates for operating and finance leases.


Supplemental Balance Sheet Information for Finance Leases
($ in millions)	2020			2019
Finance leases
Property, plant and equipment, at original cost	$	0.4		n/a
Accumulated depreciation and amortization	$	—		n/a
Net property, plant and equipment	$	0.4		n/a
Current finance lease liability included in "Current liabilities-Other"	$	0.1		n/a
Non-current finance lease liability included in "Long-term Debt"	$	0.3		n/a
Weighted average remaining lease term
Operating leases	12.4 years			13.3 years
Finance leases	4.9 years			n/a
Weighted average discount rate
Operating leases	3.27		%	3.32	%
Finance leases	1.69		%	n/a

Lessor Leases

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 8180 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.

Maturity of Operating Lease Payments(a)
(In millions)	December 31, 2019
2020	$	0.9
2021	0.7
2022	0.7
2023	0.7
2024	0.6
Thereafter	57.8
Total lease payments	$	61.4

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

The following table summarizes the future operating lease payments to be received associated with these leases:


Maturity of Operating Lease Payments(a)
(In millions)	December 31, 2020
2021	$	1.1
2022	0.8
2023	0.8
2024	0.7
2025	0.6
Thereafter	57.3
Total lease payments	$	61.3

(a) The payments are presented on an undiscounted basis

The property, plant and equipment associated with these leases are not significant. The following table provides the operating lease income recognized for the periods.

The property, plant and equipment associated with these leases are not material. For information on the lease income recognized during the period, see the Disaggregated Revenue by Type of Service table in Note 2 — Revenue from Contracts with Customers.


Operating Lease Revenue Recognized
($ in millions)	Calendar Years Ended December 31,
($ in millions)	2020		2019
Leasing revenue included in Operating Revenue	$	0.7	$	0.7
Lease revenue included in Other income (expense) — net	$	0.4	$	0.4
Total	$	1.1	$	1.1

During the calendar ~~year~~years ended December 31, 2020 and 2019, Washington Gas did not record any impairments related to our leased assets.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 5. REGULATED OPERATIONS

Washington Gas accounts for its regulated operations in accordance with ASC Topic 980. This standard includes accounting principles for companies whose rates are determined by independent third-party regulators. When setting rates, regulators may require us to record expense in different periods than may be appropriate for unregulated enterprises. When this occurs, Washington Gas defers the associated costs as assets (regulatory assets) on its balance sheet and records them as expenses on its statements of operations as it collects the revenues designed to recover these costs through customers’ rates. Further, regulators can also impose liabilities upon a company for gains previously realized or for amounts previously collected from customers for expenses expected to be incurred in the future (regulatory liabilities).

When Washington Gas files a request with certain regulatory commissions to modify customers’ rates, it may be permitted to charge customers new rates, subject to refund, until the regulatory commission renders a final decision on the amount of the authorized change in rates. During this interim period, Washington Gas records a provision for a rate refund regulatory liability based on the difference between the amount it collects in rates and the amount it expects to recover from a final regulatory decision. Similarly, Washington Gas periodically records provisions for rate refunds related to other transactions. Actual results for these regulatory contingencies are often difficult to predict and could differ significantly from the estimates reflected in the financial statements. Refer to Note 13 — Commitments and Contingencies for further discussion of regulatory matters and related contingencies.

At December 31, 2019 and 2018, we recorded the following regulatory assets and liabilities on our balance sheets. These assets and liabilities will be recognized as revenues or expenses in future periods as they are reflected in customers’ rates.67

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

Regulatory Assets and Liabilities
	Regulatory Assets				Regulatory Liabilities
	December 31,				December 31,
(In millions)	2019		2018		2019		2018
Current:
Gas costs due from/to customers(a)	$	5.9	$	5.6	$	44.2	$	46.9
Interruptible sharing(a)	2.1		0.4		0.3		1.7
Revenue normalization mechanisms for Maryland and Virginia(a)	—		—		4.0		3.6
Accelerated replacement recovery mechanisms(l)	1.9		—		0.3		3.8
Rates subject to refund(c)	—		—		31.1		—
Tax Cuts and Jobs Act rate refunds(d)	—		—		25.5		19.2
Total current	$	9.9	$	6.0	$	105.4	$	75.2
Deferred:
Accrued asset removal costs(m)	$	—	$	—	$	254.4	$	264.6
Deferred gas costs(a)(b)	98.7		141.6		—		—
Pension and other post-retirement benefits
Deferred pension costs—trackers(e)	—		5.7		—		—
ASC Topic 715 unrecognized costs/income(a)(f)
Pensions	39.4		80.8		—		—
Other post-retirement benefits	—		—		199.7		121.3
Total pension and other post-retirement benefits	39.4		86.5		199.7		121.3
Other:
Income tax-related amounts due from/to customers(g)	26.0		41.6		400.6		427.2
Losses/gains on issuance and extinguishment of debt and interest-rate derivative instruments(a)(h)	13.9		15.0		1.2		1.3
Rights-of-way fees(a)	—		—		2.4		2.5
Business process outsourcing and related costs(a)	1.9		3.2		—		—
Non-retirement employee benefits(a)(i)	14.9		15.6		—		—
Deferred distribution integrity management (a)(j)	2.0		5.4		—		—
Recoverable portion of abandoned liquid natural gas facility(a)	2.3		2.7		—		—
Environmental response costs(a)(k)	7.0		5.8		—		—
Energy efficiency program-Maryland(n)	9.3		3.4		—		—
Other regulatory expenses	7.6		6.4		0.5		0.9
Total other	$	84.9	$	99.1	$	404.7	$	431.9
Total deferred	$	223.0	$	327.2	$	858.8	$	817.8
Total	$	232.9	$	333.2	$	964.2	$	893.0

