Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 NiSource Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Mr. Nick Drew, Director of Investor Relations. Please go ahead.

Thanks, Amy. Good morning, and welcome to the NiSource Third Quarter 2020 Investor Call. Joining me today are Joe Hamrock, our Chief Executive Officer; Donald Brown, our Chief Financial Officer; Shawn Anderson, our Chief Strategy and Risk Officer; and Randy Hulen, our Vice President, Investor Relations and Treasurer. The purpose of this presentation is to review NiSource's financial performance for the third quarter of 2020, as well as provide an update on our operations, growth drivers and financing plans. Following our prepared remarks, we'll open the call to your questions. Slides for today's call are available on nisource.com. Before turning the call over to Joe, Donald, Shawn and Randy, just a quick reminder. Some of the statements made during this presentation will be forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings. Additionally, some of the statements made on this call relate to non-GAAP measures. For additional information on the most directly comparable GAAP measure and a reconciliation of these measures, please refer to the supplemental slides and segment information, including our full financial schedules available at nisource.com. With all of that out of the way, I'd now like to turn the call over to Joe.

Thanks, Nick. Good morning, everyone, and thank you for joining us. Hopefully, you've all had a chance to read our third quarter earnings release, which was issued earlier this morning. With 2020 in its home stretch, NiSource continues to execute on a path to deliver premium value from our 100% regulated electric and gas utility platform. Our teams are focused on continued execution of our safety and asset modernization programs and our transition to renewable energy in our electric business. These investments are expected to drive compound annual growth of 7% to 9% in net operating earnings per share from 2021 through 2024, while reducing greenhouse gas emissions 90% by 2030. Sustaining this level of execution, while maintaining safe, reliable energy service through the COVID-19 pandemic is a testament to the thousands of dedicated employees throughout NiSource. With the announcement of additional solar and storage energy projects in Indiana, and the closing of the sale of Columbia Gas of Massachusetts last month, we have strengthened our foundation for future growth. So let's dive into the update, starting on Slide 3. We delivered non-GAAP net operating earnings of $0.09 per share in the third quarter compared to $0 in the same quarter a year ago. Our continued cost management and regulatory mitigation efforts are reducing the financial impacts of COVID-19, which we continue to monitor closely. Our transformational NiSource Next initiative is well underway and designed to enhance organizational capabilities, drive efficiencies and maintain affordable service for our customers. Despite challenges related to the pandemic, we continue to expect to make $1.7 billion to $1.8 billion in capital investments in 2020 as our safety and asset modernization investments remain among our top priorities. We advanced our renewable generation strategy last month by reaching build transfer agreements with NextEra for 3 Indiana solar and storage projects, representing an $850 million capital investment for NIPSCO. On the regulatory front, we received approval of the sale of Columbia Gas of Massachusetts assets to Eversource, and the transaction closed on October 9. We also reached a settlement in our gas base rate case in Maryland and received approval of our latest capital expenditure program tracker update in Ohio. We are also today reaffirming non-GAAP net operating earnings per share guidance for 2021 in the range of $1.28 to $1.36, which includes an expected COVID impact of $0.05, and we are reaffirming the financial guidance that we provided at our Investor Day on September 29. These include investments of $1.9 billion to $2.2 billion per year in safety, modernization and growth from 2021 through 2024, $1.8 billion to $2 billion in incremental renewable generation investment opportunities across 2022 and 2023, and compound annual earnings per share growth of 7% to 9% from 2021 through 2024, with 5% to 7% annual growth in the near term. Now I'd like to turn the call over to Donald, who will discuss our third quarter financial performance in more detail.

