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Published: 2020-02-14
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ENBRIDGE GAS INC.
(a subsidiary of Enbridge Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019 
 
MANAGEMENT'S REPORT
To the Shareholders of Enbridge Gas Inc.
Financial Reporting Management of Enbridge Gas Inc. (the Company) is responsible for the accompanying Consolidated Financial Statements. The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and necessarily include amounts that reflect management's judgment and best estimates.
The Board of Directors is responsible for all aspects related to governance of the Company. The Company does not have an Audit Committee, having received an exemption from such requirement.
Internal Control over Financial Reporting Management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting includes policies and procedures to facilitate the preparation of relevant, reliable and timely information, to prepare Consolidated Financial Statements for external reporting purposes in accordance with U.S. GAAP and provide reasonable assurance that assets are safeguarded.
PricewaterhouseCoopers LLP, independent auditors appointed by the shareholders of the Company, haveconducted an audit of the Consolidated Financial Statements of the Company in accordance with Canadian generally accepted auditing standards and have issued an unqualified audit report, which isaccompanying the Consolidated Financial Statements. 
(Signed) (Signed)  
Cynthia L. Hansen Cassell V. Kincaid
President  Vice President, Finance
February 14, 2020 
Independent auditor’s report 
To the Shareholders of Enbridge Gas Inc. 
Our opinion 
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Enbridge Gas Inc. (the Company) as at December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America (US GAAP). 
What we have audited The Company’s financial statements comprise: 
the consolidated statements of earnings for the years ended December 31, 2019 and 2018; 
the consolidated statements of comprehensive income for the years ended December 31, 2019 and 2018; 
the consolidated statements of shareholders’ equity for the years ended December 31, 2019 and 2018; 
the consolidated statements of cash flows for the years ended December 31, 2019 and 2018; 
the consolidated statements of financial position as at December 31, 2019 and 2018; and 
the notes to the consolidated financial statements, which include a summary of significant accounting policies. 
Basis for opinion 
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 
Independence We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. 
PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2 
T: +1 416 863 1133, F: +1 416 365 8215 
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership. 
Other information 
Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis. 
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 
In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. 
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 
Responsibilities of management and those charged with governance for the financial statements 
Management is responsible for the preparation and fair presentation of the financial statements in accordance with US GAAP, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. 
Those charged with governance are responsible for overseeing the Company’s financial reporting process.  
Auditor’s responsibilities for the audit of the financial statements 
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. 
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.  
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.  
(Signed) “PricewaterhouseCoopers LLP” 
Chartered Professional Accountants, Licensed Public Accountants 
Toronto, Ontario February 14, 2020 
ENBRIDGE GAS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31,20192018
(millions of Canadian dollars)Operating revenues (Notes 4 and 22)
Gas commodity and distribution revenue4,1524,242
Storage and transportation revenue836972
Other revenue8783
Total operating revenues5,0755,297
Operating expenses
Gas commodity and distribution costs (Note 22)2,3342,676
Operating and administrative (Notes 16, 18, 19 and 22)1,1091,077
Depreciation and amortization (Notes 8 and 9)638608
Total operating expenses4,0814,361
Operating income994936
Other income (Notes 5, 18 and 22)2080
Interest expense, net (Notes 12, 15 and 22)(400)(391)
Earnings before income taxes614625
Income tax expense (Note 17)(58)(57)
Earnings556568
Preference share dividends—(6)
Earnings attributable to common shareholders556562
The accompanying notes are an integral part of these consolidated financial statements.
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ENBRIDGE GAS INC. 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended December 31,20192018
(millions of Canadian dollars)Earnings
556568
Other comprehensive income/(loss), net of tax (Notes 14 and 15)
Change in unrealized loss on cash flow hedges(37)(4)
Reclassification to earnings of realized loss on cash flow hedges43
Recognition of regulatory offset (Note 14)55—
Actuarial loss on pension plans and other postretirement benefits (OPEB) (Note 18)
(12)(15)
Foreign currency translation adjustment(5)4
Other comprehensive income/(loss), net of tax5(12)
Comprehensive income561556
Preference share dividends—(6)
Comprehensive income attributable to common shareholders561550
The accompanying notes are an integral part of these consolidated financial statements.
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ENBRIDGE GAS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated 
other 
Common comprehensive 
PreferencesharesAdditionalloss 
shares (Note 13)paid-in capitalDeficit(Note 14)Total
(millions of Canadian dollars)December 31, 2018
—3,0307,253(339)(51)9,893
Earnings attributable to
common shareholders———556—556
Other comprehensive
income, net of tax————55
Capital contribution (Note 22)
—800———800
Return of capital (Note 22)—(313)———(313)
Common shares dividends 
declared (Note 22)———(937)—(937)
December 31, 2019—3,5177,253(720)(46)10,004
December 31, 20172103,0747,253(136)(39)10,362
Preference shares
redeemed(210)————(210)
Earnings attributable to
common shareholders———562—562
Other comprehensive loss,
net of tax————(12)(12)
Common shares issued (Note 22)
—407———407
Return of capital (Note 22)—(451)———(451)
Common shares dividends 
declared (Note 22)———(765)—(765)
December 31, 2018—3,0307,253(339)(51)9,893
The accompanying notes are an integral part of these consolidated financial statements.
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ENBRIDGE GAS INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,20192018
(millions of Canadian dollars)
Operating activitiesEarnings
556568
Adjustments to reconcile earnings to net cash provided by operating activities:
Depreciation and amortization (Notes 8 and 9)638608
Deferred income tax expense (Note 17)(31)(31)
Net defined pension and other postretirement benefit obligations (OPEB)
costs (Note 18)(17)(26)
Loss on disposition (Note 5)10—
Other56
Changes in operating assets and liabilities (Note 20)116601
Net cash provided by operating activities1,2771,726
Investing activities
Proceeds from wind down of investment in affiliate—825
Capital expenditures(1,073)(914)
Additions to intangible assets(36)(413)
Proceeds from disposition (Note 5)72—
Net cash used in investing activities(1,037)(502)
Financing activities
Net change in short-term borrowings (Note 12)(127)(420)
Short-term repayments to affiliates (Note 22)(32)—
Net change in long-term borrowings from affiliates (Notes 12 and 22)(300)575
Term note issuances, net of issue costs (Note 12)697—
Term note repayments (Note 12)—(400)
Common shares issued (Notes 13 and 22)—407
Common share dividends (Note 22)(937)(765)
Preference shares redeemed—(210)
Preference share dividends—(7)
Capital contribution received (Notes 13 and 22)800—
Return of capital (Notes 13 and 22)(313)(451)
Net cash used in financing activities(212)(1,271)
Net increase/(decrease) in cash, cash equivalents and restricted cash28(47)
Cash, cash equivalents and restricted cash at beginning of year4996
Cash, cash equivalents and restricted cash at end of year7749
Supplementary cash flow information
Cash paid/(received) for income taxes12(33)
Cash paid for interest, net of amounts capitalized381386
Property, plant and equipment non-cash accruals3465
The accompanying notes are an integral part of these consolidated financial statements.
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ENBRIDGE GAS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,20192018
(millions of Canadian dollars, number of shares in millions)AssetsCurrent assets
Cash and cash equivalents7717
Restricted cash—32
Accounts receivable and other (Notes 6 and 7)1,3171,312
Accounts receivable from affiliates (Note 22)4622
Gas inventory (Note 6)631687
Assets held for sale, current (Note 5)—22
2,0712,092
Property, plant and equipment, net (Note 8)15,41814,818
Deferred amounts and other assets (Notes 6, 10, 16, 17 and 18)2,2351,931
Intangible assets, net (Note 9)173209
Goodwill4,7844,784
Assets held for sale, long-term (Note 5)—116
Total assets24,68123,950
Liabilities and shareholders’ equityCurrent liabilities
Short-term borrowings (Note 12)8981,025
Accounts payable and other (Notes 6, 11, 16, 17 and 18)1,3691,315
Accounts payable to affiliates (Notes 15 and 22)11355
Current portion of long-term debt (Note 12)400—
Liabilities held for sale, current  (Note 5)—44
2,7802,439
Long-term debt (Note 12)7,8157,543
Other long-term liabilities (Notes 6, 15, 16, 18 and 21)1,9991,773
Deferred income taxes (Note 17)1,4331,319
Loans from affiliate (Notes 12 and 22)650950
Liabilities held for sale, long-term (Note 5)—33
14,67714,057
Shareholders’ equity
Share capital (Note 13)
Common shares (522 and 291 outstanding at December 31, 2019 and 2018, respectively)3,5173,030
Additional paid-in capital7,2537,253
Deficit(720)(339)
Accumulated other comprehensive loss (Notes 14 and 18)(46)(51)
10,0049,893
Total liabilities and shareholders' equity24,68123,950
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors: 
(Signed) (Signed) 
Cynthia L. Hansen                                                            David G. UnruhDirector 
Director
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS OVERVIEW
Enbridge Gas Inc. (the Company) is a rate-regulated natural gas distribution, storage and transmission utility, serving residential, commercial and industrial customers in Ontario. The Company also served areas in northern New York State through its wholly-owned subsidiary, St. Lawrence Gas Company, Inc. (St. Lawrence Gas), prior to disposition on November 1, 2019 (Note 5). The Company is a wholly-owned subsidiary of Enbridge Inc. (Enbridge). 
AMALGAMATIONOn August 30, 2018, Enbridge Gas Distribution Inc. (EGD) and Union Gas Limited (Union Gas) received approval from the Ontario Energy Board (OEB) for their application to amalgamate on January 1, 2019. The amalgamated entity has continued from this date as the Company. The Company continues to have all of the assets, rights, contracts, liabilities and obligations of each of EGD and Union Gas, including licenses and permits. 
Prior to the amalgamation, EGD and Union Gas were both indirect wholly-owned subsidiaries of Enbridge and operated as companies under common control since February 27, 2017, when Enbridge completed a stock-for-stock merger transaction to acquire all outstanding common stock of Spectra Energy Corp (Spectra Energy). As a result of the February 27, 2017 merger, Enbridge and its subsidiaries obtained ownership of Union Gas through its ownership in Spectra Energy.
In accordance with generally accepted accounting principles in the United States of America (U.S.GAAP), the Consolidated Financial Statements reflect EGD as the receiving entity with Union Gas' accounts transferred at Enbridge’s historical cost as at February 27, 2017. The carrying values of certain assets and liabilities of Union Gas were adjusted to reflect EGD’s accounting policies retrospectively to the transfer date. All intercompany transactions and balances have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
These Consolidated Financial Statements are prepared in accordance with U.S. GAAP. Amounts are stated in Canadian dollars unless otherwise noted. 
The Company is permitted to prepare its Consolidated Financial Statements in accordance with U.S. GAAP for purposes of meeting Canadian continuous disclosure requirements under an exemption granted by Canadian securities regulators until the earliest of January 1, 2024, the first day of the Company's financial year that commences if and after the Company ceases to have activities subject to rate regulation, or the effective date prescribed by the International Accounting Standards Board for the mandatory application of a standard within International Financial Reporting Standards specific to entities with activities subject to rate regulation.
Certain comparative disclosures in the notes to the financial statements have been retrospectively adjusted to conform to the current year's presentation.
BASIS OF PRESENTATION AND USE OF ESTIMATESThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities in the Consolidated Financial Statements. Significant estimates and assumptions used in the preparation of the Consolidated Financial Statements include, but are not limited to: carrying values of regulatory assets and liabilities; unbilled revenues; estimates of revenue; depreciation rates and carrying value of property, plant and equipment; amortization rates and carrying value of intangible assets; measurement of goodwill; fair value of asset 
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retirement obligations (AROs); fair value of financial instruments; provisions for income taxes; assumptions used to measure retirement benefits and OPEB; and commitments and contingencies. Actual results could differ from these estimates.