At December 31, 2020 and 2019, we recorded the following regulatory assets and liabilities on our balance sheets. These assets and liabilities will be recognized as revenues or expenses in future periods as they are reflected in customers’ rates.

(a)Washington Gas does not earn its overall rate of return on these assets. Washington Gas is allowed to recover and required to pay, using short-term interest rates, the carrying costs related to billed gas costs due from and to its customers in the District of Columbia and Virginia jurisdictions.


Regulatory Assets and Liabilities
(In millions)	Regulatory Assets				Regulatory Liabilities
	December 31,				December 31,
	2020		2019		2020		2019
Current:
Gas costs due from/to customers(a)	$	10.9	$	5.9	$	47.3	$	44.2
Interruptible sharing(a)	0.7		2.1		1.0		0.3
Revenue normalization mechanisms for Maryland and Virginia(a)	15.1		—		—		4.0
Accelerated replacement recovery mechanisms(k)	4.7		1.9		0.3		0.3
Rates subject to refund(c)	—		—		—		31.1
Virginia Coronavirus Relief Fund(o)	—		—		7.7		—
Tax Cuts and Jobs Act rate refunds(d)	—		—		15.9		25.5
Total current	$	31.4	$	9.9	$	72.2	$	105.4
Deferred:
Accrued asset removal costs(l)	$	—	$	—	$	239.3	$	254.4
Deferred gas costs(a)(b)	109.0		98.7		—		—
Pension and other post-retirement benefits

ASC Topic 715 unrecognized costs/income(a)(e)
Pension (n)	3.9		44.1		—		—
Pension and other post-retirement benefits (n)	—		—		262.4		195.7
Total pension and other post-retirement benefits	3.9		44.1		262.4		195.7
Other:
Income tax-related amounts due from/to customers(f)	29.8		26.0		373.5		400.6
Losses/gains on issuance and extinguishment of debt and interest-rate derivative instruments(a)(g)	13.0		13.9		1.1		1.2
Rights-of-way fees(a)	—		—		1.6		2.4
Business process outsourcing and related costs(a)	0.6		1.9		—		—
Non-retirement employee benefits(a)(h)	16.5		14.9		—		—
Deferred distribution integrity management (a)(i)	0.7		2.0		—		—
Recoverable portion of abandoned liquid natural gas facility(a)	2.0		2.3		—		—
Environmental response costs(a)(j)	7.4		7.0		—		—
Energy efficiency program-Maryland(m)	14.3		9.3		—		—
COVID-19 related costs(p)	7.9		—		—		—

Other regulatory items	7.6		7.6		0.8		0.5
Total other	$	99.8	$	84.9	$	377.0	$	404.7
Total deferred	$	212.7	$	227.7	$	878.7	$	854.8
Total	$	244.1	$	237.6	$	950.9	$	960.2

(ba)~~Includes~~ ~~fair~~Washington ~~value~~Gas does not earn its overall rate of ~~derivatives~~return on these assets. Washington Gas is allowed to recover and required to pay, ~~which~~using ~~are~~short-term ~~not~~interest ~~included~~rates, the carrying costs related to billed gas costs due from and to its customers in ~~customer~~the ~~bills~~District ~~until~~of ~~settled~~Columbia and Virginia jurisdictions.

(cb )~~Represents~~ ~~estimated~~Includes ~~refunds~~fair value of derivatives, which are not included in customer bills until settled. The amounts also include $5.1 million and $4.7 million receivables related to sharing with our customers ~~billed~~associated with the Antero contract at aDecember ~~higher~~31, ~~rate~~2020 ~~during~~and ~~the~~2019, ~~interim~~respectively. ~~period~~Refer asto ~~part~~Note of13 ~~the~~— ~~2019~~Commitments ~~Virginia~~and ~~Rate~~Contingencies ~~Case~~for discussion about the Antero contract.