Thanks, Joe, and good morning, everyone. Looking at our third quarter results from Slide 4, we had non-GAAP net operating earnings of about $36 million or $0.09 per share, compared to a net loss operating loss of nearly $2 million or $0.00 per share in 2019. The year-over-year increase was driven primarily by increased gas segment results with relatively flat electric results in the quarter. For the year, our net operating earnings are up about $52 million or $0.11 per share compared to the same period of 2019. Looking more closely at our segment results on Slide 5, operating earnings were up about $36 million for the quarter in our gas segment, driven primarily by infrastructure investment revenue and cost management measures put in place to offset COVID 19 impact. In our electric segment, operating earnings were down by $2.5 million, driven primarily by slightly higher revenues, excluding the cost of sales, with COVID-driven decreases in commercial and industrial sales, offset by increased residential sales. This net increase in revenue was offset by higher depreciation as a result of the accelerated depreciation of our coal-fired generation assets. Turning to Slide 6. We provide additional details about the financial impact of COVID-19. As you can see, we're seeing lower commercial and industrial sales, which are partially offset by increased residential sales. We're also seeing reduced late payment and reconnection fees as well as higher bad debt and other expenses. The total impact of COVID-19 in the third quarter was approximately $0.01 per share and $0.07 per share year-to-date. As I mentioned, this impact was reduced by non-safety-related expense reductions as well as regulatory mitigation efforts. We currently expect covet to reduce EPS by $0.05 in 2021 under our base case scenario, and that amount has already been factored into our 2021 non-GAAP EPS guidance range. While we're monitoring the pandemic closely, to date, it has not presented significant barriers to our safety and infrastructure modernization programs or our long-term growth. As Joe mentioned earlier, we continue to expect to invest $1.70 to $1.8 billion of capital in 2020. We are reaffirming the guidance for long-term CapEx and EPS CAGR guidance that we outlined at Investor Day. Now turning to Slide 7, I'd like to briefly touch on our debt and credit profile. Our debt level as of September 30 was about $10.6 billion, of which about $9.1 billion was long-term debt. The weighted average maturity on our long-term debt was approximately 15 years and weighted average interest rate was approximately 3.68%. I will note that the liability management transaction that we completed during the quarter lowered our weighted average interest rate by more than 60 basis points and removed the need for any significant long-term debt refinancing through 2024. As Joe mentioned earlier, we closed on the sale of our Columbia Gas of Massachusetts assets on October 9. This produced net proceeds of $1.1 billion, which we used to pay down our term loan and other short-term debt in October. At the end of the third quarter, we maintained net available liquidity of about $1.6 billion, consisting of cash and available capacity under our credit facility and our accounts receivable securitization program. Our credit ratings from all 3 major rating agencies are investment grade, and we're committed to maintaining our current investment-grade ratings. Taken together, this represents a solid financial foundation to support our long-term safety and infrastructure investments. Now I'd like to turn the call back over to Joe, who will provide some infrastructure investment and regulatory updates from our gas and electric businesses.

Thank you, Donald. Now let's look at some NiSource utilities highlights for the third quarter and early fourth quarter of 2020, starting with our gas operations on Slide 9. In Pennsylvania, our base rate case remains pending before the Public Utility Commission. The application filed in April seeks an annual revenue increase of $100.4 million to invest in, modernize and upgrade our existing natural gas distribution system as well as maintain the continued safety of the system. An order is expected in the first quarter of 2021, with new rates expected to become effective in January 2021. In Maryland, we reached settlement with parties to the base rate case request we filed in May. The settlement supports further upgrading and replacement of our pipelines and would result in an annual revenue increase of $3.3 million, including $1.3 million of current tracker revenue, if approved as filed. A Maryland Public Service Commission order is expected in November 2020, with new rates effective in December 2020. In Ohio, the Public Utilities Commission approved our annual application for adjustment to our capital expenditure program rider, and new rates went into effect in September 2020. The order allows us to begin recovery of approximately $185 million in capital invested under the CEP in 2019. In Indiana, our latest tracker update is pending in our long-term gas infrastructure modernization program. The application covers $26 million in incremental capital invested under the program between January and June 2020. Earlier in the quarter, the Indiana Utility Regulatory Commission approved a 6-year extension of the program, including nearly $950 million in planned capital investments through 2025 to be recovered through semiannual adjustments to the existing transmission, distribution and storage improvement charge or TDSIC tracker. Now let's look at our electric operations on Slide 10. Shawn will update you in a moment on our progress transitioning our generation portfolio. Before then, I'll note that we continue to execute on our long-term electric infrastructure modernization plan in Indiana. This well-established program includes enhancements to our electric transmission and distribution system designed to further enhance safety and reliability. The program, originally approved by the IURC in 2016, includes approximately $1.2 billion in electric infrastructure investments expected to be made through 2022. In September, we filed our latest electric TDSIC tracker update request, covering more than $122 million in incremental capital investments made between July 2019 and June 2020. We expect an IURC order in January 2021, with new rates effective in February 2021. And now I'll ask Shawn to talk about our renewable generation projects.