REGULATIONThe utility operations of the Company within Ontario are regulated by the OEB, while the utility operations of St. Lawrence Gas were regulated by the New York State Public Service Commission (NYSPSC) (collectively the Regulators). 
The Regulators exercise statutory authority over matters such as construction, rates and ratemaking and agreements with customers. To recognize the economic effects of the actions of the Regulators, the timing of recognition of certain revenues and expenses in the utility operations may differ from that otherwise expected under U.S. GAAP for non rate-regulated entities (Note 6).
As a result of rate regulation accounting, the Company has recognized a number of regulatory assets and liabilities. Regulatory assets represent amounts that are expected to be recovered from customers in future periods through rates. Regulatory liabilities represent amounts that are expected to be refunded to customers in future periods through rates and amounts collected from customers in advance of costs being incurred. Long-term regulatory assets are recorded in Deferred amounts and other assets and current regulatory assets are recorded in Accounts receivable and other. Long-term regulatory liabilities are recorded in Other long-term liabilities and current regulatory liabilities are recorded in Accounts payable and other. Regulatory assets are assessed for impairment if the Company identifies an event indicative of possible impairment. In the absence of rate regulation accounting, the Company would generally not recognize regulatory assets or liabilities and the earnings impact would be recorded in the period the expenses are incurred or revenues are earned. The recognition of regulatory assets and liabilities is based on the actions, or an expectation of the future actions, of the Regulators. The Regulators’ future actions may differ from current expectations, or futurelegislative changes may impact the regulatory environment in which the Company operates. To the extentthat the Regulators’ future actions are different from current expectations, the timing and amount of recovery or settlement of regulatory balances could differ significantly from those recorded.
REVENUE RECOGNITIONRevenues from contracts with customers are generally recognized upon the fulfillment of the performance obligations for the distribution, storage, transportation and sale of natural gas. For distribution and transportation service arrangements where the services are simultaneously received and consumed by the customer, revenues are recorded on the basis of regular meter readings and estimates of customer usage from the last meter reading to the end of the reporting period. Estimates are based on historical consumption patterns and heating degree days experienced. Heating degree days is a measure of coldness that is indicative of volumetric requirements for natural gas utilized for heating purposes in the Company's distribution franchise areas. Revenue from storage services are recognized as the storage services are provided. 
A significant portion of the Company's operations are subject to regulation and accordingly, there are circumstances where the revenues recognized do not match the amounts billed. Revenue under such circumstances is recognized in a manner that is consistent with the underlying rate-setting mechanism as approved by the Regulators. This may give rise to regulatory deferral accounts pending disposition by decisions of the Regulator, which follow the accounting guidance found in ASC 980 - Regulated Operations.
PUSH-DOWN ACCOUNTINGEGD elected to apply push-down accounting in respect of its original acquisition by its ultimate parent, Enbridge, when it first adopted U.S. GAAP. On the original acquisition, the fair value adjustment was recorded by Enbridge rather than by EGD. Upon adopting push-down accounting, the historical cost of 
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EGD’s property, plant and equipment and related accounts were adjusted by the remaining unamortized fair value adjustment. 
The Company has applied push-down accounting with respect to the accounts of Union Gas from February 27, 2017, the date upon which Enbridge acquired common control of EGD and Union Gas. The carrying values of certain assets and liabilities of Union Gas transferred to EGD have been adjusted to reflect Enbridge's historical cost as at February 27, 2017.
DERIVATIVE INSTRUMENTS AND HEDGINGDerivatives in Qualifying Hedging RelationshipsThe Company uses derivative financial instruments to manage its exposure to changes in interest rates and foreign exchange rates. Hedge accounting is optional and requires the Company to document the hedging relationship and test the hedging item’s effectiveness in offsetting changes in fair values or cash flows of the underlying hedged item on an ongoing basis. The Company presents the earnings effects of hedging items with the hedged transaction. Derivatives in qualifying hedging relationships are categorized as cash flow hedges, fair value hedges and net investment hedges. 
Cash Flow Hedges The Company uses cash flow hedges to manage its exposure to changes in currency exchange rates related to unregulated storage revenue and changes in interest rates (Note 15). The change in the fair value of a cash flow hedging instrument is recorded in Other comprehensive income/(loss) (OCI) and is reclassified to earnings when the hedged item impacts earnings.
If a derivative instrument designated as a cash flow hedge ceases to be effective or is terminated, hedge accounting is discontinued and the gain or loss at that date is deferred in OCI and recognized concurrently with the related transaction. If a hedged anticipated transaction is no longer probable, the gain or loss is recognized immediately in earnings. Subsequent gains and losses from derivative instruments for which hedge accounting has been discontinued are recognized in earnings in the period in which they occur.
Classification of DerivativesThe Company recognizes the fair value of derivative instruments on the Consolidated Statements of Financial Position as current and non-current assets or liabilities depending on the timing of the settlements and the resulting cash flows associated with the instruments. Fair value amounts related to cash flows occurring beyond one year are classified as non-current.
Cash inflows and outflows related to derivative instruments in qualifying hedging relationships are classified as Operating activities on the Consolidated Statements of Cash Flows.
Balance Sheet OffsetAssets and liabilities arising from derivative instruments may be offset in the Consolidated Statements of Financial Position when the Company has the legal right and intention to settle them on a net basis.
Transaction Costs Transaction costs are incremental costs directly related to the acquisition of a financial asset or the issuance of a financial liability. The Company incurs transaction costs primarily through the issuance of debt and accounts for these costs as a deduction from Long-term debt on the Consolidated Statements of Financial Position. These costs are amortized using the effective interest rate method over the term of the related debt instrument and are recorded in Interest expense. 
INCOME TAXESIncome taxes are accounted for using the liability method. Deferred income tax assets and liabilities are recorded based on temporary differences between the tax bases of assets and liabilities and their
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carrying values for accounting purposes. Deferred income tax assets and liabilities are measured using the tax rate that is expected to apply when the temporary differences reverse. For the Company’s regulated operations, a deferred income tax liability or asset is recognized with a corresponding regulatory asset or liability, respectively, to the extent taxes can be recovered through rates (Note 6). Any interest and/or penalty incurred related to tax is reflected in Income taxes.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONForeign currency transactions are those transactions whose terms are denominated in a currency other than the currency of the primary economic environment in which the Company or a reporting subsidiary operates, referred to as the functional currency. Transactions denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the rate of exchange in effect at the date of the Consolidated Statement of Financial Position. Exchange gains and losses resulting from translation of monetary assets and liabilities are included in the Consolidated Statements of Earnings in the period that they arise.
Prior to its sale, the Company's only foreign operation was St. Lawrence Gas. The functional currency of  St. Lawrence Gas was the United States dollar (USD). The effects of translating the financial statements of St. Lawrence Gas to Canadian dollars were included in the cumulative translation adjustment component of Accumulated other comprehensive income/loss (AOCI). Asset and liability accounts were translated at the exchange rates in effect on the date of the Consolidated Statements of Financial Position, while revenues and expenses were translated at monthly average rates.
CASH AND CASH EQUIVALENTSCash and cash equivalents include short-term investments with a term to maturity of three months or lesswhen purchased. The Company combines Cash and cash equivalents and Bank indebtedness where the corresponding bank accounts are subject to cash pooling arrangements. 
RESTRICTED CASHCash and cash equivalents that are restricted as to withdrawal or usage, in accordance with specificagreements, are presented as Restricted cash on the Consolidated Statements of Financial Position. Restricted cash represented funds received from the Green Investment Fund (GIF) program. The Company's use of the funds was limited to eligible expenditures for the purpose of executing the program. The Company managed the GIF program separately from its core regulated activities. There was no earnings impact related to the GIF program. 
GAS INVENTORYGas inventories are primarily comprised of natural gas in storage and also include costs such as storage injection and demand costs. Natural gas in storage is recorded at the prices approved by the Regulators in the determination of distribution rates. The actual price of natural gas purchased may differ from the Regulators’ approved price. The difference between the approved price and the actual cost of the natural gas purchased is deferred as a liability for future refund or as an asset for collection by the Company to/ from customers, as approved by the Regulators.
PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment is recorded at historical cost, including associated operating costs and an allowance for interest during construction as authorized by the Regulators. Expenditures for construction, expansion, major renewals and betterments are capitalized. Maintenance and repair costs are expensed as incurred. Expenditures for project development are capitalized if they are expected to have a future benefit. 
The pool method of accounting for property, plant and equipment is followed whereby similar assets with comparable useful lives are grouped and depreciated as a pool, as approved by the Regulators. When those assets are retired or otherwise disposed of, gains and losses are not reflected in earnings, but are 
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recorded as an adjustment to accumulated depreciation until the last asset in the pool is disposed of. Gains and losses from the disposal of assets not subject to the pool method of accounting, such as land, are reflected in earnings. Depreciation of property, plant and equipment is provided on a straight-line basis over the estimated useful lives of the assets, as approved by the Regulators, commencing when the asset is placed in service. Depreciation expense includes a provision for future removal and site restoration costs at rates approved by the Regulators.
DEFERRED AMOUNTS AND OTHER ASSETSDeferred amounts and other assets primarily include costs which the Regulators have permitted, or are expected to permit, to be recovered through future rates, including: deferred income taxes; derivative financial instruments; and actuarial gains and losses arising from defined benefit pension plans. 
INTANGIBLE ASSETSIntangible assets consist primarily of certain software costs and emission allowances. The Company capitalizes costs incurred during the application development stage of internal use software projects. Intangible assets are generally amortized on a straight line basis over their expected lives, commencing when an asset is available for use. 
From January 1, 2017 through July 3, 2018, emission allowances were purchased in order to meet greenhouse gas (GHG) compliance obligations and were recorded at their original cost.
GOODWILLGoodwill represents the excess of the purchase price over the fair value of net identifiable assets on acquisition of a business. The carrying value of goodwill, which is not amortized, is assessed for impairment annually, or more frequently if events or changes in circumstances arise that suggest the carrying value of goodwill may be impaired. For the purposes of impairment testing, the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the quantitative goodwill impairment test is performed, the Company determines the fair value of goodwill and compares those values to the carrying value. If the carrying value exceeds its fair value, goodwill impairment is measured at the amount by which the carrying value exceeds its fair value. 
ASSET RETIREMENT OBLIGATIONSAROs associated with the retirement of long-lived assets are measured at fair value and recognized as Other long-term liabilities in the period in which they can be reasonably determined. The fair value approximates the cost a third party would charge to perform the tasks necessary to retire such assets and is recognized at the present value of expected future cash flows. AROs are added to the carrying value of the associated asset and depreciated over the asset’s useful life. The corresponding liability is accreted over time through charges to earnings and is reduced by actual costs of decommissioning and reclamation. The Company's estimates of retirement costs could change as a result of changes in cost estimates and regulatory requirements.
For the majority of the Company's assets, it is not possible to make a reasonable estimate of AROs due to the indeterminate timing and scope of the asset retirements.
PENSION AND OTHER POSTRETIREMENT BENEFITS The Company provides pension benefits through defined benefit and defined contribution pension plans and OPEB, including group health care and life insurance benefits, through defined benefit OPEB plans. 
Defined benefit pension obligation and net periodic benefit cost are estimated using the projected unit credit method, which incorporates management’s best estimates of future salary levels, other cost escalations, retirement ages of employees and other actuarial factors including discount rates and mortality. The OPEB benefit obligation and net periodic benefit cost are estimated using the projected unit credit method, where benefits are attributed to years of service, taking into consideration projection of 
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benefit costs. 
