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What changed in Essential Utilities, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Essential Utilities, Inc.'s 2023 and 2024 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 2024 report.

+399 added−479 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in Essential Utilities, Inc.'s 2024 10-K

399 paragraphs added · 479 removed · 309 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

93 edited+29 added−64 removed94 unchanged
Biggest changeIn Ohio, Virginia, North Carolina, and Kentucky, we may bill our utility customers, in certain circumstances, in accordance with a rate filing that is pending before the respective regulatory commission, which would allow for interim rates. As of December 31, 2023, we have no billings under interim rate arrangements for rate case filings in progress.
Biggest changeAll eight states in which we operate permit us to file a revenue requirement for some form of consolidated rates for all, or some, of the rate divisions in that state. 7 Table of Contents In Ohio, Virginia, North Carolina, Texas, and Kentucky, we may bill our utility customers, in certain circumstances, in accordance with a base rate filing that is pending before the respective regulatory commission, which would allow for interim rates.
The Company’s growth in revenues over the past five years is primarily a result of its acquisition in 2020 of Peoples Natural Gas Company LLC and its affiliated companies, or the Peoples Gas Acquisition, increases in water and wastewater rates, increase in the cost of natural gas in 2021 and 2022, and customer growth.
The Company’s growth in revenues over the past five years is primarily a result of increases in water and wastewater rates, increase in the cost of natural gas in 2021 and 2022, customer growth, and its acquisition in 2020 of Peoples Natural Gas Company LLC and its affiliated companies, or the Peoples Gas Acquisition.
The Company’s environmental sustainability initiatives and strategy are discussed further in our environmental, social, and governance reporting, which can be found on our website at https:// esg.essential.co . Such reports are not incorporated by reference and should not be considered part of this Annual Report. Human Capital Management The Company values its workforce as one of its most important assets.
The Company’s environmental sustainability initiatives and strategy are discussed further in our sustainability reporting, which can be found on our website at https:// esg.essential.co . Such reports are not incorporated by reference and should not be considered part of this Annual Report. Human Capital Management The Company values its workforce as one of its most important assets.
Lancaster Avenue Bryn Mawr, PA 19010-3489 Telephone: 610-527-8000 The references to our web site and the SEC’s web site are intended to be inactive textual references only, and the contents of those web sites are not incorporated by reference herein and should not be considered part of this or any other report that we file with or furnish to the SEC. ‎ 18 Table of Contents
Lancaster Avenue Bryn Mawr, PA 19010-3489 Telephone: 610-527-8000 The references to our web site and the SEC’s web site are intended to be inactive textual references only, and the contents of those web sites are not incorporated by reference herein and should not be considered part of this or any other report that we file with or furnish to the SEC. ‎ 16 Table of Contents
Further, we are also seeking other potential business opportunities, including but not limited to, partnering with public and regulated utilities to invest in infrastructure projects, growing our market-based activities by acquiring businesses that provide water and wastewater or other utility-related services, and investing in infrastructure projects. Based on the 2021 U.S.
Further, we are also seeking other potential business opportunities, including but not limited to, partnering with public and regulated utilities to invest in infrastructure projects, growing our market-based activities by acquiring businesses that provide water and wastewater or other utility-related services, and investing in infrastructure projects. Based on the 2023 U.S.
In the states where we operate regulated water utilities, we believe there are over 14,000 community water systems of widely-varying size, with the majority of the population being served by government-owned water systems. Although not as fragmented as the water industry, the wastewater industry in the U.S. also presents opportunities for consolidation. Based on the 2021 U.S.
In the states where we operate regulated water utilities, we believe there are over 14,000 community water systems of widely-varying size, with the majority of the population being served by government-owned water systems. Although not as fragmented as the water industry, the wastewater industry in the U.S. also presents opportunities for consolidation. Based on the 2023 U.S.
Aqua Pennsylvania’s service territory is located in the suburban areas in counties north and west of the City of Philadelphia and in 27 other counties in Pennsylvania. Our other regulated water or wastewater utility subsidiaries provide similar services in seven additional states. Our Peoples subsidiaries provide natural gas service to approximately 744,000 customers in western Pennsylvania and Kentucky.
Aqua Pennsylvania’s service territory is located in the suburban areas in counties north and west of the City of Philadelphia and in 27 other counties in Pennsylvania. Our other regulated water or wastewater utility subsidiaries provide similar services in seven additional states. Our Peoples subsidiaries provide natural gas service to approximately 745,000 customers in western Pennsylvania and Kentucky.