Thank you, Joe. As Joe shared earlier, within the last month, we announced build transfer agreements with NextEra Energy Resources on 3 Indiana solar projects, representing a capital investment of approximately $850 million for NIPSCO. The Dunns Bridge I and II and Cavalry Solar Energy Centers are expected to be under construction by 2022 and placed into service across 2022 and 2023. NextEra will construct the solar and storage facilities, and we plan to form joint ventures with unrelated financial partners to own, operate and maintain some facets of these assets. We will request the addition of these new projects to our supply portfolio in filings with the IURC by the end of this year. Construction is already underway on IURC approved wind projects, representing about $400 million in capital investment. Rosewater wind, a joint venture with EDP renewables North America, and Wells Fargo as the tax equity partner, is on track to be placed into service by the end of this year, and construction has begun on Indiana Crossroads, also a joint venture project with EDP and, is expected to be in service by the end of 2021. We continue to expect $1.8 billion to $2 billion of renewable generation investments through 2023. Inclusive of the aforementioned joint venture projects, we currently have executed agreements, representing approximately $1.25 billion of this anticipated investment and are well underway in negotiating additional agreements which we expect will complete the balance of need for replacement capacity at an anticipated $550 million to $750 million in capital investments. We are also well underway to complete purchase power agreements to fill out the balance of our capacity needs. Our Jordan Creek project is IURC-approved, under construction and is expected to be in service by the end of this year. Our Brickyard and Greensboro Solar and storage PPAs are pending before the IURC. NextEra Energy Resources will develop Brickyard and Greensboro which are expected in-service in mid-2023. In addition to the remaining JVs under negotiation, we are engaged in additional solar and wind PPA negotiations, all of which are anticipated to go into service in 2022 and 2023. These renewable projects are consistent with our 2018 integrated resource plan, which provides a preferred pathway to retire nearly 80% of our remaining coal-fired generation by 2023 and retire all coal generation by 2028 to be replaced by low-cost, reliable and cleaner options. The plan is designed to drive a 90% reduction in our greenhouse gas emissions by 2030 and is expected to save our electric customers an estimated $4 billion over 30 years. Now I will turn the call back over to Joe.

