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What changed in MIDDLESEX WATER CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MIDDLESEX WATER CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+243 added−225 removedSource: 10-K (2024-03-01) vs 10-K (2023-02-24)

Top changes in MIDDLESEX WATER CO's 2023 10-K

243 paragraphs added · 225 removed · 171 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+26 added−14 removed46 unchanged
Biggest changeA DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return on, qualifying capital improvements made between base rate proceedings. Pinelands Rate Matters In September 2022, Pinelands Water and Pinelands Wastewater filed separate petitions with the NJBPU seeking permission to increase base rates by approximately $0.6 million and $0.4 million per year, respectively.
Biggest changeIn October 2023, the NJBPU approved Middlesex’s petition for a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing a DSIC rate that allows water utilities to recover investments in, and generate a return on, qualifying capital improvements to their water distribution system made between base rate proceedings.
Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania (the Pennsylvania Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States Constitution.
Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania (the Commonwealth Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States Constitution.
The approved tariff rates were designed to recover increased operating costs, as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective 7 Index January 1, 2023.
The approved tariff rates were designed to recover increased operating costs, as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January 1, 2023.
In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the Pennsylvania Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the Pennsylvania Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the Commonwealth Court issued an opinion upholding PAPUC’s November 2021 Order in its entirety.
In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the Commonwealth Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the Commonwealth Court issued an opinion upholding PAPUC’s November 2021 Order in its entirety.
The treatment process includes pH adjustment, ozone and chlorination for disinfection, and corrosion control for the distribution system. Treatment of groundwater in our Tidewater System is by chlorination for disinfection purposes and, in some cases, pH adjustment and filtration for nitrate and iron removal and granular activated carbon filtration for organics removal.
The treatment process includes pH adjustment, ozone and chlorination for disinfection, and corrosion control for the distribution system. 10 Treatment of groundwater in our Tidewater System is by chlorination for disinfection purposes and, in some cases, pH adjustment and filtration for nitrate and iron removal and granular activated carbon filtration for organics removal.
USA-PA USA-PA operates the City of Perth Amboy, New Jersey’s (Perth Amboy) water and wastewater systems under a 10-year agreement, which expires in December 2028. In addition to performing day-to day operations, USA-PA is also responsible for emergency responses and management of capital projects funded by Perth Amboy. USA-PA produced approximately 4% of our 2022 consolidated operating revenues.
USA-PA USA-PA operates the City of Perth Amboy, New Jersey’s (Perth Amboy) water and wastewater systems under a 10-year agreement, which expires in December 2028. In addition to performing day-to day operations, USA-PA is also responsible for emergency responses and management of capital projects funded by Perth Amboy. USA-PA produced approximately 4% of our 2023 consolidated operating revenues.
In December 2021, Middlesex temporarily ceased pumping from its Company-owned wells at the Park Avenue Wellfield Treatment Plant in South Plainfield, New Jersey and alternate sources of supply were obtained in order to comply with new State of New Jersey water quality regulations relative to poly- and perfluoroalkyl substances, collectively referred to as PFAS that became effective in 2021. 4 Index Prior to 2021, the Company began design for construction of an enhanced treatment process at the Park Avenue Wellfield Treatment Plant to meet the expected PFAS water quality standards anticipated to be enacted by the State of New Jersey, which at that time were unknown as to their timing and extent.
In November 2021, Middlesex temporarily ceased pumping from its Company-owned wells at the Park Avenue Wellfield Treatment Plant (Park Avenue Plant) in South Plainfield, New Jersey and alternate sources of supply were obtained in order to comply with new State of New Jersey water quality regulations relative to poly- and perfluoroalkyl substances, collectively referred to as PFAS, that became effective in 2021. 4 Prior to 2021, the Company began design for construction of an enhanced treatment process at the Park Avenue Plant to meet the expected PFAS water quality standards anticipated to be enacted by the State of New Jersey, which at that time were unknown as to their timing and extent.
Kooper serves as a volunteer director on selected non-profit utility industry-related Boards including the National Association of Water Companies (current Director and Chairman of the New Jersey Chapter) and the New Jersey State Bar Association’s Public Utility Law Section (current Consultor and Past Chairman) and on other non-profit boards based in New 11 Index Jersey, including as President of Temple B’Nai Abraham in Livingston, New Jersey and as a Director of the Crohn’s and Colitis Foundation’s New Jersey Chapter.
Kooper serves as a volunteer director on selected non-profit utility industry-related Boards including the National Association of Water Companies (current Director and Chairman of the New Jersey Chapter) and the New Jersey State Bar Association’s Public Utility Law Section (current Consultor and Past Chairman) and on other non-profit boards based in New Jersey, including as President of Temple B’Nai Abraham in Livingston, New Jersey and as a Director of the Crohn’s and Colitis Foundation’s New Jersey Chapter.
The Company is a signatory to CEO Action for Diversity and Inclusion, a business led initiative which encourages companies to cultivate environments that support dialogue on DEI, implement and expand bias education and training and engage boards of directors in the development and evaluation of inclusion and diversity strategies.
The Company remains a signatory to CEO Action for Diversity and Inclusion, a business led initiative which encourages companies to cultivate environments that support dialogue on DEI, implement and expand bias education and training and engage boards of directors in the development and evaluation of inclusion and diversity strategies.
In addition to the enhanced groundwater treatment process for PFAS, we treat the groundwater supplies in our Middlesex System with chlorination for primary disinfection purposes and use air stripping for removal of volatile organic compounds. Surface water treatment in our Middlesex System is by conventional treatment; coagulation, sedimentation and filtration.
In addition to the enhanced groundwater treatment process for PFOA, we treat the groundwater supplies in our Middlesex System with chlorination for primary disinfection purposes and use air stripping for removal of volatile organic compounds. Surface water treatment in our Middlesex System is by conventional treatment; coagulation, sedimentation and filtration.
Chloramination is used for final disinfection at Southern Shores. Treatment of groundwater in the Pinelands Water and Bayview Systems (primary disinfection only) is performed at individual well sites. Treatment of wastewater in the Pinelands Wastewater System includes the use of rotating biological contactors.
Chloramination is used for final disinfection at Southern Shores. Treatment of groundwater in the Pinelands Water and Fortescue Systems (primary disinfection only) is performed at individual well sites. Treatment of wastewater in the Pinelands Wastewater System includes the use of rotating biological contactors.
The NJDEP and DEDPH monitor our activities and review the results of water quality tests that are performed for adherence to applicable regulations. Other applicable regulations include the Federal Lead and Copper Rule, the Federal Surface Water Treatment Rule and the Federal Total Coliform Rule and regulations for maximum contaminant levels established for various volatile organic compounds.
The NJDEP and DEDPH monitor our activities and review the results of water quality tests that are performed for adherence to applicable regulations. Other applicable regulations include the Lead, Copper and Lead Service Line Rules, the Federal Surface Water Treatment Rule and the Federal Total Coliform Rule and regulations for maximum contaminant levels established for various volatile organic compounds.
In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to acquire the Twin Lakes water system and for Middlesex to submit $1.7 million into an escrow account within 30 days.
In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to acquire the Twin Lakes water system and for Middlesex, the parent company of Twin Lakes, to submit $1.7 million into an escrow account within 30 days.
When capital improvements and/or increases in operation, maintenance or other costs indicate a need for rate relief, base rate increase requests are filed with the respective Public Utility Commissions. 8 Index Regulatory Service Matters Twin Lakes Utilities, Inc. (Twin Lakes) provides water services to approximately 115 residential customers in Shohola, Pennsylvania.
When capital improvements and/or increases in operation, maintenance or other costs indicate a need for rate relief, base rate increase requests are filed with the respective Public Utility Commissions. Regulatory Service Matters Twin Lakes Utilities, LLC (Twin Lakes) provides water services to approximately 115 residential customers in Shohola, Pennsylvania.
Middlesex Rate Matters In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million.
In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million.
Olsen Surface Water Treatment Plant (CJO Plant)-11.7 billion gallons; ● Twenty-seven Company-owned wells (ground water)-0.8 billion gallons, and; ● The balance purchased from a non-affiliated water utility regulated by the New Jersey Board of Public Utilities (NJBPU) under an agreement which expires February 27, 2026.
Olsen Surface Water Treatment Plant (CJO Plant)-10.7 billion gallons; ● Twenty-seven Company-owned wells (ground water)-2.0 billion gallons; and ● The balance purchased from a non-affiliated water utility regulated by the New Jersey Board of Public Utilities (NJBPU) under an agreement which expires February 27, 2026.
In addition, our issuances of equity securities are subject to the prior approval of the NJBPU and require registration with the Securities & Exchange Commission (SEC). Our issuances of long-term debt securities are subject to the prior approval of the respective state Public Utility Commissions.
In addition, our issuances of equity securities are subject to the prior approval of the NJBPU and require registration with the United States Securities and Exchange Commission. Our issuances of long-term debt securities are subject to the prior approval of the respective state Public Utility Commissions.
In June 2022, a portion of the enhanced treatment process was completed, placed into service and is effectively treating the ground water in compliance with all state and federal drinking water standards.
In June 2022, a portion of the enhanced treatment process was completed, placed into service and effectively treated the ground water in compliance with all state and federal drinking water standards.
Middlesex provides water service to approximately 300 customers in Cumberland County, New Jersey. This system is referred to as the Bayview System, and is not physically interconnected with the Middlesex System. The Bayview System produced less than 0.1% of our 2022 consolidated operating revenues.
Middlesex provides water service to approximately 300 customers in Cumberland County, New Jersey. This system is referred to as the Fortescue System, and is not physically interconnected with the Middlesex System. The Fortescue System produced less than 0.1% of our 2023 consolidated operating revenues.
Workforce As of December 31, 2022, the Company had 350 employees. None of our employees are subject to a collective bargaining agreement. We believe our employee relations are positive. 5 Index Employee Compensation and Benefits We offer comprehensive competitive employee compensation and benefit programs consistent with job functions, skill levels, experience, knowledge and geographic location.
Workforce As of December 31, 2023, the Company had 355 employees. None of our employees are subject to a collective bargaining agreement. We believe our employee relations are positive. 5 Employee Compensation and Benefits We offer comprehensive competitive employee compensation and benefit programs consistent with job functions, skill levels, experience, knowledge and geographic location.
In September 2021, the NJDEP issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in South Plainfield, New Jersey exceeded a recently promulgated NJDEP standard effective in 2021.
In September 2021, the NJDEP issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Plant in South Plainfield, New Jersey exceeded a standard promulgated in a NJDEP regulation that became effective in 2021.
As the number has grown, many of Tidewater’s individual systems have been interconnected, forming several regional systems that are served by multiple water treatment facilities owned by Tidewater. Pinelands Water System Water supply to our Pinelands Water System is derived from four wells which produced approximately 139.6 million gallons in 2022.
As the number has grown, many of Tidewater’s individual systems have been interconnected, forming several regional systems that are served by multiple water treatment facilities owned by Tidewater. Pinelands Water System Water supply to our Pinelands Water System is derived from four wells which produced approximately 134.7 million gallons in 2023.
Middlesex is under contract with the NJWSA, which expires November 30, 2023, and provides for average purchases of 27.0 mgd of untreated water from the Delaware & Raritan Canal, augmented by the Round Valley/Spruce Run Reservoir System. The untreated surface water is pumped to, and treated at, the CJO Plant.
Middlesex is under contract with the NJWSA, which expires November 30, 2048, and provides for average purchases of 27.0 mgd, with a peak up to 47.0 mgd, of untreated water from the Delaware & Raritan Canal, augmented by the Round Valley/Spruce Run Reservoir System. The untreated surface water is pumped to, and treated at, the CJO Plant.
Consequently, Tidewater reset its Distribution System Improvement Charge (DSIC) rate to zero effective April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Consequently, Tidewater reset its DSIC rate to zero effective 8 April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
The aggregate pumping capacity of the four wells is 2.2 mgd. Wastewater Facilities Pinelands Wastewater System The Pinelands Wastewater System discharges into the South Branch of the Rancocas Creek through a wastewater treatment plant that provides clarification, sedimentation, filtration and disinfection. The total capacity of the plant is 0.5 mgd, and the system treated approximately 93.7 million gallons in 2022.
The aggregate pumping capacity of the four wells is 2.2 mgd. Wastewater Facilities Pinelands Wastewater System The Pinelands Wastewater System discharges into the South Branch of the Rancocas Creek through a wastewater treatment plant that provides clarification, sedimentation, filtration and disinfection. The total capacity of the plant is 0.5 mgd, and the system treated approximately 94.8 million gallons in 2023.
In addition to performing day-to-day service operations, USA is responsible for emergency responses and management of capital projects funded by Avalon. USA operates the Borough of Highland Park, New Jersey’s (Highland Park) water utility and sewer utility under a ten-year operations and maintenance contract expiring in 2030.
