UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~March 3031, ~~2020~~2021


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

Commission File Number: 0-49807

WASHINGTON GAS LIGHT COMPANY

(Exact name of Registrant as Specified in Its Charter)

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 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 [☑] 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 [☑] 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

☐

Accelerated Filer

☐

Non-Accelerated Filer

☑

Smaller Reporting Company

☐

Emerging growth company

☐

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

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

~~Securities~~As ~~registered~~of ~~pursuant~~April to29, ~~Section~~2021, ~~12(b)~~there were 46,479,536 shares of registrant common stock, $1 par value, outstanding. All of the ~~Act:~~outstanding ~~None~~shares of common stock are held by Wrangler SPE LLC, an indirect wholly owned subsidiary of AltaGas Ltd.

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

REDUCED DISCLOSURE FORMAT

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

Washington Gas Light Company

For the Quarter Ended ~~September~~March 3031, ~~2020~~2021

Table of Contents

PART I
Safe Harbor for Forward-Looking Statements		4
Item 1.	Financial Statements (Unaudited)
	Condensed Balance Sheets	6
	Condensed Statements of Operations	7
	Condensed Statements of Comprehensive Income	8
	Condensed Statements of Cash Flows	9
	Notes to Condensed Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4135
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5243
Item 4.	Controls and Procedures	5344
PART II. Other Information
Item 1.	Legal Proceedings	5445
Item 1A.	Risk Factors	5546
Item 4.	Mine Safety Disclosures	5747
Item 6.	Exhibits	5848
Signature		5949

(i)

Washington Gas Light Company

Part I-Financial Information

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

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

Certain matters discussed in this report, excluding historical information, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the outlook for earnings, dividends, revenues and other future financial business performance, strategies, financing plans, AltaGas' integration of us and other expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates,” “expects,” “anticipates,” “intends,” “believes,” “plans” and similar expressions, or future or conditional terms such as “will,” “should,” “would” and “could.” Forward-looking statements speak only as of the filing date of this report, and the registrant assumes no duty to update them. Factors that could cause actual results to differ materially from forward-looking statements or historical performance include those discussed in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020, and may include, but are not limited to the following:

•Impacts related to the COVID-19 global health pandemic, which poses challenges to the health and safety of the Company's personnel and the strength of communities it serves;

•increasing levels of political insecurity and civil unrest that could threaten Company property and personnel; hazards involved in the storage, transportation, moving, and marketing of hydrocarbon products;

•hazards involved in the storage, transportation, moving, and marketing of hydrocarbon products;

•leaks, mechanical problems, incidents, or other operational issues that could affect public safety and the reliability of Washington Gas’ distribution system;

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

•the availability of natural gas supply or an inability to obtain an adequate supply of gas to satisfy present and future demands;

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

•~~cyberattacks,~~the ~~including~~outcome ~~cyberterrorism,~~of ornew ~~other~~and ~~information~~existing ~~technology~~matters ~~security~~before ~~breaches~~courts, regulators, government agencies or ~~failures~~arbitrators;

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

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

•the inability to meet commitments under various orders and agreements associated with regulatory approvals for the 2018 merger between AltaGas and WGL (the Merger);

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

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

•securities class action suits and derivative suits;

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

•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;

Washington Gas Light Company

Part I-Financial Information

•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;

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

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

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

•strikes or work stoppages by unionized employees;

•changes in the costs of providing retirement plan benefits;

•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~~

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

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

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

Washington Gas Light Company

Condensed Balance Sheets (Unaudited)

Part I-Financial Information

Item 1-Financial Statements

	September 30, 2020		December 31, 2019
(In thousands)	March 31, 2021		December 31, 2020
(In thousands)			As Adjusted
ASSETS
Property, Plant and Equipment
At original cost	$	6,~~237~~408,~~537~~122	$	56,~~962~~363,~~866~~392
Accumulated depreciation and amortization	(1,~~656~~673,~~788~~419)		(1,~~579~~668,~~718~~491)
Net property, plant and equipment	4,~~580~~734,~~749~~703		4,~~383~~694,~~148~~901
Current Assets
Cash and cash equivalents	111,~~214~~056		~~17,069~~1
Receivables (net of allowance for doubtful accounts of $26,517 and $18,708, respectively)	210,649		400,891
Receivables (net of allowance for doubtful accounts of $32,401 and $27,283, respectively)	346,997		339,759
Gas costs and other regulatory assets	1820,~~643~~318		931,~~894~~376
Materials and supplies—principally at average cost	2019,~~682~~632		20,~~184~~389
Storage gas	7228,~~077~~971		8770,~~977~~582
Prepaid taxes	3017,~~479~~835		3423,~~576~~547
Other prepayments	1827,~~176~~289		3330,~~867~~980
Receivables from associated companies	84,~~920~~243		12128,~~421~~254
Derivatives	410,~~665~~605		65,~~553~~049
Other	72,~~666~~278		196,~~619~~836
Total current assets	~~393~~489,~~171~~224		~~643~~656,~~051~~773
Deferred Charges and Other Assets
Regulatory assets
Gas costs	6974,~~076~~174		98109,~~717~~034
Pension and other post-retirement benefits	392,~~966~~982		443,~~078~~880
Other	9997,~~267~~468		8499,~~886~~793
Prepaid post-retirement benefits	~~372~~435,~~307~~354		~~366~~433,~~508~~319
Right of use asset	38,963		40,004
Operating lease right of use asset	39,005		38,097
Derivatives	914,~~113~~788		1011,~~370~~263
Other	2719,~~805~~071		3022,~~620~~637
Total deferred charges and other assets	~~656~~682,~~497~~842		~~675~~718,~~183~~023
Total Assets	$	5,~~630~~906,~~417~~769	$	56,~~701~~069,~~382~~697
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholder’s equity	$	1,~~756~~965,~~332~~561	$	1,~~578~~855,~~592~~925
Long-term debt	1,~~431~~519,~~390~~986		1,~~430~~547,~~949~~202
Total capitalization	3,~~187~~485,~~722~~547		3,~~009~~403,~~541~~127
Current Liabilities
Notes payable	~~169,959~~—		~~299~~184,~~483~~953
Accounts payable and other accrued liabilities	~~216~~223,~~958~~245		~~267~~292,~~408~~454
Customer deposits and advance payments	3825,~~267~~558		4038,~~052~~743
Gas costs and other regulatory liabilities	3155,~~761~~491		~~105~~72,~~399~~197
Accrued taxes	2826,~~281~~668		2326,~~781~~637
Payables to associated companies	6332,~~176~~870		5729,~~923~~526
Operating lease liability	5,~~846~~886		5,~~850~~734
Derivatives	911,~~622~~641		47,~~069~~053
Other	346,~~196~~269		306,~~032~~543
Total current liabilities	~~598~~387,~~066~~628		~~833~~663,~~997~~840
Deferred Credits
Deferred income taxes	~~518~~695,~~208~~344		~~464~~656,~~717~~876
Accrued pensions and benefits	~~116~~62,~~299~~172		~~115~~65,~~837~~276
Asset retirement obligations	~~213~~214,~~265~~360		~~206~~212,~~820~~161
Regulatory liabilities
Accrued asset removal costs	~~242~~238,~~921~~713		~~254~~239,~~429~~259
Other post-retirement benefits	184,370		195,670
Pension and other post-retirement benefits	258,202		262,411
Excess deferred taxes and other	~~389~~374,972		~~404~~376,~~700~~975
Operating lease liability	5251,~~087~~443		5350,~~642~~894
Derivatives	7687,~~407~~624		9788,~~695~~559
Other	5150,~~100~~764		6450,~~334~~319
Total deferred credits	12,~~844~~033,~~629~~594		12,~~857~~002,~~844~~730
Commitments and Contingencies (Note 11)
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities	$	5,~~630~~906,~~417~~769	$	56,~~701~~069,~~382~~697

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Operations (Unaudited)

Part I-Financial Information

Item 1-Financial Statements (continued)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2020		2019		2020		2019
	2021		2020
(In thousands)			As Adjusted				~~As Adjusted~~
OPERATING REVENUES	$	~~143~~582,~~383~~496	$	~~122~~501,~~305~~735	$	~~856,284~~	$	~~914,442~~
OPERATING EXPENSES
Utility cost of gas	20217,~~846~~005		33141,~~433~~951		~~221,301~~		~~331,285~~
Operation and maintenance	9499,~~175~~583		~~101~~102,~~195~~678		~~291,885~~		~~300,433~~
Depreciation and amortization	36,~~298~~625		3435,~~383~~870		~~108,485~~		~~106,623~~
General taxes and other assessments	2755,~~992~~435		2650,~~344~~069		~~110,006~~		~~106,709~~
Total Operating Expenses	~~179~~408,~~311~~648		~~195~~330,~~355~~568		~~731,677~~		~~845,050~~
OPERATING INCOME (LOSS)	(35,928)		(73,050)		124,607		69,392
OPERATING INCOME	173,848		171,167
Other income (expense) — net	49,~~070~~583		25,~~619~~332		~~16,419~~		~~4,556~~
Interest expense	1615,~~088~~420		1516,~~575~~694		~~49,011~~		~~45,092~~
INCOME (LOSS) BEFORE INCOME TAXES	(47,946)		(86,006)		92,015		28,856
INCOME BEFORE INCOME TAXES	168,011		159,805
INCOME TAX EXPENSE (BENEFIT)	(11,324)		(19,530)		15,477		4,280
INCOME TAX EXPENSE	34,397		32,046
NET INCOME (LOSS)	$	(36,622)	$	(66,476)	$	76,538	$	24,576
NET INCOME	$	133,614	$	127,759
Dividends on preferred stock	—		—		—		660
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(36,622)	$	(66,476)	$	76,538	$	23,916

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Comprehensive Income (Unaudited)

Part I-Financial Information

Item 1-Financial Statements (continued)

	Three Months Ended September 30,				Nine Months EndedSeptember 30,
	Three Months Ended March 31,
	2020		2019		2020		2019
	2021		2020
(In thousands)			As Adjusted				~~As Adjusted~~
NET INCOME (LOSS)	$	(36,622)	$	(66,476)	$	76,538	$	24,576
NET INCOME	$	133,614	$	127,759
OTHER COMPREHENSIVE INCOME, BEFORE INCOME TAXES
Pension and other post-retirement benefit plans
Change in prior service cost	(~~292~~81)		(~~163~~304)		~~(924)~~		~~(486)~~
Change in actuarial net gain	1,~~713~~470		~~442~~2,691		~~4,628~~		~~2,596~~
Total pension and other post-retirement benefit plans	$	1,~~421~~389	$	~~279~~2,387	$	~~3,704~~	$	~~2,110~~
INCOME TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME	366		(700)		959		572
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME	367		620
OTHER COMPREHENSIVE INCOME	$	1,~~055~~022	$	~~979~~1,767	$	~~2,745~~	$	~~1,538~~
COMPREHENSIVE INCOME (LOSS)	$	(35,567)	$	(65,497)	$	79,283	$	26,114
COMPREHENSIVE INCOME	$	134,636	$	129,526

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Condensed Statements of Cash Flows (Unaudited)

Part I-Financial Information

Item 1-Financial Statements (continued)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2020		2019
	2021		2020
(In thousands)			As Adjusted
OPERATING ACTIVITIES
Net income	$	76133,~~538~~614	$	24127,~~576~~759
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization	~~108~~36,~~485~~625		~~106~~35,~~623~~870
Amortization of:
Other regulatory assets and liabilities — net	63,~~044~~090		52,~~583~~225
Debt related costs	~~1,072~~250		~~1,128~~360
Deferred income taxes — net	1533,~~908~~248		632,~~375~~196
Accrued/deferred pension and other post-retirement benefit cost (benefit)	(6,~~758~~038)		(1,~~793~~797)
Compensation expense related to stock-based awards	2,~~156~~479		~~2,275~~446
Provision for doubtful accounts	117,~~101~~345		105,~~615~~874
Unrealized (gain) loss on derivative contracts	(5,~~501~~337)		(~~128~~6,122)
Amortization of investment tax credits	(431)		(494)
Other non-cash charges (credits) — net	(71)		(172)
Other non-cash charges (credits) — net	364		1,226
Changes in operating assets and liabilities (Note 14)	136,729		49,043
Changes in operating assets and liabilities (Note 16)	53,708		94,572
Net Cash Provided by Operating Activities	341,934		245,682
Net Cash Provided by Operating Activities	262,686		254,144
FINANCING ACTIVITIES
Capital contribution from parent	~~175,000~~—		—125,000
Long-term debt issued	—		298,482
Net borrowing (repayment) under credit facilities	(212,459)		(253,972)
Debt issuance costs	(10)		(2,756)
Dividends on common stock	(25,000)		(25,000)
Notes payable issued (retired) — net	(129,524)		(179,000)
Other financing activities — net	(164)		—
Dividends on common stock and preferred stock	(75,000)		(75,227)
Net Cash Used in Financing Activities	(237,623)		(153,972)
Net Cash Provided by (Used in) Financing Activities	(29,534)		41,499
INVESTING ACTIVITIES
Capital expenditures	(~~265~~99,~~060~~308)		(~~318~~70,~~895~~995)
Net Cash Used in Investing Activities	(~~265~~99,~~060~~308)		(~~318~~70,~~895~~995)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(31,908)		(23,252)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	5,003		20,715
Cash, Cash Equivalents, and Restricted Cash at Beginning of the Period	6121,~~148~~962		7161,~~423~~148
Cash, Cash equivalents and Restricted Cash at End of the Period	$	2926,~~240~~965	$	4881,~~171~~863
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 16)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 14)

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

~~Following a 2018 merger agreement,~~ Washington Gas ~~became~~is an indirect, ~~majority~~wholly owned subsidiary of, among other entities, AltaGas and WGL. ~~In connection with the Merger, WGL formed a wholly owned subsidiary,~~ Wrangler SPE LLC (Wrangler ~~SPE~~), a bankruptcy remote, special purpose entity, todirectly ~~own~~owns the common stock of Washington Gas. InWrangler ~~addition,~~was ~~WGL~~formed ~~owns~~for ~~all~~the purpose of ~~the~~“ring ~~shares~~fencing” ofWashington ~~common~~Gas, ~~stock~~that ofis ~~certain~~removing ~~affiliated~~Washington ~~non-utility~~Gas ~~subsidiaries.~~from Onthe ~~December~~bankruptcy ~~20,~~estate ~~2019,~~of ~~Washington~~AltaGas ~~Gas~~and ~~redeemed~~its ~~all~~affiliates in the ~~outstanding~~event ~~shares~~that ofany ~~its~~parent ~~preferred~~or ~~stock,~~affiliate ~~after~~entity ~~which,~~becomes ~~Washington~~the ~~Gas~~subject ~~became~~of anbankruptcy ~~indirect,~~or insolvency proceedings. Wrangler is the wholly owned subsidiary of ~~AltaGas~~WGL and ~~WGL~~AltaGas.

The condensed financial statements of Washington Gas have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Therefore, certain financial information and note disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) are omitted in this interim report. The interim condensed financial statements and accompanying notes should be read in conjunction with the Financial Statements on Form 10-K for the year ended December 31, ~~2019~~2020. Due to the seasonal nature of our business, the results of operations for the periods presented in this report are not necessarily indicative of actual results for the full years ending December 31, ~~2020~~2021 and ~~2019~~2020.

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

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

For a complete description of our significant accounting policies, refer to Note 1 — Accounting Policies of the Notes to Financial Statements on Form 10-K for the fiscal year ended December 31, ~~2019~~2020. We include herein certain updates to those policies.

Change in Accounting Principle

In 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~~We ~~change~~have ~~uses~~retrospectively ~~the~~applied ~~fair~~this ~~value~~change ~~approach~~in ~~for~~accounting ~~the~~principle ~~fixed~~to ~~income~~all ~~investments~~applicable ~~and~~prior ~~related~~period ~~derivatives,~~financial ~~which~~information ~~represent~~presented aherein ~~separate~~as ~~asset~~required. ~~class~~The offollowing ~~the~~tables ~~plan~~summarize ~~assets,~~the ~~compared~~effect toof the ~~prior~~change ~~method~~in ~~that~~accounting ~~utilized~~principle aon ~~calculated~~the ~~value~~primary ~~for~~financial ~~all~~statement ~~investments~~line ~~where~~items ~~gains~~on ~~and~~our ~~losses~~condensed ~~arising~~statements ~~from~~of ~~changes~~operations, incondensed ~~fair~~statements ~~value~~of ~~were~~comprehensive ~~deferred~~income, and ~~amortized~~condensed ~~into~~statements ~~the calculation~~ of ~~the~~cash ~~MRVA over a period of five years~~flows. The ~~MRVA~~following isNotes ~~used~~have inbeen ~~the~~impacted ~~calculation~~by of the ~~expected~~change: ~~return~~Note on7 ~~assets~~— ~~and~~Components ~~the recognized actuarial gain or loss components~~ of ~~net~~Total ~~periodic~~Equity, ~~benefit~~Note ~~cost.~~8 ~~The~~— ~~gains~~Pension and ~~losses~~Other ~~for~~Post ~~other~~— ~~plan~~Retirement ~~assets~~Benefit ~~will~~Plans, ~~continue to be deferred~~ and ~~amortized~~Note ~~into~~13 ~~the~~— ~~MRVA~~Accumulated ~~over~~Other aComprehensive ~~five-year~~Income ~~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.