Thank you, Shawn. As you can see from what we've covered today, we're continuing to execute on our plan to deliver long-term value for all of our stakeholders. I want to touch on our foundational commitment to safety. We're continuing to make progress on our safety initiatives across our gas and electric businesses, including our accelerated safety management system, or SMS implementation, which follows American Petroleum Institute's RP 1173 and provides a comprehensive approach to managing safety, emphasizing continual assessment and improvement as well as proactively identifying and mitigating potential risks. We can highlight a few areas of accomplishment thus far in 2020, including continued deployment of our upgraded service line maps and records, with significant progress made in Kentucky, Pennsylvania and Virginia, and we're on track for achieving this milestone in all of our states by the end of the year. We received regulatory approval in Ohio for a pilot of advanced mobile leak detection technology to perform quality assurance in our construction work. We have also continued to install automatic shutoff devices and enhanced monitoring on our low-pressure gas distribution systems, with work completed in Maryland, Kentucky and Virginia. If you missed Investor Day, I encourage you to visit nisource.com to view the safety video we introduced, which brings our SMS work to life and which provides specific examples of these and other steps we're taking to help ensure safety for our customers, employees, business partners and the public. I'm also pleased to note that our work to enhance customer service and make it easier to do business with us online has received national recognition. The American Business Awards recognized NiSource with its Gold Stevie Award for the work we did in 2019 to combine our utility website into a seamless customer experience, including a customer portal with bill payment and account management services. Our customer experience team is hard at work on other benefits that we hope to bring customers in the future, including digital service requests, high usage alerts, outage map improvements and enhanced views of their energy usage history. Our customers should expect more from us in the future and know that we are aiming higher to meet their needs. Before opening the call to your questions, I'll share and reiterate a few key takeaways. Our teams are focused on continued execution of our safety and asset modernization programs and our transition to renewable energy in our electric business. We continue to expect to deliver non-GAAP net operating earnings per share in the range of $1.28 to $1.36 in 2021, which reflects an expected COVID-19 impact of $0.05. The guidance that we provided at our Investor Day on September 29 remain in place. These include $1.9 billion to $2.2 billion in annual safety, modernization and growth investments from 2021 through 2024, $1.8 billion to $2 billion in incremental renewable generation investments across 2022 and 2023, and compound annual earnings per share growth of 7% to 9% from 2021 through 2024, with near-term growth of 5% to 7% from 2021 to 2023. Our transformational NiSource Next initiative is well underway to enhance organizational capabilities, drive efficiencies and continued affordability for our customers. This effort is designed to ensure that we are optimally positioned to support both the significant capital investments we will be making in renewable generation and our ongoing asset modernization and safety enhancement investments. With the completion of the sale of our Massachusetts assets, we are firmly focused on the future in delivering premium value from our 100% regulated electric and gas utility platform across our 6 states. Thank you all for participating today and for your ongoing interest in and support of NiSource. We're now ready to take your questions. Amy?

[Operator Instructions]. Our first question today comes from the line of Shar Pourreza with Guggenheim Partners.

So just a couple of quick questions. First, looking at sort of the '21 COVID impact, you obviously reaffirmed the $0.05 impact at the midpoint, but usage and cost mitigation in the third quarter seemed fairly strong. So wondering how you're seeing this trend progressing into 4Q since we're already into it, and also, how you're sort of thinking about '21 progressing? So is there a scenario where we could potentially see an updated guidance in '21 at sort of the year-end results? Or are you looking to sort of maintain the numbers in the near-term to keep some contingency in place, assuming that COVID realities are better than sort of your internal planning assumptions. So how do we sort of think of that?

Shar, it's Donald. So if we think about COVID, as you stated, we've got $0.05 in our guidance for 2021, and that's really based upon our scenario, our base case scenario that we outlined earlier. We're not seeing any changes in that scenario at this point, certainly continuing to see lower revenues from our commercial industrial customers, offset by the residential customers. But we're also seeing some higher bad debt expense. As we look forward into this quarter and into the heating season, it really is the first time that we'll have -- we'll experience COVID in our heating season on our gas business, so we'll continue to monitor that. And as we progressed through this quarter, we'll provide updates if we're seeing anything significant. But I would say we'll continue -- we are continuing to watch the impacts on our customers as we progress through this time.

Got it, Donald. So just to reiterate, the few weeks we're in to the fourth quarter, you're not seeing any sort of variation in your current assumptions?

No, not at this point.

And Shar, it's Joe. One of the things that I would note, Shar -- one of the things I would note is that, as Donald said, we haven't seen heating season yet with the COVID impacts. And keep in mind that on the gas side of the business, most of our residential rate structures are essentially decoupled, so you don't have the same volumetric shift that we've seen on the electric side through the second and third quarters. And so that's all factored into our thinking as we look both at Q4 and Q1, the two big heating season quarters for the gas side of the business.

Perfect. And then Joe AND Donald, in your sort of prepared remarks, you obviously highlighted that 8 to 10 renewal projects were sort of in advanced commercial negotiations, you highlighted that. Obviously, 3 were announced very recently with NextEra. Wondering what the timeline looks like for the announcement of the remaining projects, could we get an update on this as soon as EEI?