USA USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a ten-year operations and maintenance contract expiring in 2032. In addition to performing day-to-day service operations, USA is responsible for emergency responses and management of capital projects funded by Avalon.
White Marsh produced approximately 1% of our 2022 consolidated operating revenues. 3 Index Financial Information Consolidated operating revenues, operating income and net income are as follows: (Thousands of Dollars) Years Ended December 31, 2022 2021 2020 Operating Revenues $ 162,434 $ 143,141 $ 141,592 Operating Income $ 47,333 $ 33,211 $ 37,420 Net Income $ 42,429 $ 36,543 $ 38,425 Operating revenues were earned from the following sources: Years Ended December 31, 2022 2021 2020 Residential 52.3 % 54.3 % 54.2 % Commercial 14.0 11.7 10.9 Industrial 6.9 6.3 6.7 Fire Protection 7.8 8.8 8.8 Contract Sales 11.6 10.2 10.7 Contract Operations 7.4 8.6 8.6 Other 0.0 0.1 0.1 Total 100.0 % 100.0 % 100.0 % Water Supplies and Contracts Our New Jersey and Delaware water supply systems are physically separate and are not interconnected.
White Marsh produced approximately 1% of our 2023 consolidated operating revenues. 3 Financial Information Consolidated operating revenues, operating income and net income are as follows: (Thousands of Dollars) Years Ended December 31, 2023 2022 2021 Operating Revenues $ 166,274 $ 162,434 $ 143,141 Operating Income $ 39,223 $ 47,333 $ 33,211 Net Income $ 31,524 $ 42,429 $ 36,543 Operating revenues were earned from the following sources: Years Ended December 31, 2023 2022 2021 Residential 52.1% 52.3% 54.3% Commercial 14.4 14.0 11.7 Industrial 7.0 6.9 6.3 Fire Protection 7.6 7.8 8.8 Contract Sales 11.5 11.6 10.2 Contract Operations 7.4 7.4 8.6 Other 0.0 0.0 0.1 Total 100.0% 100.0% 100.0% Water Supplies and Contracts Our New Jersey and Delaware water supply systems are physically separate and are not interconnected.
Doll 64 President, Chief Executive Officer and Chairman of the Board of Directors A. Bruce O’Connor 64 Senior Vice President, Treasurer and Chief Financial Officer G. Christian Andreasen, Jr. 63 Vice President-Enterprise Engineering Robert K. Fullagar 56 Vice President-Operations Lorrie B. Ginegaw 47 Vice President-Human Resources Jay L. Kooper 50 Vice President-General Counsel and Secretary Georgia M.
Doll 65 President, Chief Executive Officer and Chairman of the Board of Directors A. Bruce O’Connor 65 Senior Vice President, Treasurer and Chief Financial Officer G. Christian Andreasen, Jr. 64 Vice President-Enterprise Engineering Robert K. Fullagar 57 Vice President-Operations Lorrie B. Ginegaw 48 Vice President-Human Resources Jay L. Kooper 51 Vice President-General Counsel and Secretary Georgia M.
Pinelands Systems Pinelands Water provides water services to approximately 2,500 residential customers in Burlington County, New Jersey. Pinelands Water is not physically interconnected with the Middlesex System. Pinelands Water produced approximately 1% of our 2022 consolidated operating revenues. Pinelands Wastewater provides wastewater collection and treatment services to approximately 2,500 residential customers.
Pinelands Systems Pinelands Water provides water services to approximately 2,500 residential customers in Burlington County, New Jersey. Pinelands Water is not physically interconnected with the Middlesex System. Pinelands Water produced approximately 1% of our 2023 consolidated operating revenues.
In New Jersey, the Pinelands System and Bayview System are not interconnected with the Middlesex System or each other. We believe we have adequate sources of water supply to meet the current service requirements of our present customers in New Jersey and Delaware. Middlesex System Our Middlesex System produced approximately 14.2 billion gallons in 2022 from: ● The Carl J.
In New Jersey, the Pinelands System and Fortescue System are not interconnected with the Middlesex System or each other. We believe we have adequate sources of water supply to meet the current service requirements of our present customers in New Jersey and Delaware. Middlesex System Our Middlesex System produced approximately 13.8 billion gallons in 2023 from: ● The Carl J.
Tidewater System Tidewater, together with its wholly-owned subsidiary, Southern Shores, provides water services to approximately 56,000 retail customers for residential, commercial and fire protection purposes in over 460 separate communities 2 Index in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 26% of our 2022 consolidated operating revenues.
Tidewater System Tidewater, together with its wholly-owned subsidiary, Southern Shores, provides water services to approximately 59,000 retail customers for residential, commercial and fire protection purposes in over 470 separate communities 2 in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 25% of our 2023 consolidated operating revenues.
Regulations relating to water quality require us to perform tests to ensure our water meets state and federal quality requirements. In addition, government environmental regulatory agencies continuously review current regulations governing the limits of certain organic compounds found in the water as byproducts of the treatment process.
They also regulate our operations with respect to wastewater collection, treatment and disposal. Regulations relating to water quality require us to perform tests to ensure our water meets state and federal quality requirements. In addition, government environmental regulatory agencies continuously review current regulations governing the limits of certain organic compounds found in the water as byproducts of the treatment process.
Water supply to customers of the Bayview System is derived from two wells, which produced approximately 6.4 million gallons in 2022. Tidewater System Our Tidewater System produced approximately 2.8 billion gallons in 2022, primarily from 178 wells. Tidewater expects to submit applications to Delaware regulatory authorities for the approval of additional wells as growth, customer demand and water quality warrant.
Water supply to customers of the Fortescue System is derived from two wells, which produced approximately 6.7 million gallons in 2023. Tidewater System Our Tidewater System produced approximately 2.9 billion gallons in 2023, primarily from 175 wells. Tidewater expects to submit applications to Delaware regulatory authorities for the approval of additional wells as growth, customer demand and water quality warrant.
We continue to monitor the results of our DEI efforts and continually explore opportunities to further engage our employees and customers. Competition Our business in our franchised service areas is substantially free from direct competition for growth with other public utilities, municipalities and other entities.
Statements on DEI and our Human Rights Policy can be found on our website. We continue to monitor the results of our DEI efforts and continually explore opportunities to further engage our employees and customers. 6 Competition Our business in our franchised service areas is substantially free from direct competition for growth with other public utilities, municipalities and other entities.
Tidewater augments its water production with annual minimum purchases of 15.0 million gallons of treated water under contract from the City of Dover, Delaware. Tidewater does not have a central water treatment facility for the over 460 separate communities it serves.
Tidewater augments its water production with annual purchases of up to 60.0 million gallons of treated water from the City of Dover, Delaware. Tidewater does not have a central water treatment facility for the over 470 separate communities it serves.
Sohler joined the Company in 1994 and was named Vice President-Corporate Affairs in March 2007. She also serves as Vice President of USA. Prior to joining the Company, Ms. Sohler held marketing and public relations management positions in the financial services industry. Ms.
Sohler joined the Company in 1994 after having served in several marketing and public relations management positions in the financial services industry. She was named Director of Communications in 2004 and promoted to Vice President-Corporate Affairs in March 2007 and also serves as Vice President of USA. Ms.
The Middlesex System produced approximately 65% of our 2022 consolidated operating revenues.
The Middlesex System produced approximately 66% of our 2023 consolidated operating revenues.
Fullagar – Mr. Fullagar, a licensed professional engineer, joined the Company in 1997, was named Assistant Vice President-Operations in January 2019 and promoted to Vice President-Operations in July 2019. He is President and a Director of USA-PA, USA and Twin Lakes. Mr. Fullagar serves as Sector Chair of the New Jersey Infrastructure Advisory Committee. Lorrie B. Ginegaw – Ms.
Fullagar – Mr. Fullagar, a licensed professional engineer, joined the Company in 1997, was named Assistant Vice President-Operations in January 2019 and promoted to Vice President-Operations in July 2019. He is President and a Director of USA-PA, USA and Twin Lakes. Mr.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to permit Middlesex to reset its PWAC tariff rate to recover additional costs of $2.7 million for the purchase of treated water from a non-affiliated regulated water utility.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million for the purchase of treated water from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings.
On January 1, 2019, Mr. O’Connor was appointed Senior Vice President of Middlesex and President of Tidewater and White Marsh. Mr. O’Connor is also the principal financial officer and a Director of all Middlesex subsidiaries. G. Christian Andreasen, Jr. – Mr.
O’Connor, a Certified Public Accountant, joined the Company in 1990 and was named Vice President and Chief Financial Officer in 1996 and Treasurer in 2014. On January 1, 2019, Mr. O’Connor was appointed Senior Vice President of Middlesex. Mr. O’Connor is also the principal financial officer and a Director of all Middlesex subsidiaries. G. Christian Andreasen, Jr. – Mr.
Water and Wastewater Quality and Environmental Regulations Government environmental regulatory agencies regulate our operations in New Jersey and Delaware with respect to water supply, treatment and distribution systems and the quality of the water. They also regulate our operations with respect to wastewater collection, treatment and disposal.
The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex. Water and Wastewater Quality and Environmental Regulations Government environmental regulatory agencies regulate our operations in New Jersey and Delaware with respect to water supply, treatment and distribution systems and the quality of the water.
Ginegaw serves as a volunteer director on the Board of the New Jersey Utilities Association. Jay L. Kooper – Mr. Kooper joined the Company in 2014 as Vice President and General Counsel and serves as Secretary for the Company and all subsidiaries. Prior to joining the Company, Mr.
Kooper joined the Company in 2014 as Vice President and General Counsel and serves as Secretary for the Company and all subsidiaries. Prior to joining the Company, Mr.
In September 2022, Twin Lakes filed a Petition For Allowance of Appeal to the Supreme Court of Pennsylvania seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the grounds that the Pennsylvania Court erred in failing to address Twin Lakes’ constitutional claims.
In September 2022, Twin Lakes filed a Petition For Allowance of Appeal (Appeal Petition) to the Supreme Court of Pennsylvania seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the grounds that the Commonwealth Court erred in failing to address Twin Lakes’ claims that because the $1.7 million escrow requirement placed on Middlesex violated Middlesex’s constitutional rights, Middlesex’s refusal to submit this escrow payment would jeopardize the relief Twin Lakes was otherwise entitled to in the appointment of the Receiver Utility.
Sohler serves as a volunteer director on area Chambers of Commerce and several other non-profit Boards and is the former Chair of the New Jersey Utilities Association’s Communications Committee.
Sohler is a volunteer director on area Chambers of Commerce and several other non-profit Boards supporting public safety and the arts. She is a past director of the National Association of Water Companies and former Chair of the New Jersey Utilities Association’s Communications Committee. 12 Bruce E. Patrick – Mr.
In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand for our water may decrease and therefore, adversely affect our revenues. 10 Index Management This table lists information concerning our executive management team: Name Age Principal Position(s) Dennis W.
In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand for our water may decrease and therefore, adversely affect our revenues. Management In May 2023, President and Chief Executive Officer, Dennis W. Doll announced a plan to retire upon turning age 65.
The Notice further required the Company to take any action necessary to comply with the new standard by September 7, 2022.
Middlesex was required by the regulation to notify its affected customers and complied within the required Notice period in November 2021. The Notice further required the Company to take any action necessary to comply with the new standard by September 7, 2022.
Since completion was not expected until mid-2023, in December 2021, the Company implemented an interim solution to meet the Notice requirements. The Park Avenue Wellfield Treatment Plant was temporarily taken off-line and alternate sources of supply were obtained.
Consequently, in November 2021, the Company implemented an interim solution to meet the Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status and obtaining alternate sources of supply.
USA also provides water and wastewater services to several other New Jersey municipalities under contracts that are not regulated by a public utility commission as to rates and service. Under a marketing agreement with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware various water and wastewater related home maintenance programs.
USA operates the Borough of Highland Park, New Jersey’s (Highland Park) water utility and sewer utility under a ten-year operations and maintenance contract expiring in 2030. USA also provides water and wastewater services to several other New Jersey municipalities under contracts that are not regulated by a public utility commission as to rates and service.
In May 2010, he was elected Chairman of the Board, also serving as Chairman of the Boards of the Company’s subsidiary companies. He is a Past President of the National Association of Water Companies and past Chairman of the Board of the New Jersey Utilities Association, representing the state’s electric, gas, water and telecommunications industries.
He is a Past President of the National Association of Water Companies and past Chairman of the Board 11 of the New Jersey Utilities Association, representing the state’s electric, gas, water and telecommunications industries. He is a past Chairman of the Board of The Water Research Foundation where he continues to serve as a non-Trustee member of the Audit Committee.