	Three Months Ended March 31, 2020
(In thousands)	As Previously Reported		Adjustment		As Adjusted
Condensed Statements of Operations
Other income (expense) — net	$	3,070	$	2,262	$	5,332
Income tax expense	$	31,459	$	587	$	32,046
Net income	$	126,084	$	1,675	$	127,759
Condensed Statements of Comprehensive Income
Other comprehensive income	$	1,941	$	(174)	$	1,767
Comprehensive income	$	128,025	$	1,501	$	129,526
Condensed Statements of Cash Flows
Net income	$	126,084	$	1,675	$	127,759
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Accrued/deferred pension and other post-retirement benefit cost (benefit)	$	465	$	(2,262)	$	(1,797)
Deferred income taxes — net	$	31,609	$	587	$	32,196

We have 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 $9.4 million and decreased accumulated other comprehensive income (loss), net of taxes, $0.4 million, with a net increase of $9.0 million in common shareholder’s equity at January 1, 2019. The following tables summarize the effect of the change in accounting principle on the primary financial statement line items on our condensed balance sheets, condensed statements of operations, condensed statements of comprehensive income, and condensed statements of cash flows. The following Notes have been impacted by the change: Note 8 — Components of Total Equity, Note 10 — Pension and Other Post — Retirement Benefit Plans, and Note 15 — Accumulated Other Comprehensive Income (Loss).

	September 30, 2020						December 31, 2019
(In thousands)	Without Change		Adjustment		As Reported (with change)		As Previously Reported		Adjustment		As Adjusted
Condensed Balance Sheets
Regulatory assets — Pension and other post-retirement benefits	$	31,337	$	8,629	$	39,966	$	39,435	$	4,643	$	44,078
Common shareholder’s equity	$	1,745,434	$	10,898	$	1,756,332	$	1,572,196	$	6,396	$	1,578,592
Regulatory liabilities — Other post-retirement benefits	$	190,460	$	(6,090)	$	184,370	$	199,665	$	(3,995)	$	195,670
Deferred income taxes	$	514,387	$	3,821	$	518,208	$	462,475	$	2,242	$	464,717
Components of Total Equity
Retained earnings (a)	$	536,505	$	11,754	$	548,259	$	541,535	$	6,729	$	548,264
Accumulated other comprehensive income (loss), net of taxes (a)	$	8,177	$	(856)	$	7,321	$	4,909	$	(333)	$	4,576

(a) Retained earnings and Accumulated other comprehensive income (loss), net of taxes, are reported in Note 8 — Components of Total Equity.

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
(In thousands)	Without Change		Adjustment		As Reported (with change)		Without Change		Adjustment		As Reported (with change)
Condensed Statements of Operations
Other income (expense) — net	$	1,808	$	2,262	$	4,070	$	9,632	$	6,787	$	16,419
Income tax expense (benefit)	$	(11,911)	$	587	$	(11,324)	$	13,715	$	1,762	$	15,477
Net income (loss)	$	(38,297)	$	1,675	$	(36,622)	$	71,513	$	5,025	$	76,538
Condensed Statements of Comprehensive Income
Other comprehensive income (loss), net of taxes	$	1,229	$	(174)	$	1,055	$	3,268	$	(523)	$	2,745
Comprehensive income (loss)	$	(37,068)	$	1,501	$	(35,567)	$	74,781	$	4,502	$	79,283

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
(In thousands)	As Previously Reported		Adjustment		As Adjusted		As Previously Reported		Adjustment		As Adjusted
Condensed Statements of Operations
Other income (expense) — net	$	3,533	$	(914)	$	2,619	$	7,298	$	(2,742)	$	4,556
Income tax expense (benefit)	$	(19,293)	$	(237)	$	(19,530)	$	4,992	$	(712)	$	4,280
Net income (loss)	$	(65,799)	$	(677)	$	(66,476)	$	26,606	$	(2,030)	$	24,576
Condensed Statements of Comprehensive Income
Other comprehensive income (loss), net of taxes	$	942	$	37	$	979	$	1,428	$	110	$	1,538
Comprehensive income (loss)	$	(64,857)	$	(640)	$	(65,497)	$	28,034	$	(1,920)	$	26,114

	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
(In thousands)	Without Change		Adjustment		As Reported (with change)		As Previously Reported		Adjustment		As Adjusted
Condensed Statements of Cash Flows
Net income	$	71,513	$	5,025	$	76,538	$	26,606	$	(2,030)	$	24,576
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Accrued/deferred pension and other post-retirement benefit cost (benefit)	$	29	$	(6,787)	$	(6,758)	$	(949)	$	2,742	$	1,793
Deferred income taxes — net	$	14,146	$	1,762	$	15,908	$	7,087	$	(712)	$	6,375

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

The following ~~tables~~table ~~represent~~represents accounting standards adopted by Washington Gas during the ~~nine~~three months ended ~~September~~March 3031, ~~2020, and other newly issued accounting standards that will be adopted by Washington Gas in the future~~2021.

ACCOUNTING STANDARDS ADOPTED IN CALENDAR YEAR 2020

ACCOUNTING STANDARDS ADOPTED IN CALENDAR YEAR 2021

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 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

The adoption of this standard did not have a material effect on our financial statements.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

This update modifies the disclosure requirements on fair value measurements.

January 1, 2020

The adoption of this standard did not 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, including other subsequent ASUs further amending and clarifying the guidance.

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 and hedging relationships existing on or after the date of adoption and through December 31, 2022.

January 1, 2021

Currently, our credit facilities and carrying charges in certain commodity sale arrangements, reference LIBOR. The discontinuation of LIBOR will require these arrangements to be modified to an alternative interest rate. The majority of our credit facilities include fallback provisions that contemplate the replacement of LIBOR. The Company has made a policy election to adopt the optional expedients related to contract modifications related to its debt and certain other arrangements and will apply the relief on a prospective basis as modifications are made. The Company continues to monitor the activities of regulators and financial institutions to transition to an alternative reference rate, and also continues to review additional arrangements for references to LIBOR. Accordingly, the Company may make additional optional elections in the future.

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 2020-10, Codification Improvements

The amendments in this ASU provide clarification and improve the codification in recently issued accounting standards.

January 1, 2021

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, FinancialInstruments—Credit Losses, Topic 815, Derivatives andHedging, and Topic 825, Financial Instruments

The amendments in this ASU provide clarification and improve the codification in recently issued accounting standards.

January 1, 2020

The adoption of this standard did not have a material effect on our financial statements.

ASU 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.

OTHER NEWLY ISSUED ACCOUNTING STANDARDS

Standard

Description

Required date of adoption

Effect on the financial statements or other significant matters

ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

This standard modifies the disclosure requirements related to defined benefit pension and other postretirement plans. Early adoption is permitted.

December 31, 2020

It is not expected that the adoption of this standard will have a material effect on our financial statements.

ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes

January 1, 2021

We are in the process of evaluating the impact the adoption of this standard will have on our financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting

This standard provides optional expedients and exceptions to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The amendments may be elected prospectively to contract modifications made and to hedging relationships existing as of or entered into on or after the date of adoption and through December 31, 2022.

December 31, 2022

We have not yet elected to adopt this ASU as of September 30, 2020 and are assessing the impact the adoption of this standard will have on our financial statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 2. CREDIT LOSSES

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~~Our ~~CECL~~assessment ~~model~~concluded ~~requires~~that ~~the~~our ~~expected~~cash ~~credit~~equivalents, ~~losses~~accounts toreceivables, ~~consider~~unbilled ~~past~~revenue, ~~events~~contract assets, ~~including~~and ~~historical~~receivables ~~experience,~~from ~~current~~our ~~conditions~~trading ~~and~~partners ~~reasonable~~that ~~and~~is ~~supportable~~part ~~forecasts.~~of ~~When~~a ~~measuring~~collaborative ~~credit~~arrangement ~~losses,~~are ~~financial~~within ~~assets~~scope ~~with~~of ~~similar~~the ~~risk~~new ~~characteristics~~standard. ~~should~~We beadopted ~~pooled,~~the ~~and~~standard ~~credit~~using ~~losses~~a ~~should~~modified-retrospective beapproach ~~recognized~~through ~~over~~a ~~the~~cumulative-effect ~~contractual~~adjustment ~~term~~to ofretained ~~the~~earnings ~~financial~~at ~~asset~~January 1, 2020. Upon Inimplementation ~~addition~~of ASU 2016-13, ~~entities~~we ~~may~~recorded ~~make~~a $1.5 million increase to the Company's allowance for doubtful accounts and a ~~one-time~~decrease ~~irrevocable~~to ~~election~~retained onearnings. ~~certain~~Washington ~~eligible~~Gas ~~financial~~also ~~instruments~~elected to ~~elect~~account ~~fair-value~~for ~~treatment~~its oncash anequivalents ~~instrument-by-instrument~~at ~~basis.~~fair value.

~~Our~~Customer ~~assessment~~Receivables: ~~concluded~~Washington ~~that~~Gas ~~our~~is ~~cash~~exposed ~~equivalents,~~to ~~accounts~~customer ~~receivables,~~credit ~~unbilled~~risk ~~revenue,~~resulting ~~contract~~from ~~assets,~~the ~~and~~non-payment aof ~~long~~utility ~~term~~bills. ~~receivable~~To ~~from~~manage ~~one~~this ofcustomer ~~our~~credit ~~trading~~risk, ~~partners~~Washington ~~that~~Gas iscustomers ~~part~~are ofoffered abudget ~~collaborative~~billing ~~arrangement~~options ~~are~~or ~~within~~higher ~~scope~~risk ofcustomers ~~the~~may ~~new~~be ~~standard.~~required Weto ~~adopted~~provide ~~the~~a ~~standard~~cash ~~using~~deposit auntil ~~modified-retrospective~~the ~~approach~~requirement ~~through~~for adeposit ~~cumulative-effect~~refunds ~~adjustment~~are tomet. ~~retained~~Washington ~~earnings~~Gas atcan ~~January~~recover 1,a ~~2020.~~portion ~~Prior~~of ~~periods~~non-payments ~~presented~~from ~~for~~customers ~~comparative~~in ~~purposes~~future ~~are~~periods ~~not~~through ~~adjusted.~~the ~~Upon~~rate-setting ~~implementation~~process. ofFor ~~ASU~~accounts ~~2016-13,~~receivable weand ~~recorded~~unbilled arevenue ~~$1.5~~generated ~~million~~by ~~increase~~the toutility ~~the~~business, ~~Company's~~an allowance for doubtful accounts ~~and~~is recognized using a ~~decrease~~historical toloss-rate ~~retained~~based ~~earnings,~~on ~~including~~historical apayment $1and collection experience.4 ~~million~~This ~~increase~~rate tomay ~~allowance~~be ~~for~~adjusted ~~doubtful~~based ~~account~~on ~~associated~~management’s ~~with~~expectations ~~utility~~of ~~customer~~unusual ~~receivables~~macroeconomic conditions and aother $0factors.1 ~~million~~Washington ~~reduction~~Gas toregularly ~~“Deferred~~evaluates ~~charges~~the ~~and~~reasonableness ~~other~~of ~~assets-Other”~~the ~~associated~~allowance ~~with~~based on a ~~long-term~~combination ~~receivable~~of ~~from~~factors, asuch ~~trading~~as ~~partner~~the ~~under~~length ~~Washington~~of ~~Gas'~~time ~~asset~~receivables ~~optimization~~are ~~programs.~~past ~~Washington~~due, ~~Gas~~historical ~~also~~expected ~~elected~~payment, tocollection ~~account~~experience, ~~for~~financial ~~its~~condition ~~cash~~of ~~equivalents~~customers, atand ~~fair~~other ~~value~~circumstances that could impact customers' ability or desire to make payments.

Based ~~Utility~~on ~~Customer~~previous ~~Receivables:~~collection ~~Washington Gas is exposed to customer credit risk resulting from the non-payment of utility bills. To manage this customer credit risk~~experience, Washington Gas ~~customers~~has ~~are~~not ~~offered~~recorded 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 isfor ~~recognized~~its ~~using~~contract aassets ~~historical~~associated ~~loss-rate~~with ~~based~~our onenergy ~~historical payment and collection experience. This rate may be adjusted based on~~ management’s ~~expectations~~services ofprojects ~~unusual~~with ~~macroeconomic~~the ~~conditions~~federal ~~and other factors~~government. ~~Washington~~Refer ~~Gas~~to ~~regularly~~Note ~~evaluates~~12 ~~the~~— ~~reasonableness~~Related ofParty ~~the~~Transactions ~~allowance~~for ~~based~~further 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 paymentsinformation.

~~Based~~Washington onGas ~~previous~~Asset ~~collection~~Optimization: ~~experience,~~ Washington Gas ~~has~~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 ~~recorded~~being used to physically serve utility customers. Refer to Note 10 — Derivatives for further discussion of asset optimization program. 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 ~~its~~one-year ~~contract~~receivables ~~assets~~sourced from external credit rating agencies to the accounts receivable and unbilled revenue balances associated with ~~our~~counterparties ~~energy~~Washington ~~management~~Gas ~~services~~has ~~projects~~determined ~~with~~to ~~the~~be ~~federal~~below ~~government~~investment grade. ~~Refer~~In tothe ~~Note~~event 14that —a ~~Related~~counterparty ~~Party~~no ~~Transactions~~longer ~~for~~exhibits ~~further~~similar ~~information~~risk characteristics, the associated receivable is evaluated individually.

~~Washington~~COVID-19: ~~Gas~~The ~~Asset~~COVID-19 ~~Optimization:~~pandemic ~~The~~has ~~Utility~~resulted ~~operates~~in ~~under~~widespread anchallenges ~~existing~~to ~~wholesale~~businesses ~~counterparty~~and ~~credit~~the ~~policy~~job ~~that~~market issince ~~designed~~2020. The increased unemployment rate has impacted the ability of the Company’s customers to ~~mitigate~~pay ~~credit~~for ~~risk~~services. ~~Credit~~As ~~limits~~a ~~are~~result ~~established~~of regulatory orders, we temporarily suspended customer disconnections for ~~each~~non-payment, ~~counterparty~~temporarily suspended collection activities and ~~credit~~temporarily ~~enhancements~~waived ~~such~~assessing asand ~~letters~~billing late payment fees. While the suspension of ~~credits~~disconnections has been lifted in Maryland for customers effective April 1, ~~parent~~2021, ~~guarantees~~the ~~and~~suspension ~~cash~~in ~~collateral~~District ~~maybe~~of ~~required~~Columbia and Virginia continues. ~~The~~We ~~creditworthiness~~resumed ofassessing ~~all~~late ~~counterparties~~payment isfees ~~continuously~~in ~~monitored~~Maryland in October 2020 following a regulatory order. The ~~allowance~~suspension ~~for~~of ~~doubtful~~collection activities has caused our overall accounts isreceivable ~~estimated~~portfolio byto ~~applying~~age ~~30-year~~more than historical ~~default~~levels. ~~rates~~However, ~~for~~we ~~one-year~~do ~~receivables~~not ~~sourced~~expect ~~from~~the ~~external~~increase in credit ~~rating~~losses ~~agencies~~ to have a significant impact on net income. In addition, the ~~accounts~~Public ~~receivable~~Service Commission of the District of Columbia (PSC of DC), the Maryland Public Service Commission (PSC of MD) and ~~unbilled~~the ~~revenue~~Commonwealth ~~balances~~of ~~associated~~Virginia State Corporation Commission (SCC of VA) each issued an Order authorizing Washington Gas to establish a regulatory asset to capture and track the incremental COVID-19 related costs. 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 ~~counterparties~~balances over 30 days in arrears. Virginia customers need to meet the ~~Utility~~criteria ~~has~~established ~~determined~~by the program to be ~~below~~eligible ~~investment~~to ~~grade~~receive the funds. InAny ~~the~~unused ~~event~~funds ~~that~~will abe ~~counterparty~~returned noto ~~longer~~the ~~exhibits~~SCC ~~similar~~of ~~risk~~VA. ~~characteristics~~At March 31, 2021, $5.4 million of unused funds remained in "Gas costs due to customer" on Washington Gas' condensed balance sheets. Considering the ~~associated~~Virginia ~~receivable~~Coronavirus isRelief ~~evaluated~~Funds, ~~individually~~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 March 31, 2021.

