Berkshire Hathaway Energy Company

03/02/2026 | Press release | Distributed by Public on 03/02/2026 05:03

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of EGTS during the periods included herein. This discussion should be read in conjunction with EGTS' historical Consolidated Financial Statements and Notes to Consolidated Financial Statements in Item 8 of this Form 10-K. EGTS' actual results in the future could differ significantly from the historical results.
Results of Operations
Overview
Net income for the year ended December 31, 2025 was $266 million, an increase of $10 million, or 4%, compared to 2024, primarily due to higher margin from regulated gas transmission and storage operations of $19 million and an increase in interest income from higher lending activity under Eastern Energy Gas' intercompany revolving credit agreement, partially offset by increases in depreciation and amortization, property and other taxes and operations and maintenance expenses.
Net income for the year ended December 31, 2024 was $256 million, an increase of $18 million, or 8%, compared to 2023, primarily due to lower technology and related charges, lower outside services due to the termination of Dominion Energy, Inc.'s transition services agreement and higher margin from regulated gas transmission and storage operations of $4 million, partially offset by a gain in 2023 from an agreement to convey development rights underneath one of its natural gas storage fields.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Operating revenue increased $13 million, or 1%, for 2025 compared to 2024, primarily due to an increase in regulated gas transmission and storage services revenues of $22 million primarily due to additional capacity contracts, partially offset by a decrease in variable revenue related to park and loan activity of $5 million and a decrease in regulated gas sales for operational and system balancing purposes primarily due to decreased volumes of $5 million.
Cost of gas decreased $6 million, or 86%, for 2025 compared to 2024, primarily due a decrease in volumes sold.
Operations and maintenanceincreased $4 million, or 1%, for 2025 compared to 2024, primarily due to an increase in charges from affiliates of $11 million, partially offset by a gain from the sale of a compressor unit to Northern Natural Gas of $5 million.
Depreciation and amortization increased $6 million, or 4%, for 2025 compared to 2024, primarily due to higher plant placed in-service.
Property and other taxes increased $5 million, or 9%, for 2025 compared to 2024, primarily due to higher tax assessments.
Other, net increased $6 million for 2025 compared to 2024, primarily due to an increase in interest income from higher lending activity under Eastern Energy Gas' intercompany revolving credit agreement.
Income tax expense was flat for 2025 compared to 2024 and the effective tax rate was 25% in 2025 and 2024.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Operating revenue decreased $27 million, or 3%, for 2024 compared to 2023, primarily due to a decrease in variable revenue related to park and loan activity of $18 million, a decrease in regulated gas sales for operational and system balancing purposes due to decreased prices and volumes of $15 million and a decrease in services provided to affiliates of $7 million, partially offset by an increase in regulated gas transmission and storage services revenues of $17 million primarily due to additional capacity contracts.
Cost of gas decreased $31 million, or 82%, for 2024 compared to 2023, primarily due to the unfavorable revaluation of volumes retained in 2023.
Operations and maintenance decreased $20 million, or 5%, for 2024 compared to 2023, primarily due to lower technology and related charges of $14 million, lower outside services of $7 million due to the termination of Dominion Energy Inc.'s transition services agreement and a decrease in services provided to affiliates of $7 million, partially offset by a gain in 2023 from an agreement to convey development rights underneath one of its natural gas storage fields of $8 million.
Other, netincreased $4 million for 2024 compared to 2023, largely due to ARO settlement gains resulting from the FERC order in late 2023 finalizing the remediation activities for the Supply Header Project.
Income tax expense increased $8 million, or 10%, for 2024 compared to 2023 and the effective tax rate was 25% in 2024 and 2023. The $8 million increase was primarily due to higher pre-tax income.
Liquidity and Capital Resources
As of December 31, 2025, EGTS' total net liquidity was as follows (in millions):
Cash and cash equivalents $ 10
Intercompany revolving credit agreement
400
Total net liquidity $ 410
Intercompany revolving credit agreement:
Maturity date 2027
Refer to Note 17 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding EGTS' intercompany revolving credit agreement.
EGTS' future financial performance and capital expenditures related to certain projects may be affected by the combined effects of ongoing macroeconomic and geopolitical conditions, including changes in international trade policies and tariff regimes. The pace of change in these areas accelerated during 2025, and uncertainty persists regarding the scope and duration of these external factors. However, EGTS currently does not believe these items and any resulting changes to future capital project allocations will significantly impact its business in the near term.
Operating Activities
Net cash flows from operating activities for the years ended December 31, 2025 and 2024 were $462 million and $497 million, respectively. The change was primarily due to lower collections from customers and the timing of payments for operating costs, partially offset by favorable operating results and other working capital adjustments.