He presently serves as Treasurer and member of the Board of Court Appointed Special Advocates of Middlesex County, NJ serving the needs of children living in foster care. A. Bruce O’Connor – Mr. O’Connor, a Certified Public Accountant, joined the Company in 1990 and was named Vice President and Chief Financial Officer in 1996 and Treasurer in 2014.
He has also served as a Director and member of the Executive Committee of the Board of Directors of the American Water Works Association. He presently serves as Treasurer and member of the Board of Trustees of Court Appointed Special Advocates of Middlesex County, NJ serving the needs of children living in foster care. A. Bruce O’Connor – Mr.
The Company also delivered various DEI trainings throughout 2022 to its entire employee base. The Company is focused on recruitment and/or development of both external and internal candidates so that all prospective and current employees are provided an opportunity to advance their careers.
The Company is focused on recruitment and/or development of both external and internal candidates so that all prospective and current employees are provided an opportunity to advance their careers. We are intentional in our efforts to attract candidates from historically marginalized groups and seek a diverse pool of candidates for apprenticeships and internship opportunities.
Tidewater Rate Matters On August 31, 2022, the DEPSC issued an Order requiring Tidewater to reduce its base rates charged to general metered and private fire customers by 6%, effective for service rendered on and after September 1, 2022.
The initial DEPSC order required Tidewater to reduce its base rates charged to general metered and private fire customers by 6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered as a result of Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1 million in 2023.
Simpson 49 Vice President-Information Technology Bernadette M. Sohler 62 Vice President-Corporate Affairs Dennis W. Doll – Mr. Doll joined the Company as Executive Vice President in November 2004 and was named President and Chief Executive Officer, and a Director of Middlesex, effective January 1, 2006.
Doll joined the Company as Executive Vice President in November 2004 and was named President and Chief Executive Officer, and a Director of Middlesex, effective January 1, 2006. In May 2010, he was elected Chairman of the Board, also serving as Chairman of the Boards of the Company’s subsidiary companies.
In June 2022, a portion of the enhanced treatment process was completed, placed into service and is effectively treating the ground water in compliance with all state and federal drinking water standards. The Middlesex System’s distribution storage facilities are used to supply water to customers at times of peak demand, outages and emergencies.
In June 2023, the Company completed the permanent construction of the entire Park Avenue Plant treatment upgrades and placed the upgrades into operation in full compliance with the new State of New Jersey PFAS water quality regulations. The Middlesex System’s distribution storage facilities are used to supply water to customers at times of peak demand, outages and emergencies.
The increase, effective October 1, 2022, is on an interim basis and subject to refund, with interest, pending final resolution expected in the second quarter of 2023.
The increase, effective October 1, 2022, was on an interim basis and subject to refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023. In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero in October 2023.
USA receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts. USA produced approximately 2% of our 2022 consolidated operating revenues. White Marsh White Marsh operates or maintains water and/or wastewater systems that serve approximately 4,500 service connections under 30 separate contracts.
USA produced approximately 2% of our 2023 consolidated operating revenues. White Marsh White Marsh operates or maintains water and/or wastewater systems that serve approximately 4,300 service connections under 31 separate contracts. White Marsh also owns two commercial properties that are leased to Tidewater for its administrative office campus and its field operations center.
Ginegaw joined Tidewater in 2004 and in 2007 was promoted to Director of Human Resources for Middlesex. In March 2012, Ms. Ginegaw was named Vice President-Human Resources. Prior to joining the Company, Ms. Ginegaw worked in various human resources positions in the healthcare and transportation/logistics industries. Ms.
Fullagar serves as Sector Chair of the New Jersey Infrastructure Advisory Committee and is a Member of the NJDEP’s Licensed Operator Advisory Committee. Lorrie B. Ginegaw – Ms. Ginegaw joined Tidewater in 2004 and in 2007 was promoted to Director of Human Resources for Middlesex. In March 2012, Ms. Ginegaw was named Vice President-Human Resources.
Under contract, it also services one municipal wastewater system in Burlington County, New Jersey with approximately 200 residential customers. Pinelands Wastewater produced approximately 1% of our 2022 consolidated operating revenues. USA USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a ten-year operations and maintenance contract expiring in 2032.
Pinelands Wastewater provides wastewater collection and treatment services to approximately 2,500 residential customers and one municipal wastewater system in Burlington County, New Jersey. Pinelands Wastewater produced approximately 1% of our 2023 consolidated operating revenues.
Removed
White Marsh also owns two commercial properties that are leased to Tidewater for its administrative office campus and its field operations center.
Added
Under a marketing agreement with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware various water and wastewater related home maintenance programs. HomeServe is a leading national provider of such home maintenance service programs. USA receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.
Removed
For further discussion of the impact of the COVID-19 pandemic on the Company, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation, Coronavirus (COVID-19 ) Pandemic .
Added
Middlesex Rate Matters In February 2024, Middlesex’s petition to the NJBPU, filed in May 2023, seeking permission to increase its base water rates was concluded, based on a negotiated settlement that is expected to increase annual operating revenues by $15.4 million effective March 1, 2024.
Removed
We are intentional in our efforts to attract candidates from historically marginalized groups and seek a diverse pool of candidates for 6 Index apprenticeships and internship opportunities. Statements on Diversity, Equity and Inclusion and our Human Rights Policy can be found on our website.
Added
The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of service.
Removed
As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings, was reset to zero.
Added
Net proceeds from the settlement of Middlesex’s 3M Company (3M) lawsuit were used to recover costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. The rate case settlement will result in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction in the March 31, 2024 balance sheet.
Removed
In March 2021, the NJBPU approved Middlesex’s annual petition to reset its PWAC tariff rate to recover additional costs of $1.1 million for the purchase of treated water from a non-affiliated regulated water utility. The new PWAC rate became effective April 4, 2021.
Added
The Company will also record in the first quarter of 2024 the recovery of $0.7 million and $2.4 million of prior year depreciation and carrying costs, respectively, as well as the recovery of $1.4 million of prior year costs which were associated with the interim solution to comply with the Notice, all of which were approved in the rate case settlement. 7 For further information on the 3M settlement agreement, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , Regulatory Notice of Non-Compliance and Regulatory Matters .
Removed
In June 2022, the Delaware Division of the Public Advocate had filed a petition with the DEPSC requesting that Tidewater’s rates be reduced based on the claim that Tidewater had been earning above its authorized rate of return. The rate reduction is expected to reduce annual revenues by approximately $2.2 million.
Added
In January 2024, the NJBPU approved Middlesex’s petition for the proposed cost recovery of its Lead Service Line Replacement (LSLR) Plan and cost recovery of project costs associated with replacing Middlesex customer-owned lead service lines. Replacement of Middlesex and Middlesex customer-owned lead service lines is required by the New Jersey LSLR Law.
Removed
These requests were necessitated by capital infrastructure investments both companies have made, or have committed to make, and increased operations and maintenance costs. We cannot predict whether the NJBPU will ultimately approve, deny, or reduce the amount of the requests. A decision by the NJBPU in both matters is expected in the first quarter of 2023.
Added
Under this legislation, the costs associated with replacing customer-owned lead service lines are recoverable through future customer surcharges. Cost recovery for replacing Company-owned lead service lines are recoverable through traditional base rate case filings. The current estimates for replacement of Middlesex and Middlesex customer-owned lead service lines are approximately $46 million to $77 million over a nine-year period.
Removed
The timing of the final decision by the Supreme Court of Pennsylvania and the final adjudication of this matter cannot be predicted at this time. The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.
Added
Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total revenues established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually, beginning in April 2024, the Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible investments made during the period.
Removed
COVID-19 Pandemic The NJBPU and the DEPSC have allowed for potential future recovery in customer rates of incremental costs related to the COVID-19 pandemic. The Company has not deferred any COVID-19 related incremental costs.
Added
DSIC rates remain in effect until Middlesex’s next base rate case increase subsequent to the March 1, 2024 increase. Under the terms of the Foundational Filing, the Company is required to file a base rate petition before November 2026.
Removed
Neither jurisdiction has yet to establish a timeline or definitive formal procedures for seeking cost recovery (for further discussion of the impact of COVID-19 on the Company, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Coronavirus (COVID-19 )).
Added
As part of the negotiated settlement, the PWAC was reset to zero. Tidewater Rate Matters In December 2023, the DEPSC approved Tidewater’s application to implement a new DSIC. Effective January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate revenue of approximately $1.3 million annually.
Removed
The NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level of 14 parts per trillion. Neither the NJDEP nor Middlesex characterized this exceedance as an acute health threat. 9 Index However, Middlesex was required to notify its affected customers and complied in November 2021 as required by the regulation.
Added
A Delaware DISC is subject to a semi-annual reset with an overall maximum rate of 7.5%. In October 2023, the DEPSC issued an Order that made a temporary base rate reduction permanent.

… 18 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

16 edited+9 added−4 removed59 unchanged
Biggest changeFurther, acquisitions may result in dilution in the value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results. In addition, the assets, operations, contracts or companies we acquire may not achieve the revenues and profitability projected. Our ability to achieve organic customer growth in our market area is dependent on the residential building market.
Biggest changeIn addition, the assets, operations, contracts or companies we acquire may not achieve the revenues and profitability projected. Our ability to achieve organic customer growth in our market area is dependent on the residential building market. New housing starts and home sale closings are one element that impacts our rate of growth and therefore, may not meet our expectations.
Similarly, the DEPSC regulates our public utility companies in Delaware. We cannot provide assurance as to when we will request approval for any such matter, nor can we predict whether these Utility Commissions will approve, deny or reduce the amount of such requests. Certain costs are not completely within our control.
Similarly, the DEPSC regulates our public utility companies in Delaware. We cannot provide assurance as to when we will request approval for any such matter, nor can we predict whether these Public Utility Commissions will approve, deny or reduce the amount of such requests. Certain costs are not completely within our control.
There are also similar NJDEP regulations for our New Jersey water systems. The NJDEP and DEDPH a monitor our activities and review the results of water quality tests we perform for adherence to applicable regulations. In addition, Government Environmental Regulatory Agencies are continually reviewing regulations governing the limits of certain organic compounds found in the water as byproducts of treatment.
There are also similar NJDEP regulations for our New Jersey water systems. The NJDEP and DEDPH monitor our activities and review the results of water quality tests we perform for adherence to applicable regulations. In addition, Government Environmental Regulatory Agencies are continually reviewing regulations governing the limits of certain organic compounds found in the water as byproducts of treatment.
We cannot raise utility rates in our regulated businesses without petitioning the appropriate Utility Commissions. If these agencies modify, delay or deny our petition, our revenues will not increase and our earnings will decline unless we are able to reduce costs without degrading service quality.
We cannot raise utility rates in our regulated businesses without petitioning the appropriate Public Utility Commissions. If these agencies modify, delay or deny our petition, our revenues will not increase and our earnings will decline unless we are able to reduce costs without degrading service quality.
Also, third parties entering into agreements to operate municipal utility systems may adversely affect the management of our long-term agreements to supply water or wastewater services on a contract basis to those municipalities, which could adversely affect our financial results. 14 Index We have short-term and long-term contractual obligations for water, wastewater and storm water system operation and maintenance under which we may incur costs in excess of payments received.
Also, third parties entering into agreements to operate municipal utility systems may adversely affect the management of our long-term agreements to supply water or wastewater services on a contract basis to those municipalities, which could adversely affect our financial results. 15 We have short-term and long-term contractual obligations for water, wastewater and storm water system operation and maintenance under which we may incur costs in excess of payments received.
Our performance is affected by many factors, some of which are beyond our control. 15 Index We believe cash generated from operations and, if necessary, borrowings under existing credit facilities, will be sufficient to enable us to make our debt payments as they become due.
Our performance is affected by many factors, some of which are beyond our control. 16 We believe cash generated from operations and, if necessary, borrowings under existing credit facilities, will be sufficient to enable us to make our debt payments as they become due.
Contamination of the water supply or the water service provided to our customers could result in substantial injury or damage to our customers, employees or others and we could be exposed to substantial claims and litigation, which are inherently subject to uncertainties and are potentially subject to unfavorable regulatory and/or legal 12 Index actions.
Contamination of the water supply or the water service provided to our customers could result in substantial injury or damage to our customers, employees or others and we could be exposed to substantial claims and litigation, which are inherently subject to uncertainties and are potentially subject to unfavorable regulatory and/or legal 13 actions.
We are subject to USEPA regulations under the Federal Safe Drinking Water Act and under the Federal Clean Water Act regarding 13 Index wastewater services. Regulations under the Safe Drinking Water Act include the Lead and Copper Rule, the maximum contaminant levels established for various volatile organic compounds, the Federal Surface Water Treatment Rule and the Total Coliform Rule.