Washington Gas also has a long-term receivable from a trading partner totaling $1.4 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 I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

As ~~COVID-19:~~of On March 1131, ~~2020~~2021, ~~the~~we ~~World~~have ~~Health~~evaluated ~~Organization declared~~ the ~~outbreak~~adequacy of aour ~~strain~~allowance offor ~~novel~~credit ~~coronavirus~~losses ~~disease, COVID-19, a global pandemic. Governments~~ in ~~affected~~light ~~areas in which we operate have imposed a number~~ of ~~measures designed to contain~~ the ~~outbreak,~~suspension ~~including business closures, travel restrictions, quarantines and cancellations~~ of ~~gatherings~~shut-offs ~~and~~for ~~events.~~nonpayment ~~These~~due ~~measures have resulted in widespread challenges~~ to ~~businesses~~COVID-19 and the ~~job~~economic ~~market~~downturn. ~~The~~Our ~~increased~~evaluation ~~unemployment~~included ~~rates~~an ~~could~~analysis ~~impact the ability~~ of ~~the~~customer ~~Company’s~~payment ~~customers~~trends, toeconomic ~~pay~~conditions, ~~for~~receivables ~~services.~~aging, Asconsiderations ~~a result~~ of ~~regulatory~~past ~~orders~~economic downturns, wethe ~~have~~actions ~~temporarily~~the ~~suspended~~company ~~customer~~is ~~disconnections~~taking ~~for~~to ~~non-payment,~~assist ~~temporarily~~customers ~~suspended~~with ~~collection~~past ~~activities~~due balances, and ~~temporarily~~other ~~waived~~stimulus ~~assessing~~programs, and ~~billing~~customer ~~late~~account ~~payment fees~~write-offs. WeIn ~~resumed~~addition, ~~assessing~~we ~~late~~considered ~~payment~~benefits ~~fees~~available inunder ~~Maryland~~government inCOVID-19 ~~October~~relief ~~2020 following a regulatory order~~programs. ~~The~~Based ~~suspension~~on ofthis ~~collection activities has caused our overall accounts receivable portfolio to age more than historical levels. However~~evaluation, we dohave ~~not~~concluded ~~expect~~that the ~~increase~~allowance infor credit losses toas ~~have a significant impact on net income. In addition, the Public Service Commission~~ of ~~the District of Columbia (PSC of DC)~~March 31, ~~the~~2021 ~~Public~~adequately ~~Service~~reflected ~~Commission of Maryland (PSC of MD) and~~ the ~~Virginia~~collection ~~State~~risk ~~Corporation Commission (SCC of VA) each issued an Order authorizing Washington Gas to establish a regulatory asset to capture~~ and ~~track~~net ~~the~~realizable ~~incremental~~value ~~COVID-19~~for ~~related~~our ~~costs~~receivables. ~~For~~We ~~the~~will ~~three~~continue ~~and~~to ~~nine~~monitor ~~months~~changing ~~ended~~circumstances ~~September 30, 2020, Washington Gas has recorded total $4.7 million~~ and ~~$7.7~~will ~~million~~adjust inour ~~deferrals~~allowance offor ~~incremental~~credit ~~bad~~losses ~~debt~~as ~~expense~~additional toinformation ~~COVID-19~~becomes ~~regulatory assets across all three jurisdictions, respectively~~available.

As of September 30, 2020, we have evaluated the adequacy of our allowance for credit losses in light of the suspension of shut-offs for nonpayment due to COVID-19 and the economic downturn. Our evaluation included an analysis of customer payment trends in 2020, economic conditions, receivables aging, and considerations of past economic downturns, the actions the company is taking to assist customers with past due balances, and the corresponding allowance for credit losses and customer account write-offs. Based on this evaluation, we have concluded that the allowance for credit losses as of September 30, 2020 adequately reflected the collection risk and net realizable value for our receivables. We will continue to monitor changing circumstances and will adjust our allowance for credit losses as additional information becomes available.

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

	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
(In millions)	Account Receivables and Unbilled Revenue		Asset Optimization		Account Receivables and Unbilled Revenue		Asset Optimization
Balance, beginning of period	$	2327.23	$	0.1	$	18.7	$	—
Provision	17.35		—(0.1)		115.19		—
Recorded to regulatory asset due to COVID-19	4.7		—		7.7		—
Write offs	(2.8)		—		(7.5)		—
Write offs	(3.0)		—		(13.8)		—
Recoveries	0.4		—		0.3		—
Recoveries	0.3		—		1.4		—
Adjustment upon adoption of ASC 326	—		—		1.4		0.1
Balance, end of period	$	2632.54	$	~~0.1~~—	$	2618.58	$	0.1

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company recognizes revenue from contracts with customers towhen ~~depict~~ the ~~transfer~~obligation ofto ~~goods~~customers oris ~~services~~satisfied toand ~~customers~~ at an amount it expects to be ~~entitled~~received 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.

The following table disaggregates revenue by type of service for the periods.

Disaggregated Revenue by Type of Service
	Three Months Ended September 30,				Nine Months EndedSeptember 30,
	Three Months Ended March 31,
(In millions)	~~2020~~2021		~~2019~~2020		~~2020~~		~~2019~~
Revenue from contracts with customers
Gas and transportation sales
Gas sold and delivered	$	91442.26	$	70346.73	$	~~592.8~~	$	~~665.1~~
Gas delivered for others	39102.59		3397.46		~~186.5~~		~~186.8~~
Other	312.68		1013.97		~~23.6~~		~~34.4~~
Other revenues	10.39		10.47		~~2.1~~		~~4.2~~
Total revenue from contracts with customers	$	~~135~~559.62	$	~~116~~458.43	$	~~805.0~~	$	~~890.5~~
Other sources of revenue
Revenue from alternative revenue programs (a)	$	721.6	$	340.6	$	~~47.7~~	$	~~14.9~~
Leasing revenue	0.2		0.2		0.5		0.5
Other (b)	1.7		2.8
Other (b)	—		2.1		3.1		8.5
Total revenue from other sources	$	23.3	$	43.4
Total revenue from other sources	$	7.8	$	5.9	$	51.3	$	23.9
Total Operating Revenue	$	582.5	$	501.7
Total Operating Revenue	$	143.4	$	122.3	$	856.3	$	914.4

(a) Washington Gas has determined that its Revenue Normalization Adjustment (RNA), Weather Normalization Adjustment (WNA), and Conservation and Ratemaking Efficiency (CARE) Ratemaking Adjustment (CRA) billing adjustment mechanisms and accelerated pipe replacement programs are alternative revenue programs and accounted for under ASC Topic 980.

(b) The amount includes late fees billed. The decreases from prior periods were primarily caused by not billing of late payment fees due to COVID-19 as required by regulatory orders.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

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 $2886.58 million and $~~116~~112.37 million are included within "Receivables" on Washington Gas' balance sheets at ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, 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 (refer to Project Financing in Note 12 — Related party transactions for further discussion of Washington Gas’s area-wide contract). Washington Gas did not have any contract liabilities at ~~September~~March 3031, ~~2020~~2021 and ~~2019~~December 31, 2020. 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.

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

(In millions)	~~2020~~2021		~~2019 (a)~~2020
Contract assets at January 1	$	4416.21	$	8544.32
Contract assets at September 30	$	51.8	$	40.5
Contract assets at March 31	$	6.7	$	46.1
Increase (decrease) in contract assets	$	7.6	$	(44.8)
Increase (decrease) in contract assets (a)	$	(9.4)	$	1.9

(a) Decrease in ~~contract~~2021 ~~asset~~reflected inprojects ~~2019~~accepted ~~was~~by ~~due~~federal togovernment ~~the~~offset ~~sale~~to of the contract asset. ~~Refer~~was a reduction to "~~Project~~Payable ~~financing"~~to inassociated ~~Note 14 — Related party transactions for detail discussion~~companies".

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 4. ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

~~Washington~~ The ~~Gas~~table ~~has~~below ~~operating~~provides ~~leases~~details asfor athe ~~lessee~~amounts ~~for~~included ~~our~~in ~~corporate~~“Accounts ~~headquarters~~payable and other ~~offices,~~accrued ~~communication~~liabilities” ~~tower~~on ~~space,~~the ~~and~~balance ~~certain office equipment~~sheets.

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


(In millions)	March 31, 2021		December 31, 2020
Accounts payable—trade	$	168.7	$	201.2
Employee benefits and payroll accruals	10.2		22.3
Wages payable	20.8		19.5
Accrued interest	3.4		18.4
Other accrued liabilities (a)	20.1		31.1
Total	$	223.2	$	292.5

(a) Amount at December 31, 2020 included $12.5 million liability associated with the Antero judgment which was paid in February 2021.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 5. SHORT-TERM DEBT

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

(In millions)	September 30, 2020		December 31, 2019
Accounts payable—trade	$	135.3	$	154.3
Employee benefits and payroll accruals	20.9		39.3
Wages payable	25.6		22.2
Accrued interest	3.2		17.3
Other accrued liabilities (a)	32.0		34.4
Total	$	217.0	$	267.5

(a) Amount includes $12.3 million and $11.7 million estimated liability associated with the Antero judgment at September 30, 2020 and December 31, 2019, respectively. Refer to Note 11 — Commitments and Contingencies for further information.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Washington Gas satisfies the short-term financing requirements through the sale of commercial paper, or through bank borrowings. Due to the seasonal nature of our operations, short-term financing requirements can vary significantly during the year. Revolving credit agreements are maintained to support outstanding commercial paper and to permit short-term borrowing flexibility. The policy of Washington Gas is to maintain bank credit facilities in amounts equal to or greater than the expected maximum commercial paper position.

Credit Facility

The following is a summary of committed credit available at ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020.

(In millions)	September 30, 2020	December 31, 2019
Committed Credit Available
(In millions)	March 31, 2021	December 31, 2020
Committed credit agreements
Unsecured revolving credit facility, expires July 19, 2024(a)	$450.0	$450.0
Less: Commercial Paper outstanding(b)	(~~270~~72.05)	(~~400~~285.0)
Net committed credit available	$~~180~~377.05	$50165.0
Weighted average interest rate	0.2723%	20.0431%

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

(b) The amount represents principal amount of commercial paper.

At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, there were no outstanding bank loans from Washington Gas’ revolving credit facilities.

Commercial Paper

The total commercial paper carrying value ~~was $270.0 million and $399.5 million~~ at ~~September~~March ~~30, 2020 and December~~ 31, ~~2019,~~2021 ~~respectively.~~was ~~At both September 30, 2020 and December 31, 2019, Washington Gas classified~~ $~~100~~72.05 million ofand ~~our~~was ~~commercial~~classified ~~paper balance~~ as a "Long-term debt" on Washington Gas' condensed balance sheets due to its ability and intent to refinance these balances on a long-term basis. ~~Accordingly, $170.0 million and $299.5 million of commercial paper remained in “Notes payable” at September 30, 2020 and December 31, 2019, respectively.~~

17The total commercial paper carrying value at December 31, 2020 was $285.0 million. Washington Gas classified $100.0 million of our commercial paper balance as "Long-term debt" on Washington Gas' condensed balance sheets due to its ability and intent to refinance these balances on a long-term basis. Accordingly, $185.0 million of commercial paper remained in “Notes payable” at December 31, 2020.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 6. LONG-TERM DEBT

Washington Gas issues unsecured long-term debt in the form of medium-term notes (MTNs) and private placement notes with individual terms regarding interest rates, maturities and call or put options. In addition, Washington Gas classifies certain commercial paper balance as "Long-term debt" due to its ability and intent to refinance these balances on a long-term basis.

The following table shows the long-term debt outstanding at ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020.

Long Term Debt Outstanding
(In millions)	~~September~~March 3031, ~~2020~~2021			December 31, ~~2019~~2020
Washington Gas Unsecured Notes (a)	$	1,~~346~~446.0		$	1,~~346~~446.0
Commercial Paper	~~100~~72.05			100.0
Total Principal Amounts of Long-Term Debt	$	1,~~446~~518.05		$	1,~~446~~546.0
Unamortized discount	(4.2)			(4.3)
Unamortized premium (discount)	12.3			12.5
Unamortized debt expense	(1011.45)			(1011.86)
Less—current maturities	—			—
Non-current finance lease liability	0.7			0.3
Total Long-Term Debt	$	1,431.4		$	1,430.9
Total Carrying Amount of Long-Term Debt	$	1,520.0		$	1,547.2
Weighted average interest rate(b)	4.5246		%	4.5246		%

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

(b) Weighted average interest rate is for the Washington Gas unsecured notes.

~~The following table shows the issuances of Washington Gas' unsecured notes for the three and nine months ended September 30, 2019.~~ There ~~was no retirement of long-term debt for the three and nine months ended September 30, 2019. There~~ were no issuances or retirements of ~~long-term~~unsecured ~~debt~~notes for the three ~~and nine~~ months ended ~~September 30~~March 31, 2021 and 2020.

Washington Gas' Unsecured Notes Issuances

(In millions)

Principal(a)

Interest Rate(b)

Effective Cost(b)

Nominal Maturity Date

Three and Nine Months Ended September 30, 2019

Issuances:

09/13/2019

300.00

3.65

3.72

9/15/2049

NOTE 7. COMPONENTS OF TOTAL EQUITY

(a)Represents face amount of notes.


	Common Stock			Paid-In Capital		Retained Earnings (b)		Accumulated Other Comprehensive Income, Net of Taxes (b)
(In thousands, except shares)	Shares	Amount								Total (b)
Three Months Ended March 31, 2021
Balance at December 31, 2020	46,479,536	$	46,479	$	1,204,273	$	603,596	$	1,577	$	1,855,925
Net income	—	—		—		133,614		—		133,614
Other comprehensive income	—	—		—		—		1,022		1,022

Capital contribution from parent	—	—		—		—		—		—
Common stock dividends declared	—	—		—		(25,000)		—		(25,000)

Balance at March 31, 2021	46,479,536	$	46,479	$	1,204,273	$	712,210	$	2,599	$	1,965,561
Three Months Ended March 31, 2020
Balance at December 31, 2019	46,479,536	$	46,479	$	979,273	$	548,264	$	4,576	$	1,578,592
Net income	—	—		—		127,759		—		127,759
Other comprehensive income	—	—		—		—		1,767		1,767
Capital contribution from parent	—	—		125,000		—		—		125,000
ASU 2016-13 implementation (a)	—	—		—		(1,543)		—		(1,543)
Common stock dividends declared	—	—		—		(25,000)		—		(25,000)

Balance at March 31, 2020	46,479,536	$	46,479	$	1,104,273	$	649,480	$	6,343	$	1,806,575

(b)Represents the interest rate and effective cost at the trade date of the debt.

	Common Stock			Paid-In Capital		Retained Earnings (b)		Accumulated Other Comprehensive Income/(Loss), Net of Taxes (b)
(In thousands, except shares)	Shares	Amount								Total (b)
Three Months Ended September 30, 2020
Balance at June 30, 2020	46,479,536	$	46,479	$	1,104,273	$	609,881	$	6,266	$	1,766,899
Net income (loss)	—	—		—		(36,622)		—		(36,622)
Other comprehensive income	—	—		—		—		1,055		1,055
Capital contribution from parent	—	—		50,000		—		—		50,000
Dividends declared:
Common stock	—	—		—		(25,000)		—		(25,000)
Balance at September 30, 2020	46,479,536	$	46,479	$	1,154,273	$	548,259	$	7,321	$	1,756,332
Three Months Ended September 30, 2019
Balance at June 30, 2019	46,479,536	$	46,479	$	979,273	$	593,276	$	(6,547)	$	1,612,481
Net income (loss)	—	—		—		(66,476)		—		(66,476)
Other comprehensive income	—	—		—		—		979		979
Dividends declared:								—
Common stock	—	—		—		—		—		—
Preferred stock	—	—		—		—		—		—
Balance at September 30, 2019	46,479,536	$	46,479	$	979,273	$	526,800	$	(5,568)	$	1,546,984
Nine Months Ended September 30, 2020
Balance at December 31, 2019	46,479,536	$	46,479	$	979,273	$	548,264	$	4,576	1,578,592
Net income	—	—		—		76,538		—		76,538
Other comprehensive income	—	—		—		—		2,745		2,745
Capital contribution from parent	—	—		175,000		—		—		175,000
ASU 2016-13 implementation (a)	—	—		—		(1,543)		—		(1,543)
Dividends declared:
Common stock	—	—		—		(75,000)		—		(75,000)
Balance at September 30, 2020	46,479,536	$	46,479	$	1,154,273	$	548,259	$	7,321	$	1,756,332
Nine Months Ended September 30, 2019
Balance at December 31, 2018	46,479,536	$	46,479	$	979,273	$	552,884	$	(7,106)	$	1,571,530
Net income	—	—		—		24,576		—		24,576
Other comprehensive income	—	—		—		—		1,538		1,538
Dividends declared:
Common stock	—	—		—		(50,000)		—		(50,000)
Preferred stock	—	—		—		(660)		—		(660)
Balance at September 30, 2019	46,479,536	$	46,479	$	979,273	$	526,800	$	(5,568)	$	1,546,984

(a) 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.

(b) In the third quarter of 2020, Washington Gas made a voluntary change in accounting principle for calculating the ~~market-related~~MRVA ~~value of assets~~ used in the determination of net periodic pension and other post-retirement benefit plan costs. We have 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.