The Company uses mortality tables issued by the Canadian Institute of Actuaries (revised in 2014) to measure the benefit obligation of its pension plans. 
The Company determines discount rates by reference to rates of high-quality long-term corporate bonds with maturities that approximate the timing of future payments the Company anticipates making under each of the respective plans. 
Funded pension plan assets are measured at fair value. The expected return on funded pension plan assets is determined using market related values and assumptions on the invested asset mix consistent with the investment policies relating to the plan assets. The market related values reflect estimated return on investments consistent with long-term historical averages for similar assets.   
Actuarial gains and losses arise from the difference between the actual and expected rate of return on plan assets for that period (funded pension plans) and from changes in actuarial assumptions used to determine the accrued benefit obligation, including discount rate, changes in headcount and salary inflation experience.  
The excess of the fair value of a plan’s assets over the fair value of a plan’s benefit obligation is recognized as Deferred amounts and other assets in the Company’s Consolidated Statements of Financial Position. The excess of the fair value of a plan’s benefit obligation over the fair value of a plan’s assets is recognized as Accounts payable and other and Other long-term liabilities in the Company’s Consolidated Statements of Financial Position. 
Net periodic benefit cost is charged to Earnings and includes:  
• Cost of benefits provided in exchange for employee services rendered during the year (current service cost);  
• Interest cost of plan obligations; 
• Expected return on plan assets (funded pension plans);   
• Amortization of prior service costs on a straight-line basis over the expected average remaining service period of the active employee group covered by the plans; and 
• Amortization of cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the accrued benefit obligation or the fair value of plan assets, over the expected average remaining service life of the active employee group covered by the plans.  
Cumulative unrecognized net actuarial gains and losses and prior service costs arising from defined benefit OPEB plans are presented as a component of AOCI in the Consolidated Statements of Shareholders' Equity. Any unrecognized OPEB-related actuarial gains and losses and prior service costs and credits that arise during the period are recognized as a component of OCI, net of tax. Cumulative unrecognized net actuarial gains and losses and prior service costs arising from defined benefit pension plans, which have been permitted or are expected to be permitted by the Regulators, to be recovered through future rates, are presented as a component of Deferred amounts and other assets in the Company's Consolidated Statements of Financial Position. 
The Company also records regulatory adjustments to reflect the difference between certain net periodic benefit costs for accounting purposes and net periodic benefit costs for ratemaking purposes. Offsetting regulatory assets or liabilities are recorded to the extent net periodic benefit costs are expected to be collected from or refunded to customers, respectively, in future rates. In the absence of rate regulation, regulatory assets or liabilities would not be recorded and net periodic benefit costs would be charged to Earnings and OCI on an accrual basis. 
For defined contribution plans, contributions made by the Company are expensed in the period in whichthe contribution occurs. 
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COMMITMENTS AND CONTINGENCIESLiabilities for other commitments and contingencies are recognized when, after fully analyzing availableinformation, the Company determines it is either probable that an asset has been impaired, or a liabilityhas been incurred, and the amount of the impairment or loss can be reasonably estimated. When a rangeof probable loss can be estimated, the Company recognizes the most likely amount, or if no amount ismore likely than another, the minimum of the range of probable loss is accrued. The Company expenseslegal costs associated with loss contingencies as such costs are incurred.
3. CHANGES IN ACCOUNTING POLICIES
ADOPTION OF NEW ACCOUNTING STANDARDS Cloud Computing Arrangements  Effective January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-15 on a prospective basis. The new standard was issued to provide guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU specifies that an entity would apply Accounting Standards Codification (ASC) 350-40, internal-use software, to determine which implementation costs related to a hosting arrangement that is a service contract should be capitalized and which should be expensed. The amendments in the update also require that the capitalized costs be amortized on a straight-line basis generally over the term of the arrangement and presented in the same income statement line as fees paid for the hosting service, in addition to specifying that the capitalized costs must be presented on the same balance sheet line as the prepayment of fees related to the hosting arrangement. The ASU requires similar consistency in classifications from a cash flow statement perspective. The adoption of this ASU did not have a material impact on the Consolidated Financial Statements.
Recognition of LeasesEffective January 1, 2019 the Company adopted ASU 2016-02 Leases (Topic 842) using the modified retrospective approach.
The Company recognizes an arrangement as a lease when a customer in the arrangement has the right to obtain substantially all of the economic benefits from the use of an asset, as well as the right to direct the use of the asset. The Company recognizes right-of-use (ROU) assets and the related lease liabilities on the statement of financial position for operating lease arrangements with a term of 12 months or longer. The Company does not separate non-lease components from the associated lease components of lessee contracts and accounts for both components as a single lease component. The Company combines lease and non-lease components within a contract for operating lessor leases when certain conditions are met. ROU assets are assessed for impairment using the same approach as is applied for other long-lived assets, as described in Note 2 Significant Accounting Policies.
Lease liabilities and ROU assets require the use of judgment and estimates, which are applied in determining the term of a lease, appropriate discount rates, whether an arrangement contains a lease, whether there are any indicators of impairment for ROU assets and whether any ROU assets should be grouped with other long-lived assets for impairment testing.
In adopting Topic 842, the Company elected the package of practical expedients permitted under the transition guidance. The election to apply the package of practical expedients allows an entity to not apply the new lease standard to the prior year comparative periods in the year of adoption. The application of the package of practical expedients also permits entities not to reassess whether any expired or existing contracts contain leases in accordance with the new guidance, lease classifications, and whether initial direct costs capitalized under current guidance continue to meet the definition of initial direct costs under the new guidance. The Company also elected the practical expedient related to land easements, allowing it to carry forward accounting treatment for land easements on existing agreements that had commenced prior to January 1, 2019.
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On January 1, 2019, the Company recorded ROU assets based on corresponding lease liabilities of $52 million. When measuring lease liabilities existing at January 1, 2019, the Company discounted lease payments using the weighted average discount rate of 3.3%. There were no impacts on the Consolidated Statements of Earnings, Comprehensive Income, Shareholder's Equity and Cash Flows.
The following ASUs have been issued, but not yet adopted:
Accounting for Income TaxesASU 2019-12 was issued in December 2019 with the intent of simplifying the accounting for income taxes. The accounting update removes certain exceptions to the general principles in ASC 740 as well as provides simplification by clarifying and amending existing guidance. ASU 2019-12 is effective January 1, 2021 and entities are permitted to adopt the standard early. We are currently assessing the impact of the new standard on the Consolidated Financial Statements. 
Clarifying Interaction between Collaborative Arrangements and Revenue from Contracts with CustomersASU 2018-18 was issued in November 2018 to provide clarity on when transactions between entities in a collaborative arrangement should be accounted for under the new revenue standard, ASC 606. In determining whether transactions in collaborative arrangements should be accounted under the revenue standard, the update specifies that entities shall apply unit of account guidance to identify distinct goods or services and whether such goods and services are separately identifiable from other promises in the contract. ASU 2018-18 also precludes entities from presenting transactions with a collaborative partner which are not in scope of the new revenue standard together with revenue from contracts with customers. The accounting update is effective January 1, 2020 and early adoption is permitted. The adoption of ASU 2018-18 is not expected to have a material impact on the Consolidated Financial Statements.
Disclosure EffectivenessIn August 2018, the Financial Accounting Standards Board (FASB) issued two amendments as a part of its disclosure framework project aimed to improve the effectiveness of disclosures in the notes to financial statements.
ASU 2018-14 was issued in August 2018 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendment modifies ASC 715, Compensation - Retirement Benefits, by adding and removing several disclosure requirements while also clarifying the guidance on current disclosure requirements. ASU 2018-14 is effective January 1, 2021 and entities are permitted to adopt the standard early. The adoption of ASU 2018-14 is not expected to have a material impact on the Consolidated Financial Statements.
ASU 2018-13 was issued to modify the disclosure requirements in ASC 820, Fair Value Measurement. The amendments in ASU 2018-13 eliminate and modify some disclosures, while also adding new disclosures for fair value measurements. This update is effective January 1, 2020, however entities are permitted to early adopt the eliminated or modified disclosures. The adoption of ASU 2018-13 is not expected to have a material impact on the Consolidated Financial Statements.
Accounting for Credit LossesASU 2016-13 was issued in June 2016 with the intent of providing financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Current treatment uses the incurred loss methodology for recognizing credit losses that delays the recognition until it is probable a loss has been incurred. The accounting update adds a new impairment model, known as the current expected credit loss model, which is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.
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Further, ASU 2018-19 was issued in November 2018 to clarify that operating lease receivables should be accounted for under the new leases standard, ASC 842, and are not within the scope of ASC 326, Financial Instruments - Credit Losses. Both accounting updates are effective January 1, 2020. 
The Company has performed a detailed evaluation as of December 31, 2019 and does not anticipate the adoption of ASU 2016-13 to have a material impact on the Consolidated Financial Statements.
4. REVENUE
REVENUE FROM CONTRACTS WITH CUSTOMERS
Major Services
December 31,20192018
 
(millions of Canadian dollars)
Gas commodity and distribution revenue - residential2,8472,894
Gas commodity and distribution revenue - commercial and industrial1,3161,385
Storage revenue140147
Transportation revenue716843
Other revenue6546
Total revenue from contracts with customers5,0845,315
Other(9)(18)
Total operating revenues 5,0755,297
The Company disaggregates revenue into categories which represent its principal performanceobligations because these revenue categories represent the most significant revenue streams, andconsequently are considered to be the most relevant revenue information for management to consider inevaluating performance.
Contract Balances 
ReceivablesContract Liabilities
(millions of Canadian dollars)
Balance as at January 1, 201958963
Balance as at December 31, 201961365
Balance as at January 1, 201880175
Balance as at December 31, 201858963
Receivables represent an unconditional right to consideration where only the passage of time is requiredbefore payment of consideration is due and consist of trade accounts receivable, unbilled revenue andother accrued receivable balances.
Contract liabilities represent payments received for performance obligations which have not been fulfilled under the Company's equal billing and budget billing programs. Revenue recognized during the year ended December 31, 2019 included in contract liabilities at the beginning of the period is $63 million (2018 - $75 million). Increases in contract liabilities from cash received, net of amounts recognized as revenue during the year ended December 31, 2019 were $65 million (2018 - $63 million). 
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 Performance Obligations
Nature of Performance Obligation
Gas commodity and distribution revenue• Supply and delivery of natural gas to 
customers.
Storage and transportation revenue• Storage and transportation of natural gas on 
behalf of customers.
Other revenue• Other billing and service fees.
The Company recognized a reduction of revenue in the current period of $7 million (2018 - $12 million) from performance obligations satisfied in previous periods, primarily resulting from differences in actual and estimated consumption, as discussed below in Significant Judgments Made in Recognizing Revenue. The associated reduction in gas commodity and distribution costs was also recognized in the current period.
Payment Terms Payments from distribution revenue customers are received on a continuous basis based on established billing cycles. The Company's policy requires that customers settle their billings in accordance with the payment terms listed on their bill, which is generally within 20 days. Payments from transportation revenue customers are received on a continuous basis based on established billing cycles, or monthly under long-term transportation capacity contracts. Payments from storage customers are received monthly under long-term storage capacity contracts.
Revenue to be Recognized from Unfulfilled Performance Obligations Total revenue from performance obligations expected to be fulfilled in future periods is $623 million, of which $298 million is expected to be recognized during the year ending December 31, 2020.