Good morning, Shar. This is Shawn Anderson. Great to hear from you. Thanks for the question. We continue to advance all facets of our generation transition journey. First and foremost, we're focused on the continued progress of the existing agreements that our teams have worked tirelessly to advance. So specifically, those under construction or in the regulatory process. For example, we look forward to Rosewater and Jordan Creek facilities to become operational and anticipate it even by the end of this year, perhaps. As it relates to the commercial negotiations underway, we do expect to have additional information by the end of this year and perhaps early into next year as well as we step toward both the commercial agreements and any potential to file through the regulatory process simultaneously. So we're well underway focused on this. Meanwhile, we also expect to file for CPCN approval for the 3 projects just announced, Dunns Bridge I, II and Cavalry by the end of this year. So a lot going on just across the team and across the board, but we're excited for what fourth quarter will bring for us and plan to have more to share very soon.

Got it. So just to reiterate, so the 8 to 10 that are currently in advanced negotiations, the next update should be at the year-end results.

Yes, that's correct. And that 8 to 10 was 3 heat-free agreements that we didn't describe, so probably in that 5 to 7 range at this point.

Shar, this is Randy. Just to interject something. You won't necessarily have to wait until the year-end results. We'll be announcing progress as this takes place, and you'll likely see a press release with the next set of projects that we would announce done at the NIPSCO level. So although you'll probably not going to see something new in a week when EEI starts, but as Shawn mentioned, certainly by year-end, a lot of things are in-flight to be announced. So it won't necessarily be February of next year; it will be more likely before the end of this year.

Your next question today comes from the line of Andres Sheppard with Crédit Suisse.

It's Mike Weinstein actually. Just to be clear on the CPCN process, when you get a CPCN for Dunns and Cavalry, that just establishes prudence later for the rate case, right? I mean, it's not a guarantee of anything?

That's correct. That's correct.

Got you. And then the same thing, is this the same exact thing that you're waiting for? Or will -- yes, that you're waiting for on the PPAs for Greensboro and Brickyard?

Yes. Yes. We are still waiting for CPCN approval for those projects and expect those by year-end.

Got you. Got you. And the block equity needs that you're citing for '22 to '23, just to be clear, that's intended to finance these projects, right? That's why the timing is '22 to '23?

That's correct. Yes, we -- as you think about the timing of those investments when we'll need to make the investments on those joint ventures will be in that '22 to '23 time period. And we'll top off the -- a block equity deal off of the whatever remaining equity content we need once we do are hybrid or convertible in 2021.

Got you. Got you. And then on the rate case issue, Columbia Gas and Maryland, they're expecting to receive something this month? Is that coming up soon or next -- the next week or two or?

We have a settlement filed there. Yes, that's correct. We're awaiting an order.

Awaiting an order. Okay. So is that first half of the month usually, or do you have any idea? This November?

Yes.

Your next question today comes from the line of Harry Pollans with Bank of America. Julien Dumoulin-Smith: It's Julien here, actually. Just wanted to follow-up real quickly, if you can. A couple nuanced ones and then just following up more conceptually on the strategy side. How do you think about the timing of potential equity or equity-like solutions, especially in '21, relative to any evolution on strategic desires when you think about asset monetization? And where are you in that thought process? Just think about the timing more than anything else here around some of the ideas you floated at the time of your Analyst Day a few weeks back.

Julien, we've got flexibility in terms of timing of the -- going out to the markets for the hybrid or convertible next year. So we don't have any specific timing to give you at this point. Certainly will be by the end of 2021, and again, looking for equity content greater than 50% on those securities. As with regards to portfolio optimization, it's certainly analysis that is ongoing as we evaluate the plan. And certainly, as we have more information, if there's something to discuss, we'd provide updates to the investors. Julien Dumoulin-Smith: Got it. But basically, if I'm hearing you right, it's just too early to really say one way or another how serious of an intention is for asset sales rather than equity alternatives right now, if I'm hearing you right?