1918

NOTE 8. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

WGL and its wholly owned subsidiaries, including Washington Gas, are included in the AltaGas Services (US) Inc. (ASUS) consolidated income tax returns. We have a tax sharing policy with ASUS, an indirect, wholly owned subsidiary of AltaGas, that allocates consolidated tax liabilities and benefits using a ratio determined by the separate taxable income for each member applied to the consolidated return tax liability of the group. State income tax returns are filed on a separate company basis in most states and on a unitary basis as required, where we or the consolidated ASUS group have operations and/or a requirement to file.

At September 30, 2020 and December 31, 2019, Washington Gas recorded a $5.5 million receivable in "Receivables from associated companies" and a $0.6 million payable in "Payables to associated companies" under the ASUS tax sharing policy on Washington Gas' balance sheets, respectively.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act includes various income and payroll tax provisions. Washington Gas will benefit from certain provisions such as the deferral of payment of applicable payroll taxes. As of September 30, 2020, we have determined that there is no material impact to our financial statements. However, we continue to assess and quantify the impact of the legislation to our financial statements.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

The following table shows the components of the net periodic benefit costs (income) recognized in our financial statements.

Components of Net Periodic Benefit Costs (Income)
Components of Net Periodic Benefit Costs (Income) (b)
	Three Months Ended September 30,
	Three Months Ended March 31,
	2020				2019 (c)
	2021				2020 (a)
(In millions)	Pension Benefits		Health and Life Benefits		Pension Benefits		Health and Life Benefits
Service cost	$	3.1	$	1.36	$	3.02	$	1.3
Interest cost	87.96		2.30		108.29		32.03
Expected return on plan assets	(10.67)		(5.97)		(10.58)		(65.19)
Recognized prior service cost (credit)	0.1		(3.4)		0.1		(3.94)
Recognized actuarial loss (gain)	10.83		(01.52)		12.94		—(0.5)
Settlement charge	21.40		—		—1.1		—
Net periodic benefit cost (income)	51.74		(6.27)		4.79		(56.72)
Allocation to affiliates	~~(0.4)~~—		0.52		(0.43)		0.54
Adjusted net periodic benefit cost (income)	51.34		(56.75)		4.36		(5.28)
Amount allocated to construction projects	(0.56)		(0.23)		(0.4)		(0.2)
Amount charged (credited) to expense	$	40.8	$	(56.98)	$	34.92	$	(56.40)
	Nine Months Ended September 30,
	2020				2019 (c)
(In millions)	Pension Benefits		Health and Life Benefits		Pension Benefits		Health and Life Benefits
Service cost	$	9.4	$	4.0	$	9.1	$	3.8
Interest cost	26.6		6.9		30.7		9.0
Expected return on plan assets	(31.9)		(17.7)		(31.4)		(18.2)
Recognized prior service cost (credit)	0.2		(10.2)		0.3		(11.7)
Recognized actuarial loss (gain)	5.7		(1.5)		5.9		—
Settlement charge(a)	3.6		—		4.3		—
Net periodic benefit cost (income)	13.6		(18.5)		18.9		(17.1)
Allocation to affiliates	(1.2)		1.6		(1.3)		1.8
Adjusted net periodic benefit cost (income)	12.4		(16.9)		17.6		(15.3)
Amount allocated to construction projects	(1.6)		(0.7)		(1.2)		(0.6)
Amount deferred as regulatory asset (liability)-net allocations (b)	—		—		0.7		—
Amount charged (credited) to expense	$	10.8	$	(17.6)	$	17.1	$	(15.9)

(a) In ~~Amounts~~the ~~relate~~third toquarter ~~partial~~of ~~settlement~~2020, ~~charges~~Washington ~~associated~~Gas ~~with~~made ~~lump~~a ~~sum~~voluntary ~~payments~~change ~~from~~in accounting principle for calculating the ~~Washington~~MRVA ~~Gas’~~used ~~defined~~in ~~benefit~~the ~~supplemental~~determination ~~executive~~of net periodic pension and other post-retirement benefit plan ~~(DB~~costs. ~~SERP)~~We have 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.

(b) ~~Amount~~The ~~represents~~other ~~the~~components ~~amortization~~ of ~~previously~~net ~~unrecovered~~benefit ~~costs~~cost ofare ~~the~~presented ~~applicable~~separately ~~pension~~from ~~benefits~~service orcost ~~the health~~ and ~~life~~recorded ~~benefits~~in as“Other ~~approved~~income in(expense)-net” on the ~~District~~accompanying statements of ~~Columbia through 2019~~operations.

~~(c) In~~At ~~the~~March 31, ~~third~~2021 ~~quarter~~and ofDecember 31, 2020, ~~Washington~~the ~~Gas~~rabbi ~~made~~trust abalance ~~voluntary~~associated ~~change~~with inthe ~~accounting~~DB ~~principle~~SERP ~~for~~and ~~calculating~~defined ~~the~~benefit ~~market-related~~restoration ~~value~~plan of(DB ~~assets~~restoration) ~~used~~plans inwere ~~the~~$12.7 ~~determination~~million ofand ~~net~~$18.8 ~~periodic~~million, ~~pension~~respectively. $2.1 million and ~~other~~$10.6 ~~post-retirement~~million ~~benefit~~were ~~plan~~recorded ~~costs.~~in We“Current ~~have~~Assets-Other” ~~retrospectively~~and ~~applied~~“Deferred ~~this~~Charges ~~change~~and inOther ~~accounting~~Assets ~~principle~~- toOther” ~~all~~on ~~applicable~~Washington ~~prior~~Gas' ~~period~~balance ~~financial~~sheets ~~information~~at ~~presented~~March 31, ~~herein~~2021; as$6.7 ~~required~~million and $12.1 ~~Refer~~million towere ~~Note~~recorded 1in —“Current ~~Accounting~~Assets-Other” ~~Policies~~and ~~for~~“Deferred ~~further~~Charges ~~discussion~~and Other Assets - Other” at December 31, 2020, respectively, along with other rabbi trust balances.

2119

~~Washington~~NOTE ~~Gas~~9. ~~Light~~COMMITMENTS ~~Company~~AND CONTINGENCIES

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

At September 30, 2020 and December 31, 2019, the rabbi trust balance associated with the DB SERP and non-funded defined benefit restoration plan (DB restoration) plans were $24.8 million and $40.0 million, respectively. $7.5 million and $17.3 million were recorded in “Current Assets-Other” and “Deferred Charges and Other Assets - Other” on Washington Gas' balance sheets at September 30, 2020; $19.5 million and $20.5 million were recorded in “Current Assets-Other” and “Deferred Charges and Other Assets - Other” at December 31, 2019, respectively, along with other rabbi trust balances.

NOTE 11. COMMITMENTS AND CONTINGENCIES

Commitments

Washington Gas has certain natural gas contracts incurred in the normal course of business that require fixed and determinable payments in the future, including unconditional purchase obligations for pipeline capacity, transportation and storage services. ~~Refer~~There were no significant changes to ~~Note~~contractual ~~13-~~obligations ~~Commitments~~that ~~and~~are ~~Contingencies~~out toof the ~~Financial~~ordinary ~~Statements~~course inof ~~Form~~business ~~10-K~~during ~~for~~ the three ~~calendar~~months ~~year~~ ended ~~December~~ March 31, ~~2019 for future payments~~2021.

There were no significant changes to contractual obligations that are out of the normal course of business during the nine months ended September 30, 2020.

Merger Commitments

In connection with the Merger in 2018, Washington Gas and AltaGas have made commitments related to the terms of ~~settlement~~the ~~agreement with~~ PSC of DC settlement agreement and the conditions of approval from the PSC of MD and the SCC of VA. Among other things, these commitments included rate credits distributable to both residential and non-residential customers, gas expansion and other programs, various public interest commitments, and safety programs. As of ~~September~~March 3031, ~~2020~~2021, the remaining unpaid ~~liability~~amount for the previously ~~expensed~~accrued merger commitments was $~~15.~~9.4 million. In addition, there are certain additional regulatory commitments that were and will be expensed as the costs are incurred, including the hiring of damage prevention trainers in each jurisdiction for a total of $2.4 million over 5 years; investing up to $70.0 million over a 10-year period to further extend natural gas service; and spending $8.0 million for leak mitigation within 3 years after the Merger close which has been paid as of December 31, 2020. Additionally, there are a number of operational commitments that have an impact on the ongoing business of Washington Gas, including reductions of leak backlogs, conducting a root cause analysis related to customer service, increasing supplier diversity, achieving synergy savings benefits, developing protocols for moving meters from inside to outside customers’ premises, as well as reporting and tracking related to all the commitments.

Contingencies

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

Antero Contract

In June 2019, a jury trial was held in the County Court for Denver, Colorado to consider a contractual dispute relating to gas pricing between Washington Gas and its affiliate WGL Midstream and Antero Resources Corporation (Antero). Following the trial, the jury returned a verdict in favor of Antero for $95.9 million, of which $11.2 million was against Washington Gas, and $84.7 million against WGL Midstream. Following the official entry of the judgment, the Company filed an appeal on August 16, 2019. Arguments on the appeal occurred on November 4, 2020.

As a result of this verdict, it was determined that a loss contingency is probable and Washington Gas recorded an estimated liability and recognized a loss in June 2019. In addition, Washington Gas recorded a receivable from our trading partner, and a receivable related to sharing with our customers as the contract relates to asset optimization. Washington Gas has been accruing interest expense on a monthly basis associated with the liability since June 2019. At September 30, 2020, the estimated liability with court fees and accrued interest was $12.3 million recorded in “Accounts payable and accrued liabilities” on Washington Gas' balance sheets. The net receivable from our trading partner was $1.3 million in “Deferred charges and other assets-Other”, and sharing with customers was $5.0 million in “Regulatory assets - Gas costs” on the balance sheets. For the nine months ended September 30, 2020 the interest expense associated with the legal liability was immaterial. For the nine months ending September 30, 2019, the net pre-tax loss recorded as a result of the verdict was $3.0 million in “Utility cost of gas” on Washington Gas’ statements of operations.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Regulatory Contingencies

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

Maryland Show-Cause Order. 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.

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

The Company timely responded to the PSC of MD’s Show-Cause Order, providing a detailed response to the NTSB’s probable cause findings, providing evidence regarding the status of its 2003 mercury regulator replacement program and demonstrating cause why the PSC of MD should not impose a civil penalty on the Company. Following the Company’s response, certain intervenors filed written comments and a public hearing was held on the matter, with some intervenors and members of the public advocating for penalties against the Company. The Company filed its rejoinder comments and the Show-Cause Order is working its way through the regulatory proceeding process with the PSC of MD. An evidentiary hearing was conducted on September 24 – 25, 2020. Initial briefs were filed on October 28, 2020 and reply briefs will be filed on November 13, 2020.

Management believes that the likelihood of a civil penalty is probable and has accrued $330,000 to reflect the minimum liability as a result of delinquent mercury regulator replacement status reporting. Though the Company is unable to estimate the maximum possible penalty, other parties have recommended penalties ranging from $620,500 (PSC of MD Staff, which argued the Company should pay a minimum penalty for failing to provide annual reports detailing progress in replacing the mercury regulators) to $123.3 million (Office of People's Counsel, which argued the Company should absorb all costs of removal and relocation of mercury service regulators and pay a fine of $25,000 per day for each day mercury service regulators remain on the Company’s system).

Environmental Matters

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

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

At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas reported a liability of $10.42 million and $10.73 million, respectively, on an undiscounted basis related to future environmental response costs. These estimates principally include the minimum liabilities associated with a range of environmental response costs expected to be incurred. At both ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas estimated the maximum liability associated with all of its sites to be approximately $30.76 million. The maximum liability at March 31, 2021 included $19.1 million related to the Anacostia river study and $8.0 million related to the East Station property, which are further discussed below. The estimates were determined by Washington Gas’ environmental experts, based on experience in remediating MGP sites and advice from legal counsel and environmental consultants. The variation between the recorded and estimated maximum liability primarily results from differences in the number of expected years that will be required to perform environmental response processes and the extent of remediation that may be required.

Washington Gas is currently remediating its East Station property, located adjacent to the Anacostia River in Washington D.C., including ground water pump and treat, tar recovery, soil encapsulation and other treatment. Under a 2012 consent decree with the District of Columbia and the federal government, Washington Gas is also conducting a remedial investigation and feasibility study on an adjacent property owned by the District of Columbia. The Draft Remedial Investigation Report was submitted to the National Park Service (NPS) and the Department of Energy and Environment (DOEE) on June 12, 2020. Additional remediation may be required at this property.

23In addition, at another adjoining property known as the “Boat Club Property,” located to the east of the property owned by the District of Columbia, Washington Gas agreed to perform a site investigation and report the findings pursuant to oversight by the District of Columbia DOEE. This property was subject to a July 12, 2019, Administrative Order from the DOEE. That Administrative Order was withdrawn and the Company entered into a negotiated Administrative Order on Consent with the DOEE that was effective on March 11, 2020. Under the terms of the Administrative Order on Consent, the Company submitted a Remedial Investigative Report on February 26, 2021. On March 11, 2021, the Company received an Administrative Order related to the alleged presence of sheens in the Anacostia River. The Company filed an appeal of the Administrative Order with the District of Columbia Office of Administrative Hearings on March 26, 2021. The appeal is pending.

Washington Gas ~~Light~~received a letter in February 2016 from the DOEE and National Park Service regarding the Anacostia River Sediment Project, indicating that the District of Columbia is conducting a separate remedial investigation and feasibility study of the river to determine if and what cleanup measures may be required and to prepare a natural resource damage assessment. On December 27, 2019, DOEE issued an Anacostia River Sediment Project Proposed Plan, a River-wide Feasibility Study, and supporting documents for public comment. Although the Proposed Plan identifies East Station as one of fifteen potential environmental cleanup sites, DOEE is proposing to continue the remediation of East Station under Washington Gas’ existing Consent Decree rather than as part of the Anacostia River Sediment Project. DOEE issued an Interim Record of Decision for remediation of “Early Action Areas” (that do not include East Station) in the Anacostia River by September 30, 2020. On January 6, 2021, the Company received a supplement to a September 2017 information request from DOEE and the National Park Service regarding its East Station property. We are not able to estimate the total amount of potential costs or timing associated with the District of Columbia’s environmental investigation on the Anacostia River at this time. While an allocation method has not been established, Washington Gas has accrued an amount for estimated study costs based on a potential range of estimates.

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

In addition, at another adjoining property known as the “Boat Club Property,” located to the east of the property owned by the District of Columbia, Washington Gas agreed to perform a site investigation and report the findings pursuant to oversight by the District of Columbia DOEE. This property was subject to a July 12, 2019, Administrative Order from the DOEE. That Administrative Order was withdrawn and the Company entered into a negotiated Administrative Order on Consent with the DOEE that was effective on March 11, 2020. Under the terms of the Administrative Order on Consent, the Company is scheduled to submit a Remedial Investigative Report by December 29, 2020.

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

Regulatory orders issued by the PSC of MD allow Washington Gas to recover the costs associated with the sites applicable to Maryland over the period ending in 2035. Regulatory orders issued by the PSC of DC allow Washington Gas a three-year recovery of prudently incurred environmental response costs and allow Washington Gas to defer additional costs incurred between rate cases. Regulatory orders from the SCC of VA have generally allowed the recovery of prudent environmental remediation costs to the extent they were included in the underlying financial data supporting an application for rate change.

At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas reported a regulatory asset of $67.82 million and $7.04 million, respectively, for the portion of environmental response costs that are expected to be recoverable in future rates.

2421

~~Washington~~NOTE ~~Gas~~10. ~~Light Company~~DERIVATIVES

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 12. DERIVATIVES

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

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

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

Washington Gas has a collaborative arrangement with a third party to facilitate the asset optimization program. The collaborative arrangement allocates a tiered percentage of profits or losses to the third party as compensation for its participation. The costs recorded by Washington Gas related to the collaborative arrangement totaled $21.43 million and $21.50 million for the three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019, respectively, and $5.8 million and $3.8 million for the nine months ended September 30,~~ 2020 ~~and 2019~~, respectively. These amounts were recorded in “Utility cost of gas” on Washington Gas’ statements of operations. Either party may terminate the collaborative arrangement through the delivery of a termination notice. In such an event, Washington Gas may make a payment upon termination.

~~All~~The ~~physically~~following ~~and~~table ~~financially~~presents ~~settled contracts under our asset optimization program are reported on a net basis in~~ the ~~statements of operations in “Utility cost of gas”. Total~~ net ~~margins~~margin recorded to “Utility cost of gas” after sharing and management fees associated with ~~all~~our asset optimization transactions ~~for the three months ended September 30, 2020 was a net gain of $5~~.1 million including an unrealized loss of $1.3 million. During the three months ended September 30, 2019, we recorded a net loss of $1.2 million including an unrealized loss of $6.5 million . During the nine months ended September 30, 2020, we recorded a net gain of $19.7 million including an unrealized gain of $5.5 million. During the nine months ended September 30, 2019, we recorded a net gain of $8.3 million including an unrealized gain of $0.1 million and the $3.0 million loss related to the Antero Contract. Refer to Note 11 - Commitments and Contingencies for further discussion of the Antero Contract.