Net cash flows from operating activities for the years ended December 31, 2024 and 2023 were $497 million and $418 million, respectively. The change was primarily due to the repayment of EGTS rate refunds to customers in 2023 and other changes in working capital.
Investing Activities
Net cash flows from investing activities for the years ended December 31, 2025 and 2024 were $(399) million and $(251) million, respectively. The change was primarily due to an increase in notes issued to Eastern Energy Gas under an intercompany revolving credit agreement of $128 million, an increase in capital expenditures of $30 million and a decrease in repayments of notes by Eastern Energy Gas under an intercompany revolving credit agreement of $3 million, partially offset by an increase in proceeds from sales of marketable securities of $8 million.
Net cash flows from investing activities for the years ended December 31, 2024 and 2023 were $(251) million and $(237) million, respectively. The change was primarily due to an increase in notes issued to Eastern Energy Gas under an intercompany revolving credit agreement of $25 million, an increase in capital expenditures of $14 million and proceeds from the assignment of shale development rights in 2023 of $8 million, partially offset by an increase in repayments of notes by Eastern Energy Gas under an intercompany revolving credit agreement of $25 million, an increase in proceeds from sales of marketable securities of $3 million a decrease in purchases of marketable securities of $3 million.
Financing Activities
Net cash flows from financing activities for the year ended December 31, 2025 were $(56) million and consisted of dividends paid to Eastern Energy Gas.
Net cash flows from financing activities for the year ended December 31, 2024 were $(248) million. Sources of cash totaled $162 million and consisted of proceeds from the issuance of long-term debt of $149 million and proceeds from equity contributions from Eastern Energy Gas of $13 million. Uses of cash totaled $410 million and consisted of dividends paid to Eastern Energy Gas of $297 million, repayment of long-term debt of $111 million and net repayment of notes payable to Eastern Energy Gas of $2 million.
Net cash flows from financing activities for the year ended December 31, 2023 were $(192) million and consisted of dividends paid to Eastern Energy Gas of $158 million and net repayment of notes payable to Eastern Energy Gas of $34 million.
Future Uses of Cash
Capital Expenditures
Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, new growth projects and the timing of growth projects; changes in environmental and other rules and regulations; impacts to customers' rates; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital.
EGTS' historical and forecasted capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items, for the years ending December 31 are as follows (in millions):
Historical Forecast
2023 2024 2025 2026 2027 2028
Natural gas transmission and storage $ 16 $ 34 $ 54 $ 114 $ 258 $ 605
Other 225 221 231 350 177 179
Total $ 241 $ 255 $ 285 $ 464 $ 435 $ 784
EGTS' natural gas transmission and storage capital expenditures primarily include growth capital expenditures related to planned regulated projects. EGTS' other capital expenditures consist primarily of pipeline integrity work, automation and controls upgrades, underground storage, corrosion control, unit exchanges, compressor modifications and projects related to Pipeline Hazardous Materials Safety Administration natural gas storage rules. The amounts also include EGTS' asset modernization program, which includes projects for vintage pipeline replacement, compression replacement, pipeline assessment and underground storage integrity.
Material Cash Requirements
The following table summarizes EGTS' material cash requirements as of December 31, 2025 (in millions):
Payments Due by Periods
2026 2027-2028 2029-2030 2031 and thereafter Total
Interest payments on long-term debt(1)
$ 68 $ 136 $ 123 $ 735 $ 1,062
Natural gas supply and transmission(1)
46 92 92 46 276
Total cash requirements $ 114 $ 228 $ 215 $ 781 $ 1,338
(1)Not reflected on the Consolidated Balance Sheets.
In addition, EGTS also has cash requirements that may affect its consolidated financial condition that arise from operating leases (refer to Note 5), long-term debt (refer to Note 8), construction and other development costs (refer to Liquidity and Capital Resources included within this Item 7), uncertain tax positions (refer to Note 9) and AROs (refer to Note 11). Refer, where applicable, to the respective referenced note in Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Regulatory Matters
EGTS is subject to comprehensive regulation. Refer to the discussion contained in Item 1 of this Form 10-K for further information regarding EGTS' general regulatory framework and current regulatory matters.
Environmental Laws and Regulations
EGTS is subject to federal, state and local laws and regulations regarding air quality, climate change, emissions performance standards, water quality and other environmental matters that have the potential to impact its current and future operations. In addition to imposing continuing compliance obligations and capital expenditure requirements, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. EGTS believes it is in material compliance with all applicable laws and regulations, although many laws and regulations are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and EGTS is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results.
Refer to "Environmental Laws and Regulations" in Item 1 of this Form 10-K for further discussion regarding environmental laws and regulations.