We are subject to USEPA regulations under the Federal Safe Drinking Water Act and under the Federal Clean Water Act regarding 14 wastewater services. Regulations under the Safe Drinking Water Act include the Lead and Copper Rule, the maximum contaminant levels established for various volatile organic compounds, the Federal Surface Water Treatment Rule and the Total Coliform Rule.
Our regulated utility companies cannot issue debt or equity securities without prior regulatory approval. We require financing from external sources to fund the ongoing capital program for the improvement in our utility system assets and for planned expansion of those systems. We expect to spend approximately $266 million for capital projects through 2025.
Our regulated utility companies cannot issue debt or equity securities without prior regulatory approval. We require financing from external sources to fund the ongoing capital program for the improvement in our utility system assets and for planned expansion of those systems. We expect to spend approximately $226 million for capital projects through 2026.
Market factors can adversely affect the rate of return on assets held in trusts to satisfy our future postretirement benefit obligations, as well negatively affect interest rates, which impacts the discount rates used in the determination of our postretirement benefit actuarial valuations. In addition, changes in demographics, such as increases in life expectancy assumptions, can increase future postretirement benefit obligations.
Market factors can adversely affect the rate of return on assets held in trusts to satisfy our future postretirement benefit obligations, as well as negatively affect interest rates, which impacts the discount rates used in the determination of our postretirement benefit actuarial valuations.
If we lose the services of certain members of our team, or are unable to attract and retain qualified personnel in key roles, our operating results could be negatively impacted.
Our success depends significantly on the continued individual and collective contributions of our team. If we lose the services of certain members of our team, or are unable to attract and retain qualified personnel in key roles, our operating results could be negatively impacted.
Possible impacts associated with a cyber-incident may include remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulations, including standards for drinking water, litigation and reputational damage.
Possible impacts associated with a cyber-incident may include remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulations, including standards for drinking water, litigation and reputational damage. 18 We depend significantly on the technical and management services of our team, and the departure of any of certain persons could cause our operating results to temporarily be short of our expectations.
New housing starts and home sale closings are one element that impacts our rate of growth and therefore, may not meet our expectations. We expect our revenues to increase from customer growth for our regulated water operations as a result of anticipated construction, sale and close of new housing units.
We expect our revenues to increase from customer growth for our regulated water operations as a result of anticipated construction, sale and close of new housing units.
Any negative impact to these factors, either individually or a combination thereof, may have a material adverse effect on our financial condition and results of operations. An element of our growth strategy is the acquisition of water and wastewater assets, operations, contracts or companies. Any pending or future acquisitions we decide to undertake will involve risks.
An element of our growth strategy is the acquisition of water and wastewater assets, operations, contracts or companies. Any pending or future acquisitions we decide to undertake will involve risks. The acquisition and/or operation of water and wastewater systems is an element of our growth strategy.
The acquisition and/or operation of water and wastewater systems is an element of our growth strategy. This strategy depends on identifying suitable opportunities that meet our risk/reward profile and reaching mutually agreeable terms with acquisition candidates or contract parties.
This strategy depends on identifying suitable opportunities that meet our risk/reward profile and reaching mutually agreeable terms with acquisition candidates or contract parties. Further, acquisitions may result in dilution in the value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results.
This could be used by the Board of Directors to discourage, delay or prevent an acquisition the Board of Directors determines is not in the best interest of the common shareholders. 16 Index General Risks We rely on our information technology systems to help manage our operations.
This could be used by the Board of Directors to discourage, delay or prevent an acquisition the Board of Directors determines is not in the best interest of the common shareholders. 17 We identified material weaknesses in our internal controls which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price.
Removed
The COVID-19 pandemic and the attempt to contain it may harm our business, results of operations, financial condition and liquidity.
Added
In addition, changes in demographics, such as increases in life expectancy assumptions, can increase future postretirement benefit obligations. Any negative impact to these factors, either individually or a combination thereof, may have a material adverse effect on our financial condition and results of operations.
Removed
In January 2023, the United States Secretary of Health and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic with an announced end to the declared health emergency on May 11, 2023.
Added
Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting.
Removed
While the Company’s operations and capital construction program have not been materially disrupted to date from the pandemic, the impact on economic conditions nationally and the areas the Company operates continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future.
Added
During the fourth quarter of 2023, management identified a material weakness in internal control related to ineffective information technology general controls (ITGCs) in the areas of user access and change management over certain information technology (IT) systems that support the Company’s financial reporting processes.
Removed
We depend significantly on the technical and management services of our team, and the departure of any of certain persons could cause our operating results to temporarily be short of our expectations. Our success depends significantly on the continued individual and collective contributions of our team.
Added
Certain of those controls were found to be deficient because of a lack of sufficient IT control processes designed to prevent or detect unauthorized changes in applications and data in selected IT environments. In December 2023, management implemented various auditing and monitoring solutions that provide greater transparency into changes made within our IT systems.
Added
These control solutions are supported by a timely review process that focuses on the proper authorization and approval of IT system changes. Due to the timing of implementing the solutions, the controls implemented did not operate over a sufficient time period to adequately test and validate the remediation and reassess other ITGCs, which may require further remediation actions.
Added
In addition, there were ineffective controls related to income tax accounting for a non-routine transaction, which management has identified as a material weakness in internal controls over financial reporting. Therefore, management concluded that our internal control over financial reporting was not effective as of December 31, 2023.
Added
Until remediation measures are completed, fully tested and determined effective, we will not be able to conclude that the material weaknesses have been remediated.
Added
If we are unable to determine that our remediation measures are effective or otherwise remediate the material weaknesses, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affecting investor confidence in our financial statements and adversely impacting our stock price.
Added
General Risks We rely on our information technology systems to help manage our operations.

Item 2. Properties

Properties — owned and leased real estate

7 edited+0 added−1 removed10 unchanged
Biggest changeAlso included are a 58,600 foot transmission main and a 38,800 foot transmission main, augmented with a long-term, non-exclusive agreement with East Brunswick to transport water through the East Brunswick system to several of our other contract customers.
Biggest changeAlso included are a 58,600 foot transmission main and a 38,800 foot transmission main, augmented with a long-term, non-exclusive agreement with East Brunswick to transport water through the East Brunswick system to several of our other contract customers. 21 The Middlesex System’s storage facilities consist of a 10 million gallon reservoir at the CJO Plant, 5 million gallon and 2 million gallon reservoirs in Edison and a 2 million gallon reservoir at the Park Avenue Plant.
The CJO Plant includes chemical storage and chemical feed equipment, two dual rapid mixing basins, four upflow clarifiers which are also called superpulsators, two ozone contactors, twelve rapid filters containing gravel, sand and anthracite for water treatment and a steel washwater tank.
The CJO Plant includes chemical storage and chemical feed equipment, two dual rapid mixing basins, four upflow clarifiers which are also called superpulsators, three ozone contactors, twelve rapid filters containing gravel, sand and anthracite for water treatment and a steel washwater tank.
In addition, Tidewater maintains a field operations center servicing its largest service territory in Sussex County, Delaware. The operations center is located on a 2.9 acre parcel owned by White Marsh, and consists of three buildings totaling approximately 12,000 square feet. 18 Index Pinelands Water System Pinelands Water owns well site and storage properties in Southampton Township, New Jersey.
In addition, Tidewater maintains a field operations center servicing its largest service territory in Sussex County, Delaware. The operations center is located on a 2.9 acre parcel owned by White Marsh, and consists of three buildings totaling approximately 12,000 square feet. Pinelands Water System Pinelands Water owns well site and storage properties in Southampton Township, New Jersey.
The leased space, which is under contract through 2028, houses our corporate administrative functions including executive, accounting, customer service and billing, engineering, human resources, information technology and legal. Tidewater System The Tidewater System is comprised of 87 production plants that vary in pumping capacity from 46,000 gallons per day to 4.4 mgd.
The leased space, which is under contract through 2028, houses our corporate administrative functions including executive, accounting, customer service and billing, engineering, human resources, information technology and legal. Tidewater System The Tidewater System is comprised of 85 production plants that vary in pumping capacity from 46,000 gallons per day to 4.4 mgd.
Its wastewater collection system is comprised of approximately 24 miles of sewer lines. Bayview System The Bayview System includes two well sites, which are located in Downe Township, Cumberland County, New Jersey. Water is transported to its customers through our 4.2 mile distribution system.
Its wastewater collection system is comprised of approximately 24 miles of sewer lines. Fortescue System The Fortescue System includes two well sites, which are located in Downe Township, Cumberland County, New Jersey. Water is transported to its customers through our 4.2 mile distribution system.
ITEM 2. PROPERTIES. Utility Plant The water utility plant in our systems consists of source of supply, pumping, water treatment, transmission and distribution, general facilities and all appurtenances, including all connecting pipes. 17 Index The wastewater utility plant in our systems consist of pumping, treatment, collection mains, general facilities and all appurtenances, including all connecting pipes.
ITEM 2. PROPERTIES. Utility Plant The water utility plant in our systems consists of source of supply, pumping, water treatment, transmission and distribution, general facilities and all appurtenances, including all connecting pipes. The wastewater utility plant in our systems consist of pumping, treatment, collection mains, general facilities and all appurtenances, including all connecting pipes.
Water is transported to our customers through 888 miles of transmission and distribution mains. Storage facilities include 46 tanks, with an aggregate capacity of 7.9 million gallons. The Delaware office property, located on an eleven-acre parcel owned by White Marsh, consists of two office buildings totaling approximately 17,000 square feet.
Water is transported to our customers through 917 miles of transmission and distribution mains. Storage facilities include 48 tanks, with an aggregate capacity of 9.9 million gallons. The Delaware office property, located on an eleven-acre parcel owned by White Marsh, consists of two office buildings totaling approximately 17,000 square feet.
Removed
The Middlesex System’s storage facilities consist of a 10 million gallon reservoir at the CJO Plant, 5 million gallon and 2 million gallon reservoirs in Edison and a 2 million gallon reservoir at the Park Avenue Well Field.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

9 edited+6 added−1 removed5 unchanged
Biggest changeDiscovery in this case is currently underway with a scheduled end date of January 9, 2024. The Company is a defendant in other lawsuits in the normal course of business. We believe the resolution of these pending claims and legal proceedings will not have a material adverse effect on the Company’s consolidated financial statements.
Biggest changeWe believe the resolution of these pending claims and legal proceedings will not have a material adverse effect on the Company’s consolidated financial statements.
On February 16, 2022, Middlesex filed a Motion To Dismiss Plaintiffs’ complaint for: (1) failure to include an indispensable party, 3M Company (3M) , whom Middlesex claims is the source of the PFOA in the Company’s wells; and (2) failure to state legally cognizable claims in support of all of the counts set forth in the complaint.
On February 16, 2022, Middlesex filed a Motion To Dismiss Plaintiffs’ complaint for: (1) failure to include an indispensable party, 3M, whom Middlesex claims is the source of the PFOA in the Company’s wells; and (2) failure to state legally cognizable claims in support of all of the counts set forth in the complaint.
Plaintiff’s motion for Class Certification and further discovery is postponed pending the outcome of Middlesex’s Motion To Dismiss. On April 21, 2022, the Judge granted Vera’s Motion for Class Certification and granted in part and denied in part Middlesex’s Motion to Dismiss. On May 4, 2022, the Company impleaded 3M as a third-party defendant in this lawsuit.
Plaintiff’s motion for Class Certification and further discovery was postponed pending the outcome of Middlesex’s Motion To Dismiss. On April 21, 2022, the Judge granted Vera’s Motion for Class Certification and granted in part and denied in part Middlesex’s Motion to Dismiss. On May 4, 2022, the Company impleaded 3M as a third-party defendant in this lawsuit.
In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water filter replacement and other claimed related costs. These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time. The Company’s insurance provider has acknowledged coverage of potential liability resulting from these lawsuits.
In 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water filter replacement and other claimed related costs. These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.
Neither the NJDEP nor Middlesex characterized this exceedance as an acute health emergency. However, Middlesex was required to notify its affected customers and the Company complied in due course. Water currently being delivered to customers is in compliance with all USEPA and NJDEP drinking water standards, including the newly established water quality standard for PFOA.
However, Middlesex was required to notify its affected customers and the Company complied in due course. Water currently being delivered to customers is in compliance with all USEPA and NJDEP drinking water standards, including the newly established water quality standard for PFOA.
On July 6, 2022, the Company filed a Motion to Remove this case from New Jersey Superior Court to the United States District Court for the District of New Jersey. Vera is currently challenging Middlesex’s Motion To Remove at the U.S.
On July 6, 2022, the Company filed a Motion to Remove this case from New Jersey Superior Court to the United States District Court for the District of New Jersey.