Net Margins for Asset Optimization
(In millions)	Three Months Ended March 31,
		2021		2020
Realized gain		$	2.9	$	2.3
Unrealized gain		5.3		6.1
Net margin gain		$	8.2	$	8.4

Managing Price Risk. To manage price risk associated with acquiring natural gas supply for utility customers, Washington Gas enters into physical and financial derivative transactions in the form of forward, option and other contracts, as authorized by its regulators. Any gains and losses associated with these derivatives are recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities.

2522

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Notional Summary

The following table presents notional amounts of our outstanding derivatives ~~September~~at March 3031, ~~2020~~2021 and December 31, ~~2019~~2020.

Absolute Notional Amounts
of Open Positions on Derivative Instruments
	September 30, 2020	December 31, 2019
	March 31, 2021	December 31, 2020
Natural Gas (In millions of therms)
Asset optimization & trading	10,~~726~~353.0	1110,~~671~~471.0
Other risk-management activities	~~915~~794.0	~~976~~881.0

Location, Fair Value and Offsetting of Derivative Assets and Liabilities Recognized in the Balance Sheets

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

Balance Sheet Classification of Derivative Instruments
(In millions)	Gross amounts of recognized assets/(liabilities)		Gross amountsoffset in balance sheet		Netting ofcollateral		Net amountspresented on balance sheet
September 30, 2020
March 31, 2021
Derivative assets (a)	$	2025.28	$	(60.4)	$	—	$	1325.84
Derivative liabilities (b)	(9299.46)		60.4		—		$	(8699.02)
Net derivative assets (liabilities)	$	(7273.28)	$	—	$	—	$	(7273.28)
December 31, 2019
December 31, 2020
Derivative assets (a)	$	1317.08	$	4(1.05)	$	—	$	1716.03
Derivative liabilities (b)	(~~104~~98.08)		(41.0)5		61.26		(~~101~~95.87)
Net derivative assets (liabilities)	$	(9181.0)	$	—	$	61.26	$	(8479.84)

(a) Derivative assets at ~~September~~March 3031, ~~2020~~2021 include $410.76 million recorded in "Current assets — Derivatives" and $914.18 million in" Deferred charges and other assets — Derivatives" on Washington Gas' balance sheets; Derivative assets at December 31, ~~2019~~2020 include $65.60 million recorded in "Current assets —Derivatives" and $1011.43 million in" Deferred charges and other assets — Derivatives" on Washington Gas' condensed balance sheets.

(b) Derivative liabilities at ~~September~~March 3031, ~~2020~~2021 include $911.6 million recorded in "Current liabilities — Derivatives " and $7687.46 million recorded in " Deferred credits — Derivatives" on Washington Gas' balance sheets; Derivative liabilities at December 31, ~~2019~~2020 include $47.1 million recorded in "Current liabilities — Derivatives " and $9788.76 million recorded in " Deferred credits — Derivatives" on Washington Gas' condensed balance sheets.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Gains and (Losses) on Derivatives

The following tables present all gains and losses associated with derivative instruments for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020.

Gains and (Losses) on Derivative Instruments
(In millions)	Three Months Ended ~~September~~March 3031,				~~Nine Months Ended September 30,~~
	2020		2019		2020		2019
	2021		2020
Recorded to income-Utility cost of gas	$	(0.3)7	$	(53.8)1	$	~~6.2~~	$	~~(0.1)~~
Recorded to regulatory assets-Gas costs	(78.10)		(98.6)9		~~9.8~~		~~4.8~~
Total	$	(7.43)	$	~~(15~~12.4)0	$	~~16.0~~	$	~~4.7~~

Collateral

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

At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas had $13.01 million and $5.2.8 million, respectively, in collateral deposits posted with counterparties that are not offset against derivative asset and liabilities. At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas had $0.1 million and $0.12 million, respectively, cash collateral held representing an obligation, and are not offset against derivative asset and liabilities.

Certain derivative instruments of Washington Gas contain contract provisions that require collateral to be posted if the credit rating of Washington Gas falls below certain levels or if counterparty exposure to Washington Gas exceeds a certain level (credit-related contingent features). At ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, Washington Gas was not required to post collateral related to a derivative liability that contained a credit-related contingent feature.

The following table shows the aggregate fair value of all derivative instruments with credit-related contingent features that are in a liability position, as well as the maximum amount of collateral that would be required if the most intrusive credit-risk-related contingent features underlying these agreements were triggered on ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, respectively.

Potential Collateral Requirements for Derivative Liabilitieswith Credit-Risk-Contingent Features
(In millions)	~~September~~March 3031, ~~2020~~2021		December 31, ~~2019~~2020
Derivative liabilities with credit-risk-contingent features	$	0.21	$	0.47
Maximum potential collateral requirements	$	0.21	$	0.46

We do not enter into derivative contracts for speculative purposes.

Concentration of Credit Risk

We are exposed to credit risk from derivative instruments with wholesale counterparties, which is represented by the fair value of these instruments at the reporting date. We actively monitor and work to minimize counterparty concentration risk through various practices. At ~~September~~March 3031, ~~2020~~2021, ~~one~~three ~~counterparty~~counterparties represented over 10% of Washington Gas’ credit exposure to wholesale derivative counterparties for a total credit risk of $1532.16 million.

2724

~~Washington~~NOTE ~~Gas~~11. ~~Light~~FAIR ~~Company~~VALUE MEASUREMENTS

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 13. FAIR VALUE MEASUREMENTS

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

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

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

Level 1. Level 1 of the fair value hierarchy consists of assets or liabilities that are valued using observable inputs based upon unadjusted quoted prices in active markets for identical assets or liabilities at the reporting date. Included in this category are cash equivalents and Rabbi trust investments in money market funds which are recorded on the balance sheets at fair value on a recurring basis.

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

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

Level 3 derivative assets and liabilities included: (i) physical contracts valued at illiquid market locations with no observable market data; (ii) long-dated positions where observable pricing is not available over the majority of the life of the contract; (iii) contracts valued using historical spot price volatility assumptions and (iv) valuations using indicative broker quotes for inactive market locations.

Our level 2 and level 3 derivatives are recorded on the balance sheets at fair value on a recurring basis.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Other financial instruments including commercial paper, unsecured notes, and other long-term receivables are recorded on the balance sheets at amortized cost. The fair value of the long-term receivable from one of our trading partners related to the Antero contract approximates its carrying value using Level 2 input to estimate the credit loss associated with the receivable. The carrying cost of our commercial paper approximates fair value using Level 2 inputs. The fair value of Washington Gas unsecured notes was estimated based on valuation techniques using indirectly observable inputs corroborated with market data and therefore is classified as Level 2.

Summary of Carrying Amounts and Fair value of Financial Instruments

The following table summarizes the carrying amounts and fair value of financial assets and liabilities. A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy.

Fair Value Under the Fair Value Hierarchy
(In millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
At September 30, 2020
At March 31, 2021
Financial assets
Fair value through net income
Cash equivalents (a)	$	0.82	$	0.82	$	—	$	—	$	0.82
Rabbi trust investments (b)	2815.09		2815.09		—		—		2815.09
Derivative asset - current	14.93		—		0.24		13.79		14.93
Derivative asset - deferred	36.76		—		—1.2		35.74		36.76
Fair value through regulatory assets/liabilities
Derivative asset - current	26.83		—		0.46		25.47		26.83
Derivative asset - deferred	58.42		—		—1.9		56.43		58.42
Amortized cost
Total Assets	$	41.5	$	16.1	$	4.1	$	21.3	$	41.5
Other long-term receivables (c)	1.3		—		1.3		—		1.3
Total Assets	$	43.9	$	28.8	$	1.9	$	13.2	$	43.9
Financial Liabilities
Fair value through net income
Derivative liabilities - current	$	(2.46)	$	—	$	(0.25)	$	(2.21)	$	(2.46)
Derivative liabilities - deferred	(2224.80)		—		—		(2224.80)		(2224.80)
Fair value through regulatory assets/liabilities
Derivative liabilities - current	(79.20)		—		(0.46)		(6.8.4)		(79.20)
Derivative liabilities - deferred	(5363.6)		—		—		(5363.6)		(5363.6)
Amortized cost
Commercial paper (d)	(~~270~~72.05)		—		(~~270~~72.05)		—		(~~270~~72.05)
Unsecured notes (e)	(1,~~331~~446.48)		—		(1,~~605~~613.05)		—		(1,~~605~~613.05)
Total Liabilities	$	(1,~~687~~618.45)	$	—	$	(1,~~875~~687.61)	$	(8598.41)	$	(1,~~961~~785.02)
(In millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
At December 31, 2019
At December 31, 2020
Financial assets
Fair value through net income
Cash equivalents (a)	$	113.02	$	113.02	$	—	$	—	$	113.02
Rabbi trust investments (b)	4422.10		4422.10		—		—		4422.10
Derivative asset - current	2.61		—		0.17		21.54		2.61
Derivative asset - deferred	4.15		—		~~0.2~~—		34.95		4.15
Fair value through regulatory assets/liabilities
Derivative asset - current	42.09		—		—0.9		42.0		42.09
Derivative asset - deferred	6.8		—		—		6.8		6.8
Amortized cost
Other long-term receivables (c)	1.4		—		1.4		—		1.4
Total Assets	$	42.9	$	25.2	$	3.0	$	14.7	$	42.9
Financial Liabilities
Fair value through net income
Derivative liabilities - current	$	(0.4)	$	—	$	—	$	(0.4)	(0.4)
Derivative liabilities - deferred	(26.8)		—		—		(26.8)		(26.8)

2926

Washington Gas Light Company


Fair value through regulatory assets/liabilities
Derivative liabilities - current	(6.7)		—		(0.3)		(6.4)		(6.7)
Derivative liabilities - deferred	(61.8)		—		(0.7)		(61.1)		(61.8)
Amortized cost
Commercial paper (d)	(285.0)		—		(285.0)		—		(285.0)
Unsecured notes (e)	(1,446.9)		—		(1,779.8)		—		(1,779.8)
Total Liabilities	$	(1,827.6)	$	—	$	(2,065.8)	$	(94.7)	$	(2,160.5)

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Derivative asset - deferred	6.3		—		0.3		6.0		6.3
Amortized cost
Other long-term receivables (c)	1.3		—		1.3		—		1.3
Total Assets	$	73.4	$	55.1	$	1.9	$	16.4	$	73.4
Financial Liabilities
Fair value through net income
Derivative liabilities - current	$	(0.7)	$	—	$	—	$	(0.7)	(0.7)
Derivative liabilities - deferred	(28.4)		—		—		(28.4)		(28.4)
Fair value through regulatory assets/liabilities
Derivative liabilities - current	(3.4)		—		(0.6)		(2.8)		(3.4)
Derivative liabilities - deferred	(69.3)		—		—		(69.3)		(69.3)
Amortized cost
Commercial paper (d)	(399.5)		—		(399.5)		—		(399.5)
Unsecured notes (e)	(1,330.9)		—		(1,480.8)		—		(1,480.8)
Total Liabilities	$	(1,832.2)	$	—	$	(1,880.9)	$	(101.2)	$	(1,982.1)

(a) Cash equivalents represent the amounts invested in money market funds and were included in "Cash and cash equivalents" of the accompanying balance sheets.

(b) Rabbi Trust investments are invested in money market funds. At ~~September~~March 3031, ~~2020~~2021, carrying amount of $72.51 million and $2013.58 million was included in "Current assets — Other" and "Deferred charges and other assets — Other" of the accompanying balance sheets, respectively; At December 31, ~~2019~~2020, carrying amount of $196.57 million and $2415.63 million was included in "Current assets — Other" and "Deferred charges and other assets — Other", respectively.

(c) Amount represents a long-term receivable from one of our trading partners related to the Antero contract ~~discussed~~at inDecember ~~Note~~31, 112020. —The ~~Commitments~~receivable became current and ~~Contingencies.~~netted ~~The~~against ~~carrying~~the ~~amount~~payable ~~represents~~to the ~~long-term~~ ~~receivable~~trading ~~net~~partner ofin ~~allowance~~"Account ~~for~~payable ~~doubtful~~and ~~accounts~~other accrued liabilities" on the accompanying balance sheets at March 31, 2021.

(d) The balance at ~~September~~March 3031, ~~2020~~2021 ~~includes~~included $~~170~~72.05 million located in ~~"Notes payable", and $100.0 million located in~~ “Long-term debt” on the accompanying balance sheets. The balance at December 31, ~~2019~~2020 ~~includes~~included $~~299~~185.50 million located in "Notes payable", and $100.0 million located in “Long-term debt” on the accompanying balance sheets.

(e) Includes adjustments for current maturities and unamortized discounts, as applicable. The amount was included in "Long-term debt" on the accompanying balance sheets.

Quantitative Information About Unobservable Inputs

The following table includes quantitative information about the significant unobservable inputs used in the fair value measurement of our Level 3 financial instruments and the respective fair values of the net derivative asset and liability positions.

Quantitative Information about Level 3 Fair Value Measurements

(In millions)

Net Fair Value

Valuation Techniques

Unobservable Inputs

Weighted Average ~~(a)~~

Range

September 30, 2020

($72.2)

Discounted Cash Flow

Natural Gas Basis Price (per dekatherm)

($0.34)

($1.105)-$2.068

March 31, 2021

$(76.80)

Discounted Cash Flow

Natural Gas Basis Price (per dekatherm)

$(0.41)

$(1.168)-$1.963

December 31, 2019

($84.8)

Discounted Cash Flow

Natural Gas Basis Price (per dekatherm)

n/a

($0.905)-$2.523

December 31, 2020

$(80.00)

Discounted Cash Flow

Natural Gas Basis Price (per dekatherm)

$(0.36)

$(0.910)-$2.073

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

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Reconciliation of Level 3 Assets and Liabilities

The following table presents a reconciliation of changes in net fair value of Level 3 derivative instruments measured at fair value on a recurring basis.

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs
	Three Months Ended September 30,				Nine Months EndedSeptember 30,
	Three Months Ended March 31,
(In millions)	~~2020~~2021		~~2019~~2020		~~2020~~		~~2019~~
Balance at beginning of period	$	(6580.80)	$	(8684.98)	$	~~(84.8)~~	$	~~(106.6)~~
Realized and unrealized gains (losses)
Recorded to income	~~(0.~~2).4		(63.2)1		~~5.2~~		~~(1.4)~~
Recorded to regulatory assets — Gas costs	(65.4)		~~(10~~9.1)		~~9.0~~		~~4.3~~
Transfers into Level 3	—		(2.9)		—		(6.7)
Settlements	6.2		1.4
Transfers out of Level 3	—		2.9		—		7.9
Balance at end of period	$	(76.8)	$	(71.2)
Settlements	0.2		(3.1)		(1.6)		(3.8)
Balance at end of period	$	(72.2)	$	(106.3)	$	(72.2)	$	(106.3)

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

The following table presents the unrealized gains (losses) attributable to Level 3 derivative instruments measured at fair value on a recurring basis.

Unrealized Gains (Losses) Recorded for Level 3 Measurements

Three Months Ended September 30,

Nine Months EndedSeptember 30,

Three Months Ended March 31,

(In millions)

~~2020~~2021

~~2019~~2020

~~2020~~

~~2019~~

Recorded to income — Utility cost of gas

01.26

(52.9)3

~~8.6~~

~~1.6~~

Recorded to regulatory assets — Gas costs

(46.43)

~~(10~~7.2)6

~~14.5~~

~~7.9~~

Total

(4.27)

~~(16~~9.1)9

~~23.1~~

~~9.5~~

3128

~~Washington~~NOTE ~~Gas~~12. RELATED ~~Light~~PARTY ~~Company~~TRANSACTIONS

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 14. RELATED PARTY TRANSACTIONS

Corporate Service Allocation

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

The net expenses of $5.30 million and $155.4 0 million were included in “Operation and maintenance” on the statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, 2021 and 2020, respectively, reflecting the corporate service cost allocated to Washington Gas.

The net expenses of $5.0 million and $12.5 million were included in “Operation and maintenance” on the statements of operations for the three and nine months ended September 30, 2019, respectively, reflecting the corporate service cost allocated to Washington Gas.

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

Project Financing

WGL Energy Systems, Inc. (WGL Energy Systems), an indirect, wholly- owned subsidiary of WGL, obtains third-party project financing for energy management services projects with the federal government under Washington Gas’s area-wide contract. As work is performed, Washington Gas establishes a contract asset in “Receivables” representing the government’s obligation to remit principal and interest and records a “Payable to associated company” to WGL Energy Systems for the construction work performed for the same amount.

At ~~September~~March 3031, ~~2020~~2021, Washington Gas recorded $516.87 million of contract assets in “Receivables” and a $516.87 million payable to WGL Energy Systems in “Payables to associated companies,” respectively, for energy management services projects financed by WGL Energy Systems that were not complete.