The amounts above reflect revenues expected to be recognized in future periods from unfulfilledperformance obligations pursuant to contracts with customers for the purchase of natural gas distribution,transportation and storage services. The Company uses the optional exemption available under ASC 606whereby certain revenues such as flow through costs charged to customers are recognized at the amountfor which the Company has the right to invoice its customers. Those revenues are not included in theamounts above. The Company also uses the optional exemption available under ASC 606 wherebyrevenues from contracts with customers which have an original expected duration of one year or less areexcluded from the amounts above. Variable consideration is excluded from the amounts above due to theuncertainty of the associated consideration, which is generally resolved when actual volumes and pricesare determined. For example, the Company considers interruptible transportation service revenues to bevariable revenues since volumes cannot be estimated. A significant portion of the Company's operationsare subject to regulation and accordingly the amounts above only include, where applicable, revenue forwhich the underlying rate has been approved by regulation. The revenues excluded from the amountsabove, as explained, represent a significant portion of the Company's overall revenues and revenuesfrom contracts with customers.
SIGNIFICANT JUDGEMENTS MADE IN RECOGNIZING REVENUE 
Revenue Recognition Revenues from contracts with customers are generally recognized upon the fulfillment of the performance obligations as described above. Distribution and transportation service revenues are recorded on the basis of regular meter readings and estimates of customer usage from the last meter reading to the end of the reporting period. Estimates are based on historical consumption patterns and heating degree days experienced. Heating degree days is a measure of coldness that is indicative of volumetric requirements for natural gas utilized for heating purposes in the Company’s distribution franchise areas. 
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A significant portion of the Company’s operations are subject to regulation and accordingly, there are circumstances where the revenues recognized do not match the amounts billed. Revenue under such circumstances is recognized in a manner that is consistent with the underlying rate-setting mechanism as approved by the regulator. This may give rise to regulatory deferral accounts pending disposition by decisions of the regulator, which follow the accounting guidance found in ASC 980 - Regulated Operations.
Recognition and Measurement of Revenue
Timing of Revenue Recognition 
December 31,20192018
 
(millions of Canadian dollars)
Revenue from products and services transferred over time15,0195,246
Revenue from products transferred at a point in time26569
Total revenue from contracts with customers5,0845,315
1 Revenue from distribution, transportation and storage services. 2 Primarily from other revenue. 
Performance Obligations Satisfied Over TimeFor distribution and transportation services arrangements where the services are simultaneously received and consumed by the customer, the Company recognizes revenue over time using an output method based on volumes of commodities delivered.
Revenue from storage services are recognized as the storage services are provided.
Determination of Transaction PricesPrices for distribution and transportation services and regulated storage services are prescribed by regulation. Fees for unregulated storage services are determined through negotiations with customers based on market rates. Prices for the natural gas commodity are driven by market prices and the Company has a quarterly rate adjustment mechanism in place that allows for rates to reflect changes in natural gas prices, subject to regulatory approval.
5. DISPOSITION
ST. LAWRENCE GAS COMPANY, INC.In August 2017, the Company entered into an agreement to sell the issued and outstanding shares of its wholly-owned subsidiary, St. Lawrence Gas and classified St. Lawrence Gas as held for sale on the Consolidated Statements of Financial Position. On November 1, 2019, the Company closed the previously announced sale of St. Lawrence Gas for total cash proceeds of approximately $72 million (US $55 million). A loss on disposal of approximately $10 million before tax was included in Other income in the Consolidated Statements of Earnings. 
6. REGULATORY MATTERS
GENERAL INFORMATION ON RATE REGULATION AND ITS ECONOMIC EFFECTSThe Company is regulated by the OEB pursuant to the provisions of the Ontario Energy Board Act, (1998), which is part of a package of legislation known as the Energy Competition Act, (1998). This legislation provides for different forms of regulation and competition in the energy (electricity and natural gas) industry in Ontario. 
The Company records assets and liabilities that result from the regulated ratemaking process that would not be recorded under U.S. GAAP for non-regulated entities. 
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RATE APPROVALSThe Company’s distribution rates, beginning in 2019, are set under a five-year incentive regulation (IR) framework using a price cap mechanism. The price cap mechanism establishes new rates each year through an annual base rate escalation at inflation less a 0.3% stretch factor, annual updates for certain costs to be passed through to customers, and where applicable, the recovery of material discrete incremental capital investments beyond those that can be funded through base rates. The IR framework includes the continuation and establishment of certain deferral and variance accounts, as well as an earnings sharing mechanism that requires the Company to share any earnings in excess of 150 basis points over the annual OEB approved return on equity equally with customers.
FINANCIAL STATEMENT EFFECTSAs a result of rate regulation, the following regulatory assets and liabilities have been recognized:
Consolidated
Statements of
Recovery/Refund
Financial
December 31,20192018Period Ends
Position
(millions of Canadian dollars)
Current regulatory assets
Purchase gas variance123196AR2020
Federal carbon receivables8145—AR2020
Other current regulatory assets12297AR2020
Total current regulatory assets290293
Long-term regulatory assets
Deferred income taxes - long-term21,2661,131DAVarious
Pension plan receivable322260DAVarious
OPEB45358DAVarious
Long-term debt7362387DAVarious
Other long-term regulatory assets187—DAVarious
Total long-term regulatory assets2,0901,636
Total regulatory assets52,3801,929
Current regulatory liabilities
Purchase gas variance141—AP2020
Other current regulatory liabilities176135AP2020
Total current regulatory liabilities217135
Long-term regulatory liabilities
Future removal and site restoration reserves61,4241,356OLTLVarious
Other long-term regulatory liabilities4724OLTLVarious
Total long-term regulatory liabilities1,4711,380
Total regulatory liabilities51,6881,515
AR – Accounts receivable and otherAP – Accounts payable and otherDA – Deferred amounts and other assetsOLTL – Other long-term liabilities
1 Purchase gas variance is the difference between the actual cost and the approved cost of natural gas reflected in rates. The 
Company has been granted OEB approval to refund this balance to, or collect this balance from, customers on a rolling 12 month basis via the Quarterly Rate Adjustment Mechanism process.
2 The deferred income taxes balance represents the regulatory offset to deferred income tax liabilities to the extent that it is
expected to be included in regulator-approved future rates and recovered from future customers. The recovery period dependson the timing of the reversal of the temporary differences. In the absence of rate regulation accounting, this regulatory balanceand the related earnings impact would not be recorded.
3 The pension plan balance represents the Company’s regulatory offset to the pension liability to the extent the amounts are 
to be collected in future rates. The settlement period for this balance is not determinable. In the absence of rate regulation accounting, this regulatory balance would not be recorded and pension expense would have been charged to earnings and OCI based on the accrual basis of accounting.
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4 The OPEB balance represents the Company’s right to recover OPEB costs resulting from the adoption of the accrual basis of 
accounting for OPEB costs upon transition to US GAAP in 2012. Pursuant to the OEB rate order, the amount as at December 31, 2012 is to be collected in rates over a 20-year period that commenced in 2013. In the absence of rate regulation accounting, this regulatory balance and related earnings impact would not be recorded.
5 All regulatory assets and liabilities are excluded from rate base unless otherwise noted.6 Future removal and site restoration reserves result from amounts collected from customers by the Company, with the approval
of the OEB, to fund future costs for removal and site restoration relating to property, plant and equipment. These costs arecollected as part of depreciation charged on property, plant and equipment that is recorded in rates. The balance representsthe amount that the Company has collected from customers, net of actual costs expended on removal and site restoration. Thesettlement of this balance will occur over the long-term as future removal and site restoration costs are incurred. In theabsence of rate regulation accounting, costs incurred for removal and site restoration would be charged to earnings asincurred with recognition of revenue for amounts previously collected.
7 The debt balance represents the Company's regulatory offset to the fair value adjustment to debt pushed down to the
Company. The offset is viewed as a proxy for the regulatory asset that would be recorded in the event such debt wasextinguished at an amount higher than the carrying value.
8 The federal carbon balance is the difference between actual carbon costs and carbon costs recovered in rates, as well as the 
Company’s administration costs associated with the impacts of the federal carbon program requirements. The amount will be recovered from or refunded to customers in future periods in accordance with the OEB’s approval. In the absence of rate regulation accounting, this regulatory balance and the related earnings impact would not be recorded. 
OTHER ITEMS AFFECTED BY RATE REGULATION
Operating Cost CapitalizationIn the absence of rate regulation accounting, property, plant and equipment would not include some operating costs since these costs would have been charged to earnings in the period incurred.
With the approval of the Regulators, the Company capitalizes a percentage of certain operating costs. The Company is authorized to charge depreciation and earn a return on the net book value of such capitalized costs in future years. In the absence of rate regulation accounting, a portion of such operating costs would be charged to earnings in the year incurred.
The Company entered into a services contract relating to asset management initiatives. The majority of the costs were capitalized to gas mains in accordance with regulatory approval. At December 31, 2019, the net book value of these costs included in gas mains in Property, plant and equipment, net was $103 million (2018 - $110 million). In the absence of rate regulation accounting, some of these costs would be charged to earnings in the year incurred.
WAMS is the Company's integrated work and asset management solution. At December 31, 2019, the net book value of the asset included in intangible assets was $60 million (2018 - $68 million). In the absence of rate regulation accounting, a portion of the original cost of the asset would have been expensed in the period incurred.
Gas InventoriesNatural gas in storage is recorded in inventory at the prices approved by the Regulators in the determination of customers’ system supply rates. Included in gas inventories at December 31, 2019 is $66 million (2018 - $59 million) related to the Company storage injection and demand costs. Consistent with the regulatory recovery pattern, these costs are recorded in gas inventories during the off-peak months and charged to gas costs during the peak winter months. In the absence of rate regulation accounting, these costs would be expensed as incurred and inventory would be recorded at the lower of cost or market value. 
DepreciationIn the absence of rate regulation accounting, depreciation rates would not have included a charge for future removal and site restoration costs.
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7. ACCOUNTS RECEIVABLE AND OTHER
December 31,20192018
(millions of Canadian dollars)Trade receivables
581548
Unbilled revenues314270
Gas imbalances14484
Regulatory assets (Note 6)290293
Rebillables receivable88110
Other3845
Allowance for doubtful accounts (Note 15)(38)(38)
1,3171,312
1The Company, in the normal course of its operations, experiences imbalances in natural gas volumes between interconnecting 
pipelines and provides gas balancing services to customers. Natural gas volumes owed to or from the Company are valued at 
natural gas market prices as of the Consolidated Statements of Financial Position dates. As the settlement of imbalances is done 
with gas volumes, changes in the balances do not have an impact on the Company's cash flow from operating activities. 
8. PROPERTY, PLANT AND EQUIPMENT
Weighted Average
December 31,Depreciation Rate201920181
(millions of Canadian dollars)Regulated property, plant and equipment
Gas transmission2.45%1,5051,398
Gas mains, services and other2.68%12,11411,501
Compressors, meters and other operating equipment4.52%2,9182,716
Storage2.83%919891
Land and right-of-way1.04%334307
Vehicles, office furniture, equipment and other buildings
7.35%506475
and improvements
Under construction—223193
18,51917,481
Accumulated depreciation(3,490)(3,056)
15,02914,425
Unregulated property, plant and equipment
Gas mains, services and other6.65%1313
Compressors, meters and other operating equipment1.30%4039
Storage3.07%347347
Land and right-of-way1.83%3232
Under construction—2413
456444
Accumulated depreciation(67)(51)
389393
Property, plant and equipment, net15,41814,818
1 2018 comparative figures were reclassified to conform to the current year's asset classification to reflect the application of push-down accounting.  
Depreciation expense, including amounts collected for future removal and site restoration costs, was $558 million for the year ended December 31, 2019 (2018 - $540 million).