It is. We're just continuing to look at full plan and how we finance that. The plan that we outlined on Investor Day is still the same plan from a financing standpoint, and we're continuing to look at what the pricing is of those potential securities. As we look at those securities, we'll evaluate portfolio optimization and see what drives the highest shareholder value. Julien Dumoulin-Smith: Got it. And sorry to go back, to come back and clarify Shar's question a little bit if I can. You alluded to it. When you think about this $0.05 COVID impact, how much of that is the gas business and the fact that we haven't been through the winter season yet in the context of an LDC and seeing COVID impacts versus, say, just ongoing impacts from electric year-over-year here?

Yes. We probably haven't -- I don't think we've provided that level of detail. Certainly, as we look at the overall impacts to gas electric, it's almost -- I'd look at in terms of the $0.03 gas and $0.02 electric. But ultimately, we'll have to see where that comes out. Julien Dumoulin-Smith: Right. Hence, why we might be a little early here in saying where you are against that range despite some nice tailwinds on COVID year-to-date already?

That's right. Yes. I mean, we're really going to have to look at sales as we get into the heating season. And then again, bad debt and see from a customer standpoint, what's the impact there. We do have really good regulatory programs in terms of our bad debt, and that has limited the impact so far this year, but it's something we continue to watch.

Your next question today comes from the line of Richard Sunderland with JPMorgan.

Just following up real quick on the COVID impact question. One, are there any items specifically included or excluded from that $0.05 that you just stated for '21? And then two, any regulatory proceedings that could impact that number.

Thanks for the question. Let me start with the regulatory. At this point, we're not pursuing any additional regulatory items that would impact that number. Obviously, if there were any significant changes in our outlook that we could pursue regulatory mechanisms, we would. And so what we've got baked into that $0.05 is based upon the programs that we've got in hand right now. And the second question, I'm sorry, I missed that.

Just any specific to bid related items that are, I guess, really excluded from that impact? Or just kind of definitionally, anything that might see the COVID impact but wouldn't actually be included in the $0.05?

No, for us, we're really tracking sales impacts, bad debt expense, other fees that we might collect from customers and any kind of cleaning and safety expenses. Those are the key categories that we're tracking.

Great. And then just want to dig into the O&M on this quarter a little bit. The O&M results seem strong. Just curious if you can quantify one-off savings versus savings you expect it to recur in 2021?

Yes, I'd say most of the savings that we've had this year are temporary reductions in programs that we've slowed down, non-safety programs that we've reduced or slowed down or stopped this year. And so I'd say they're more temporary expenses. As we look forward, thinking about our NiSource Next program, that program really is driven to -- or designed to drive long-term lower costs through 2024.

And just to follow-up real quick on that. So the savings from that program really aren't driving results currently and wouldn't necessarily be a significant driver in '21? Is that fair?

I'd say the NiSource Next programs aren't driving significant results yet in 2020, but our -- will drive impacts in 2021 and beyond.

Your next question comes from the line of Durgesh Chopra with Evercore ISI.

Most of my questions have been answered. Just 1 big picture, can you talk about hydrogen? And a lot of your peers are doing some test projects. Obviously, you have extensive assets and gas LDCs. Maybe just what your view and outlook is there and are you going to be collaborating with others or projects of your own as it relates to blending hydrogen to your our gas system?

Thanks, Durgesh. That's something we're closely monitoring. It's not yet part of our investment plan, and our programs, as we've outlined, are driven by safety, asset modernization and growth programs as well as our renewable transition on the electric side. But as we look forward at the role of natural gas in a decarbonizing economy, we certainly see opportunities, both for increased renewable natural gas and for hydrogen blending. So it's an area we're watching. I would expect to see more information on that, more insight on that in terms of additional investment opportunities in the future. But at this time, it's what I would consider something that we're closely monitoring and very well positioned. The other thing I'd stress there is one of the things that's always a key factor is just the fundamental economics of supply and demand. And you look at our territories where we sit across shale belts and the low basis cost and low volatility has really not been conducive to introducing much renewables or blending alternative fuels. But if you've kind of flipped that over, it also creates quite a bit of headroom for those kind of policies as we look forward. So we're very bullish on natural gas going forward in both environments, the current environment and a decarbonizing environment, because we have such strong fundamentals to work from across our territories.