(dc) Represents ~~amounts~~estimated ~~accrued for future~~ refunds ~~due~~related to ~~the~~customers ~~Tax~~billed ~~Cuts~~at ~~and Jobs Act of 2017. For~~ a ~~further~~higher ~~discussion,~~rate ~~see~~during ~~"Rates~~the ~~and~~interim ~~Regulatory~~period ~~Matters"~~as ~~section~~part of ~~Management's Discussion Analysis and Note 9 — Income Taxes in~~ the ~~Notes~~2019 toVirginia ~~Financial~~Rate ~~Statements~~Case.

(ed)~~Relates~~ Represents amounts accrued for future refunds due to the ~~District~~Tax ofCuts ~~Columbia~~and ~~jurisdiction~~Jobs Act of 2017. ~~The~~For ~~amortization~~a further discussion, see "Rates and Regulatory Matters" section of ~~the~~Management's ~~regulatory~~Discussion ~~tracker~~Analysis ~~ended~~and Note 9 — Income Taxes in ~~2019~~the Notes to Financial Statements.

(fe) Refer to Note 10 — Pension and Other Post-Retirement Benefit Plans for a further discussion of these amounts.

(gf) This balance represents amounts due from customers for deferred tax liabilities related to tax benefits on deduction flowed directly to customers prior to the adoption of income tax normalization for ratemaking purposes and to tax rate changes including the latest reduction as a result of the Tax Act.

(hg) The losses or gains on the issuance and extinguishment of debt and interest-rate derivative instruments include unamortized balances from transactions executed in prior ~~fiscal~~ years. These transactions create gains and losses that are amortized over the remaining life of the debt as prescribed by regulatory accounting requirements.

(i)Represents the timing difference between the recognition of workers compensation and short-term disability costs in accordance with generally accepted accounting principles and the recovery of these costs through rates.68

(j)This balance represents amounts for deferred expenditures associated with Washington Gas’ Distribution Integrity Management Program (DIMP) in Virginia.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

(kh)~~This~~ Represents ~~balance~~the ~~represents~~timing ~~allowed~~difference ~~environmental~~between ~~remediation~~the ~~expenditures~~recognition atof ~~Washington~~workers ~~Gas~~compensation ~~sites~~and toshort-term bedisability ~~recovered~~costs ~~through~~in ~~rates~~accordance ~~for~~with ~~Maryland~~generally ~~and~~accepted ~~the~~accounting ~~District~~principles ofand ~~Columbia.~~the ~~The~~ recovery ~~period~~of isthese ~~over~~costs ~~several~~through ~~years~~rates.

(li)~~Balance~~ This balance represents amounts for deferred ~~over~~expenditures ~~collections or under collections of surcharges~~ associated with Washington Gas'’ ~~accelerated~~Distribution ~~pipeline~~Integrity ~~recovery~~Management ~~programs~~Program in(DIMP) ~~the District of Columbia, Maryland and Virginia compared the amounts reflected~~ in ~~revenues~~Virginia.

(mj)~~Refer~~ toThis ~~Note~~balance 1represents —allowed ~~Accounting~~environmental ~~Policies~~remediation expenditures at Washington Gas sites to be recovered through rates for aMaryland ~~further~~and ~~discussion~~the District of ~~these~~Columbia. ~~amounts~~The recovery period is over several years.

(nk) Balance represents amounts ~~for~~deferred ~~costs~~over ~~incurred~~collections or under collections of surcharges associated with Washington Gas' ~~participation~~accelerated inpipeline ~~the~~recovery ~~energy~~programs ~~conservation~~in ~~and~~the ~~efficiency~~District ~~program~~of ~~EmPOWER~~Columbia, in Maryland ~~that~~and ~~are~~Virginia ~~recovered~~compared ~~from~~the ~~customer~~amounts ~~over~~reflected ~~time~~in revenues.

As required by ASC Topic 980, Washington Gas monitors its regulatory and competitive environment to determine whether the recovery of its regulatory assets remains probable. If Washington Gas were to determine that recovery of these assets is no longer probable, it would write off the assets against earnings. We have determined that ASC Topic 980 continues to apply to our regulated operations. During the calendar year ended December 31, 2019, Washington Gas recorded a $2.0 million write down of the regulatory asset related to our distribution integrity management program based on the HE’s recommendations and Commission's Final Order related to Virginia rate case (l) Refer to Note 131 — ~~Commitments~~Accounting ~~and~~Policies ~~Contingencies~~ for a further discussion on the Virginia Rate case). During the three months ended December 31, 2018, Washington Gas recorded a $2.5 million write down to the regulatory asset associated with business process outsourcing costs, which was disallowed as a result of ~~the~~these ~~Maryland Rate Case~~amounts.