Included within depreciation expense is $22 million for the year ended December 31, 2019 (2018 - $22 million) in incremental depreciation resulting from push-down accounting (Note 2). 
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9. INTANGIBLE ASSETS
December 31,201920181
(millions of Canadian dollars)Software and Customer Information System (CIS)
592557
Less: Accumulated amortization(419)(348)
Intangible assets, net173209
1 2018 comparative figures reflect the application of push-down accounting. 
For the year ended December 31, 2019, the weighted average amortization rate for software and CISwas 13.9% (2018 - 12.6%).
Intangible assets include $16 million of work-in-progress as at December 31, 2019 (2018 - $33 million). Total amortization expense for intangible assets was $80 million for the year ended December 31, 2019 (2018 - $68 million). The Company expects aggregate amortization expense for the years endingDecember 31, 2020 through 2024 of $58 million, $35 million, $18 million, $15 million, and $15 million, respectively.
10.  DEFERRED AMOUNTS AND OTHER ASSETS
December 31,20192018
(millions of Canadian dollars)Regulatory assets (Note 6)
2,0901,636
Pension and OPEB assets3429
Other111266
2,2351,931
11. ACCOUNTS PAYABLE AND OTHER
December 31,20192018
(millions of Canadian dollars)Trade payables and accrued liabilities
572702
Gas imbalances14484
Regulatory liabilities (Note 6)217135
Federal carbon program liability140—
Taxes payable11474
Other282320
1,3691,315
1The Company, in the normal course of its operations, experiences imbalances in natural gas volumes between interconnecting 
pipelines and provides gas balancing services to customers. Natural gas volumes owed to or from the Company are valued at 
natural gas market prices as of the Consolidated Statements of Financial Position dates. As the settlement of imbalances is done 
with gas volumes, changes in the balances do not have an impact on the Company's cash flow from operating activities. 
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12.  DEBT
On July 11, 2019, the Company entered into a new trust indenture and filed a $2 billion medium-term notes (MTN) shelf prospectus with Canadian securities regulators. The prospectus is effective for a 25-month period.
Weighted
Average
December 31,Interest RateMaturity20192018
(millions of Canadian dollars)
Medium-term notes14.16% 2020-20507,6856,985
Debentures9.14% 2024-2025210210
Commercial paper and credit facility draws2.03%20218981,025
Other2(42)(40)
Fair value adjustment from push down accounting (Note 2)
362388
Total debt9,1138,568
Current maturities(400)—
Short-term borrowings2.03%(898)(1,025)
Long-term debt7,8157,543
Loans from affiliate companies (Note 22)650950
1  The balance pertaining to St. Lawrence Gas amounting to approximately $10 million as at December 31, 2018 was presented as 
Liabilities held for sale, long term (Note 5) on the Consolidated Statements of Financial Position.
2  Primarily unamortized discounts and debt issuance costs.
On August 9, 2019, the Company issued $400 million of 10-year MTNs and $300 million of 30-year MTNs at an interest rate of 2.37% and 3.01%, respectively, payable semi-annually in arrears. The notes mature on August 9, 2029 and August 9, 2049, respectively.
In September 2018, EGD borrowed $300 million from its parent company, Enbridge through a subordinated promissory note at an interest rate of 3.37%, payable quarterly in arrears. The note was repaid in August 2019.
In October 2018, Union Gas borrowed $650 million from Westcoast Energy Inc., an affiliate undercommon control, through a subordinated promissory note at an interest rate of 3.65%, payable semi-annually in arrears. This note matures in October 2028.
For the years ending December 31, 2020 through 2024, debentures and medium-term note maturities are $400 million, $375 million, $125 million, $350 million and $300 million, respectively. The Company’s debentures and medium-term notes bear interest at fixed rates, and interest obligations for the years ending December 31, 2020 through 2024 are $339 million, $320 million, $306 million, $303 million and $287 million, respectively.
INTEREST EXPENSE
Year ended December 31,20192018
(millions of Canadian dollars)
Debentures and term notes331338
Commercial paper and credit facility draws3116
Interest on loans from affiliates (Note 22)3134
Other interest and finance costs128
Capitalized(5)(5)
400391
The Company’s borrowings, whether senior debentures or MTNs, are unsecured.
21
CREDIT FACILITIESOn February 7, 2019, the Company extended the term out date of its external credit facility to July 24, 2020, with a maturity date of July 24, 2021, and increased the size of total commitments to $2 billion. The Company’s credit facility and commercial paper program through Union Gas were terminated. On February 28, 2019, the Company also increased the size of its commercial paper program to $2 billion which is backstopped by committed lines of credit of $2 billion. Issues of commercial paper and revolving borrowings reduce the amount available under the credit facility.
The Company actively manages its bank funding sources to ensure adequate liquidity and to optimize pricing and other terms. The following table provides details of the Company’s credit facilities at December 31, 2019.
December 31,December 31,
20192018
MaturityTotal
DatesFacilitiesDraws1Available Total Facilities
(millions of Canadian dollars)Enbridge Gas Inc.
202122,0008981,1021,700
St. Lawrence Gas Company, Inc.3———18
Total credit facilities2,0008981,1021,718
1  Includes facility draws and commercial paper issuances, net of discount, that are back-stopped by the external credit facility. St. 
Lawrence Gas draws were presented as Liabilities held for sale, current and long-term on the Consolidated Statements of Financial Position.
2  Maturity date is inclusive of the one year term out option.3  On November 1, 2019, the Company closed the sale of St. Lawrence Gas (Note 5).
Credit facilities carried a weighted average standby fee of 0.1% on the unused portion and the draws bear interest at market rates.
DEBT COVENANTSThe Company’s credit facility agreements and term debt indentures include standard events of default and covenant provisions whereby accelerated repayment and/or terminations of the agreements may result if the Company were to default on payment or violate certain covenants. As at December 31, 2019, the Company was in compliance with all debt covenants.
13.  SHARE CAPITAL 
At December 31, 2019, the authorized share capital of the Company consisted of an unlimited number of common shares with no par value and an unlimited number of preference shares.
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COMMON SHARES
20192018
NumberNumber
December 31,of sharesAmountof sharesAmount
(millions of Canadian dollars; number of common shares in millions)Enbridge Gas Inc.
Common shares converted from amalgamation5223,030——
Capital contribution—800——
Return of capital—(313)——
Balance at end of year (Note 22)5223,517——
Enbridge Gas Distribution Inc.
Balance at beginning of year2332,3172132,417
Common shares converted from amalgamation(233)(2,317)——
Common shares issued——20350
Return of capital———(450)
Balance at end of year (Note 22)——2332,317
Union Gas Limited
Balance at beginning of year5871358657
Common shares converted from amalgamation(58)(713)——
Common shares issued1———57
Return of capital———(1)
Balance at end of year (Note 22)——58713
1  In February 2018 Union Gas Gas issued 621,866 shares for $57 million. Total Union Gas shares outstanding 58,444,516. 
The Company is authorized to issue an unlimited number of Class A and Class B common shares. On January 1, 2019, the Company issued to Enbridge Energy Distribution Inc. (EEDI), which wholly-owned EGD and owned 1% of Union Gas, 281,881,334 Class A common shares in exchange for 232,749,988 EGD common shares and 621,866 Union Gas Class A common shares. Great Lakes Basin Energy L.P. (GLBE), which owned 99% of Union Gas, was issued 240,020,243 Class B common shares of the Company in exchange for 57,822,650 Union Gas common shares. Both classes of common shares of the Company are identical in every respect. Dividends cannot be paid to one class without paying dividends on the other. 
On February 1, 2019, the stated capital of Class B common shares held by GLBE was reduced by approximately $1 million as part of a return of capital transaction, which had no impact on total shares outstanding.
On November 15, 2019, the stated capital of Class A common shares held by EEDI and Class B common shares held by GLBE were reduced by approximately $169 million and $143 million, respectively, as part of a return of capital transaction, which had no impact on total shares outstanding. 
On November 27, 2019, the Company received capital contributions of $432 million and $368 million, respectively, from EEDI and GLBE, which had no impact on total shares outstanding.
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14.  COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in AOCI for the years ended December 31, 2019 and 2018 are as follows:
2019
CumulativePension and
Cash FlowTranslationOPEB
HedgesAdjustmentAdjustmentTotal
(millions of Canadian dollars)Balance at January 1, 2019
(9)5(47)(51)
Other comprehensive income/(loss) retained in AOCI(50)(2)586
Other comprehensive (income)/loss reclassified to earnings5(3)—2
(54)—11(43)
Tax Impact
Income tax on amounts retained in AOCI13—(15)(2)
Income tax on amounts reclassified to earnings(1)——(1)
12—(15)(3)
Balance at December 31, 2019(42)—(4)(46)
2018
CumulativePension and
Cash FlowTranslationOPEB
HedgesAdjustmentAdjustmentTotal
(millions of Canadian dollars)Balance at January 1, 2018
(8)1(32)(39)
Other comprehensive income/(loss) retained in AOCI(6)4(20)(22)
Other comprehensive loss reclassified to earnings4——4
(10)5(52)(57)
Tax Impact
Income tax on amounts retained in AOCI2—57
Income tax on amounts reclassified to earnings(1)——(1)
1—56
Balance at December 31, 2018(9)5(47)(51)
OCI for the twelve months ended December 31, 2019 was increased by an adjustment of $74 million in respect of the Company applying rate regulated accounting to record a regulatory offset to certain pension liabilities of the Company.  An offsetting amount of $19 million was also recorded for the related tax impact in OCI.
15.  RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
MARKET RISKThe Company’s earnings, cash flows and OCI are subject to movements in natural gas prices, foreign exchange rates and interest rates (collectively, market risk). Portions of these risks are borne by customers through certain regulatory mechanisms. Formal risk management policies, processes and systems have been designed to mitigate these risks.
The following summarizes the types of market risks to which the Company is exposed and the risk management instruments used to mitigate them. The Company uses a combination of qualifying and non-qualifying derivative instruments to manage the risks noted below. 
Natural Gas Price RiskNatural gas price risk is the risk of gain or loss due to changes in the market price of natural gas. In compliance with the directive of the OEB, fluctuations in natural gas prices are borne by the customers. 
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Foreign Exchange RiskForeign exchange risk is the risk of gains and losses due to the volatility of currency exchange rates. The Company generates certain revenues and held a subsidiary that was denominated in USD. As a result, the Company’s earnings, cash flows, and OCI are exposed to fluctuations resulting from USD exchange rate variability.
The Company implemented a policy to hedge a portion of USD denominated unregulated storage revenue exposures. Qualifying derivative instruments are used to hedge anticipated USD denominated revenues and to manage variability in cash flows. 
A portion of the Company’s purchases of natural gas are denominated in USD and as a result there is exposure to fluctuations in the exchange rate of the USD against the Canadian dollar. Realized foreign exchange gains or losses relating to natural gas purchases are passed on to customers, therefore the Company has no net exposure to movements in the foreign exchange rate on natural gas purchases.
The Company did not have any outstanding derivative instruments relating to net investment hedges as at December 31, 2019 and December 31, 2018. Interest Rate RiskThe Company’s earnings and cash flows are exposed to short-term interest rate variability due to the regular repricing of its variable rate debt, primarily commercial paper. Pay fixed-receive floating interest rate swaps are used to hedge against the effect of future interest rate movements. The Company has implemented a program to significantly mitigate the impact of short-term interest rate volatility on interest expense via execution of floating to fixed interest rate swaps with an average swap rate of 2.3%.