At December 31, ~~2019~~2020, Washington Gas recorded $4416.21 million of contract assets in “Receivables” and a $4416.21 million payable to WGL Energy Systems in “Payables to associated companies,” respectively, for energy management services projects financed by WGL Energy Systems that were not complete.

In October 2018, WGL Energy Systems repaid $53.0 million historically drawn by Washington Gas from a third-party lender for Washington Gas' area-wide contract that the lender demanded repayment for due to delays in achieving final acceptance from the federal government agency customer. The $53.0 million was included in "Payables to associated companies" on Washington Gas' balance sheets at December 31, 2018. In February 2019, WGL sold the contract asset, and accordingly, Washington Gas reversed the associated amount in “Payables to associated companies” and “Receivables” on its balance sheets during the three months ended March 31. 2019.29

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Related Party Transactions with Hampshire

Hampshire Gas Company (Hampshire), a wholly owned subsidiary of WGL, owns full and partial interests in underground natural gas storage facilities, including pipeline delivery facilities located in and around Hampshire County, West Virginia, and operates those facilities to serve Washington Gas, which purchases all of the storage services of Hampshire. Washington Gas includes the cost of these services in the bills sent to its customers and records the cost of the services in "Operation and maintenance" in its statements of operations. Hampshire operates under a “pass-through” cost of service-based tariff approved by the FERC and adjusts its billing rates to Washington Gas on a periodic basis to account for changes in its investment in utility plant and associated expenses. The arrangement between Hampshire and Washington Gas is classified as an operating lease. A right-of-use (ROU) asset and lease liability was not recognized upon the adoption of ASC 842 because all the costs associated with the arrangement are variable. Washington Gas recorded expenses related to the cost of services provided by Hampshire in "Operation and maintenance " on Washington Gas' statements of operations of $2.31 million and $62.40 million for three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021, and ~~$1.5 million and $5.5 million for the three and nine months ended September 30~~2020, ~~2019,~~ respectively. The outstanding balance not cleared between Washington Gas and Hampshire at the end of the reporting period was recorded in "Payable to associated companies" of Washington Gas' balance sheets.

Related Party Income Taxes

Washington Gas is included in the AltaGas Services (US) Inc.(ASUS) consolidated income tax returns. We have a tax sharing policy with ASUS, an indirect, wholly owned subsidiary of AltaGas, that allocates consolidated tax liabilities and benefits using a ratio determined by the separate taxable income for each member applied to the consolidated return tax liability of the group. State income tax returns are filed on a separate company basis in most states and on a unitary basis as required, where we or the consolidated ASUS group have operations and/or a requirement to file.

At March 31, 2021 Washington Gas recorded a $0.6 million receivable in "Receivables from associated companies" and a $0.6 million payable in "Payables to associated companies" under the ASUS tax sharing policy on Washington Gas' balance sheets, respectively. At December 31, 2020, Washington Gas recorded a $112.2 million receivable in "Receivables from associated companies" and a $0.6 million payable in "Payables to associated companies" under the ASUS tax sharing policy on Washington Gas' balance sheets, respectively.

Other Related Party Transactions

In connection with billing for unregulated third-party marketers, including WGL Energy Services, ~~Inc., (WGL Energy Services), an indirect, wholly-owned subsidiary of WGL,~~ and with other miscellaneous billing processes, Washington Gas collects cash on behalf of affiliates and transfers the cash in a reasonable time period. Cash collected by Washington Gas on behalf of its affiliates but not yet transferred is recorded in “Payables to associated companies” on Washington Gas’ balance sheets.

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

Washington Gas - Gas Balancing Service Charges
Gas Balancing Service Charges
	Three Months Ended September 30,				Nine Months EndedSeptember 30,
(In millions)	Three Months Ended March 31,
(In millions)	2020		2019		2020		2019
	2021		2020
Gas balancing service charge	$	27.7	$	26.96	$	~~12.4~~	$	~~14.9~~

As a result of these balancing services, an imbalance is created for volumes of natural gas received by Washington Gas that are not equal to the volumes of natural gas delivered to customers of the energy marketers. Washington Gas recorded $01.2 4 million and $2.1 0 million ~~payable~~receivable tofrom WGL Energy Services at ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, respectively, related to an imbalance in gas volumes. The ~~payables~~receivables were recorded in "~~Accounts payable and other accrued liabilities~~Receivables" on Washington Gas' balance sheets.

Washington Gas participates in a purchase of receivables (POR) program as approved by the PSC of MD and separate program approved by the PSC of DC, whereby it purchases receivables from participating energy marketers at approved discount rates. WGL Energy Services is one of the energy marketers that participates in these POR programs whereby it sells its receivables to various utilities, including Washington Gas, at approved discount rates. The receivables purchased by Washington Gas are included in “Accounts receivable” in the accompanying balance sheets. At September 30~~, 2020 and December 31, 2019, Washington Gas had balances of $2.9 million and $7.9 million, respectively, of purchased receivables from WGL Energy Services.~~

Washington Gas participates in a purchase of receivables (POR) program as approved by the PSC of MD and separate program approved by the PSC of DC, whereby it purchases receivables from participating energy marketers at approved discount rates. WGL Energy Services is one of the energy marketers that participates in these POR programs whereby it sells its receivables to various utilities, including Washington Gas, at approved discount rates. The receivables purchased by Washington Gas are included in “Accounts receivable” in the accompanying balance sheets. At March 31, 2021 and December 31, 2020, Washington Gas had balances of $8.4 million and $6.9 million, respectively, of purchased receivables from WGL Energy Services.

NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table shows the changes in accumulated other comprehensive income (AOCI) by component for the reporting periods.


Changes in Accumulated Other Comprehensive Income by Component
	Three Months Ended March 31,
(In thousands)	2021		2020
Beginning Balance	$	1,577	$	4,576
Amortization of prior service credit (a)(b)	(81)		(304)
Amortization of actuarial loss (a)(b)(c)	34		781
Actuarial gain arising during the period (a)	1,436		1,910
Current-period other comprehensive income	1,389		2,387
Income tax expense related to pension and other post-retirement benefit plans retained in AOCI(c)	367		620
Ending Balance	$	2,599	$	6,343

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

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

(c) In the third quarter of 2020, Washington Gas made a voluntary change in accounting principle for calculating the MRVA used in the determination of net periodic pension and other post-retirement benefit plan costs. We have 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.

NOTE 14. SUPPLEMENTAL CASH FLOW INFORMATION

The following table details the changes in operating assets and liabilities from operating activities, cash payments that have been included in the determination of earnings and non-cash investing and financing activities.


(In thousands)	Three Months Ended March 31,
	2021		2020
CHANGES IN OPERATING ASSETS AND LIABILITIES
Receivables	$	(14,583)	$	53,278
(Receivables from) Payables to associated companies — net	127,218		11,649
Gas costs and other regulatory assets/liabilities — net	(5,648)		(43,613)
Storage gas	41,611		56,430
Prepaid taxes	5,712		3,711

Accounts payable and other accrued liabilities	(36,860)		(59,144)
Customer deposits and advance payments	(13,185)		(6,949)
Accrued taxes	31		5,499

Other current assets	5,756		10,273
Other current liabilities	(365)		(243)
Deferred gas costs — net	33,063		24,874
Deferred assets — other	2,019		(1,014)
Deferred liabilities — other	(2,427)		(1,463)

Pension and other post-retirement benefits	(5,613)		(4,245)

Changes in operating assets and liabilities	$	136,729	$	49,043
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded) — net	$	—	$	(3,880)
Interest paid including interest for finance leases	$	31,437	$	30,965
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,535	$	1,490
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,788	$	—
Right-of-use assets obtained in exchange for new finance lease liabilities	$	425	$	—
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	44,996	$	45,817

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



(In thousands)	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	11,056	$	42,418
Restricted cash included in Current assets-Other	2,083		11,332
Restricted cash included in Deferred charges and other assets-Other	13,826		28,113
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	26,965	$	81,863

~~Washington~~Restricted ~~Gas~~cash ~~Light~~included ~~Company~~in "Current assets — Other" and "Deferred charges and other assets — Other" on the balance sheets represents amount of investment in rabbi trusts to fund deferred compensation, pension and other post-retirement benefits for certain management personnel and directors. The funds in the rabbi trusts can only be used to pay for plan participant benefits and other plan expenses such as investment fees or trustee fees. The funds are invested in money market funds at the end of March 31, 2021 and 2020. Refer to Note 8 — Pension and Other Post-Retirement Benefit Plans for further discussion of rabbi trusts.

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table shows the changes in accumulated other comprehensive income (loss) (AOCI) by component for the reporting periods.

Changes in Accumulated Other Comprehensive Income (Loss) by Component
	Three Months Ended September 30,				Nine Months EndedSeptember 30,
(In thousands)	2020		2019 (c)		2020		2019 (c)
Beginning Balance	$	6,266	$	(6,547)	$	4,576	$	(7,106)
Amortization of prior service credit (a)(b)	(292)		(163)		(924)		(486)
Amortization of actuarial loss (a)(b)	427		442		1,432		1,346
Actuarial gain (loss) arising during the period (a)	1,286		—		3,196		1,250
Current-period other comprehensive income	1,421		279		3,704		2,110
Income tax expense related to pension and other post-retirement benefit plans retained in AOCI	366		(700)		959		572
Ending Balance	$	7,321	$	(5,568)	$	7,321	$	(5,568)

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

(c) 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 have 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.

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION

	Nine Months Ended September 30,
(In thousands)	2020		2019
CHANGES IN OPERATING ASSETS AND LIABILITIES
Receivables	$	177,598	$	174,986
(Receivables from) Payables to associated companies — net	8,754		6,402
Gas costs and other regulatory assets/liabilities — net	(82,387)		(8,253)
Storage gas	15,900		11,479
Prepaid taxes	4,097		(3,791)
Accounts payable and other accrued liabilities	(67,114)		(109,287)
Customer deposits and advance payments	(1,785)		(11,511)
Accrued taxes	4,500		6,830
Other current assets	20,226		5,077
Other current liabilities	4,163		(240)
Deferred gas costs — net	16,360		49,379
Deferred assets — other	(19,523)		11,807
Deferred liabilities — other	(14,929)		(26,879)
Pension and other post-retirement benefits	(12,152)		(11,427)
Changes in operating assets and liabilities	$	53,708	$	94,572
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid (refunded) — net	(2,880)		5,253
Interest paid	62,169		54,238
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Extinguishment of project debt financing activities — net	—		(15,460)
Capital expenditure accruals included in accounts payable and other accrued liabilities	$	52,643	$	39,976

(In thousands)	September 30, 2020		September 30, 2019
Cash and cash equivalents	$	1,214	$	1
Restricted cash included in Current assets-Other	7,507		4,225
Restricted cash included in Deferred charges and other assets-Other	20,519		43,945
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	29,240	$	48,171

Washington Gas Light Company

Part I-Financial Information

Item 1-Financial Statements (continued)

Notes to Condensed Financial Statements (Unaudited)

Restricted cash included in "Current assets — Other" and "Deferred charges and other assets — Other" on the balance sheets represents amount of investment in rabbi trusts to fund deferred compensation, pension and other post-retirement benefits for certain management personnel and directors. The funds in the rabbi trusts can only be used to pay for plan participant benefits and other plan expenses such as investment fees or trustee fees. The funds are invested in money market funds at the end of September 30, 2020 and 2019. Refer to Note 10 — Pension and Other Post-Retirement Benefit Plans for further discussion of rabbi trusts.

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

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

Introduction

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 H(2) of Form 10-Q, in light of Washington Gas’ status as a wholly owned subsidiary of AltaGas as permitted under General Instruction H(1) of Form 10-Q. It includes management’s narrative analysis of results of operations and reasons for material changes. This narrative discusses past financial results and potential factors that may affect future results, potential future risks and approaches that may be used to manage them. Except where the content clearly indicates otherwise, “Washington Gas,” “we,” “us,” “our” or the "Company" refers to Washington Gas Light Company.

Management’s Discussion and Analysis is designed to provide an understanding of our operations and financial performance and should be read in conjunction with the company’s financial statements and the Notes to Condensed Financial Statements.

COVID-19

We continue to monitor how the COVID-19 pandemic is affecting our workforce, customers, suppliers, financial results and cash flows. 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 ~~have~~ 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 customers effective on April 1, 2021, 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. However, we do not expect the increase in credit losses to have a significant impact on net income. ~~The~~We ~~PSC of DC, PSC of MD, and SCC of VA each~~ have ~~issued~~been anauthorized ~~Order authorizing Washington Gas~~ to establish a regulatory asset to capture and track the 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 ~~September~~March 3031, ~~2020~~2021, we have recorded $97.09 million of incremental COVID-19 related costs to regulatory assets across all three jurisdictions, ~~primarily~~related to bad debt expense, and ~~services~~supplies. ~~and~~The ~~supplies~~amount has not changed since December 31, 2020. Additionally, we waived late payment fees of $1.6 million ~~and~~for the three months ended March 31, 2021. In December 2020, Washington Gas received $47.47 million ~~for~~of Coronavirus Relief Funds from the ~~three~~SCC ~~and~~of ~~nine~~VA ~~months~~to ~~ended~~provide ~~September~~direct assistance to Virginia customers with balances over 30 days in arrears, ~~2020~~to the extent the customers meet the qualification requirements. At March 31, ~~respectively~~2021, $5.4 million of unused funds remained in "Gas costs due to customer" on Washington Gas' condensed balance sheets.

Unfavorable Noeconomic ~~material~~conditions ~~impairments~~due to COVID-19 have reduced demand for natural gas. Compared to the same period in 2020 and not considering the weather impact, the lower commercial usage in the District of ~~our~~Columbia ~~long~~and Virginia has resulted in a decrease to net revenue for the three months ended March 31, 2021. We expect lower commercial usage due to COVID-~~lived~~19 ~~assets~~that ~~were~~will ~~recorded~~continue ~~through~~to negatively impact our financial results in 2021. However, due to significant uncertainty related to the ~~date~~pandemic ofand ~~this~~its ~~report~~economic impact, asmanagement's nojudgment ~~triggering~~and ~~events~~estimates orregarding ~~changes~~the situation could change in ~~circumstances~~the ~~had~~future, ~~occurred~~and current expected outcomes and actual results may differ.

Unfavorable economic conditions due to COVID-19 have reduced demand for natural gas. Compared to prior period, the lower commercial usage in DC and VA, waived late fees, and lower service initiation fees have resulted in a decrease to net revenue. Based on the year to date results and our current estimates of COVID-19 impacts, and assuming normal weather for the remainder of the year, Washington Gas expects lower commercial usage due to COVID-19 that could negatively impact our financial results. 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.

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

Results of Operations

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 ~~loss~~income was $36133.6 million for the three months ended ~~September~~March 3031, ~~2020~~2021 compared to net ~~loss~~income of $66127.58 million for the three months ended ~~September~~March 3031, ~~2019~~2020. The $295.98 million improvement in net ~~loss~~income was mainly from a higher net ~~revenue~~revenues driven by ~~the impact of rate cases,~~ accelerated pipe replacement programs and ~~our~~colder ~~asset optimization program~~weather, ~~partially~~ offset by a negative ~~impact~~impacts from a prior year adjustment related to the Virginia rate case and COVID-19. ~~pandemic~~The improvement in net income was also driven by lower general operating expenses, and higher other income due to lower pension and post-retirement costs.

Net income was $76.5 million for the nine months ended September 30, 2020 compared to net income of $24.6 million for the nine months ended September 30, 2019. The $51.9 million increase in net income was mainly from an increase in net revenues driven by the impact of rate cases, accelerated pipe replacement programs and our asset optimization program, partially offset by negative impacts from warmer weather and the COVID-19 pandemic.

Our chief operating decision maker utilizes the non-GAAP measure, Earnings Before Interest, Taxes, Depreciation and Amortization (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 reconciles EBITDA to net income for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020.

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
(In millions)	~~2020~~2021		~~2019~~2020		Increase/(Decrease)		~~2020~~		~~2019~~		~~Increase/(Decrease)~~
Net income (loss)	$	(36.6)	$	(66.5)	$	29.9	$	76.5	$	24.6	$	51.9
Net income	$	133.6	$	127.8	$	5.8
Interest expense	1615.14		1516.67		0(1.53)		~~49.0~~		~~45.1~~		~~3.9~~
Income tax expense (benefit)	(11.3)		(19.5)		8.2		15.5		4.3		11.2
Income tax expense	34.4		32.0		2.4
Depreciation and amortization	36.36		3435.49		10.97		~~108.5~~		~~106.6~~		~~1.9~~
EBITDA	$	4220.50	$	~~(36~~212.0)4	$	407.56	$	~~249.5~~	$	~~180.6~~	$	~~68.9~~

The following table summarizes the Company’s financial data for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020.