On occasion, abnormally dry weather in our service areas can result in governmental authorities declaring drought warnings and imposing water use restrictions in the affected areas, which could reduce water consumption. See “Business – Water Utility Supplies, and Facilities and Wastewater Utility Facilities ” for a discussion of water use restrictions that may impact water consumption during abnormally dry weather.
On occasion, abnormally dry weather in our service areas can result in governmental authorities declaring drought warnings and imposing water use restrictions in the affected areas, which could reduce water consumption. See “Business – Water Utility Supplies, and Facilities and Wastewater Utility Facilities” for a discussion of water use restrictions that may impact water consumption during abnormally dry weather.
We are actively exploring opportunities to expand our water and wastewater utility operations through acquisitions or other growth ventures. During the three-year period ended December 31, 2023, we expanded our utility operations by completing 12 acquisitions of water or wastewater utilities or other similar assets.
We are actively exploring opportunities to expand our water and wastewater utility operations through acquisitions or other growth ventures. During the three-year period ended December 31, 2024, we expanded our utility operations by completing 12 acquisitions of water or wastewater utilities or other similar assets.
Dam Safety - Our subsidiaries own 34 dams, of which 18 are classified as high hazard dams that are subject to the requirements of the federal and state regulations related to dam safety, which undergo regular inspections and an annual engineering inspection.
Dam Safety - Our subsidiaries own 32 dams, of which 18 are classified as high hazard dams that are subject to the requirements of the federal and state regulations related to dam safety, which undergo regular inspections and an annual engineering inspection.
We value feedback from our employees, as it helps us gain a deeper understanding of areas where we are doing well and where we need improvement. Employees are requested to participate in a bi-annual culture assessment by completing an anonymous survey. We have worked with various functional areas to create and implement action plans to address areas of employee concern.
We value feedback from our employees, as it helps us gain a deeper understanding of areas where we are doing well and where we need improvement. Periodically, employees are requested to participate in a culture assessment by completing an anonymous survey. We have worked with various functional areas to create and implement action plans to address areas of employee concern.
In the event we amend or waive any portion of the Code of Ethical Business Conduct that applies to any of our directors, executive officers, or senior financial officers, we will post that information on our web site. 17 Table of Contents Available Information We file annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (SEC).
In the event we amend or waive any portion of the Code of Ethical Business Conduct that applies to any of our directors, executive officers, or senior financial officers, we will post that information on our web site. Available Information We file annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (SEC).
We maintain safety policies and procedures to comply with the Occupational Safety and Health Administration’s rules and regulations, but violations may occur from time to time, which 13 Table of Contents may result in fines and penalties, which are not expected to have a material impact on our business, financial condition, or results of operations.
We maintain safety policies and procedures to comply with the Occupational Safety and Health Administration’s rules and regulations, but violations may occur from time to time, which may result in fines and penalties, which are not expected to have a material impact on our business, financial condition, or results of operations.
Residential water and wastewater customers make up the largest component of our water utility customer base, with these customers representing approximately 69%, 68%, and 69%, of our water and wastewater revenues for 2023, 2022, and 2021, respectively. Substantially all of our water utility customers are metered, which allows us to measure and bill for our customers’ water consumption.
Residential water and wastewater customers make up the largest component of our water utility customer base, with these customers representing approximately 67%, 69%, and 68%, of our water and wastewater revenues for 2024, 2023, and 2022, respectively. Substantially all of our water utility customers are metered, which allows us to measure and bill for our customers’ water consumption.
Each of our utility rate divisions require a separate rate filing for the evaluation of the cost of service, including the recovery of investments, in connection with the establishment of rates for that rate division.
Each of our utility rate divisions requires a separate rate filing for the evaluation of the cost of service, including the recovery of investments, in connection with the establishment of rates for that rate division.
In the states in which we operate, we are primarily subject to economic regulation by the following state utility commissions: State Utility Commission Pennsylvania Pennsylvania Public Utility Commission Ohio Public Utilities Commission of Ohio North Carolina North Carolina Utilities Commission Texas Public Utility Commission of Texas Illinois Illinois Commerce Commission New Jersey New Jersey Board of Public Utilities Kentucky Public Service Commission of Kentucky Virginia Virginia State Corporation Commission Indiana Indiana Utility Regulatory Commission Our water and wastewater operations are comprised of 57 rate divisions, and our natural gas operations are comprised of three rate divisions.