The Company’s earnings and cash flows are also exposed to variability in longer term interest rates ahead of anticipated fixed rate debt issuances. Forward starting interest rate swaps are used to hedge against the effect of future interest rate movements. The Company has implemented a program to significantly mitigate its exposure to long-term interest rate variability on select forecast term debt issuances via execution of floating to fixed interest rate swaps with an average swap rate of 2.7%.
The Company’s portfolio mix of fixed and variable rate debt instruments is monitored by its ultimate parent company, Enbridge.
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TOTAL DERIVATIVE INSTRUMENTSThe following table summarizes the financial statement line item in the Consolidated Statements of Financial Position and carrying value of the Company’s derivative instruments. 
The Company generally has a common practice of entering into individual International Swaps and Derivatives Association, Inc. agreements, or other similar derivative agreements, with the majority of its derivative counterparties. These agreements provide for the net settlement of derivative instruments outstanding with specific counterparties in the event of bankruptcy or other significant credit event, and would reduce the Company’s credit risk exposure on derivative asset positions outstanding with these counterparties in those particular circumstances. The following table also summarizes the maximum potential settlement amount in the event of those specific circumstances. All amounts are presented gross in the Consolidated Statements of Financial Position.
DerivativeTotal Gross
InstrumentsNon-QualifyingDerivativeAmountsTotal Net
Used as CashDerivativeInstruments asAvailable forDerivative
December 31, 2019Flow HedgesInstrumentsPresentedOffsetInstruments
(millions of Canadian dollars)Accounts payable to affiliates
Interest rate contracts(9)—(9)—(9)
(9)—(9)—(9)
Other long-term liabilities
Foreign exchange contracts—————
Interest rate contracts(13)—(13)—(13)
(13)—(13)—(13)
Total net derivative asset/(liability)
Foreign exchange contracts—————
Interest rate contracts(22)—(22)—(22)
(22)—(22)—(22)
DerivativeTotal Gross
InstrumentsNon-QualifyingDerivativeAmountsTotal Net
Used as CashDerivativeInstruments asAvailable forDerivative
December 31, 2018Flow HedgesInstrumentsPresentedOffsetInstruments
(millions of Canadian dollars)Accounts payable to affiliates
Interest rate contracts(2)—(2)—(2)
(2)—(2)—(2)
Other long-term liabilities
Foreign exchange contracts(1)—(1)—(1)
Interest rate contracts(3)—(3)—(3)
(4)—(4)—(4)
Total net derivative asset/(liability)
Foreign exchange contracts(1)—(1)—(1)
Interest rate contracts(5)—(5)—(5)
(6)—(6)—(6)
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The following table summarizes the maturity and notional principal or quantity outstanding related to the Company's derivative instruments. 
December 31, 201920202021202220232024 Thereafter
Foreign exchange contracts - United States dollar 
forwards - sell (millions of USD)331———
Interest rate contracts - short-term borrowings (millions 
of Canadian dollars)53938718———
Interest rate contracts - long-term debt (millions of 
Canadian dollars)180275————
The Effect of Derivative Instruments on the Consolidated Statements of Earnings and Comprehensive IncomeThe following table presents the effect of cash flow hedges on the Company’s consolidated earnings and comprehensive income, before the effect of income taxes.
Year ended December 31,20192018
(millions of Canadian dollars)Amount of unrealized loss recognized in OCI cash flow hedges
Interest rate contracts(50)(5)
Foreign exchange contracts—(1)
(50)(6)
Amount of loss reclassified from AOCI to earnings
Interest rate contracts16(4)
Foreign exchange contracts(1)—
5(4)
1  Reported within Interest expense in the Consolidated Statements of Earnings. 
The Company estimates a loss of $2 million of AOCI related to cash flow hedges will be reclassified to earnings in the next 12 months. Actual amounts reclassified to earnings depend on interest and foreign exchange rates in effect when derivative contracts that are currently outstanding mature. Forall forecasted transactions, the maximum term over which the Company is hedging exposures to thevariability of cash flows is 24 months as at December 31, 2019.
LIQUIDITY RISKLiquidity risk is the risk that the Company will not be able to meet its financial obligations, including commitments as they become due. In order to manage this risk, the Company forecasts cash requirements over a 12-month rolling time period to determine whether sufficient funds will be available. The Company’s primary sources of liquidity and capital resources are funds generated from operations, the issuance of commercial paper, draws under committed credit facilities and long-term debt, which includes debentures and MTNs and, if necessary, additional liquidity is available through intercompany transactions with its ultimate parent, Enbridge, and other related entities. These sources are expected to be sufficient to enable the Company to fund all anticipated requirements. The Company maintains a current MTN shelf prospectus with securities regulators, which enables ready access to the Canadian public capital markets, subject to market conditions. The Company also maintains committed credit facilities with a diversified group of banks and institutions. The Company is in compliance with all the terms and conditions of its committed credit facilities as at December 31, 2019. As a result, all credit facilities are available to the Company and the banks are obligated to fund the Company under the terms of the facilities.
CREDIT RISKCredit risk arises from the possibility that a counterparty will default on its contractual obligations.
 The 
Company is exposed to credit risk from accounts receivable and derivative financial instruments. Exposure to credit risk is mitigated by the large and diversified customer base and the ability to recover an estimate for doubtful accounts for utility operations through the rate-making process. The Company 
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actively monitors the financial strength of large industrial customers and, in select cases, has obtained additional security to minimize the risk of default on receivables. Generally, the Company classifies receivables older than 20 days as past due. The maximum exposure to credit risk related to non-derivative financial assets is their carrying value.
The Company’s policy requires that customers settle their billings in accordance with the payment terms listed on their bill, which generally require payment in full within 20 days. A provision for credit and recovery risk associated with accounts receivable has been made through the allowance for doubtful accounts, which totaled $38 million at December 31, 2019 (December 31, 2018 - $38 million).
The allowance for doubtful accounts is determined based on collection history. When the Company has determined that further collection efforts are unlikely to be successful, amounts charged to the allowance for doubtful accounts are applied against the impaired accounts receivable.
Estimated costs associated with uncollectible accounts receivable are recovered through regulated distribution rates, which largely limits the Company’s exposure to credit risk related to accounts receivable, to the extent such estimates are accurate.
Entering into derivative financial instruments may also result in exposure to credit risk. The Company enters into risk management transactions primarily with institutions that possess investment grade credit ratings. Credit risk relating to derivative counterparties is mitigated by credit exposure limits and contractual requirements, frequent assessment of counterparty credit ratings and netting arrangements. As at December 31, 2019 the Company does not have any significant group credit concentrations andmaximum credit exposure, with respect to derivative instruments, in any counterparty segments.
Derivative assets are adjusted for non-performance risk of the Company’s counterparties using their credit default swap spread rates and are reflected in the fair value. For derivative liabilities, the Company’s non-performance risk is considered in the valuation.
FAIR VALUE MEASUREMENTSThe Company’s financial assets and liabilities measured at fair value on a recurring basis include derivative instruments. The Company also discloses the fair value of other financial instruments not measured at fair value. The fair value of financial instruments reflects the Company’s best estimates of fair value based on generally accepted valuation techniques or models and are supported by observable market prices and rates. When such values are not available, the Company uses discounted cash flow analysis from applicable yield curves based on observable market inputs to estimate fair value.
FAIR VALUE OF FINANCIAL INSTRUMENTSThe Company categorizes its derivative instruments measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement.
Level 1Level 1 includes derivatives measured at fair value based on unadjusted quoted prices for identical assets and liabilities in active markets that are accessible at the measurement date. An active market for a derivative is considered to be a market where transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company does not have any derivative instruments classified as Level 1.
Level 2Level 2 includes derivative valuations determined using directly or indirectly observable inputs other than quoted prices included within Level 1. Derivatives in this category are valued using models or other industry standard valuation techniques derived from observable market data. Such valuation techniques include inputs such as quoted forward prices, time value, volatility factors and broker quotes that can be observed or corroborated in the market for the entire duration of the derivative. Derivatives valued using 
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Level 2 inputs include non-exchange traded derivatives such as over-the-counter interest rate swaps for which observable inputs can be obtained.
Level 3Level 3 includes derivative valuations based on inputs which are less observable, unavailable or where the observable data does not support a significant portion of the derivatives’ fair value. Generally, Level 3 derivatives are longer dated transactions, occur in less active markets, occur at locations where pricing information is not available, or have no binding broker quote to support a Level 2 classification. The Company has developed methodologies, benchmarked against industry standards, to determine fair value for these derivatives based on extrapolation of observable future prices and rates. The Company does not have any derivative instruments classified as Level 3.
The Company uses the most observable inputs available to estimate the fair value of its derivatives. When possible, the Company estimates the fair value of its derivatives based on quoted market prices. If quoted market prices are not available, the Company uses estimates from third party brokers. For non-exchange traded derivatives classified in Levels 2 and 3, the Company uses standard valuation techniques to calculate the estimated fair value. These methods include discounted cash flows for forwards and swaps. Depending on the type of derivative and the nature of the underlying risk, the Company uses observable market prices (interest, foreign exchange, and natural gas) and volatility as primary inputs to these valuation techniques. Finally, the Company considers its own credit default swap spread as well as the credit default swap spreads associated with its counterparties in its estimation of fair value.
At December 31, 2019, the Company had Level 2 derivative assets with fair value of $nil (2018 - $nil million) and Level 2 derivative liabilities with fair value of $22 million (2018 - $6 million). The Company’s policy is to recognize transfers between levels as at the last day of the reporting period. There were no transfers between levels as at December 31, 2019 or December 31, 2018.
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTSThe Company recognizes equity investments in other entities not categorized as held to maturity at fair value, with changes in fair value recorded in net income, unless actively quoted market prices are not available for fair value measurement in which case these investments are recorded at the fair value measurement alternative. 
The fair value of the Company’s long-term debt is based on quoted market prices for instruments of similar yield, credit risk and tenor, and is classified as a Level 2 measurement. At December 31, 2019, the Company’s long-term debt, including the current portion had a carrying value of $7,895 million (2018 - $7,195 million) before debt issue costs and a fair value of $9,182 million (2018 - $7,855 million).
The fair value of other financial assets and liabilities other than derivative instruments and long-term debt approximate their cost due to the short period to maturity.
16. LEASES
The Company incurs operating lease payments related to natural gas storage and real estate. The Company's operating lease agreements have remaining lease terms of 3 months to 10 years, some of which include options to terminate at our discretion.
For the year ended December 31, 2019, the Company incurred operating lease expenses of $7 million. Operating lease expenses are reported within Operating and administrative expenses in the Consolidated Statements of Earnings.
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For the year ended December 31, 2019, operating lease payments to settle lease liabilities were $7 million. Operating lease payments are reported within Operating activities in the Consolidated Statements of Cash Flows.
Supplemental Consolidated Statements of Financial Position Information
December 31,20192018
(millions of Canadian dollars, except lease term and discount rate)Operating leasesOperating lease right-of-use assets, net1
4652
Operating lease liabilities - current266
Operating lease liabilities - long-term34046
Total operating lease liabilities4652
Weighted average remaining lease termOperating leases
9 years9 years
Weighted average discount rateOperating leases
3.3%3.3%
1  Right-of-use assets are reported within Deferred amounts and other assets in the Consolidated Statements of Financial Position.2  Current lease liabilities are reported within Accounts payable and other in the Consolidated Statements of Financial Position.3  Long-term lease liabilities are reported within Other long-term liabilities in the Consolidated Statements of Financial Position.