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
(In millions)	~~2020~~2021		~~2019~~2020		Increase/(Decrease)		~~2020~~		~~2019~~		~~Increase/(Decrease)~~
Revenues:
Operating revenues	$	~~143~~582.45	$	~~122~~501.37	$	2180.18	$	~~856.3~~	$	~~914.4~~	$	~~(58.1)~~
Less: Cost of gas	20217.80		33142.40		~~(12~~75.6)0		~~221.3~~		~~331.3~~		~~(110.0)~~
Less: Revenue taxes	1230.23		1127.60		03.63		~~54.3~~		~~57.7~~		~~(3.4)~~
Total net revenues	~~110~~335.42		77332.37		332.15		~~580.7~~		~~525.4~~		~~55.3~~
Operation and maintenance	9499.26		~~101~~102.27		(73.01)		~~291.9~~		~~300.4~~		~~(8.5)~~
General taxes and other assessments	1525.82		1422.79		12.13		~~55.7~~		~~49.0~~		~~6.7~~
Other income (expenses)-net	4.1		2.6		1.5		16.4		4.6		11.8
Other income (expense) - net	9.6		5.3		4.3
EBITDA	$	4220.50	$	~~(36~~212.0)4	$	407.56	$	~~249.5~~	$	~~180.6~~	$	~~68.9~~

Revenues

Operating revenues increased by $2180.18 million in the three months ended ~~September~~March 3031, ~~2020~~2021 compared to the three months ended ~~September~~March 3031, ~~2019~~2020 mainly driven by ~~the~~an ~~impact~~increase ofin ~~rate~~gas ~~cases~~cost recoveries, accelerated pipe replacement programs revenue surcharges and ~~our~~the ~~asset~~effect ~~optimization~~of ~~program~~colder weather, ~~partially~~ offset by a negative ~~impact~~impacts from a prior year adjustment related to the Virginia rate case and COVID-19 ~~pandemic~~.

Operating revenues decreased by $58.1 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 mainly driven by the reduction in gas costs, effects of weather and consumption patterns and a negative impact from the COVID-19 pandemic, partially offset by the impact from rate cases.

We also utilize the non-GAAP measure of net revenues, calculated as revenues less the associated cost of energy and applicable revenue taxes, to assist in the analysis of profitability. The cost of the natural gas commodity and revenue taxes are included in the rates that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in the cost of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues, operating income or net income. Net revenues should not be considered an alternative to, or a more meaningful indicator of our operating performance than operating revenues. Additionally, net revenues may not be comparable to similarly titled measures of other companies.

The table above reconciles net revenues to operating revenues for the reporting periods as part of the reconciliation of operating revenues to EBITDA. Net revenues increased by $332.15 million ~~and $55.3 million~~ in the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 compared to the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2019~~2020. The following explains the main drivers noted above for the change in operating revenues, as well as the additional drivers for the increase in net revenues.

Impact of rate cases

~~The~~Rate case impacts caused a $247.05 million ~~increase~~decrease in net revenues for the three months ended ~~September~~March 3031, ~~2020~~2021 compared to the same period ~~of the prior year included an increase of $3.1 million impact of new base rates~~ in ~~Maryland~~2020, ~~effective~~mainly ~~October~~due ~~2019,~~to ~~and~~ a ~~$20.9~~true-up ~~million reduction~~ to ~~operating revenues in~~ the ~~third~~Virginia ~~quarter~~rate ofrefund ~~2019~~liability ~~due~~after toincorporating ~~the~~final ~~Hearing~~commission ~~Examiner's~~approved ~~report~~rates ~~regarding~~in ~~the~~Washington ~~Company’s~~Gas' Virginia base rate case decided in the prior period.

The $48.5 million increase for the nine months ended September 30, 2020 compared to the same prior year period included an increase of $20.1 million impact of new base rates in Maryland, a $20.9 million adjustment related to the Virginia rate case discussed above, and a $7.5 million increase due to a true-up recorded in the first quarter of 2020 to the Virginia rate refund liability after incorporating final commission approved rates.

Accelerated replacement programs

~~The~~Approved ~~$3.0~~accelerated ~~million~~replacement ~~and~~programs drove a $85.82 million increase in net revenues for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 compared to the same ~~periods~~period ~~of the prior year were due to approved accelerated replacement programs that were~~ in ~~place~~2020, ~~with~~driven anby the associated surcharge mechanism to recover the cost, including a return, on those capital investments.

Asset optimization

$6.3 million and $11.4 million increase for the three months and nine months ended September 30, 2020 compared to the same periods prior year associated with our energy-related derivatives. Refer to Note 12-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~~colder weather primarily caused the 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.

~~Net~~Weather ~~revenue~~was 1.6% and 22.2% warmer than normal for the three months ended ~~September~~March 3031, ~~2020~~2021 ~~was~~and ~~negatively~~2020, ~~impacted~~respectively. byThe ~~lower~~comparative ~~commercial~~colder ~~usage~~weather indrove DChigher ~~and~~net VArevenues ~~due~~of toapproximately ~~COVID-19,~~$4.0 ~~resulting~~million infor athe ~~total~~three ~~decrease~~months inended ~~net~~March ~~revenue of $2.0 million~~31, 2021 compared to the same period ~~2019~~in 2020.

~~Weather was 14.7% and 10.5% warmer than normal for the nine months ended September 30, 2020 and 2019, respectively, with an additional negative impact from lower commercial usage in DC and VA due to~~ COVID-19~~, driving lower net revenues of $11.9 million.~~

The lower commercial usage in the District of Columbia and Virginia, and the waived late payment fees due to COVID-19 drove lower net revenues of approximately $4.0 million in the three months ended March 31, 2021 compared to the same period in 2020.

Operation and Maintenance Expenses

Operating and maintenance expenses decreased $73.01 million ~~and $8.5 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 compared to the same ~~periods~~period of the prior year. The ~~decreases~~decrease ~~were~~was ~~mainly~~ driven mainly by lower ~~general~~labor ~~operating expenses~~costs.

General taxes and other assessments

The $2.3 million increase in general taxes and other assessments between the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020 was associated with clean energy programs.

Other income (expense)

The increase in other income (~~expenses~~expense) between the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020 ~~was~~of $14.53 million ~~and~~was ~~$11.8 million~~ due to lower pension ~~costs,~~and ~~including~~post-retirement ~~the impact from the change in accounting principle~~costs. ~~Refer to Note 1— Accounting Policies for further discussion.~~

Income Taxes

The effective income tax rate for the three months ended ~~September~~March 3031, ~~2020~~2021 was 2320.65% compared to 2220.71% for the same period of the prior year.

~~The effective income tax rate for the nine months ended September 30, 2020 was 16.8% compared to 14.8% for the same period prior year. The change relates to amortization of excess deferred taxes.~~35

Statistical Information

Key gas volumes, weather and meter statistics are shown in the table below for the three and nine months ended September 30, 2020 and 2019.

Gas Volumes, Weather and Meter Statistics
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2020		2019		Increase/(Decrease)	2020		2019		Increase/(Decrease)
Base Gas Volumes (millions of therms)
Firm	113.3		114.1		(0.8)	859.7		954.9		(95.2)
Interruptible	45.7		40.8		4.9	176.3		189.3		(13.0)
Other	47.5		33.7		13.8	76.7		74.7		2.0
Total gas volumes	206.5		188.6		17.9	1,112.7		1,218.9		(106.2)
Degree Days
Actual	30		—		30	2,111		2,205		(94)
Normal	16		16		—	2,475		2,463		12
Percent colder (warmer) than normal	87.5	%	(100.0)	%	n/a	(14.7)	%	(10.5)	%	n/a
Average active customer meters	1,203,000		1,190,000		13,000	1,200,000		1,189,000		11,000
Ending active customer meters	1,203,954		1,188,909		15,045	1,203,954		1,188,909		15,045
New customer meters added	3,372		3,000		372	9,185		8,290		895

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Statistical Information

Key gas volumes, weather and meter statistics are shown in the table below for the three months ended March 31, 2021 and 2020.


Gas Volumes, Weather and Meter Statistics
	Three Months Ended March 31,
	2021		2020		Increase/(Decrease)
Base Gas Volumes (millions of therms)
Firm	633.0		546.1		86.9
Interruptible	78.3		76.7		1.6
Other	18.9		14.1		4.8
Total gas volumes	730.2		636.9		93.3
Degree Days
Actual	1,996		1,666		330
Normal	2,028		2,141		(113)
Percent colder (warmer) than normal	(1.6)	%	(22.2)	%	n/a
Average active customer meters	1,207,000		1,196,000		11,000
Ending active customer meters	1,207,069		1,198,036		9,033
New customer meters added	2,659		2,927		(268)

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, mitigate the effect on net revenues of variations in weather from normal levels (refer to the section entitled “Weather Risk” in the Form 10-K for year ended December 31, ~~2019~~2020 for a further discussion).

Gas Service to Interruptible Customers

Customers whose service can be temporarily interrupted in order for the regulated utility to meet the needs of firm customers pay a lower delivery rate than firm customers and they must be able to readily substitute an alternate fuel for natural gas. Per approved tariffs, Washington Gas retains a majority of the margins earned on interruptible gas and delivery sales. Washington Gas has sharing mechanisms in the District of Columbia that shares most of these margins with firm customers.

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 contributions from its parent ~~holding~~ companies~~, routed through Wrangler SPE~~. Access to short-term debt markets provides 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, including other rules imposed by regulatory commissions or laws in Washington Gas’ service territory, the Company is prohibited to make advances or issue loans to an affiliate or parent holding company without prior regulatory commission approval.

Generally, pursuant to its Merger commitments, Washington Gas can make dividend payments in the ordinary course of business unless any of the following regulatory limitations apply: (i) Washington Gas will not pay extraordinary dividends to its parent for three years from the date of the Merger close, (ii) Washington Gas will not pay dividends to its parent company if Washington Gas’ senior unsecured debt rating is below investment grade or (iii) Washington Gas will not make a dividend payment to its parent company if the payment would result in its equity level to drop below 48%. At ~~September~~March 3031, ~~2020~~2021, we had no significant restrictions on our cash balances or retained earnings that would affect the payment of dividends.

During the first and third quarter of 2020, Washington Gas received a $125.0 million and $50.0 million cash capital contribution from Wrangler SPE, respectively. The proceeds are used to support the Company's construction program, to repay its short-term debt and for other corporate purposes.36

As of September 30, 2020, we believe that our cash flows from operations and sources of funding will provide sufficient liquidity to satisfy our financial obligations. However, as the impact of the COVID-19 pandemic on the economy and operations evolves, we will continue to assess our liquidity needs, the ability to access capital markets for commercial paper or long-term debt financing, and potential impacts due to the ability of our customers to pay for services. Should the Company’s cash flow be materially impacted owing to virus-driven circumstances, the Company may find itself without adequate cash flow to fund its operations, and we may need additional liquidity.

Short-Term Cash Requirements and Related Financing

Washington Gas has seasonal short-term cash requirements to fund the purchase of storage gas inventory in advance of the winter heating season. 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 I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Washington~~As ~~Gas uses short-term debt in the form~~ of ~~commercial~~March 31, ~~paper~~2021, orwe ~~unsecured~~believe ~~short-term~~that ~~bank~~our ~~loans to fund seasonal~~ cash ~~requirements.~~flows ~~Our~~from ~~policy~~operations isand tosources ~~maintain~~of ~~back-up~~funding ~~bank~~will ~~credit~~provide ~~facilities~~sufficient inliquidity ~~an amount equal~~ to orsatisfy ~~greater than~~ our ~~expected~~operating ~~maximum~~activities, ~~commercial~~capital ~~paper~~expenditures, ~~position.~~financial ~~Washington~~obligations, ~~Gas~~and ~~classifies~~the ~~certain~~effects ~~commercial~~of ~~paper balances as "Long~~COVID-~~term~~19. ~~debt"~~Depending on the ~~balance~~duration ~~sheets~~and ~~based~~severity onof ~~its~~economic ~~ability~~impacts ~~and~~caused ~~intent~~by tothe ~~refinance~~pandemic, ~~these~~we ~~balances~~will oncontinue ato ~~long-term~~assess ~~basis.~~our Atliquidity ~~September 30~~needs, ~~2020~~the ~~and~~ability ~~December 31,~~to ~~2019,~~access ~~$100.0~~capital ~~million~~markets offor ~~our~~ commercial paper ~~balance~~or ~~was classified as~~ long -term debt ~~on Washington Gas' balance sheets~~financing, ~~respectively.~~and ~~Bank~~potential ~~credit~~impacts ~~balances~~due ~~available~~ to ~~Washington Gas under~~ the ~~existing~~ability ~~credit facility, net~~ of ~~commercial~~our ~~paper~~customers ~~balances,~~to ~~were~~pay ~~$180.0~~for ~~million and $50~~services.~~0 million at September 30, 2020 and December 31, 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. Washington Gas classifies certain commercial paper balances as "Long-term debt" on the balance sheets based on its ability and intent to refinance these balances on a long-term basis. At March 31, 2021 and December 31, 2020, $72.5 million and $100.0 million of our commercial paper balance was classified as long term debt on Washington Gas' balance sheets, respectively. Bank credit balances available to Washington Gas under the existing credit facility, net of commercial paper balances, were $377.5 million and $165.0 million at March 31, 2021 and December 31, 2020, 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.

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.

Rating Service

Senior Unsecured

Commercial Paper

Fitch Ratings(a)

Moody’s Investors Service(b)

P-2

Standard & Poor’s Ratings Services(c)

A-

A-2

(a) Fitch affirmed Washington Gas' long-term debt ratings outlook as stable in 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~~37

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 September 30, 2020 and December 31, 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 September 30, 2020 and December 31, 2019, we were in compliance with all of the covenants under our revolving credit facilities, term loan facility, and private placement notes.

Historical Cash Flows

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 flows provided by operating activities were $262.7 million for the nine months ended September 30, 2020, compared to $254.1 million for the nine months ended September 30, 2019. The increase was mainly driven by decreased cash collateral posted with counterparties associated with our derivative asset and liabilities.

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Ratings Triggers and Certain Debt Covenants

Under the terms of Washington Gas' revolving credit agreements and private placement notes, the ratio of consolidated financial indebtedness to consolidated total capitalization cannot exceed 0.65 to 1.0 (65.0%). At March 31, 2021 and December 31, 2020, Washington Gas' ratios of consolidated financial indebtedness to consolidated total capitalization were 44% and 48%, 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 March 31, 2021 and December 31, 2020, we were in compliance with all of the covenants under our revolving credit facilities, term loan facility, and private placement notes.

Historical Cash Flows

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 flows provided by operating activities were $341.9 million for the three months ended March 31, 2021, compared to $245.7 million for the three months ended March 31, 2020. The increase was mainly driven by the cash collected in account receivable from associated company related to the tax sharing policy with ASUS. Refer to Note 12 - Related Party Transactions for further information of tax sharing with ASUS.

Cash Flows Used in Financing Activities

Net cash flows used in financing activities were $29237.56 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, compared to $41154.50 million ~~provided~~used byin financing activities for the ~~nine~~same ~~months~~period ~~ended~~in ~~September~~2020. ~~30,~~The ~~2019~~main activity includes net repayments of borrowings under credit facilities and dividend payments in both periods. The ~~nine~~three months ended ~~September~~March 3031, 2020 financing activities also included ~~$175.0 million~~ capital contributions from our parent company, ~~compared~~of to $~~298~~125.50 million ~~cash proceeds from issuance of long-term debt in 2019~~. ~~There are additional net repayments of short term borrowings and dividend payments in both periods.~~

Cash Flows Used in Investing Activities

Cash flows used in investing activities totaled $~~265~~99.13 million and $~~318~~71.90 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, respectively, which consisted of capital expenditures made by Washington Gas.

~~Accelerated Pipe Replacement Programs (APRPs)~~38

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 $374 million over the period from January 2021 to December 2025, plus additional expenditures in subsequent periods.

$nil

Washington Gas has submitted an application for the second phase of PROJECTpipes to the PSC of DC. In the interim, in March 2020, the PSC of DC approved an additional extension of the first phase of the plan for the six month period from April 1, 2020 to September 30, 2020 for an amount not to exceed $12.5 million. On August 11, 2020, the PSC of DC suspended the procedural schedule and on September 10, 2020, the first phase of PROJECTpipes was extended for an additional three month to December 2020, or until a decision is rendered in this case, for an amount not to exceed approximately $6 million. Total program expenditures may not exceed approximately $141 million. A decision is expected by the end of the year.

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.

$102 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.

$242 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.

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.

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Accelerated Pipe Replacement Programs (APRPs)

The large portion of our capital expenditures are in our 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, plus additional expenditures in subsequent periods.

$8.1
million

The second phase of the accelerated utility pipe replacement programs in the District of Columbia (PROJECTpipes 2) began in January 2021.

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.

$132.4 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.