That's helpful, Joe. Maybe just 1 quick follow-up. On the insurance proceeds in Massachusetts, just any update there, and maybe a timeline that you could -- you know when to expect anything at all?

Yes, thanks. This is Shawn. No update from what's reported, and no anticipated time line. We're still working through that process.

Your next question comes from the line of Charles Fishman with Morningstar.

I think all my quarterly questions and guidance questions are answered. Let me -- if I could follow-up on a question I asked at your Investor Day a month ago, and the question was concerning the election prospect, what would happen if we had higher corporate income taxes, what would happen if we saw restrictions on fracking that caused natural gas price to go up. And I got some great answers from Joe, you, and Donald [indiscernible] was really good. But since then, we've had a debate, where one of the candidates has indicated they'd like to eventually get out of gas. And as somebody that owns an electric or a combined utility, electric and gas, in Northern Indiana, a place that is really, really cold at winter time, I mean, I look at the economics of -- I mean, I would assume you're going to see some parts going to work there in full day. And you're basically dealing with electric heating. And even, with all due respect to NIPSCO's low electric rates, electric heating is going to be really expensive. But my question is, as somebody that owns the electric facility in that area, do you even have the capability to [indiscernible] to deliver the kind of BTUs that are needed on a really cold day with electric in Northern Indiana? Is that even feasible? And I guess my question would be the same for, obviously, you don't own the utilities there or have the generation assets in Ohio and Pennsylvania, but my question would be similar. Would any -- wouldn't we be struggling to deliver the BTUs the gas facility currently provides in really cold weather?

Yes, Charles, thanks for your question there and for the follow-up from the Investor Day question because it's an insightful question. If you really look at the energy requirements on a peak day in the winter, especially if you look at our territory, and we're a good test bed for that in NIPSCO because we're on both sides of that, we're both electric and gas. We see the full customer demand profile, both winter peak and summer peak. And it's a very insightful question, even as you perhaps decarbonize the grid and with renewables, and therefore, decarbonize the energy equation, you still have to serve that peak winter day or those peak winter days. And there are scenarios where you could imagine the gas system as the battery or the storage system for those kind of peak days. But certainly, as it's currently configured, at least across the territories that we're familiar with, electric grid itself, not just the supply component, but the grid itself, may not be well positioned to serve those kind of peak days. So there's a lot of engineering to be done to really see your way through to a world without natural gas. And we think the better question is, how do you position natural gas with renewable natural gas, potential hydrogen blending to decarbonize the gas stream itself as a part of the strategy for meeting customer requirements and providing resilience when you have multiple fuel sources. So it's a tough -- it's complex engineering question. The economics of it are challenging. And it's an insightful question that you raised. There have been studies about this that actually converted the grid modernization required to a cost per ton of carbon avoided if you did renewable energy and upgraded the grid. And it's a pretty significant way to avoid carbon, a high-cost way to avoid carbon in most of the country, particularly in the areas that we serve.

So I would assume you kind of demonstrate to the regulators as well as the policy people and government how -- the feasibility of this electrification mandates are really just not feasible in your service areas as they are maybe in some milder climate that we're seeing. Is that what's going on?

Yes. I think it's not such an absolute thing. I think it's really a more complex picture than that in terms of what's the best role for natural gas, what's the best role for electric renewables, what's the best energy delivery system for the needs of our country. And so I don't think it's a yes, no question for gas. I don't think it's an all electrification solution either. I think we've got to solve this with the resources that are available to us to make sure that we keep our economy viable and rely on the resilience of the supply basin that we have.