As at December 31, 2019 the Company's operating lease liabilities are expected to mature as follows:
Operating leases
(millions of Canadian dollars)2020
7
20217
20226
20235
20245
Thereafter22
Total undiscounted lease payments52
Less imputed interest(6)
Total operating lease liabilities46
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17. INCOME TAXES 
INCOME TAX RATE RECONCILIATION
Year ended December 31,20192018
(millions of Canadian dollars)Earnings before income taxes
614625
Federal statutory income tax rate15.0%15.0%
Federal income taxes at statutory rate9294
Increase/(decrease) resulting from:
Provincial and state income taxes29(4)
Effects of rate regulated accounting1 (52)(56)
Non-taxable intercompany distributions1—(9)
Part VI.1 tax, net of federal Part I tax deduction1—31
Non-taxable portion of sale of investment to unrelated party (Note 5)(1)—
Investment in foreign subsidiaries—1
Other2(10)—
Income tax expense5857
Effective income tax rate9.4%9.1%
1  The provincial tax component of these items is included in “Provincial and state income taxes” above.2  Included in “Other” are miscellaneous permanent differences. These include the tax effect of items such as non-deductible meals 
and entertainment, and change in prior year estimates arising from the filing of tax returns in respect of the prior year.
  COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES
Year ended December 31,20192018
(millions of Canadian dollars)Earnings before income taxes
Canada638620
United States(24)5
614625
Current income taxes
Canada8588
United States4—
8988
Deferred income taxes
Canada(25)(32)
United States(6)1
(31)(31)
Income tax expense5857
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COMPONENTS OF DEFERRED INCOME TAXESDeferred tax assets and liabilities are recognized for the future tax consequences of differences between carrying amounts of assets and liabilities and their respective tax bases. Major components of deferred income tax assets and liabilities are:
December 31,20192018
(millions of Canadian dollars)Deferred income tax liabilities
Property, plant and equipment1,4971,395
Regulatory assets335300
Deferrals1720
Retirement and post-retirement benefits8—
Other110
Total deferred income tax liabilities1,8581,725
Deferred income tax assets
Future removal and site restoration reserves373364
Minimum tax credits3024
Retirement and post-retirement benefits—12
Financial derivatives153
Other73
Total deferred income tax assets425406
Net deferred income tax liabilities1,4331,319
The Company and its subsidiaries are subject to taxation in Canada and the United States. The material jurisdictions in which the Company is subject to potential examinations include Canada (Federal and Ontario). The Company is open to examination by Canadian tax authorities for the 2012 to 2019 tax years. The Company is currently under examination for income tax matters in Canada for the 2015 to 2017 tax years.
UNRECOGNIZED TAX BENEFITS
Year ended December 31,20192018
(millions of Canadian dollars)
Unrecognized tax benefits at beginning of year3945
Gross increases for tax positions of current year33
Gross decreases for tax positions of prior years(1)(6)
Settlements—(1)
Lapses of statute of limitations(2)(2)
Unrecognized tax benefits at end of year3939
The unrecognized tax benefits as at December 31, 2019, if recognized, would affect the Company’s effective income tax rate. The Company does not anticipate further adjustments to the unrecognized tax benefits during the next 12 months that would have a material impact on its Consolidated Financial Statements.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income taxes. Income taxes for the years ended December 31, 2019 and 2018 included $nil recoveries of interest and penalties. As of December 31, 2019 and 2018, interest and penalties of $1 million and $1 million, respectively, have been accrued. 
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18.  PENSION AND OTHER POSTRETIREMENT BENEFITS 
PENSION PLANSThe Company provides pension benefits, covering substantially all employees, through contributory and non-contributory registered defined benefit and defined contribution pension plans. The Company also provides non-registered pension benefits for certain employees through supplemental non-contributory, defined benefit pension plans. 
Defined Benefit Pension Plan BenefitsBenefits payable from the defined benefit pension plans are based on each plan participant’s years of service and final average remuneration. Some benefits are partially inflation-indexed after a plan participant’s retirement. The Company’s contributions are made in accordance with independent actuarial valuations. Participant contributions to contributory defined benefit pension plans are based upon each plan participant’s current eligible remuneration.
Defined Contribution Pension Plan BenefitsCompany contributions are based on each plan participant’s current eligible remuneration. Company contributions for some defined contribution pension plans are also based on age and years of service.  Defined contribution pension benefit costs to the Company are equal to the amount of contributions required to be made by the Company.
OTHER POSTRETIREMENT BENEFIT PLANSThe Company provides non-contributory supplemental health, dental, life and health spending account benefit coverage for certain qualifying retired employees, through unfunded defined benefit OPEB plans.
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BENEFIT OBLIGATIONS, PLAN ASSETS AND FUNDED STATUSThe following table details the changes in the benefit obligation, the fair value of plan assets and the recorded assets or liabilities for the Company's defined benefit pension and OPEB plans:
PensionOPEB
December 31,2019201820192018
(millions of Canadian dollars)Change in benefit obligationBenefit obligation at beginning of year
2,0802,115153175
Service cost635823
Interest cost726856
Participant contributions149——
Actuarial (gain)/loss210(73)15(25)
Benefits paid(108)(97)(5)(7)
Other———1
Benefit obligation at end of year12,3312,080170153
Change in plan assetsFair value of plan assets at beginning of year
1,9231,991——
Actual return/(loss) on plan assets237(15)——
Employer contributions423657
Participant contributions149——
Benefits paid(108)(97)(5)(7)
Other—(1)——
Fair value of plan assets at end of year2,1081,923——
Underfunded status at end of year(223)(157)(170)(153)
Presented as follows:
Deferred amounts and other assets (Note 10)3429——
Accounts payable and other(2)(4)(7)(7)
Other long-term liabilities (Note 21)(255)(182)(163)(146)
(223)(157)(170)(153)
1  For pension plans, the benefit obligation is the projected benefit obligation. For OPEB plans, the benefit obligations is the 
accumulated postretirement benefit obligation. The accumulated benefit obligation for the Company's pension plans was                   $2.2 billion and $1.9 billion as at December 31, 2019 and 2018, respectively.
Certain of the Company's pension plans have an accumulated benefit obligation in excess of the fair value of plan assets. For these plans, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were as follows:  
December 31,20192018
(millions of Canadian dollars)Projected benefit obligation
685595
Accumulated benefit obligation611537
Fair value of plan assets529465
AMOUNT RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOMEThe amount of pre-tax AOCI relating to the Company’s pension and OPEB plans are as follows: 
 PensionOPEB
December 31,20191201820192018
(millions of Canadian dollars)
    
Net actuarial (gain)/loss—745(11)
Total amount recognized in AOCI—745(11)
1  Pension net actuarial loss reflects a reduction of $74 million resulting from the application of rate regulated accounting and 
recognizing an offsetting long-term regulatory asset for net actuarial loss relating to the Company's pension plans (Note 14). 
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NET PERIODIC BENEFIT COST AND OTHER AMOUNTS RECOGNIZED IN COMPREHENSIVE INCOMEThe components of net periodic benefit cost and other amounts recognized in pre-tax Comprehensive income related to the Company's pension and OPEB plans are as follows:
PensionOPEB
Year ended December 31,2019201820192018
(millions of Canadian dollars)Service cost
635823
Interest cost726856
Expected return on plan assets(129)(130)—(1)
Amortization of net actuarial loss11614——
Net periodic benefit cost221078
Defined contribution benefit cost26——
Net pension and OPEB cost recognized in Earnings241678
Amount recognized in OCI:
Adjustment for rate-regulated accounting (Note 14)(74)———
Net actuarial (gain)/loss arising during the year—4416(24)
Total amount recognized in OCI(74)4416(24)
Total amount recognized in Comprehensive income(50)6023(16)
1  Reflects amortization of net actuarial loss arising from pension plans that are recognized as long-term regulatory assets (Note 6). 
The Company estimates that approximately $nil related to the pension plans and $1 million related to the OPEB plans as at December 31, 2019 will be reclassified from AOCI into Earnings in the next 12 months.
ACTUARIAL ASSUMPTIONSThe weighted average assumptions made in the measurement of the benefit obligation and net periodic benefit cost of the Company's defined benefit pension and OPEB plans are as follows:
PensionOPEB
2019201820192018
Benefit obligationDiscount rate
3.1%3.8%3.1%3.8%
Rate of salary increase3.2%3.1%3.3%3.3%
Net periodic benefit costDiscount rate
3.8%3.7%3.8%3.7%
Expected rate of return on plan assets6.8%6.5%N/AN/A
Rate of salary increase3.2%3.1%3.3%3.2%
ASSUMED HEALTH CARE COST TREND RATESThe assumed rates for the next year used to measure the expected cost of benefits are as follows:
20192018
Health care cost trend rate assumed for next year4.0%4.0%
Rate to which the cost trend is assumed to decline (ultimate trend rate)4.0%4.0%
A 1% change in the assumed health care cost trend rate would have the following effects for the year ended and as at December 31, 2019:
1%1%
IncreaseDecrease
(millions of Canadian dollars)Total service and interest costs
——
Accumulated postretirement benefit obligation12(10)
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PLAN ASSETSThe Company manages the investment risk of its pension funds by setting a long-term asset mix policy for each plan after consideration of: (i) the nature of pension plan liabilities; (ii) the investment horizon of the plan; (iii) the going concern and solvency funded status and cash flow requirements of the plan; (iv) the Company’s operating environment and financial situation and its ability to withstand fluctuations in pension contributions; and (v) the future economic and capital markets outlook with respect to investment returns, volatility of returns and correlation between assets.
The overall expected rate of return on plan assets is based on the asset allocation targets with estimates for returns based on long-term expectations.
The asset allocation targets and major categories of plan assets are as follows:
TargetDecember 31,
AllocationAsset Category20192018
Equity securities40.8%45.7%45.5%
Fixed income securities35.8%33.7%39.5%
Alternatives123.4%20.6%15.0%
1  Alternatives include investments in private debt, private equity, infrastructure and real estate funds.
The following table summarizes the fair value of the plan assets for the Company's pension plans recorded at each fair value hierarchy level.
20192018
December 31,Level 11  Level 22  Level 33 Total Level 11  Level 22  Level 33 Total
(millions of Canadian dollars) Cash and cash equivalents 
53——5374——74
Equity securities
Canada92112—204122200—322
Global—760—760—554—554
Fixed income securities
Government117272—389124280—404
Corporate—268—268—281—281
Alternatives4——427427——298298
Forward currency contracts —7—7—(10)—(10)
Total pension plan assets at fair value2621,4194272,1083201,3052981,923
1  Level 1 assets include assets with quoted prices in active markets for identical assets.2  Level 2 assets include assets with significant observable inputs.3  Level 3 assets include assets with significant unobservable inputs.4  Alternatives include investments in private debt, private equity, infrastructure and real estate funds.
Changes in the net fair value of plan assets classified as Level 3 in the fair value hierarchy were as follows:
December 31,20192018
(millions of Canadian dollars) 
Balance at beginning of year298178
Unrealized and realized gains939
Purchases and settlements, net12081
Balance at end of year427298
EXPECTED BENEFIT PAYMENTS 
Year ending December 31,20202021202220232024 2025-2029
(millions of Canadian dollars)Pension
104107110112115610
OPEB7778840
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EXPECTED EMPLOYER CONTRIBUTIONSIn 2020, the Company expects to contribute approximately $38 million and $7 million to the pension and OPEB plans, respectively. 
19. SEVERANCE COSTS
As at December 31, 2018, the Company had $18 million in accrued severance costs included in Accounts payable and other related to termination benefits to employees from the amalgamation of EGD and Union Gas. For the twelve months ended December 31, 2019, $39 million of additional severance costs are included in Operating and administrative expense with $36 million paid during the year. The remaining $21 million will be paid primarily during 2020.