ITEM 3. LEGAL PROCEEDINGS. PFOA Regulatory Notice of Non-Compliance – In September 2021, the NJDEP issued a Notice to Middlesex based on self-reporting by Middlesex that the level of PFOA in water treated at its Park Avenue Wellfield Treatment Plant in New Jersey exceeded a recently promulgated NJDEP standard effective in 2021.
ITEM 3. LEGAL PROCEEDINGS. In September 2021, the NJDEP issued a Notice to Middlesex based on self-reporting by Middlesex that the level of PFOA in water treated at its Park Avenue Plant in New Jersey exceeded a recently promulgated NJDEP standard effective in 2021. Neither the NJDEP nor Middlesex characterized this exceedance as an acute health emergency.
District Court for the District of New Jersey in an attempt to remand the case back to the Superior Court of New Jersey. 19 Index ● Lonsk et al. v.
Vera challenged Middlesex’s Motion To Remove at the United States District Court for the District of New Jersey in an attempt to remand the case back to the Superior Court of New Jersey.
For further discussion of this matter, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Regulatory Notice of Non-Compliance. The following summarizes the legal complaints brought against Middlesex related to this matter: ● Vera et al. v.
The following summarizes the legal complaints brought against Middlesex related to this matter: 22 Vera et al. v.
Removed
The Company has also initiated a separate lawsuit against 3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances, which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.
Added
On March 21, 2023, the United States District Court for the District of New Jersey issued an order remanding the case back to the Superior Court of New Jersey. Discovery is underway in this matter.
Added
On August 29, 2023, the Company executed a settlement agreement with 3M to resolve a lawsuit related to perfluoroalkyl substances in which Middlesex and 3M agreed to enter into joint mediation to resolve this and another PFOA-related class action lawsuit against Middlesex and 3M seeking restitution for medical, water replacement and other claimed related costs.
Added
A mediation session among the parties was held on November 17, 2023. The Superior Court of New Jersey has set a deadline of February 29, 2024 for the parties to submit a final settlement agreement with the Court should the parties be able to reach a settlement. Lonsk et al. v.
Added
On August 29, 2023 the Company executed a settlement agreement with 3M to resolve a lawsuit related to perfluoroalkyl substances in which Middlesex and 3M agreed to enter into a joint mediation, scheduled for November 2023, to resolve this and another PFOA-related class action lawsuit against Middlesex and 3M seeking restitution for medical, water replacement and other claimed related costs.
Added
Discovery in this case is currently underway and continues. A mediation session among the parties was held on November 17, 2023. The Superior Court of New jersey has set a deadline of March 4, 2024 for the parties to submit a final settlement agreement with the Court should the parties be able to reach a settlement.
Added
For further discussion of the 3M settlement and the case above, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Regulatory Notice of Non-Compliance. The Company is a defendant in other lawsuits in the normal course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−2 removed4 unchanged
Biggest changeThe S&P 500 Stock Index measures the stock performance of 500 large companies listed on stock exchanges in the United States. 21 Index COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Middlesex Water Company, the S&P 500 Stock Index and a Peer Group* * Peer group includes American States Water Company, Artesian Resources Corp., California Water Service Group, Global Water Resources Inc, SJW Corp., York Water Company and Middlesex.
Biggest changeThe S&P 500 Stock Index measures the stock performance of 500 large companies listed on stock exchanges in the United States. 24 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Middlesex Water Company, the S&P 500 Stock Index and a Peer Group* * Peer group includes American States Water Company, Artesian Resources Corp., California Water Service Group, Global Water Resources Inc, SJW Corp., York Water Company and Middlesex. 2018 2019 2020 2021 2022 2023 Middlesex Water Company 100.00 121.14 140.27 235.68 156.10 132.41 S&P 500 Stock Index 100.00 131.49 155.68 200.37 164.08 207.21 Peer Group 100.00 123.86 126.00 164.71 148.74 127.88
Set forth below is a graph comparing the yearly change in the cumulative total return (which includes reinvestment of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-owned water utilities, and the S&P 500 Stock Index for the period of five years commencing December 31, 2017.
Set forth below is a graph comparing the yearly change in the cumulative total return (which includes reinvestment of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-owned water utilities, and the S&P 500 Stock Index for the period of five years commencing December 31, 2018.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is traded on the NASDAQ Stock Market, LLC, under the symbol MSEX. As of December 31, 2022, there were 1,751 holders of record. The Company has paid dividends on its common stock each year since 1912.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is traded on the NASDAQ Stock Market, LLC, under the symbol MSEX. As of December 31, 2023, there were 1,717 holders of record. The Company has paid dividends on its common stock each year since 1912.
The maximum number of shares authorized for award under this plan is 0.3 million shares, of which approximately 80% remain available for award. The Company maintains a stock plan for its independent members of the Board of Directors as a component of their compensation.
The maximum number of shares authorized for award under this plan is 0.3 million shares, of which approximately 75% remain available for future issuance. The Company maintains a stock plan for its independent members of the Board of Directors as a component of their compensation.
In 2022, shares of the Company’s common stock valued at $0.3 million were granted and issued to the Independent Directors. The maximum number of shares authorized for grant under this plan is 0.1 million. Approximately 46% of the authorized shares remain available for future issuance.
In 2023, shares of the Company’s common stock valued at $0.4 million were granted and issued to the Independent Directors. The maximum number of shares authorized for grant under this plan is 0.1 million. Approximately 42% of the authorized shares remain available for future issuance.
Since the inception of the Investment Plan and its predecessor plan, the Company has periodically replenished the level of authorized shares in the plans. Currently, 0.2 million shares remain registered with the SEC for the Investment Plan and available for potential issuance to participants.
Since the inception of the Investment Plan and its predecessor plan, the Company has periodically replenished the level of authorized shares in the plans. Currently, 0.7 million shares remain registered with the SEC and available for issuance to participants under the Investment Plan. The Company raised approximately $12.1 million through the issuance of shares under the Investment Plan during 2023.
The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment. The Company maintains a long-term incentive compensation plan for certain management employees where awards are made in the form of restricted common stock.
The Company maintains a long-term incentive compensation plan for certain management employees where awards are made in the form of restricted common stock.
On March 1, 2023, the Company will begin offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering will continue until 200,000 shares are purchased at the discounted price or December 1, 2023, whichever event occurs first.
On March 1, 2023, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering ended December 1, 2023. The discount applied to all common stock purchases made under the Investment Plan during that time period, whether by optional cash payment or by dividend reinvestment.
Removed
Middlesex has filed a petition with the NJBPU seeking to increase the number of authorized shares under the Investment Plan by 0.7 million shares. The Company raised approximately $10.3 million through the issuance of shares under the Investment Plan during 2022.
Removed
December 31, 2017 2018 2019 2020 2021 2022 Middlesex Water Company 100.00 136.54 165.40 191.52 321.79 213.14 S&P 500 Stock Index 100.00 95.62 125.72 148.85 191.58 156.89 Peer Group 100.00 108.39 134.25 136.58 178.54 161.23

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+31 added−32 removed32 unchanged
Biggest changeDiluted earnings per share were $2.39 and $2.07 for the years ended December 31, 2022 and 2021, respectively. 28 Index Results of Operations for 2021 as Compared to 2020 (In Millions) Years Ended December 31, 2021 2020 Regulated Non- Regulated Total Regulated Non- Regulated Total Revenues $ 130.8 $ 12.3 $ 143.1 $ 129.5 $ 12.1 $ 141.6 Operations and maintenance expenses 65.4 8.3 73.7 62.5 8.3 70.8 Depreciation expense 20.9 0.2 21.1 18.3 0.2 18.5 Other taxes 14.9 0.2 15.1 14.7 0.2 14.9 Operating income 29.6 3.6 33.2 34.0 3.4 37.4 Other income (expense), net 5.6 0.3 5.9 4.3 0.1 4.4 Interest expense 8.1 — 8.1 7.5 — 7.5 Income taxes (6.7 ) 1.2 (5.5 ) (5.1 ) 1.0 (4.1 ) Net income $ 33.8 $ 2.7 $ 36.5 $ 35.9 $ 2.5 $ 38.4 Operating Revenues Operating revenues for the year ended December 31, 2021 increased $1.5 million from the same period in 2020 due to the following factors: ● Middlesex System revenues decreased by $0.4 million due to lower water demand from general meter service and wholesale customers, offset by an increase in the PWAC tariff rate effective April 4, 2021 (see Rates, Middlesex above for further discussion); ● Tidewater System revenues increased $1.7 million due to additional customers and higher customer demand for water, partially offset by $1.0 million due to the DSIC revenue refund (for further information, see Rates, Tidewater above for further discussion ) ; ● Non-regulated revenues increased $0.3 million, primarily due to USA’s contract to operate and maintain Highland Park’s water and wastewater systems, which commenced July 1, 2020; and ● All other revenue categories decreased $0.1 million.
Biggest changeResults of Operations for 2023 as Compared to 2022 (In Millions) Years Ended December 31, 2023 2022 Regulated Non- Regulated Total Regulated Non- Regulated Total Revenues $ 154.0 $ 12.3 $ 166.3 $ 150.6 $ 11.8 $ 162.4 Operations and maintenance expenses 74.8 8.4 83.2 70.8 8.3 79.1 Depreciation expense 24.9 0.3 25.2 22.8 0.2 23.0 Other taxes 18.5 0.2 18.7 18.0 0.2 18.2 Gain on Sale of Subsidiary — — — 5.2 — 5.2 Operating income 35.8 3.4 39.2 44.2 3.1 47.3 Other income (expense), net 6.3 0.2 6.5 7.4 0.3 7.7 Interest expense 13.1 — 13.1 9.4 — 9.4 Income taxes (0.1 ) 1.1 1.0 2.0 1.2 3.2 Net income $ 29.1 $ 2.5 $ 31.6 $ 40.2 $ 2.2 $ 42.4 30 Operating Revenues Operating revenues for the year ended December 31, 2023 increased $3.8 million from the same period in 2022 due to the following factors: ● Middlesex System revenues increased by $4.2 million due to the implementation of the final phase of the 2021 base rate case increase on January 1, 2023 and the PWAC rate increase offset by lower weather-driven demand across all customer classes (for further discussion of Middlesex’s 2021 base and PWAC rate increases, see Rates, Middlesex above); ● Tidewater System revenues decreased by $0.9 million due to a DEPSC ordered rate reduction in September 2022, lower customer connection fees and lower weather-driven customer demand partially offset by an increase in customers (for further information on the Tidewater rate reduction, see Rates, Tidewater above ) ; ● Pinelands System revenues increased $0.2 million due to the implementation of a base rate increase effective April 15, 2023 (for further discussion of Pinelands 2023 base rate increase, see Rates, Pinelands above) ; and ● Non-regulated revenues increased $0.3 million, primarily due to higher supplemental contract services.
Partially offsetting these increases were greater income tax benefits associated with increased repair expenditures on tangible property in the Middlesex system. Net Income and Earnings Per Share Net income for the year ended December 31, 2022 increased $5.9 million as compared with the same period in 2021.
Partially offsetting these increases were greater income tax benefits associated with increased repair expenditures on tangible property in the Middlesex system. 33 Net Income and Earnings Per Share Net income for the year ended December 31, 2022 increased $5.9 million as compared with the same period in 2021.
Rates Middlesex – In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million.
In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million.
Tidewater’s subsidiary, White Marsh, services approximately 4,500 customers in Kent and Sussex Counties through various operations and maintenance contracts. USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028.
Tidewater’s subsidiary, White Marsh, services approximately 4,300 customers in Kent and Sussex Counties through various operations and maintenance contracts. USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028.
The primary assumptions used for determining future retirement benefit plans’ obligations and costs, which are reviewed and revised as needed each year, are as follows: ● Discount Rate - calculated based on market rates for long-term, high-quality corporate bonds specific to the expected duration of our Pension Plan and Other Benefits Plan’s liabilities; ● Compensation Increase - based on management projected future employee compensation increases; 35 Index ● Long-Term Rate of Return - determined based on expected returns from our asset allocation for our Pension Plan and Other Benefits Plan assets; ● Mortality - The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality Improvement Scale MP-2021 for the 2022 valuation); and ● Healthcare Cost Trend Rate - based on management projected future healthcare costs.
The primary assumptions used for determining future retirement benefit plans’ obligations and costs, which are reviewed and revised as needed each year, are as follows: ● Discount Rate - calculated based on market rates for long-term, high-quality corporate bonds specific to the expected duration of our Pension Plan and Other Benefits Plan’s liabilities; ● Compensation Increase - based on management projected future employee compensation increases; ● Long-Term Rate of Return - determined based on expected returns from our asset allocation for our Pension Plan and Other Benefits Plan assets; ● Mortality - The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality Improvement Scale MP-2021); and ● Healthcare Cost Trend Rate - based on management projected future healthcare costs.
Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey. The Middlesex System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Our Bayview System provides water services in Downe Township, New Jersey.
Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey. The Middlesex System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Our Fortescue System provides water services in Downe Township, New Jersey.
To pay for our capital program in 2023, we estimate we will utilize some or all of the following: ● Internally generated funds; ● Short-term borrowings, as needed, through $140 million of available lines of credit with several financial institutions.
To pay for our capital program in 2024, we estimate we will utilize some or all of the following: ● Internally generated funds; ● Short-term borrowings, as needed, through $140 million of available lines of credit with several financial institutions.
Our other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey. Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC (Southern Shores), provide water services to approximately 56,000 retail customers in New Castle, Kent and Sussex Counties, Delaware.
Our other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey. Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC (Southern Shores), provide water services to approximately 59,000 retail customers in New Castle, Kent and Sussex Counties, Delaware.
In addition, we do not engage in trading activities involving non-exchange traded contracts. 34 Index Critical Accounting Policies and Estimates The application of accounting policies and standards often requires the use of estimates, assumptions and judgments.
In addition, we do not engage in trading activities involving non-exchange traded contracts. Critical Accounting Policies and Estimates The application of accounting policies and standards often requires the use of estimates, assumptions and judgments.
Proceeds will be used to reduce the Company’s outstanding balances under its lines of credit; ● In November 2021, Middlesex closed on a $19.5 million, 2.79% private placement of FMBs with a 2041 maturity date designated as Series 2021A.
In November 2021, Middlesex closed on a $19.5 million, 2.79% private placement of FMBs with a 2041 maturity date designated as Series 2021A. Proceeds were used to reduce the Company’s outstanding balances under its lines of credit.
Some result in direct obligations on the Company’s balance sheet while others are commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated financial statements. The table below presents our known contractual obligations for the periods specified as of December 31, 2022.
Some result in direct obligations on the Company’s balance sheet while others are commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated financial statements. 37 The table below presents our known contractual obligations for the periods specified as of December 31, 2023.
Other Income, net Other Income, net for the year ended December 31, 2022 increased $1.8 million from the same period in 2021 primarily due to higher actuarially-determined retirement benefit plans non-service benefit partially offset by lower Allowance for Funds Used During Construction (AFUDC) resulting from a reduced level of capital projects under construction.
Other Income, net Other Income, net for the year ended December 31, 2022 increased $1.8 million from the same period in 2021 primarily due to higher actuarially-determined retirement benefit plans non-service benefit partially offset by lower AFUDC resulting from a reduced level of capital projects under construction.
Interest Charges Interest charges for the year ended December 31, 2022 increased $1.3 million from the same period in 2021 due to higher long-term and short-term debt outstanding in 2022 as compared to 2021 and higher average interest rates in 2022 as compared to 2021.
Interest Charges Interest charges for the year ended December 31, 2022 increased $1.3 million from the same period in 2021 due to higher average debt outstanding and higher average interest rates in 2022 as compared to 2021 .
Capital Expenditures and Commitments To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and, when market conditions are favorable, proceeds from sales to the public of our common stock. The table below summarizes our estimated capital expenditures for the years 2023-2025.
Capital Expenditures and Commitments To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and, when market conditions are favorable, proceeds from sales to the public of our common stock. 34 The table below summarizes our estimated capital expenditures for the years 2024-2026.
The effect on the timing and amount of these payments resulting from potential changes in actuarial assumptions and returns on plan assets cannot be estimated. In 2022, the Company contributed $2.8 million to its retirement benefit plans and expects to contribute approximately $2.9 million in 2023.
The effect on the timing and amount of these payments resulting from potential changes in actuarial assumptions and returns on plan assets cannot be estimated. In 2023, the Company contributed $1.3 million to its retirement benefit plans and expects to contribute approximately $1.8 million in 2024.
Consequently, Tidewater reset its Distribution System Improvement Charge (DSIC) rate to zero effective April 1, 2021 and refunded approximately $1.0 million to customers principally in the form of an account credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Consequently, Tidewater reset its DSIC rate to zero effective April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Cash Flows from Investing Activities For the year ended December 31, 2022, cash flows used in investing activities increased $8.8 million to $88.2 million, which was attributable to higher utility plant expenditures partially offset by cash received from the sale of Middlesex’s regulated wastewater subsidiary in January 2022 .
Cash Flows from Investing Activities For the year ended December 31, 2023, cash flows used in investing activities increased $2.0 million to $90.2 million, which was attributable to cash received from the sale of Middlesex’s regulated wastewater subsidiary in January 2022 partially offset by lower utility plant expenditures.
Beginning in 2025 and thereafter, inflation based rate increases cannot exceed the lesser of the regional Consumer Price Index or 3%. Inflation based increases are in addition to the threshold rate increases. The agreement expires on December 31, 2029.
Beginning in 2025 and thereafter, inflation-based rate increases cannot exceed the lesser of the regional Consumer Price Index or 3%. Inflation based increases are in addition to the threshold rate increases.
Sources of Liquidity Short-term Debt - In January 2022, the Company increased available lines of credit from $110 million to $140 million. The outstanding borrowings under the credit lines at December 31, 2022 were $55.5 million, at a weighted average interest rate of 5.17%.
Sources of Liquidity Short-term Debt - In January 2022, the Company increased available lines of credit from $110 million to $140 million. The outstanding borrowings under the credit lines at December 31, 2023 were $42.8 million, at a weighted average interest rate of 6.50%.
In May 2022, Middlesex repaid its two outstanding NJIB construction loans by issuing FMBs to the NJIB under two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million).
Proceeds were used to reduce the Company’s outstanding balances under its bank lines of credit. In May 2022, Middlesex repaid its two outstanding NJIB construction loans by issuing FMBs to the NJIB under two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million).
SRF programs provide low cost financing for projects meeting certain water quality and system improvement benchmarks (see discussion under “ Sources of Liquidity-Long-term Debt ” below); ● Proceeds from the sale and issuance of FMBs in private placement offerings (see discussion under “ Sources of Liquidity-Long-term Debt ” below); ● Proceeds from other long-term borrowings (see discussion under “ Sources of Liquidity-Long-term Debt ” below); ● Proceeds from common stock sales through the Investment Plan (see discussion under “ Sources of Liquidity-Common Stock ” below); and ● Proceeds from a common stock sale (see discussion under “ Sources of Liquidity-Common Stock ” below).
SRF programs provide low cost financing for projects meeting certain water quality and system improvement benchmarks (see discussion under “ Sources of Liquidity-Long-term Debt ” below); ● Proceeds from other long-term borrowings (see discussion under “ Sources of Liquidity-Long-term Debt ” below); and ● Proceeds from common stock sales through the Middlesex Water Company Investment Plan (the Investment Plan) (see discussion under “ Sources of Liquidity-Common Stock ” below).
As of December 31, 2022, $55.5 million was outstanding under these lines of credit (see discussion under “ Sources of Liquidity-Short-term Debt ” below); 31 Index ● Proceeds from the Delaware State Revolving Fund (SRF).
As of December 31, 2023, $42.8 million was outstanding under these lines of credit (see discussion under “ Sources of Liquidity-Short-term Debt ” below); ● Proceeds from the Delaware State Revolving Fund (SRF) Program.
Increases in certain operating costs impact our liquidity and capital resources. We continually monitor the need for timely rate filing to minimize the lag between the time we experience increased operating costs and capital expenditures and the time we receive appropriate rate relief.
We continually monitor the need for timely rate filing to minimize the lag between the time we experience increased operating costs and capital expenditures and the time we receive appropriate rate relief.
USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities. 23 Index Regulatory Notice of Non-Compliance In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in South Plainfield, New Jersey exceeded a NJDEP standard that became effective in 2021.
Regulatory Notice of Non-Compliance In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant (Park Avenue Plant) in South Plainfield, New Jersey exceeded a standard promulgated in a NJDEP regulation that became effective in 2021.
Results of Operations for 2022 as Compared to 2021 (In Millions) Years Ended December 31, 2022 2021 Regulated Non- Regulated Total Regulated Non- Regulated Total Revenues $ 150.6 $ 11.8 $ 162.4 $ 130.8 $ 12.3 $ 143.1 Operations and maintenance expenses 70.8 8.3 79.1 65.4 8.3 73.7 Depreciation expense 22.8 0.2 23.0 20.9 0.2 21.1 Other taxes 18.0 0.2 18.2 14.9 0.2 15.1 Gain on Sale of Subsidiary 5.2 — 5.2 — — 0.0 Operating income 44.2 3.1 47.3 29.6 3.6 33.2 Other income (expense), net 7.4 0.3 7.7 5.6 0.3 5.9 Interest expense 9.4 — 9.4 8.1 — 8.1 Income taxes 2.0 1.2 3.2 (6.7 ) 1.2 (5.5 ) Net income $ 40.2 $ 2.2 $ 42.4 $ 33.8 $ 2.7 $ 36.5 Operating Revenues Operating revenues for the year ended December 31, 2022 increased $19.3 million from the same period in 2021 due to the following factors: ● Middlesex System revenues increased by $21.6 million due to the approved 2022 base rate and PWAC rate increases and higher weather driven demand across all customer classes (for further discussion of Middlesex’s base and PWAC rate increases see Rates, Middlesex above); ● Tidewater System revenues increased $0.9 million due to additional customers and a one-time customer credit issued in 2021 partially offset by a DEPSC ordered 2022 rate reduction (for further information on the one-time credit and rate reduction, see Rates, Tidewater above ) ; ● The sale of our regulated Delaware wastewater subsidiary in January 2022 reduced revenues by $2.7 million; ● Non-regulated revenues decreased $0.4 million, primarily due to lower supplemental contract services; and ● All other revenue categories decreased $0.1 million.
Results of Operations for 2022 as Compared to 2021 (In Millions) Years Ended December 31, 2022 2021 Regulated Non- Regulated Total Regulated Non- Regulated Total Revenues $ 150.6 $ 11.8 $ 162.4 $ 130.8 $ 12.3 $ 143.1 Operations and maintenance expenses 70.8 8.3 79.1 65.4 8.3 73.7 Depreciation expense 22.8 0.2 23.0 20.9 0.2 21.1 Other taxes 18.0 0.2 18.2 14.9 0.2 15.1 Gain on Sale of Subsidiary 5.2 — 5.2 — — — Operating income 44.2 3.1 47.3 29.6 3.6 33.2 Other income (expense), net 7.4 0.3 7.7 5.6 0.3 5.9 Interest expense 9.4 — 9.4 8.1 — 8.1 Income taxes 2.0 1.2 3.2 (6.7 ) 1.2 (5.5 ) Net income $ 40.2 $ 2.2 $ 42.4 $ 33.8 $ 2.7 $ 36.5 Operating Revenues Operating revenues for the year ended December 31, 2022 increased $19.3 million from the same period in 2021 due to the following factors: ● Middlesex System revenues increased by $21.6 million due to the approved 2022 base rate and PWAC rate increases and higher weather driven demand across all customer classes (for further discussion of Middlesex’s 2021 base rate and PWAC rate increases see Rates, Middlesex above); ● Tidewater System revenues increased $0.9 million due to additional customers and a one-time customer credit issued in 2021 partially offset by a DEPSC ordered 2022 rate reduction (for further information on the one-time credit and rate reduction, see Rates, Tidewater above ) ; ● The sale of our regulated Delaware wastewater subsidiary in January 2022 reduced revenues by $2.7 million; ● Non-regulated revenues decreased $0.4 million, primarily due to lower supplemental contract services; and ● All other revenue categories decreased $0.1 million. 32 Operation and Maintenance Expense Operation and maintenance expenses for the year ended December 31, 2022 increased $5.4 million from the same period in 2021 due to the following factors: ● Labor cost increased $1.5 million due to wage increases; ● Variable production costs increased $1.2 million primarily due to increased production, weather-driven changes in water quality and higher chemical prices ; ● Costs for employee benefits increased $1.0 million due to market fluctuations in the cash surrender value of life insurance policies and higher health insurance premiums; ● Higher weather-related main break activity in our Middlesex system during the winter months resulted in $0.6 million of additional non-labor costs; ● Equipment repairs and maintenance costs increased by $0.5 million; ● Transportation expenses increased $0.3 million due to higher fuel prices; ● Costs associated with the NJDEP PFOA customer notification process resulted in $0.2 million of additional expense (for further information on this matter, see Regulatory Notice of Non-Compliance above ) ; and ● All other operation and maintenance expense categories increased $0.1 million.
A portion of the borrowings under the New Jersey SRF is interest-free. Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) and submit requisitions for cost reimbursements over the life of the construction period. The interest rate on the Company’s current construction loan borrowings is near zero percent.
Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) and submit requisitions for cost reimbursements over the life of the construction period.
We expect to spend approximately $8 million in 2023 and 2024 for construction of elevated storage tanks in our Tidewater and Middlesex systems. ● Production System-Includes projects associated with our treatment plants, including approximately $22 million of expenditures in 2023 for PFAS treatment upgrades in our Middlesex system. ● Information Technology (IT) Systems-Includes further upgrade of our enterprise resource planning system and hardware and software purchases for other IT systems. ● Other-Includes purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to field and inventory management facilities in Iselin, New Jersey.
In connection with RENEW, we expect to spend approximately $11 million in each of 2024 and 2025, and $12 million in 2026. ● Production System - Includes projects associated with our treatment plants, including approximately $2.0 million of expenditures for PFAS treatment upgrades and $6.8 million for replacement of existing motor control center and electrical distribution equipment in our Middlesex system, and $3.6 million of various treatment projects in our Tidewater system in 2024. ● Information Technology (IT) Systems - Includes further upgrade of our enterprise resource planning system and hardware and software purchases for other IT systems. ● Other - Includes purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to field and inventory management facilities in Iselin, New Jersey.
Outlook Our ability to increase operating income and net income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management and customer growth (which are evident in comparison discussions in the Results of Operations section below). Weather patterns which can result in lower customer demand for water may occur in 2023.
The agreement expires on December 31, 2029. 29 Outlook Our ability to increase operating income and net income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management and customer growth (which are evident in comparison discussions in the Results of Operations section below).
For further discussion on the Company’s future capital expenditures and expected funding sources, see “ Capital Expenditures and Commitments ” below. 30 Index Cash Flows from Financing Activities For the year ended December 31, 2022, cash flows provided by financing activities decreased $12.3 million to $27.1 million.
For further discussion on the Company’s future capital expenditures and expected funding sources, see “ Capital Expenditures and Commitments ” below. Cash Flows from Financing Activities For the year ended December 31, 2023, cash flows provided by financing activities increased $8.8 million to $36.0 million.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its PWAC tariff rate to recover additional costs of $2.7 million for the purchase of treated water from a non-affiliated regulated water utility.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million for the purchase of treated water from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings.
The decrease in cash flows provided by financing activities is due to a decrease in net long-term borrowings, lower net customer advances and contributions and higher common stock dividends offset by higher proceeds from the issuance of common stock and higher short-term borrowing. For further discussion on the Company’s short-term and long-term debt, see “ Sources of Liquidity ” below.
The increase in cash flows provided by financing activities is due to an increase in net borrowings and higher proceeds from the issuance of common stock under the Investment Plan partially offset by increased common stock dividend payments. For further discussion on the Company’s short-term and long-term debt, see “ Sources of Liquidity ” below.
The Company is in compliance with all of its mortgage covenants and restrictions. 33 Index Common Stock - The Company issues shares of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s common stock.
The Company is in compliance with all of its mortgage covenants Common Stock - The Company issues shares of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s common stock. The Company raised approximately $12.1 million through the issuance of shares under the Investment Plan during 2023.
Capital Construction Program The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of assets to better serve the current and future generations of water and wastewater customers.
These lawsuits remain in the legal process and their ultimate resolution is not known at this time. 27 Capital Construction Program The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of assets to better serve the current and future generations of water and wastewater customers.
Long-term Debt - Subject to regulatory approval, the Company periodically issues long-term debt to fund investments in utility plant. To the extent possible and fiscally prudent, the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware. These government programs provide financing at interest rates typically below rates available in the broader financial markets.
To the extent possible and fiscally prudent, the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware. These government programs provide financing at interest rates typically below rates available in the broader financial markets. A portion of the borrowings under the New Jersey SRF is interest-free.
The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project scope and costs and, could be impacted if significant effects of the COVID-19 pandemic further arise and continue for an extended period of time.
The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project scope and costs.
The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment. In order to fully fund the ongoing capital investment program and maintain a balanced capital structure for a regulated water utility, Middlesex may offer for sale additional shares of its common stock.
In order to fully fund the ongoing capital investment program and maintain a balanced capital structure required for a regulated water utility, Middlesex may offer for sale additional shares of its common stock.
Changes in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining the timing and extent of rate increase requests.
Changes in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining the timing and extent of rate increase requests. Our investments in system infrastructure continue to grow significantly and our operating costs are anticipated to increase in 2024 and 2025 in a variety of categories.
Revenues Revenues from our regulated customers, which include amounts billed quarterly to residential customers and monthly to industrial, commercial, fire-protection and wholesale customers, also include unbilled amounts based upon estimated usage from the date of the last meter reading to the end of the accounting period.
We have no reason to believe any of the deferred items that are recorded will be treated differently by the regulators in the future. 38 Revenues Revenues from our regulated customers, which include amounts billed quarterly to residential customers and monthly to industrial, commercial, fire-protection and wholesale customers, also include unbilled amounts based upon estimated usage from the date of the last meter reading to the end of the accounting period.
(Millions) 2023 2024 2025 2023-2025 Distribution/Network System $ 59 $ 61 $ 62 $ 182 Production System 33 17 4 54 Information Technolgy (IT) Systems 4 2 3 9 Other 6 6 9 21 Total Estimated Capital Expenditures $ 102 $ 86 $ 78 $ 266 Our estimated capital expenditures for the items listed above are primarily comprised of the following: ● Distribution/Network System-Includes projects associated with replacement, installation and relocation of water mains and service lines and wastewater collection systems, construction of water storage tanks, installation and replacement of hydrants, meters and meter pits and the RENEW Program.
(Millions) 2024 2025 2026 2024-2026 Distribution/Network System $ 43 $ 55 $ 50 $ 148 Production System 23 18 11 52 Information Technology (IT) Systems 3 2 3 8 Other 6 6 6 18 Total Estimated Capital Expenditures $ 75 $ 81 $ 70 $ 226 Our estimated capital expenditures for the items listed above are primarily comprised of the following: ● Distribution/Network System - Includes projects associated with replacement, installation and relocation of water mains and service lines and wastewater collection systems, construction of water storage tanks, installation and replacement of hydrants, meters and meter pits and the RENEW Program.
The rate reduction is expected to reduce annual revenues by approximately $2.2 million. 25 Index In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return exceeded the rate of return authorized by the DEPSC.
In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return exceeded the rate of return authorized by the DEPSC.
As operating costs are anticipated to increase in 2023 in a variety of categories, we continue to implement plans to further streamline operations and further reduce, and mitigate increases in, operating costs.
Weather patterns which can result in lower customer demand for water may occur in 2024. As operating costs are anticipated to increase in 2024 in a variety of categories, we continue to implement plans to further streamline operations and further reduce, and mitigate increases in, operating costs.
Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants.
Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital projects. Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants.
Payment Due by Period (Millions of Dollars) Total Less than 1 Year 2-3 Years 4-5 Years More than 5 Years Long-term Debt $ 306 $ 17 $ 14 $ 13 $ 262 Note Payable 56 56 — — — Interest on Long-Term Debt 207 9 16 15 167 Purchased Water Contracts 14 6 7 1 — Commercial Office Leases 7 1 2 2 2 TOTAL $ 590 $ 89 $ 39 $ 31 $ 431 The table above does not reflect any anticipated cash payments for retirement benefit plan obligations.
Payment Due by Period (Millions of Dollars) Total Less than 1 Year 2-3 Years 4-5 Years More than 5 Years Long-term Debt $ 365 $ 8 $ 15 $ 14 $ 328 Note Payable 43 43 — — — Interest on Long-Term Debt 260 12 24 23 201 Purchased Water Contracts 97 7 11 7 72 Commercial Office Leases 6 1 2 2 1 TOTAL $ 771 $ 71 $ 52 $ 46 $ 602 The table above does not reflect any anticipated cash payments for retirement benefit plan obligations.
Depreciation Depreciation expense for the year ended December 31, 2021 increased $2.6 million from the same period in 2020 due to a higher level of utility plant in service. 29 Index Other Taxes Other taxes for the year ended December 31, 2021 increased $0.2 million from the same period in 2020 primarily due to higher payroll taxes on increased labor costs.
Depreciation Depreciation expense for the year ended December 31, 2023 increased $2.2 million from the same period in 2022 due to a higher level of utility plant in service.
Basic earnings per share were $2.40 and $2.08 for the years ended December 31, 2022 and 2021, respectively.
Diluted earnings per share were $1.76 and $2.39 for the years ended December 31, 2023 and 2022, respectively.
Tidewater has borrowed $2.6 million under this loan with expected borrowings to continue through mid-2023. The final maturity date on the loan is 2044. In September 2021, Tidewater completed its $20 million secured borrowing with CoBank, at an interest rate of 3.94% with a 2046 maturity date.
Through December 31, 2023, Tidewater has drawn a total of $4.8 million and expects that the requisitions will continue through the first quarter of 2024. The final maturity date on the loan is 2044. In September 2021, Tidewater completed its $20 million secured borrowing with CoBank, at an interest rate of 3.94% and a 2046 maturity date.
Our Regulated segment contributed approximately 93% of total revenues for the year ended December 31, 2022 and 91% for each of the years ended December 31, 2021 and 2020 and approximately 95% of net income for the year ended December 31, 2022 and 93% of net income for each of the years ended December 31, 2021, and 2020.
Operating Results by Segment The Company has two operating segments, Regulated and Non-Regulated. Our Regulated segment contributed approximately 93%, 93% and 91% of total revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and approximately 92%, 93% and 93% of net income for the years ended December 31, 2023, 2022 and 2021, respectively .
The weighted average daily amounts of borrowings outstanding under the credit lines and the weighted average interest rates on those amounts were $28.9 million and $23.7 million at 3.34% and 1.12 % for the years ended December 31, 2022 and 2021, respectively.
The weighted average daily amounts of borrowings outstanding under the credit lines and the weighted average interest rates on those amounts were $35.7 million and $28.9 million at 6.13% and 3.34 % for the years ended December 31, 2023 and 2022, respectively. 35 Long-term Debt - Subject to regulatory approval, the Company periodically issues long-term debt to fund investments in utility plant.
The term of the long-term loans currently offered through the NJIB is up to thirty years. Under the Delaware SRF program, borrowers typically enter into a long-term note agreement for a term not to exceed twenty years and submit requisitions for cost reimbursements for up to two years after the agreement is executed.
Under the Delaware SRF program, borrowers typically 1) enter into a long-term note agreement for a term not to exceed twenty years, 2) submit requisitions for cost reimbursements during the construction period for up to two years after the agreement is executed and 3) as the proceeds are received from the requisitions, Tidewater records a corresponding debt obligation amount.
Basic earnings per share were $2.08 and $2.19 for the years ended December 31, 2021 and 2020, respectively. Diluted earnings per share were $2.07 and $2.18 for the years ended December 31, 2021 and 2020, respectively.
Basic earnings per share were $2.40 and $2.08 for the years ended December 31, 2022 and 2021, respectively. Diluted earnings per share were $2.39 and $2.07 for the years ended December 31, 2022 and 2021, respectively (for further discussion of Middlesex’s 2022 rate increase, see Rates, Middlesex above).
Operation and Maintenance Expense Operation and maintenance expenses for the year ended December 31, 2022 increased $5.4 million from the same period in 2021 due to the following factors: ● Labor cost increased $1.5 million due to wage increases; ● Variable production costs increased $1.2 million primarily due to increased production, weather-driven changes in water quality and higher chemical prices ; 27 Index ● Costs for employee benefits increased $1.0 million due to market fluctuations in the cash surrender value of life insurance policies and higher health insurance premiums; ● Higher weather-related main break activity in our Middlesex system during the winter months resulted in $0.6 million of additional non-labor costs; ● Equipment repairs and maintenance costs increased by $0.5 million; ● Transportation expenses increased $0.3 million due to higher fuel prices; ● Costs associated with the NJDEP PFOA customer notification process resulted in $0.2 million of additional expense (for further information on this matter, see Regulatory Notice of Non-Compliance above ) ; and ● All other operation and maintenance expense categories increased $0.1 million.
Operation and Maintenance Expense Operation and maintenance expenses for the year ended December 31, 2023 increased $4.0 million from the same period in 2022 due to the following factors: ● Variable production costs increased $2.9 million primarily due to weather-driven changes in water quality and higher chemical prices; ● Outside service costs rose by $0.9 million primarily due to production instrumentation calibration activities; ● Labor cost increased $0.7 million due to wage increases; ● Bad debt expense increased $0.4 million due to higher anticipated customer receivable write-offs; ● Non-regulated expenses increased $0.2 million due to additional billable supplemental service expenses; ● Lower weather-related main break activity in our Middlesex System during the winter months resulted in $0.8 million of decreased non-labor costs; and ● All other operation and maintenance expense categories decreased $0.3 million.