In the states in which we operate, we are primarily subject to economic regulation by the following state utility commissions: State Utility Commission Pennsylvania Pennsylvania Public Utility Commission Ohio Public Utilities Commission of Ohio North Carolina North Carolina Utilities Commission Texas Public Utility Commission of Texas Illinois Illinois Commerce Commission New Jersey New Jersey Board of Public Utilities Kentucky Public Service Commission of Kentucky Virginia Virginia State Corporation Commission Indiana Indiana Utility Regulatory Commission Our water and wastewater operations are comprised of 38 rate divisions, and our natural gas operations are comprised of two rate divisions.
Our water supplies are primarily self-supplied and processed at twenty-four surface water treatment plants located in five states, and numerous well stations located in the states in which we conduct business. Approximately 5.9% of our water supplies are provided through water purchased from other water suppliers.
Our water supplies are primarily self-supplied and processed at twenty-four surface water treatment plants located in five states, and numerous well stations located in the states in which we conduct business. Approximately 6.6% of our water supplies are provided through water purchased from other water suppliers.
The increase in our utility customer base has been due to customers added through acquisitions, partnerships with developers, and organic growth (excluding dispositions) as shown below: Year Utility Customer Growth Rate 2023 1.0% 2022 1.7% 2021 1.2% 2020 42.9% 2019 2.1% In 2023, 2022, 2021, 2020, and 2019, our customer count increased by 5,875, 31,537, 21,246, 772,099 and 21,108 customers, respectively, primarily due to the water and wastewater utility systems that we acquired, organic growth, and in 2020, due to the Peoples Gas Acquisition that resulted to the addition of approximately 750,000 natural gas utility customers.
The increase in our utility customer base has been due to customers added through acquisitions, partnerships with developers, and organic growth (excluding dispositions) as shown below: Year Utility Customer Growth Rate 2024 0.6% 2023 1.0% 2022 1.7% 2021 1.2% 2020 42.9% In 2024, 2023, 2022, 2021, and 2020, our customer count increased by 11,845, 5,875, 31,537, 21,246, and 772,099 customers, respectively, primarily due to the water and wastewater utility systems that we acquired, organic growth, and in 2020, due to the Peoples Gas Acquisition that resulted to the addition of approximately 750,000 natural gas utility customers.
In the second quarter of 2023, based on the tax legislative guidance that was issued, the Company reevaluated the uncertain tax positions related to the Regulated Water Segment and ultimately released a portion of its historical income tax reserves.
The Company adopted the methodology on its 2023 tax return. In the second quarter of 2023, based on the tax legislative guidance that was issued, the Company reevaluated the uncertain tax positions related to the Regulated Water Segment and ultimately released a portion of its historical income tax reserves.
On occasion, we may voluntarily agree to sell systems or portions of systems in order to help focus our efforts in areas where we have more critical mass and economies of scale or for other strategic reasons.
On occasion, we may 10 Table of Contents voluntarily agree to sell systems or portions of systems in order to help focus our efforts in areas where we have more critical mass and economies of scale or for other strategic reasons.
Failure to comply with these laws and regulations may trigger a variety of administrative, civil, and criminal enforcement measures, including the assessment of monetary penalties, the 11 Table of Contents imposition of remedial actions, and the issuance of orders enjoining future operations.
Failure to comply with these laws and regulations may trigger a variety of administrative, civil, and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial actions, and the issuance of orders enjoining future operations.
In the states where we operate regulated water utilities, we believe there are approximately 4,000 wastewater facilities in operation, with the majority of the population being served by government-owned wastewater systems. 4 Table of Contents Because of the fragmented nature of the water and wastewater utility industries, we believe there are many potential water and wastewater system acquisition candidates throughout the U.S.
In the states where we operate regulated water utilities, we believe there are approximately 5,000 wastewater facilities in operation, with the majority of the population being served by government-owned wastewater systems. Because of the fragmented nature of the water and wastewater utility industries, we believe there are many potential water and wastewater system acquisition candidates throughout the U.S.
Revenue Surcharges – Eight states in which we operate water and wastewater utilities, and both states, Pennsylvania and Kentucky, in which we operate natural gas utilities, permit us to add an infrastructure rehabilitation surcharge to their respective bills to offset the additional depreciation and capital costs associated with capital expenditures related to replacing and rehabilitating infrastructure systems.
Revenue Surcharges – Eight states in which we operate water and wastewater utilities, and two states in which we operate natural gas utilities, permit us to add an infrastructure rehabilitation surcharge to their respective bills to offset the additional depreciation and capital costs associated with capital expenditures related to replacing and rehabilitating infrastructure systems.
In addition, our 7 Table of Contents subsidiaries in some states use a surcharge or credit on their bills to reflect changes in costs, such as changes in state tax rates, other taxes and purchased water costs, until such time as the new cost levels are incorporated into base rates.