Okay. And I asked just because as an analyst, it seems to weigh on not just you, but your company but other utilities in the natural gas distribution, this thought or the discussion of electrification. And I guess I'm just having -- I'm struggling making it work economically or technically in the colder climates.

Yes. I agree with you. There's a lot of work to do to help inform that perspective, and we think we're well positioned to help do that.

Your next question comes from the line of Insoo Kim with Goldman Sachs.

Just one quick question from me. I think you talked about in the slide that you -- in the third quarter, you lowered your average interest rate by over 60 basis points. Is -- how much of that dropped to your bottom line? And was that type of refinancing and lowering of the rate embedded when you gave your longer term guidance?

Great question. When you think about that financing, it did lower our long-term financing cost. It is embedded in our guidance for 2021 and beyond. And so it's embedded in there and does provide savings for us going forward.

Got it. And how much of that is more -- you get to keep your savings versus more at the utilities? I just haven't done the search yet.

Well, I'd say that's a little bit more complex because we do finance our utility separately than -- when they need cash, that saving doesn't necessarily drop to the utilities. Their financing is done over the course of the year, not necessarily when we actually go out to the external market to finance, and that's why I think -- just think about it from a standpoint of that those dollars and those savings are embedded in overall NiSource guidance and financing plans.

Got it. And I know I said one question, but just one additional one. When we think about your gas utilities, and I think in Virginia and Maryland, the revenue decoupling at the residential side. So when we head into this winter season, any of the benefit that you're seeing on the demand for -- on residential, that will get decoupled away, is your point, then part of that was embedded when you gave your $0.05 of overall impact for 2021?

That is correct.

[Operator Instructions]. Your next question comes from the line of Andrew Levi with HITE Hedge.

So just to follow-up on Julien's question, so on your Analyst Day, you definitely threw out and kind of threw out again today, the possibility of selling maybe it's an LDC, selling some assets, whatever it may be. And so I guess my first question just around that is, you wouldn't really bring that up unless it was a real possibility. Is that correct?

So our messaging hasn't changed at all from Analyst Day. We've got a track record of evaluating and executing on structural changes when that makes sense, the separation or spin of the pipeline business, the sale of CMA are good examples of that. And our financing plan, as we said on Investor Day, does not assume any portfolio changes, but our point is that we always evaluate the portfolio as a matter of normal course to make sure that we're doing what's in the best long-term interest of shareholders and in the most credit-supportive way. So just want to reiterate, that's the key message, that's what we're conveying.

And what would the process be as far as doing that? Meaning, obviously, you have to hire a banker, do all that type of stuff, but just can you kind of talk at a very high level what you're thinking about specifically on that because it is an event that would be significant to your company, even if it's a small LDC and, obviously, not having to issue as much equity and kind of the puts and takes around that, just be a little bit more specific, please?

Yes. We're not going to speculate about particular scenarios or anything like that, but it obviously involves evaluating the impact of the loss of earnings in cash flows as well as any cost to synergies that we'd have to manage as a result of a transaction like that. And all of that, as you all know, can influence credit and the earnings trajectory. So we look at the long-term value drivers for the business, and we look at the contribution of each of our companies toward that. And we look at the alternatives anytime we're looking at equity issuances.

Do you guys think there's a strong market out there for smaller LDC?

Don't really know.

Okay. And are any of your subsidiaries not earning their allowed return?

Now all of our -- we've got really constructive regulatory support in all of our states. We expect all of our -- and have seen all of our companies earn at their allowed return. Of course, we've had the recent sale of CMA, but that's a different profile.

Right. Right. And last question is, what is the timing of making the decision here? Is it kind of in step with the equity you have to issue next year, or is it hybrid you have to issue next year?

No, we haven't set any timetable for that.

And this concludes our question-and-answer session for today. I now turn the call back to Mr. Joe Hamrock.

Thank you, Amy. And thank you all for joining us today and for your continued interest in and support of NiSource. Please stay safe, and make it a great day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.