(m) Balance represents amounts for costs incurred associated with Washington Gas' participation in the energy conservation and efficiency program EmPOWER in Maryland that are recovered from customer over time.

(n) Regulatory assets and liabilities related to Pension and Other post-retirement benefits were adjusted due to the change in accounting principle we made during the third quarter of 2020. We retrospectively applied this change in accounting principle to all applicable prior period financial information presented herein as required. Refer to Note 1 — Accounting Policies for further discussion.

(o) Virginia Coronavirus Relief Funds received to provide direct assistance to Virginia customers with balance over 30 days in arrears.

(p) Regulatory assets established to capture and track the incremental COVID-19 related costs.

As required by ASC Topic 980, Washington Gas monitors its regulatory and competitive environment to determine whether the recovery of its regulatory assets remains probable. If Washington Gas were to determine that recovery of these assets is no longer probable, it would write off the assets against earnings. We have determined that ASC Topic 980 continues to apply to our regulated operations. During the calendar year ended December 31, 2019, Washington Gas recorded a $2.0 million write down of the regulatory asset related to our distribution integrity management program related to Virginia rate case. During the three months ended December 31, 2018, Washington Gas recorded a $2.5 million write down to the regulatory asset associated with business process outsourcing costs, which was disallowed as a result of the Maryland Rate Case.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 6. ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

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

(In millions)	~~December 31, 2019~~		December 31, 2020	~~December 31, 2018~~		December 31, 2019
Accounts payable—trade	$	154.3		$	228.9
Accounts payable — trade			$	201.2		$	154.3
Employee benefits and payroll accruals	~~39.2~~		22.3	~~28.0~~		39.2
Wages payable	~~22.2~~		19.5	~~22.6~~		22.2
Accrued interest	~~17.3~~		18.4	~~14.5~~		17.3
Other accrued liabilities	34.4			31.5
Other accrued liabilities (a)			31.1			34.4
Total	$	~~267.4~~	$	$292.5	~~325.5~~	$	267.4

~~Washington~~a) ~~Gas~~Amount ~~satisfies~~includes ~~the~~$12.5 ~~short-term~~million ~~financing~~and ~~requirements~~$11.7 ~~through~~million ~~the~~liability ~~sale~~associated ~~of commercial paper, financing arrangements~~ with ~~third-party lenders, or through bank borrowings. Due to~~ the ~~seasonal~~Antero ~~nature~~contract ofat ~~our operations~~December 31, ~~short-term~~2020 ~~financing~~and ~~requirements~~2019, ~~can vary significantly during the year~~respectively. ~~Revolving~~Refer ~~credit agreements are maintained~~ to ~~support~~Note ~~outstanding~~13 ~~commercial~~— ~~paper~~Commitments and toContingencies ~~permit~~for ~~short-term~~further ~~borrowing flexibility~~information. ~~The policy of Washington Gas is to maintain bank credit facilities in amounts equal to or greater than the expected maximum commercial paper position.~~

~~Credit Facility~~70

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. 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. If the long-term debt ratings were 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 Facility, the lowest level facility fee is 0.06% and the highest is 0.175%. The interest rate of loans made under the Credit Facility will be a fluctuating rate per annum that is set using certain parameters at the time each loan is made.

Washington Gas Light Company

Part II

Item 8. Financial Statements and Supplementary Data (continued)

Notes to Financial Statements

NOTE 7. SHORT-TERM DEBT

~~The~~Washington ~~following~~Gas issatisfies athe ~~summary~~short-term financing requirements through the sale of ~~committed~~commercial ~~credit~~paper, ~~available~~or atthrough ~~December 31~~bank borrowings. Due to the seasonal nature of our operations, ~~2019~~short-term financing requirements can vary significantly during the year. Revolving credit agreements are maintained to support outstanding commercial paper and ~~2018~~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.

Committed Credit Available
(In millions)	December 31, 2019	December 31, 2018
Committed credit agreements
Unsecured revolving credit facility	$450.0	$350.0
Less: Commercial Paper outstanding (a)	(400.0)	(296.0)
Net committed credit available	$50.0	$54.0
Weighted average interest rate	2.04%	2.93%

Credit Facility

The following is a summary of committed credit available at December 31, 2020 and 2019.

(a) The amount presents principal amount of commercial paper.

Filing Compare · WASHINGTON GAS LIGHT CO