Collateral and Contingent Features
Debt of EGTS is rated by credit rating agencies. Assigned credit ratings are based on each rating agency's assessment of EGTS' ability to, in general, meet the obligations of its issued debt. The credit ratings are not a recommendation to buy, sell or hold securities, and there is no assurance that a particular credit rating will continue for any given period of time.
EGTS has no credit rating downgrade triggers that would accelerate the maturity dates of outstanding debt, and a change in ratings is not an event of default under the applicable debt instruments.
Inflation
Historically, overall inflation and changing prices in the economies where EGTS operates have not had a significant impact on EGTS' consolidated financial results. EGTS operates under cost-of-service based rate-setting structures administered by the FERC. Under these rate-setting structures, EGTS is allowed to include prudent costs in its rates, including the impact of inflation. EGTS attempts to minimize the potential impact of inflation on its operations by employing prudent risk management and hedging strategies and by considering, among other areas, its impact on purchases of energy, operating expenses, materials and equipment costs, contract negotiations, future capital spending programs and long-term debt issuances. There can be no assurance that such actions will be successful.
New Accounting Pronouncements
For a discussion of new accounting pronouncements affecting EGTS, refer to Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
Critical Accounting Estimates
Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. The following critical accounting estimates are impacted significantly by EGTS' methods, judgments and assumptions used in the preparation of the Consolidated Financial Statements and should be read in conjunction with EGTS' Summary of Significant Accounting Policies included in EGTS' Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
Accounting for the Effects of Certain Types of Regulation
EGTS prepares its Consolidated Financial Statements in accordance with authoritative guidance for regulated operations, which recognizes the economic effects of regulation. Accordingly, EGTS defers the recognition of certain costs or income if it is probable that, through the ratemaking process, there will be a corresponding increase or decrease in future regulated rates.
Regulatory assets and liabilities are established to reflect the impacts of these deferrals, which will be recognized in earnings in the periods the corresponding changes in regulated rates occur.
EGTS continually evaluates the applicability of the guidance for regulated operations and whether its regulatory assets and liabilities are probable of inclusion in future regulated rates by considering factors such as a change in the regulator's approach to setting rates from cost-based ratemaking to another form of regulation, other regulatory actions or the impact of competition that could limit EGTS' ability to recover its costs. EGTS believes its application of the guidance for regulated operations is appropriate and its existing regulatory assets and liabilities are probable of inclusion in future regulated rates. The evaluation reflects the current political and regulatory climate at the federal level. If it becomes no longer probable that the deferred costs or income will be included in future regulated rates, the related regulatory assets and liabilities will be recognized in net income, returned to customers or re-established as AOCI. Total regulatory assets were $45 million and total regulatory liabilities were $533 million as of December 31, 2025. Refer to EGTS' Note 6 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding EGTS' regulatory assets and liabilities.
Impairment of Long-Lived Assets
EGTS evaluates long-lived assets for impairment, including property, plant and equipment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or when the assets are being held for sale. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value and any resulting impairment loss is reflected on the Consolidated Statements of Operations. As substantially all property, plant and equipment supports EGTS' regulated businesses, the impacts of regulation are considered when evaluating the carrying value of regulated assets.
The estimate of cash flows arising from the future use of an asset, for the purposes of impairment analysis, requires the exercise of judgment. Circumstances that could significantly alter the calculation of fair value or the recoverable amount of an asset may include significant changes in the regulatory environment, the business climate, management's plans, legal factors, market price of the asset, the use of the asset, the physical condition of the asset, future market prices, competition and many other factors over the life of the asset. Any resulting impairment loss is highly dependent on the underlying assumptions and could significantly affect EGTS' results of operations.
Income Taxes
In determining EGTS' income taxes, management is required to interpret complex income tax laws and regulations, which includes consideration of regulatory implications imposed by the FERC. EGTS' income tax returns are subject to continuous examinations by federal, state and local income tax authorities that may give rise to different interpretations of these complex laws and regulations. Due to the nature of the examination process, it generally takes years before these examinations are completed and these matters are resolved. EGTS recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured based on the largest benefit that is more-likely-than-not to be realized upon ultimate settlement. Although the ultimate resolution of EGTS' federal, state and local income tax examinations is uncertain, EGTS believes it has made adequate provisions for these income tax positions. The aggregate amount of any additional income tax liabilities that may result from these examinations is not expected to have a material impact on EGTS' consolidated financial results. Refer to EGTS' Note 9 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding EGTS' income taxes.
It is probable that EGTS will pass income tax benefit and expense related to the federal tax rate change from 35% to 21%, certain property-related basis differences and other various differences on to their customers. As of December 31, 2025, these amounts were recognized as a net regulatory liability of $360 million and will be included in regulated rates when the temporary differences reverse.
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