In addition, our subsidiaries in some states use a surcharge or credit on their bills to reflect changes in costs, such as changes in state tax rates, other taxes and purchased water costs, until such time as the new cost levels are incorporated into base rates.
Census American Housing Survey, approximately 84% of the U.S. population relies on public or private sewer systems, and 16% of the U.S. population relies on septic tank, cesspool, or other sewer options. A majority of wastewater facilities are government-owned rather than regulated utilities.
Census American Housing Survey, approximately 81% of the U.S. population relies on public or private sewer systems, and 19% of the U.S. population relies on septic tank, cesspool, or other sewer options. A majority of wastewater facilities are government-owned rather than regulated utilities.
The nation’s water systems range in size from large government-owned systems, such as the New York City water system, which serves approximately 8.5 million people, to small systems, where a few customers share a common well.
The nation’s water systems 4 Table of Contents range in size from large government-owned systems, such as the New York City water system, which serves approximately 8.5 million people, to small systems, where a few customers share a common well.
In Kentucky, our distribution system is connected to four interstate pipelines, where we maintain capacity we believe is sufficient to meet our customers’ gas requirements. Natural Gas Gathering - Our Pennsylvania Regulated Natural Gas service territory is situated in the Marcellus Shale production region.
In Kentucky, our distribution system is connected to four interstate pipelines, where we maintain capacity we believe is sufficient to meet our customers’ gas requirements. ‎ 6 Table of Contents Natural Gas Gathering - Our Pennsylvania Regulated Natural Gas service territory is situated in the Marcellus Shale production region.
Additionally, a weather-normalization adjustment (WNA) mechanism is in place for our natural gas customers served in Kentucky. The WNA serves to minimize the effects of weather on the Company’s results for its residential and small commercial natural gas customers.
Additionally, a weather-normalization adjustment (WNA) mechanism is in place for our natural gas customers served in Kentucky, and effective October 2024, to our natural gas customers in Pennsylvania. The WNA serves to minimize the effects of weather on the Company’s results for its residential and small commercial natural gas customers.
Through our partnership with Health Advocate, personalized mental health assistance is available to all employees and their family members; support is available 24/7 via in-person, phone or virtual visits with a licensed counselor.
Through our partnership with our benefit services provider, personalized mental health assistance is available to all employees and their family members; support is available 24/7 via in-person, phone or virtual visits with a licensed counselor.
Voluntary Attrition and Turnover - The Company measures turnover rates of its employees in assessing the Company’s overall human capital. The Company’s voluntary attrition rate (not including retirements) for 2023 was 0% at the executive and senior management level, 6.3% at the mid-level manager level, 11.7% at the professional level, and 7.4% across all other employees.
Voluntary Attrition and Turnover - The Company measures turnover rates of its employees in assessing the Company’s overall human capital. The Company’s voluntary attrition rate (not including retirements) for 2024 was 5.3% at the executive and senior management level, 4.5% at the mid-level manager level, 8.0% at the professional level, and 7.0% across all other employees.
In October 2023, we were recognized as a Champion of Board Diversity by The Forum of Executive Women for having one-third of our board comprised of women for the fifth year since 2016.
In October 2024, we were recognized as a Champion of Board Diversity by The Forum of Executive Women for having one-third of our board comprised of women for the sixth year since 2016.
The sale was completed in January 2024. These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of its utilities in states where it has scale.
These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of its utilities in states where it has scale.
One of our largest operating subsidiaries, Aqua Pennsylvania, Inc., or Aqua Pennsylvania, accounted for approximately 56% of operating revenues and approximately 68% of income for our Regulated Water segment in 2023. As of December 31, 2023, Aqua Pennsylvania provided water or wastewater services to approximately one-half of the total number of water and wastewater customers we serve.
One of our largest operating subsidiaries, Aqua Pennsylvania, Inc., or Aqua Pennsylvania, accounted for approximately 55% of operating revenues and approximately 67% of income for our Regulated Water segment in 2024. As of December 31, 2024, Aqua Pennsylvania provided water or wastewater services to approximately one-half of the total number of water and wastewater customers we serve.
Currently, the Company seeks to acquire businesses in the U.S. regulated sector, focusing on water and wastewater utilities and to opportunistically pursue growth ventures in select market-based activities, such as infrastructure opportunities that are supplementary and complementary to our regulated water utility businesses. 1 Table of Contents In December 2022, the Company signed an agreement to sell its regulated natural gas utility assets in West Virginia, which represented approximately two percent of the Company’s regulated natural gas customers.