$296.9 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~~There ~~Obligations~~have been no material changes to contractual obligations and commercial commitments that are out of the normal course of business as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

~~Refer~~The toCompany ~~the “Contractual~~did ~~Obligations,~~not ~~Off-Balance~~have ~~Sheet~~any ~~Arrangements~~material ~~and~~off-balance ~~Other~~sheet ~~Commercial~~arrangements ~~Commitments” section~~as of ~~“Management’s~~March ~~Discussion~~31, ~~and~~2021 ~~Analysis”~~or ~~and~~subsequent ~~Note~~to, ~~13-~~or ~~Commitments~~upon ~~and~~the ~~Contingencies~~filing toof ~~the~~our ~~Financial~~financial ~~Statements~~statements in ~~Form~~our ~~10-K~~annual ~~for~~reports ~~the~~as ~~year~~defined ~~ended~~under ~~December 31,~~SEC ~~2019 for contractual obligations~~rules.

~~There were no other significant changes to contractual obligations that are out of the normal course of business during the nine months ended September 30, 2020.~~39

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Credit Risk

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.

COVID-19 has created widespread challenges in the job market that have resulted in increased unemployment rates, which could impact the ability of the Company’s customers to pay for services. To assist the communities it serves, Washington Gas ~~has~~ temporarily suspended customer disconnections for non-payment, temporarily suspended collection activities and temporarily waived assessing and billing late payment fees. We resumed assessing late payment fees in Maryland in October 2020.

4240

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Rates and Regulatory Matters

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

~~District~~ Maryland of2020 ~~Columbia~~Rate ~~Jurisdiction~~Case.

~~PROJECTpipes 2 Plan.~~ On ~~December~~August 728, ~~2018~~2020, Washington Gas filed a ~~request~~rate ~~with~~increase ~~the~~application ~~PSC~~in ofMaryland. DCThe ~~for~~requested ~~approval~~rates ofare ~~the~~designed ~~PROJECTpipes~~to 2collect ~~Plan,~~approximately ~~the~~$28.4 million ~~second~~in ~~phase~~total ofannual ~~Washington~~revenues ~~Gas'~~representing ~~APRP,~~a to10.45% ~~cover~~rate ~~the~~of ~~period~~return ~~from~~on ~~October~~equity. 1,On ~~2019~~August ~~through December~~ 31, ~~2024. The~~2020, ~~PROJECTpipes~~the 2PSC ~~Plan~~of ~~seeks~~MD todocketed ~~address~~the ~~relatively~~application ~~higher risk pipe associated with an aging infrastructure by replacing pipe materials~~ and ~~components,~~assigned asthe ~~well~~case ~~as adding new features~~ to ~~enhance~~ the ~~safety~~Public ofUtility ~~Washington~~Law ~~Gas’~~Judge ~~system,~~(PULJ) ~~with~~division. anOn ~~estimated~~February ~~total~~12, ~~cost~~2021, ofthe ~~$305.3~~PULJ ~~million.~~issued Ina ~~its~~proposed ~~supplemental~~order ~~direct~~in ~~case,~~ the ~~Company~~case ~~revised~~and ~~its~~an ~~plan~~ERRATA ~~and~~filing ~~estimated~~correcting ~~expenditures~~ of ~~$374.0 million over~~ the ~~next~~proposed ~~five~~order ~~years.~~on InFebruary ~~September 2019~~19, ~~the~~2021. ~~PSC~~The ofCompany DCand ~~issued~~certain anparties ~~order~~filed ~~extending~~appeals ~~the~~on ~~original~~February ~~PROJECTpipes~~26, an2021. ~~additional~~On ~~six~~April ~~months through March 31~~9, ~~2020~~2021, inafter anconsidering ~~amount~~the ~~not to exceed $12.5 million. On March 26~~appeals, ~~2020,~~ the PSC of DCMD ~~approved~~issued an ~~additional~~order ~~extension~~which ofaffirmed the ~~plan,~~proposed ~~through~~order ~~September~~with ~~30,~~one ~~2020, for an amount not to exceed $12~~modification.5 ~~million.~~ The ~~PSC~~order ofauthorized DCWashington ~~further~~Gas ~~extended~~to ~~the~~increase ~~program~~its ~~through~~Maryland ~~December~~natural ~~30,~~gas ~~2020~~distribution orrates ~~until~~by a$13.1 ~~decision~~million is(including ~~rendered in this case, for an amount not to exceed~~ $65.25 0 million. Oncurrently ~~April~~collected ~~23,~~through ~~2020,~~ the ~~PSC~~STRIDE ofsurcharge), DCreflecting ~~established~~ a ~~procedural~~return ~~schedule for the case. After determining that there are no material issues~~ of ~~fact~~equity ~~in dispute, the PSC~~ of ~~DC decided that there will be no evidentiary hearings~~9.70%. ~~Under~~The ~~the~~revenue ~~revised~~increase ~~procedural~~became ~~schedule,~~effective ~~briefs were filed~~ on ~~October~~March 2326, ~~2020~~2021. ~~A decision is expected by the end of the year.~~

District of Columbia 2020 Rate Case. On January 13, 2020, Washington Gas filed an application for authority to increase charges for gas service in the District of Columbia. The requested rates are designed to collect approximately $35.2 million in total annual revenues. Of the requested revenue increase, $9.1 million represents costs 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. The Company expects new rates to be implemented in the late first quarter or early second quarter of 2021.

Maryland Jurisdiction

Maryland 2020 Rate Case. On August 28, 2020, the company filed a rate increase application in Maryland. The requested rates are designed to collect approximately $28.4 million in total annual revenues requesting a 10.45% rate of return on equity. Of the requested revenue increase, $5.8 million represents costs currently collected through the STRIDE surcharge; therefore, the incremental amount of the base rate increase is approximately $22.6 million. On August 31, 2020 the PSC of MD docketed the application and assigned the case to the Public Utility Law Judge (PULJ) division. On September 28, 2020 the PULJ division held a prehearing conference and established a procedural schedule which anticipates a final decision on or about March 26, 2021. The Company expects new rates to be implemented in late March of 2021.

Maryland Show-Cause Order. Following the 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 ordered the Company to (i) provide a detailed response to the NTSB’s probable cause findings, and (ii) provide evidence regarding the status of a 2003 mercury regulator replacement program, and if the program was not completed, to show cause why the Commission should not impose a civil penalty on the Company. The Company filed a response and rejoinder comments and the Show-Cause Order is working its way through the regulatory proceeding process with the PSC of MD. An evidentiary hearing on the Show-Cause Order was conducted on September 24 – 25, 2020. The Commission will receive initial briefs on October 28 and November 13, 2020. See Item 1 - Legal Proceedings and Note 11 - Commitments and Contingencies of the Notes to Financial Statements for additional information.

COVID-19 Related Orders

District of Columbia. On March 16, 2020, the Council of the District of Columbia (DC Council) passed legislation prohibiting the disconnection of electric and gas services for non-payment of fees during a public health emergency. The Mayor of the District of Columbia’s public health emergency declaration and all related orders have been further extended to ~~December~~May 3120, ~~2020, and the prohibition on disconnection is effective for 15 days following the end of the public health emergency~~2021. On April 15, 2020, the PSC of DC issued an ~~Order~~order authorizing Washington Gas to establish a regulatory asset to capture and track the incremental costs related to COVID-19 that were prudently incurred beginning March 11, 2020.

43 On March 3, 2021, the PSC of DC issued an order directing that 1) the Company must provide a notice to residential customers 45 days before disconnecting service after the lifting of the public health emergency and this rule will remain in effect for up to 120 days; 2) Washington Gas is to provide Deferred Payment Agreements to eligible residential customers of at least 12 months after the ending of the public health emergency; 3) Washington Gas must submit a proposal and Implementation plan for an Arrearage Management Program within 45 days from the date of the Order (April 19, 2021); and 4) The threshold used to determine eligibility for the Residential Essential Discount program increases temporarily from 60% to 75% of the state median income level.

Maryland. On 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.

On August 27 and 28, 2020 the PSC of MD held Public Conference (PC) 53 to review the impact of the executive order on utilities and the service they provide. On August 31, 2020 the PSC of MD issued an order directing that

(1) utilities may not engage in service terminations and or charge late fees until October 1, 2020 and any notices of termination for residential accounts sent before October 1, 2020 are invalid;

(2) a Public Service Company must give notice at least 45 days before terminating service on a residential account;

(3) structured payment plans offered by Public Service Companies to residential customers in arrears or unable to pay must allow a minimum of 12 months to repay, with that period extending to 24 months for customers certified as low income;

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

(5) any Public Service Company was prohibited 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.

Washington Gas Light Company

Part I-Financial Information

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

~~Maryland.~~ On ~~March~~February 1615, ~~2020~~2021, the ~~Governor~~Maryland ofGeneral MDAssembly ~~issued~~passed anthe ~~Executive~~Recovery ~~Order which ordered 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~~Economy, ~~2020. On September 22~~Livelihoods, ~~2020~~Industries, ~~the~~Entrepreneurs ~~PSC~~and ofFamilies MDAct ~~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~~RELIEF ~~1 to March 31~~Act)~~, this has the effect of delaying residential terminations until April 1, 2021~~. OnThe ~~April~~RELIEF 9,Act ~~2020,~~includes 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$83.0 Onmillion ~~August~~in 27funds ~~and 28, 2020 the PSC of MD held Public Conference (PC) 53~~ to ~~review~~help ~~the impact of the Executive Order on utilities and the service they provide. On August 31, 2020 the PSC of~~ MD ~~issued an order directing that (1) Utilities may not engage in service terminations and or charge late fees until October 1, 2020 and any notices of termination for~~ residential ~~accounts~~customers ~~sent~~who ~~before October 1, 2020~~ are invalid; (2) a Public Service Company must give notice at least 45 days before terminating service on a residential account; (3) structured payment plans offered by Public Service Companies to residential customers in arrears. orMD ~~unable~~residential ~~to pay must allow a minimum of 12 months to repay, with that period extending to 24 months for~~ customers ~~certified~~need as low income; (4) prohibited 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 (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~~qualifications ~~and~~established ~~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~~The ~~investor-owned~~RELIEF ~~utilities~~Act ~~proposing~~to ~~arrearage~~get ~~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, to be followed by a legislative-style hearing on November 9 - 10, 2020funds.

~~Virginia.~~The OnMD ~~March~~PSC ~~16,~~updated ~~2020,~~its ~~the~~moratorium SCC of VA issued an order which prohibited disconnections of electricity, gas, water and sewer utility services during the coronavirus public health emergency, and established certain consumer protection measures. While the SCC of VA order was extended, the disconnection order, but not the consumer protections expired on ~~October~~disconnects 5,through ~~2020.~~June ~~However~~30, ~~following~~2021 ~~the expiration of the disconnection order, the Virginia General assembly, on October 16, 2020, approved legislation that would extend the disconnection prohibition~~ for ~~residential~~“special needs” customers ~~for non-payment of bills~~ or ~~fees~~anyone ~~until~~“who ~~the~~has ~~Governor~~received ~~determines the prohibition does not need to remain in place~~ or ~~until~~qualified ~~at least 60 days after the state of emergency declared March 12, 2020 expires, whichever is sooner. The legislation also codified the consumer protection plans, requiring utilities~~ to ~~offer~~receive ~~customers in arrears fee-free repayment plans without deposit or eligibility requirements. Though not yet effective at~~ the ~~time~~Maryland ofOffice ~~publication~~ of ~~this~~Home ~~Form~~Energy ~~10-Q,~~Programs ~~the~~(OHEP) ~~legislation~~Energy isAssistance ~~expected~~after toFebruary ~~take effect following the Assembly’s consideration of any gubernatorial amendments in November. On April 29~~15, 2020, the SCC of VA issued an order approving a request from Washington Gas and other Virginia utilities to create a regulatory asset to record incremental prudently incurred costs and suspended late payment fees attributable to the COVID-19 pandemic2017. The October 16, 2020 legislation approved by the general assembly established certain reporting requirements for utilities to report bad debt information and provides utilities with certain exemptions from such requirements based on utilities’ particular facts and circumstances.”

Virginia. On March 16, 2020, the SCC of VA issued an order which prohibited disconnections of electricity, gas, water and sewer utility services during the coronavirus public health emergency and established certain consumer protection measures. While the SCC of VA order was extended, the disconnection order, but not the consumer protections expired on October 5, 2020. However, following the expiration of the disconnection order, the Virginia General assembly, on October 16, 2020, approved legislation that would extend the disconnection prohibition for residential customers for non-payment of bills or fees until the Governor determines the prohibition does not need to remain in place or until at least 60 days after the state of emergency declared on March 12, 2020 ends, whichever is sooner. The legislation also codified the consumer protection plans, requiring utilities to offer customers in arrears fee-free repayment plans without deposit or eligibility requirements. The legislation took effect following the Assembly’s consideration of any gubernatorial amendments in November 2020. On April 29, 2020, the SCC of VA issued an order approving a request from Washington Gas and other Virginia utilities to create a regulatory asset to record incremental prudently incurred costs and suspended late payment fees attributable to the COVID-19 pandemic. The October 16, 2020 legislation approved by the general assembly established certain reporting requirements for utilities to report bad debt information and provides utilities 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 receive the funds. Any unused funds will be returned to the SCC of VA by December 10, 2021.

Critical Accounting Policies

~~For~~Our acritical ~~description~~accounting ofestimates ~~our~~have ~~critical~~not ~~accounting~~changed ~~policies,~~materially ~~refer~~from tothose ~~Management's~~previously ~~Discussion~~reported ~~and~~in ~~Analysis~~our ~~within~~Annual ~~our~~Report on Form 10-K for the fiscal year ended December 31, ~~2019. We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1,~~ 2020. Refer to Note 2 — Credit Losses for the accounting policy related to credit losses. 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. Refer to Note 1— Accounting Policies for further discussion. There were no other new critical accounting policies or changes during the nine months ended September 30, 2020.

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Washington Gas Light Company

Part I-Financial Information

Item 3. Quantitative and Qualitative Disclosures about Market Risk

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

4543

Washington Gas Light Company

Part I-Financial Information

Item 4. Controls and Procedures

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Senior management, including the President and the Senior Vice President, ~~Chief~~Finance ~~Financial Officer and Treasurer~~ of Washington Gas, evaluated the effectiveness of Washington Gas’ disclosure controls and procedures as of ~~September~~March 3031, ~~2020~~2021. Based on this evaluation, the President and the Senior Vice President, ~~Chief~~Finance ~~Financial Officer and Treasurer~~ have concluded that Washington Gas’ disclosure controls and procedures were effective as of ~~September~~March 3031, ~~2020~~2021. There have been no changes in the internal control over financial reporting of Washington Gas during the quarter ended ~~September~~March 3031, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Washington Gas, including no changes resulting from COVID-19.

4644

Washington Gas Light Company

Part II-Other Information

ITEM 1. 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 119 — Commitments and Contingencies of the Notes to Condensed Financial Statements.

~~Maryland Show-Cause Order~~ 45

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.

On September 5, 2019, the PSC of MD ordered the Company 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).

The Company timely responded to the PSC of MD’s Show-Cause Order, providing a detailed response to the NTSB’s probable cause findings, providing evidence regarding the status of its 2003 mercury regulator replacement program and demonstrating cause why the PSC of MD should not impose a civil penalty on the Company. Following the Company’s response, certain intervenors filed written comments and a public hearing was held on the matter, with some intervenors and members of the public advocating for penalties against the Company. The Company filed its rejoinder comments and the Show-Cause Order is working its way through the regulatory proceeding process with the PSC of MD. An evidentiary hearing was conducted on September 24-25, 2020. Initial briefs were filed on October 28, 2020 and reply briefs will be filed on November 13, 2020.

Washington Gas Light Company

Part II-Other Information

Item 1A. Risk Factors

ITEM 1A. RISK FACTORS

~~The~~Not ~~COVID-19 global health pandemic poses challenges to the health and safety of the Company’s personnel and the strength of communities it serves~~Applicable. ~~These challenges could negatively impact the Company’s cash flow 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 remains 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.46

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 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.

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

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

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

Washington Gas Light Company

Part II-Other Information

Item 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.

Recently 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.

Washington Gas Light Company

Part II-Other Information

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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Washington Gas Light Company

Part II-Other Information

ITEM 6. EXHIBITS

Exhibits:

Schedule/Exhibit						Description
(a)(3)						Exhibits
						Exhibits Filed Herewith:
18						Preferability Letter of Independent Registered Public Accounting Firm
31.1						Certification of Donald M. Jenkins, President of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of ~~Douglas~~Wendy ~~I. Bonawitz~~Zelond, the Senior Vice President, ~~Chief~~Finance ~~Financial Officer and Treasurer~~ of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32						Certification of Donald M. Jenkins, the President, and ~~Douglas~~Wendy ~~I. Bonawitz~~Zelond, the Senior Vice President, ~~Chief Financial Officer and Treasurer~~Finance, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)

5148

Signature

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

WASHINGTON GAS LIGHT COMPANY (Registrant) /s/ ~~Douglas~~Krista I.Nufrio ~~Bonawitz~~Krista ~~Douglas~~Nufrio ~~I. Bonawitz Senior~~ Vice President, ~~Chief Financial Officer~~ and ~~Treasurer~~Controller (signing on behalf of the Registrant and as Principal Accounting Officer of the Registrant)

Date: ~~November~~April 629, ~~2020~~2021

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