The discount rate, compensation increase rate and long-term rate of return used to determine future obligations of our retirement benefit plans as of December 31, 2022 are as follows: Pension Plan Other Benefits Plan Discount Rate 4.98% 4.98% Compensation Increase 3.00% 3.00% Long-term Rate of Return 7.00% 7.00% For the 2022 valuation, costs and obligations for our Other Benefits Plan assumed an 7.5% annual rate of increase in the per capita cost of covered healthcare benefits in 2023 with the annual rate of increase declining 0.5% per year for 2024-2029, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5% by year 2029.
The discount rate, compensation increase rate and long-term rate of return used to determine future obligations of our retirement benefit plans as of December 31, 2023 are as follows: Pension Plan Other Benefits Plan Discount Rate 4.79% 4.79% Compensation Increase 3.00% 3.00% Long-term Rate of Return 7.00% 7.00% For the 2023 valuation, costs and obligations for our Other Benefits Plan assumed an 7.5% annual rate of increase in the per capita cost of covered healthcare benefits in 2024 with the annual rate of increase declining 0.5% per year for 2025-2030, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5% by year 2030. 39 The following is a sensitivity analysis for certain actuarial assumptions used in determining projected benefit obligations (PBO) and expenses for our retirement benefit plans: Pension Plan Actuarial Assumptions Estimated Increase/ (Decrease) on PBO (000s) Estimated Increase/ (Decrease) on Expense (000s) Discount Rate 1% Increase $ (9,903 ) $ (604 ) Discount Rate 1% Decrease 12,086 992 Other Benefits Plan Actuarial Assumptions Estimated Increase/ (Decrease) on PBO (000s) Estimated Increase/ (Decrease) on Expense (000s) Discount Rate 1% Increase $ (3,440 ) $ (552 ) Discount Rate 1% Decrease 4,286 180 Healthcare Cost Trend Rate 1% Increase 3,264 499 Healthcare Cost Trend Rate 1% Decrease (2,676 ) (696 ) Recent Accounting Standards See Note 1(r) of the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements. 40
Other Income, net Other Income, net for the year ended December 31, 2021 increased $1.6 million from the same period in 2020 primarily due to lower actuarially-determined retirement benefit plans non-service expense offset by lower AFUDC on a lower average level of capital construction projects under construction.
Other Income, net Other Income, net for the year ended December 31, 2023 decreased $1.2 million from the same period in 2022 primarily due to lower actuarially-determined retirement benefit plans non-service benefit. 31 Interest Charges Interest charges for the year ended December 31, 2023 increased $3.8 million from the same period in 2022 due to higher average debt outstanding and higher average interest rates in 2023 as compared to 2022.
Tidewater – On August 31, 2022, the DEPSC issued an Order requiring Tidewater to reduce its base rates charged to general metered and private fire customers by 6%, effective for service rendered on and after September 1, 2022.
The initial DEPSC order required Tidewater to reduce its base rates charged to general metered and private fire customers by 6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered as a result of Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1 million in 2023.
Income Taxes The benefit from income taxes for the year ended December 31, 2021 increased by $1.4 million from the same period in 2020 primarily due to lower pre-tax income . Net Income and Earnings Per Share Net income for the year ended December 31, 2021 decreased $1.9 million as compared with the same period in 2020.
Net Income and Earnings Per Share Net income for the year ended December 31, 2023 decreased $10.9 million as compared with the same period in 2022. Basic earnings per share were $1.77 and $2.40 for the years ended December 31, 2023 and 2022, respectively.
In November 2022, Middlesex filed a petition with the NJBPU for approval to borrow up to $300.0 million, in one or more negotiated transactions in the form of notes and/or FMBs through loans from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed in 32 Index order to fund portions of its capital program and for other funding requirements.
In April 2023, Middlesex received approval from the NJBPU to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025.
Overall, organic residential customer growth continues in our Tidewater system (approximately 5% in 2022). However, current and evolving economic market conditions may challenge the growth level.
These factors, among others, may require base rate increase requests filings by Tidewater, Pinelands Water and Pinelands Wastewater later in 2024. Overall, organic residential customer growth continues in our Tidewater system (approximately 4% in 2023). However, current and evolving economic market conditions may challenge that growth.
RENEW is our ongoing initiative to replace water mains in the Middlesex System. In connection with RENEW, we expect to spend approximately $12 million in 2023, and $11 million in each of 2024 and 2025.
RENEW is our ongoing initiative to replace water mains in the Middlesex System.
In connection with this approval: ● In March 2023, Middlesex expects to close on a $40.0 million, 5.24% private placement of FMBs with a 2043 maturity date designated as Series 2023A.
The Company may issue debt securities in a series of one or more transaction offerings to help fund Middlesex’s multi-year capital construction program. In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A.
The increase, effective October 1, 2022, is on an interim basis and subject to refund with interest, pending final resolution expected in the second quarter of 2022.
The increase, effective October 1, 2022, was on an interim basis and subject to refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023. In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero in October 2023.
Proceeds from the loan would be used to pay off Tidewater’s outstanding balances under its lines of credit and for other general corporate purposes. In December 2021, Tidewater closed on the DEPSC approved $5.0 million Delaware SRF Program loan and began receiving disbursements in January 2022.
In May 2023, Tidewater closed on a $20.0 million loan from CoBank, ACB (CoBank) with an interest rate of 5.71% and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.
On March 1, 2023, the Company will begin offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering will continue until 200,000 shares are purchased at the discounted price or December 1, 2023, whichever event occurs first.
On March 1, 2023, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering ended December 1, 2023. The discount applied to all common stock purchases made under the Investment Plan during that time period, whether by optional cash payment or by dividend reinvestment.
The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the level of additional debt financing and financial market conditions. In October 2022, Middlesex filed a petition with the NJBPU for approval to issue and sell up to 1.0 million shares of its common stock.
The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the level of additional debt financing and financial market conditions. Common stock offerings will occur as needed to maintain a balanced capital structure as we continue on a parallel path with future debt offerings.
Proceeds from the loan were used to pay off its outstanding balances under its lines of credit. In November 2022, Pinelands Water and Pinelands Wastewater filed petitions with the NJBPU for approval to borrow up to $4.9 million each from CoBank with terms up to 25 years and with interest rates to be determined at the loans’ closings.
Proceeds from the loan were used to pay off its outstanding balances under its bank lines of credit. In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for each loan.
In June 2022, a portion of the enhanced treatment process was completed, placed into service and is effectively treating the ground water in compliance with all state and federal drinking water standards.
In June 2022, the Company accelerated the in-service date for a portion of the enhanced treatment project based on engineering analysis that allowed a restart of the Park Avenue Wellfield Treatment Plant to ensure continued compliance with all state and federal drinking water standards.
The Company has projected to spend approximately $266 million for the 2023-2025 capital investment program, including approximately $22 million for PFAS-related treatment upgrades, $18 million for Lead and Copper Rule compliance in the Middlesex System, $34 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System and $8 million for construction of elevated storage tanks in our Tidewater and Middlesex Systems. 26 Index Operating Results by Segment The Company has two operating segments, Regulated and Non-Regulated.
The Company has projected to spend approximately $226 million for the 2024-2026 capital investment program, including approximately $15 million for replacement of a thirty inch main in our Middlesex System, $9 million for LSLR compliance in the Middlesex System, $34 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System, $6 million for evaluation of PFAS treatment at our CJO Plant and $7 million for control room and electrical distribution equipment at our CJO Plant.
A DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return on, qualifying capital improvements made between base rate proceedings. Pinelands - In September 2022, Pinelands Water and Pinelands Wastewater filed separate petitions with the NJBPU seeking permission to increase base rates by approximately $0.6 million and $0.4 million per year, respectively.
In October 2023, the NJBPU approved Middlesex’s petition for a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing a DSIC rate that allows water utilities to recover 28 investments in, and generate a return on, qualifying capital improvements to their water distribution system made between base rate proceedings.
The Company has has also initiated a separate lawsuit against 3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances (PFAS), which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.
The Company had previously initiated a lawsuit against 3M Company (3M), in connection with the Company’s claim that 3M introduced perfluoroalkyl substances (commonly known as “PFAS”), which include PFOA, into the Company’s water supply at its Park Avenue Plant. On August 29, 2023, Middlesex and 3M executed a settlement agreement (the Settlement Agreement) to resolve the lawsuit.
For the year ended December 31, 2022, cash flows from operating activities increased $28.3 million to $61.4 million. The increase in cash flows from operating activities primarily resulted from higher operating revenues from Middlesex’s January 1, 2022 rate increase and the timing of payments to vendors and to income tax authorities.
For the year ended December 31, 2023, cash flows from operating activities decreased $8.6 million to $52.8 million. The decrease in cash flows from operating activities primarily resulted from lower net income and higher interest payments. Increases in certain operating costs impact our liquidity and capital resources.
The Company raised approximately $10.3 million through the issuance of shares under the Investment Plan during 2022. Middlesex has filed a petition with the NJBPU seeking to increase the number of authorized shares under the Investment Plan by 0.7 million shares.
In May 2023, Middlesex received approval from the NJBPU to increase the number of authorized shares under the Investment Plan by 0.7 million shares. Currently, 0.7 million shares remain registered with the United States Securities and Exchange Commission and available for issuance to participants under the Investment Plan.
The Company plans to invest approximately $102 million in 2023 in connection with this plan for projects that include, but are not limited to: ● Completion of construction of a facility to provide an enhanced treatment process at the Company’s largest wellfield in South Plainfield, New Jersey to comply with new state water quality regulations relative to PFAS, and integrate surge protection to mitigate spikes in water pressures along with enhancements to corrosion control and chlorination processes; ● Replacement of approximately 24,000 linear feet of cast iron 6" water main in the Port Reading and Carteret sections of Woodbridge, New Jersey; ● Replacement of Company and customer owned lead and galvanized service lines; ● Interconnecting Tidewater’s Angola and Meadows Districts which will provide redundant capacity and storage for both districts; ● Improvements to Pinelands Water’s Well Station #2; and ● Various water main replacements and improvements.
The Company plans to invest approximately $75 million in 2024 in connection with this plan for projects that include, but are not limited to: ● Replacement of approximately 17,200 linear feet of cast iron 6" water main in the Port Reading and Carteret sections of Woodbridge, New Jersey; ● Replacement of control room and electrical distribution equipment at our The Carl J.
Removed
Prior to 2021, the Company began design for construction of an enhanced treatment process at the Park Avenue Wellfield Treatment Plant to comply with the new standard prior to the regulation being enacted. Since completion was not expected until mid-2023, the Company implemented an interim solution to meet the Notice requirements.
Added
USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities. Middlesex President and Chief Executive Officer Retirement Announcement and Replacement In May 2023, President and Chief Executive Officer, Dennis W. Doll announced a plan to retire upon turning age 65.
Removed
In September 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP with respect to the Notice, which voided any further notice regarding the fact that the permanent treatment solution was not in service by September 7, 2022 as required by the Notice. The Company must comply with several other requirements of the ACO or face penalties.
Added
On January 23, 2024, the Company named Nadine Leslie as its new President and Chief Executive Officer effective March 1, 2024. Ms. Leslie will also be appointed to the Board of Directors effective March 1, 2024. Mr.
Removed
In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other claimed related costs. These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.
Added
Doll 26 will remain Chairman of the Company’s Board of Directors through the expiration of his current term as a Director as of the May 21, 2024 Annual Meeting of Shareholders.
Removed
The Company’s insurance provider has acknowledged coverage of potential liability which may result from these lawsuits. In May 2022, the Company impleaded 3M Company (3M) as a third-party defendant in one of these class action lawsuits.
Added
Middlesex was required by the regulation to notify its affected customers and complied within the required Notice period in November 2021. The Notice further required the Company to take any action necessary to comply with the new standard by September 7, 2022.
Removed
Sale of Subsidiary In January 2022, Middlesex closed on the Delaware Public Service Commission (DEPSC) approved sale of 100% of the common stock of its subsidiary Tidewater Environmental Services, Inc. for $6.4 million in cash and other consideration, resulting in a $5.2 million pre-tax gain.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeChanges to the Company's retirement benefit plan assets’ value can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements. Risk is mitigated through our ability to recover retirement benefit plan costs through customer rates. 37 Index
Biggest changeChanges to the Company's retirement benefit plan assets’ value can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements. Risk is mitigated through our ability to recover retirement benefit plan costs through customer rates. 41
The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2023 to 2059. Over the next twelve months, approximately $17.5 million of the current portion of existing long-term debt instruments will mature.
The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2024 to 2059. Over the next twelve months, approximately $7.8 million of the current portion of existing long-term debt instruments will mature.

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