Currently, the Company seeks to acquire businesses in the U.S. regulated sector, focusing on water and wastewater utilities and to opportunistically pursue growth ventures in select market-based activities, such as infrastructure opportunities that are supplementary and complementary to our regulated water utility businesses. 1 Table of Contents In October 2023, the Company completed the sale of its regulated natural gas utility assets in West Virginia, which represented approximately two percent of the Company’s regulated natural gas customers.
To encourage managers to promote a safe environment, related metrics are incorporated in management’s incentive compensation plans. The Company provide s free access to Health Advocate, which offers a variety of innovative, flexible, and convenient employee health and wellness programs.
To encourage managers to promote a safe environment, related metrics are incorporated in management’s incentive compensation plans. 14 Table of Contents The Company provide s free access to an employee assistance program, which offers a variety of innovative, flexible, and convenient employee health and wellness programs.
Candidates for nomination to the Board are considered by the Corporate Governance Committee based on their personal abilities, qualifications, independence, knowledge, judgment, character, leadership skills, education, background (including, but not limited to race, gender, and national origin), and their expertise and experience in fields and disciplines relevant to the Company.
Candidates for nomination to the Board are considered by the Corporate Governance Committee based on their personal abilities, qualifications, independence, knowledge, judgment, character, leadership skills, education, background, and their expertise and experience in fields and disciplines relevant to the Company.
These surcharges provided revenues of $20,260,881 in 2023, $26,902,294 in 2022, and $33,771,486 in 2021. In the majority of our natural gas service territories, the public utility commissions have authorized bare steel and cast-iron replacement programs.
These surcharges provided revenues of $45,749,987 in 2024, $20,260,881 in 2023, and $26,902,294 in 2022. In the majority of our natural gas service territories, the public utility commissions have authorized bare steel and cast-iron replacement programs.
In addition, we are subject to federal and state laws and other regulations relating to solid waste disposal, dam safety, and other aspects of our operations. From time to time, Essential Utilities has acquired, and may acquire, systems that have environmental compliance issues.
These laws and regulations establish criteria and standards for drinking water and for wastewater discharges. In addition, we are subject to federal and state laws and other regulations relating to solid waste disposal, dam safety, and other aspects of our operations. From time to time, Essential Utilities has acquired, and may acquire, systems that have environmental compliance issues.
As of December 31, 2023, we employed a total of 3,258 full-time employees. Our subsidiaries are parties to 22 labor agreements with labor unions covering 1,643 employees. The labor agreements expire at various times up until 2028. 15 Table of Contents Health and Safety - Safety is the foundation of our business and guides all our employees’ actions.
As of December 31, 2024, we employed a total of 3,291 full-time employees. Our subsidiaries are parties to 23 labor agreements with labor unions covering 1,664 employees. The labor agreements expire at various times up until 2028. Health and Safety - Safety is the foundation of our business and guides all our employees’ actions.
In the states where our water subsidiaries operate, it is possible that portions of our subsidiaries’ operations could be acquired by municipal governments by one or more of the following methods: eminent domain; the right of purchase given to or reserved by a municipality or political subdivision when the original franchise was granted; and, the right of purchase given or reserved under the law of the state in which the subsidiary was incorporated or from which it received its permit. 10 Table of Contents The price to be paid upon such an acquisition by the municipal government is usually determined in accordance with applicable law under eminent domain.
In the states where our water subsidiaries operate, it is possible that portions of our subsidiaries’ operations could be acquired by municipal governments by one or more of the following methods: eminent domain; the right of purchase given to or reserved by a municipality or political subdivision when the original franchise was granted; and, the right of purchase given or reserved under the law of the state in which the subsidiary was incorporated or from which it received its permit.
During the five year period ended December 31, 2023, our utility customer base including customers associated with utility system acquisitions and dispositions increased from 1,005,590 at January 1, 2019 to 1,857,461 at December 31, 2023. Acquisitions and Other Growth Ventures We believe that acquisitions will continue to be an important source of customer growth for us.
During the five year period ended December 31, 2024, our utility customer base including customers associated with utility system acquisitions and dispositions increased from 1,026,704 at January 1, 2020 to 1,869,306 at December 31, 2024. Acquisitions and Other Growth Ventures We believe that acquisitions will continue to be an important source of customer growth for us.
The Company is also monitoring ongoing litigation and settlement activity with manufacturers of PFAS in these proceedings. For more information, see Item 3 - Legal Proceedings. Clean Water Act - The Clean Water Act regulates discharges from drinking water and wastewater treatment facilities into lakes, rivers, streams, and groundwater.