20.  CHANGES IN OPERATING ASSETS AND LIABILITIES
Year ended December 31,20192018
(millions of Canadian dollars)Accounts receivable and other
(17)238
Accounts receivable from affiliates(24)25
Regulatory assets (Note 6)29(59)
Gas inventory48(54)
Deferred amounts and other assets(2)24
Accounts payable and other(45)36
Accounts payable to affiliates18(29)
Regulatory liabilities (Note 6)10553
Other long-term liabilities(8)(8)
Cap and trade compliance liability—387
Assets held for sale12(12)
116601
21.  OTHER LONG-TERM LIABILITIES
December 31,20192018
(millions of Canadian dollars)Regulatory liabilities (Note 6)
1,4711,380
Pension and OPEB liabilities418328
Other11065
1,9991,773
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22.  RELATED PARTY TRANSACTIONS 
Related party transactions are conducted in the normal course of business and, unless otherwise noted, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The Company's transactions with related parties are as follows: 
Year ended December 31,20192018
(millions of Canadian dollars)
Enbridge Energy Distribution Inc.
Common share dividends declared506542
Capital contribution432—
Return of capital169—
Great Lakes Basin Energy L.P.
Common share dividends declared431223
Capital contribution368—
Return of capital144—
IPL System Inc.
Dividend income—60
Interest expense (Note 12)—26
Enbridge
Charges for centralized services9972
Part VI.1 tax reimbursement—3
Transfer of income tax installments48—
Repayment of note payable300—
Interest expense (Note 12)63
Interest income13—
Enbridge (U.S.) Inc.
Repayment of note payable32—
Interest expense (Note 12)1—
Westcoast Energy Inc.
Interest expense (Note 12)245
Tidal Energy Marketing Inc.
Purchase of natural gas3888
Revenue from optimization services14
Revenue from storage and transportation services108
Tidal Energy Marketing (U.S.) LLC
Purchase of natural gas3768
Gazifère Inc.
Revenue from wholesale service, including gas sales3030
Énergir L.P.
Revenue from storage and transportation services10—
Vector Pipeline Limited Partnership (U.S.)
Purchase of gas transportation services1926
Nexus Gas Transmission (U.S.)
Purchase of gas transportation services11419
Other related entities
Purchase of natural gas, storage and transportation services811
Operating lease payments for natural gas storage assets (Note 16)6—
Revenue from storage and transportation services2—
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The Company had related party balances as follows:
December 31,20192018
(millions of Canadian dollars)Common share ownership from parent company
Enbridge Energy Distribution Inc.2,6362,373
Great Lakes Basin Energy L.P.881657
Note payable to affiliate company
Westcoast Energy Inc.650650
Enbridge—300
Enbridge (U.S.) Inc.—33
Right-of-use asset, net from affiliate company
Sarnia Airport Storage Pool Limited Partnership42—
Operating lease liability to affiliate company - long-term
Sarnia Airport Storage Pool Limited Partnership38—
Derivative instruments to affiliate company
Enbridge (Note 15)134
Other accounts receivable/(payable)
Other related entities, net(67)(33)
Financing TransactionsIn September 2018, EGD borrowed $300 million from its parent company, Enbridge througha subordinated promissory note at an interest rate of 3.37% payable quarterly in arrears. The note was repaid in August 2019.
In October 2018, Union Gas borrowed $650 million from Westcoast Energy Inc., an affiliate under common control, through a subordinated promissory note at an interest rate of 3.65% payable semi-annually in arrears. This note matures in October 2028.
On February 1, 2019, the stated capital of Class B common shares held by GLBE was reduced by approximately $1 million as part of a return of capital transaction, which had no impact on total shares outstanding.
In October 2019, St. Lawrence Gas repaid the balance and accrued interest on the note payable to Enbridge (U.S.) Inc.
On November 15, 2019, the stated capital of Class A common shares held by EEDI and Class B common shares held by GLBE were reduced by approximately $169 million and $143 million, respectively, as part of a return of capital transaction, which had no impact on total shares outstanding. 
On November 27, 2019, the Company received capital contributions of $432 million and $368 million, respectively, from EEDI and GLBE, which had no impact on total shares outstanding.
Centralized ServicesEnbridge performs centralized corporate functions for the Company, including legal, accounting, compliance, treasury, information technology and other areas, as well as certain engineering and other services. The Company reimburses Enbridge for the expenses to provide these services based on the cost of actual services provided or using various allocation methodologies.
Natural Gas PurchasesThe Company contracted for the purchase of natural gas from various affiliates, including Tidal Energy Marketing Inc., and Tidal Energy Marketing (U.S.) LLC., at prevailing market prices under normal trade terms. Contractual obligations under the related party contracts are 2020 through 2021 - $15 million, 2022 through 2023 - $nil million, and thereafter - $nil.
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Wholesale ServiceThese gas procurement and transportation services are pursuant to a contract negotiated between the Company and Gazifère Inc., an affiliate under common control, and approved by the OEB and Gazifère Inc.’s regulator, the Régie de l’énergie.
Gas Storage and Transportation ServicesThe Company contracted for natural gas transportation services from various affiliates, including Vector Pipeline Limited Partnership (U.S.), Vector Pipeline Limited Partnership (Canadian) and NEXUS Gas Transmission (U.S.) LLC. Contractual obligations under the related party contracts are 2020 through 2021 - $372 million, 2022 through 2023 - $246 million and thereafter - $1,087 million.
Other TransactionsThe cash balances of the Company and its subsidiaries are subject to a concentration banking arrangement with Enbridge. Interest is received or paid at market rates.
The Company provides administrative and other services to certain related entities under common control and records recoveries from these affiliates. The Company recovers the expenses to provide these services based on the cost of actual services provided or using various allocation methodologies. Cost recoveries are recorded as a reduction to Operating and administrative expense in the Consolidated Statements of Earnings. 
23.  GUARANTEES
In the normal course of conducting business, the Company issues financial guarantees to facilitate a commercial transaction with a third party by enhancing the value of the transaction to the third party. To varying degrees, these agreements involve elements of performance and credit risk, which are not included on the Consolidated Statements of Financial Position. The possibility of having to perform under these guarantees is largely dependent upon future operations of other third parties or the occurrence of certain future events. The Company cannot reasonably estimate the maximum potential amounts that could become payable to third parties under these agreements; however, historically, the Company has not made any significant payments. While these agreements may specify a maximum potential exposure, or a specified duration, there are circumstances where the amount and duration are unlimited. The guarantees have not had, and are not reasonably likely to have, a material effect on the Company’s financial condition, changes in financial condition, earnings, liquidity, capital expenditures or capital resources.
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24.  COMMITMENTS AND CONTINGENCIES
COMMITMENTSAt December 31, 2019, the Company had commitments as detailed below:
Less than
Total1 year2 years3 years4 years5 yearsThereafter
(millions of Canadian dollars)Right-of-way commitments1
5851010101010535
Purchase of services, pipe and 
other materials, including 
transportation2,36,1521,2908945984574142,499
6,7371,3009046084674243,034
1 Included in these amounts are right-of-way payments, estimated to be approximately $10 million per year, related to cancellable
gas storage payments that are reasonably likely to occur over the remaining life of all storage reservoirs.
2 Includes capital and operating commitments.3 Includes firm capacity payments that provide the Company with uninterrupted firm access to natural gas transportation and
storage; contractual obligations to purchase physical quantities of natural gas; contracts for software and consulting or advisory
services; customer care services; and contractual obligations for engineering, procurement and construction costs for pipeline
projects.
The Company and certain affiliates, in aggregate, have access to $495 million of letters of credit that they can issue. The total outstanding letters of credit that related to the Company as at December 31, 2019 was $14 million. 
ENVIRONMENTAL The Company is subject to various federal, provincial and local laws relating to the protection of the environment. These laws and regulations can change from time to time, imposing new obligations on the Company. 
Environmental risk is inherent to natural gas pipeline operations, and the Company is, at times, subject to environmental remediation at various contaminated sites. The Company manages this environmental risk through appropriate environmental policies and practices to minimize any impact our operations may have on the environment. To the extent that the Company is unable to recover payment for environmental liabilities from insurance or other potentially responsible parties, the Company will be responsible for payment of liabilities arising from environmental incidents associated with the operating activities of the Company. 
Former Manufactured Coal Gas Plant SitesThe remediation of discontinued manufactured gas plant (MGP) sites may result in future costs. The Company was named as a defendant in ten lawsuits issued in 1991 and 1993 in the Ontario Court of Justice (General Division), commenced by the Corporation of the City of Toronto (the City). Two additional actions were commenced by the Toronto Board of Education (the School Board) in 1991. In these actions, the City and the School Board claimed damages totaling approximately $79 million for alleged contamination of lands acquired by the City for the purposes of its Ataratiri housing project. The City alleges that these lands are contaminated by coal tar deposited on the properties during a time when all or a portion of such lands were utilized by the Company for the operation of its MGP.
While these Statements of Claim were issued by the City and the School Board, they were never formally served on the Company. It remains the Company’s understanding that these lawsuits were initiated, at least in part, because of concerns that the passage of time might give rise to limitation period defences. Rather than litigate, the Company and the City entered into an agreement (known as a Tolling Agreement) pursuant to which the City and the School Board agreed to forbear from serving the Statements of Claim pending further discussions with the Company. To the knowledge of the Company, neither the City nor the School Board has taken any steps to advance the lawsuits.
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Given the novel nature of such environmental claims, the law as it relates to such claims is not settled. Should remediation of former MGP sites be required, it may result in future costs, the quantum of which cannot be determined at this time for several reasons. First, there is no certainty about the presence of and the extent of alleged coal tar contamination at or near former MGP sites. Second, there are a number of potential alternative remediation, isolation, and containment approaches, which could vary widely in cost.
Although there are no known regulatory precedents in Canada, there are precedents in the United States for the recovery in rates of costs relating to the remediation of former MGP sites. From 2006 to 2018, the OEB approved the establishment of deferral accounts to record the costs of investigating, defending and dealing with ongoing MGP-related claims. The Company expects that if it is found it must contribute to any remediation costs, either as a result of a lawsuit or government order, it would be generally allowed to recover in rates those costs not recovered through insurance or by other means. Accordingly, the Company believes that the ultimate outcome of these matters will not have a significant impact on the Company’s financial position.
Hamilton Contaminated SiteIn April 2016, the Ontario Ministry of the Environment, Conservation and Parks (MECP), formerly the Ministry of the Environment and Climate Change issued a Director’s Order (Order) naming the Company, along with other parties, as an impacted property owner in connection with a contaminated site adjacent to a property of the Company in Hamilton. In May 2016, the Company appealed the Order, and in June 2016, the Environmental Review Tribunal (Tribunal), on consent of the MECP’s Director, stayed the application of parts of the Order. The Tribunal has extended the stay of the Order several times, which has allowed the owner of the property, with the cooperation of the adjacent owners, to prepare a plan of action, including discussions with the MECP and other neighbours. The Company continues to monitor the matter, and to cooperate with the owner of the source property, the MECP and other adjacent owners. The risk of material environmental liability is unknown at this time.
TAX MATTERSThe Company maintains tax liabilities related to uncertain tax positions. While fully supportable in the Company's view, these tax positions, if challenged by tax authorities, may not be fully sustained on review.
OTHER LITIGATIONThe Company is subject to various other legal and regulatory actions and proceedings which arise in the normal course of business, including interventions in regulatory proceedings and challenges to regulatory approvals and permits by special interest groups. While the final outcome of such actions and proceedings cannot be predicted with certainty, management believes that the resolution of such actions and proceedings will not have a material impact on the Company's financial position or results of operations.
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