The Company is also monitoring ongoing litigation and settlement activity with manufacturers of PFAS in these proceedings. For more information, see Item 8 - Note 9 to the Company’s Notes to Consolidated Financial Statements. Clean Water Act - The Clean Water Act regulates discharges from drinking water and wastewater treatment facilities into lakes, rivers, streams, and groundwater.
Overall, for the five year period of 2019 through 2023, our utility customer base, adjusted to exclude customers associated with utility system dispositions, increased at an annual compound rate of 13.2%.
Overall, for the five year period of 2020 through 2024, our utility customer base, adjusted to exclude customers associated with utility system dispositions, increased at an annual compound rate of 12.9%.
These investments include replacing and expanding its water and wastewater utility infrastructure and replacing and upgrading its natural gas utility infrastructure, with the latter leading to significant reductions in methane emissions that occur in aged gas pipes.
These investments include replacing and expanding its water and wastewater utility infrastructure, construction of additional treatment facilities to comply with the latest water quality standards, and replacing and upgrading its natural gas utility infrastructure, with the latter leading to significant reductions in methane emissions that occur in aged gas pipes.
The Regulated Water segment is comprised of eight operating segments for the Company’s water and wastewater regulated utility companies, aligned with the states where we provide these services.
The Company has identified eleven operating segments and has two reportable segments, the Regulated Water segment and the Regulated Natural Gas segment. The Regulated Water segment is comprised of eight operating segments for the Company’s water and wastewater regulated utility companies, aligned with the states where we provide these services.
At the management level, the Environmental, Social and Governance, or ESG, Oversight Committee, which is a group of about a dozen of the Company’ senior leaders across the organization and the Chief Executive Officer, meet at least once each quarter to discuss these topics.
At the management level, there is an oversight committee, which is a group of about a dozen of the Company’s senior leaders across the organization and the Chief Executive Officer, that meet at least once each quarter to discuss these topics.
We cannot predict what effect, if any, such changes might have on our operations, but our Regulated Natural Gas segment could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.
We cannot predict what effect, if any, such changes might have on our operations, but our Regulated Natural Gas segment could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Refer to further discussion below in the Environmental, Health and Safety Regulation and Compliance section.
It is estimated that, in the event we experience a 0.50% decrease in residential water consumption, it would result in a decrease in annual residential water revenue of approximately $3,000,000, which would likely be partially offset by a reduction in incremental water production expenses such as chemicals and power.
It is estimated that, in the event we experience a 0.50% decrease in residential water consumption, it would result in a decrease in annual residential water revenue of approximately $3,000,000, which would likely be partially offset by a reduction in incremental water production expenses such as chemicals and power. 3 Table of Contents Our natural gas utility customer base is diversified among residential gas, commercial gas, industrial gas, gas transportation, and other utility.
Refer to further discussion below in the Environmental, Health and Safety Regulation and Compliance section. 6 Table of Contents Economic Regulation Most of our utility operations are subject to regulation by their respective state utility commissions, which have broad administrative power and authority to regulate billing rates, determine franchise areas and conditions of service, approve acquisitions, and authorize the issuance of securities.
Economic Regulation Most of our utility operations are subject to regulation by their respective state utility commissions, which have broad administrative power and authority to regulate billing rates, determine franchise areas and conditions of service, approve acquisitions, and authorize the issuance of securities.
After a thorough review and inspection of our dams by professional outside engineering firms, we 12 Table of Contents believe that all 18 dams are structurally sound and well-maintained, except as described below. These inspections provide recommendations for ongoing rehabilitation which we include in our capital improvement program.
After a thorough review and inspection of our dams by professional outside engineering firms, we believe that all 18 dams are structurally sound and well-maintained, except as described below. These inspections provide recommendations for ongoing rehabilitation which we include in our capital improvement program. The Company has approximately $39,000,000 in capital improvements budgeted between 2025 and 2029 for dam improvements.
This is particularly true for industrial customers who have the ability to switch to alternative fuels. Natural gas generally benefits from a competitive price advantage over oil, electricity, and propane.
Competition can be intense among the energy sources with price being the primary consideration. This is particularly true for industrial customers who have the ability to switch to alternative fuels. Natural gas generally benefits from a competitive price advantage over oil, electricity, and propane.
The Company intends to use the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. See Note 3 – Assets Held for Sale and Dispositions in the Notes to Consolidated Financial Statements for additional information.
The Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. See Note 3 – Dispositions in the Notes to Consolidated Financial Statements , which is contained in Item 8 of this Annual Report for additional information.
The capital investments made to rehabilitate and expand the infrastructure of the communities we serve is critical to our mission of safely and reliably delivering Earth ’ s most essential resources.
These figures could change as plans for construction execution are refined. The capital investments made to rehabilitate and expand the infrastructure of the communities we serve is critical to our mission of safely and reliably delivering Earth ’ s most essential resources.
These capital expenditures do not include the amounts discussed below in connection with the National Primary Drinking Water Regulation as that regulation is not yet finalized. We are parties to agreements with regulatory agencies in Pennsylvania, Texas, and Illinois under which we have committed to make improvements for environmental compliance.
These capital expenditures do not include the amounts related to compliance with the final National Primary Drinking Water Regulation (NPDWR) and Lead and Copper Rule Improvements (LCRI), discussed below, which are budgeted separately. We are also parties to agreements with regulatory agencies in Pennsylvania, Texas, and Illinois under which we have committed to make improvements for environmental compliance.
We believe that the capital expenditures required to address outstanding environmental compliance issues in our water and wastewater systems have been budgeted in our capital program and represent approximately $187,000,000, or less than 5% of our expected total water and wastewater capital expenditures over the next five years (2024 -2028).
We estimate the capital expenditures required to address outstanding environmental compliance issues in our water and wastewater systems and budgeted in our capital program to be approximately $104,000,000, or less than 3% of our expected total water and wastewater capital expenditures over the next five years (2025 -2029).
Furthermore, some utility commissions authorize the use of expense deferrals and amortization to provide for an impact on our operating income by an amount that approximates the requested amount in a rate request.
As of December 31, 2024, we have no billings under interim rate arrangements for base rate case filings in progress. Furthermore, some utility commissions authorize the use of expense deferrals and amortization to provide for an impact on our operating income by an amount that approximates the requested amount in a rate request.
This will be achieved by extensive gas pipeline replacement, renewable energy purchasing, accelerated methane leak detection and repair, and various other currently planned initiatives that are highly feasible with proven technology. In 2022, we have achieved 25% emissions reduction from our 2019 baseline.
Early in 2021, we announced an enterprise-wide commitment that by 2035, we will reduce our Scope 1 and 2 greenhouse gas (GHG) emissions by 60% from our 2019 baseline. This will be achieved by extensive gas pipeline replacement, renewable energy purchasing, accelerated methane leak detection and repair, and various other currently planned initiatives that are highly feasible with proven technology.
Our total rewards package includes a combination of salaries, short and long-term incentives, health and wellness benefits, retirement benefits, and other benefits which we regularly assess against the current business environment and labor market to ensure they are competitive.
Our total rewards package includes a combination of salaries, short and long-term incentives, health and wellness benefits, retirement benefits, and other benefits which we regularly assess against the current business environment and labor market to ensure they are competitive. ‎ 15 Table of Contents Communication and Engagement –We believe that our employees are critical to our business, and it is essential to have an environment of high engagement and inclusivity in which employees thrive.
In general, water consumption in the summer months is more affected by drought warnings and restrictions because discretionary and recreational use of water is at its highest during the summer months. At other times of the year, warnings and restrictions generally have less of an effect on water consumption.
The timing and duration of the warnings and restrictions can have an impact on our water revenues and net income. In general, water consumption in the summer months is more affected by drought warnings and restrictions because discretionary and recreational use of water is at its highest during the summer months.
Design for this dam commenced in 2013 and construction is expected to be completed in 2027. An additional four high hazard dams in Pennsylvania were recently added due to an acquisition in 2023. These dams are undergoing additional evaluations but have capital improvements budgeted for currently identified needs in the 2024 to 2028 period.
An additional four high hazard dams in Pennsylvania were recently added due to an acquisition in 2023. These dams are undergoing additional evaluations but have capital improvements budgeted for currently identified needs in the 2025 to 2029 period.
Creating an environment where our differences are valued and where every person feels a sense of belonging and engagement supports a thriving organization that cares about our customers and ensures our continued long-term success.
Diversity, Equity and Inclusion - Diversity of backgrounds, ideas, thoughts, and experiences is essential to our culture and the way we do business. Creating an environment where our differences are valued and where every person feels a sense of belonging and engagement supports a thriving organization that cares about our customers and ensures our continued long-term success.
Drought warnings and watches result in the public being asked to voluntarily reduce water consumption. We believe that our wastewater treatment facilities are generally adequate to meet the present requirements of our customers under normal conditions. Additionally, we own several wastewater collection systems that convey the wastewater to municipally-owned facilities for treatment.
At other times of the year, warnings and restrictions generally have less of an effect on water consumption. Drought warnings and watches result in the public being asked to voluntarily reduce water consumption. We believe that our wastewater treatment facilities are generally adequate to meet the present requirements of our customers under normal conditions.
In other instances, the price may be negotiated, fixed by appraisers selected by the parties, or computed in accordance with a formula prescribed in the law of the state or in the particular franchise or charter.
The price to be paid upon such an acquisition by the municipal government is usually determined in accordance with applicable law under eminent domain. In other instances, the price may be negotiated, fixed by appraisers selected by the parties, or computed in accordance with a formula prescribed in the law of the state or in the particular franchise or charter.
Water consumption per customer is affected by local weather conditions during the year, especially during late spring, summer, and early fall. In general, during these seasons, an extended period of dry weather increases consumption, while above-average rainfall decreases consumption. Also, an increase in the average temperature generally causes an increase in water consumption.
In general, during these seasons, an extended period of dry weather increases consumption, while above-average rainfall decreases consumption. Also, an increase in the average temperature generally causes an increase in water consumption.
In April 2023, the Internal Revenue Service issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers can adopt to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized for tax purposes.
The flow-through method of recording income tax benefits results in a reduction to current income tax expense and is included in utility customers’ rates, which generally is subject to a collar mechanism. 8 Table of Contents In April 2023, the Internal Revenue Service issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain , replace, or improve natural gas transmission and distribution property must be capitalized for tax purposes.
All of our active surface water treatment plants (within Pennsylvania, Ohio, and Illinois) maintain good standing in the program which includes many awards of achievement.
This voluntary program is a commitment to excellence within the drinking water community above and beyond the EPA’s stringent treatment goals. All of our active surface water treatment plants within Pennsylvania, Ohio, Virginia, and Illinois maintain good standing in the program which includes many awards of achievement.
Customer bills are adjusted in the December through April billing months, with rates adjusted for the difference between actual revenues and revenues calculated under this mechanism billed to the customers . 9 Table of Contents Competition In general, we believe that Essential Utilities and its water, wastewater, and natural gas subsidiaries have valid authority, free from unduly burdensome restrictions, to enable us to carry on our business as presently conducted in the franchised or contracted areas we now serve.
Competition In general, we believe that Essential Utilities and its water, wastewater, and natural gas subsidiaries have valid authority, free from unduly burdensome restrictions, to enable us to carry on our business as presently conducted in the franchised or contracted areas we now serve.
The sale closed on October 1, 2023, and the Company received net cash proceeds of $39,965,000, subject to working capital and other adjustments. The sale concluded the Company’s regulated utility operations in West Virginia. In October 2023, the Company entered into an agreement to sell its interest in three non-utility local microgrid and distributed energy projects for $165,000,000.
The Company initially received net cash proceeds of $39,965,000, subject to working capital and other adjustments. In March 2024, the Company received an additional $1,213,000 from the buyer. In January 2024, the Company completed the sale of its interest in three non-utility local microgrid and distributed energy projects for $165,000,000.
Although our natural gas subsidiaries are not currently in significant direct competition with any other distributors of natural gas in its service areas, we do compete with suppliers of other forms of energy such as fuel oil, electricity, propane, coal, wind, and solar. Competition can be intense among the energy sources with price being the primary consideration.
As a regulated utility, we believe there is little competition for the daily water, wastewater, and natural gas service we provide to our customers. ‎ 9 Table of Contents Although our natural gas subsidiaries are not currently in significant direct competition with any other distributors of natural gas in its service areas, we do compete with suppliers of other forms of energy such as fuel oil, electricity, propane, coal, wind, and solar.
Capital Investment The Company expects to invest approximately $7.2 billion from 2024 through 2028 to meet compliance requirements, improve water and natural gas systems, and better serve customers through improved information technology.
Capital Investment One of the greatest challenges facing the United States is the rehabilitation of our nation’s aging infrastructure. The Company expects to invest approximately $7.8 billion from 2025 through 2029 to meet compliance requirements, improve water and natural gas systems, and better serve customers through improved information technology.
Changes in regulatory requirements can be reflected in revised permit limits and conditions when permits are renewed, typically on a five year cycle, or when treatment capacity is 5 Table of Contents expanded.
Additionally, we own several wastewater collection systems that convey the wastewater to municipally-owned facilities for treatment. Changes in regulatory requirements can be reflected in revised permit limits and conditions when permits are renewed, typically on a five year cycle, or when treatment capacity is expanded.
Additionally, the Company estimates annual operating expenses of approximately five percent of the installed capital expenditures, in today’s dollars, related to testing, treatment, and disposal. These are preliminary estimates and actual capital expenditures and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site requirements.
These are preliminary estimates and actual capital expenditures and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site requirements.
Since 3 Table of Contents regulated natural gas revenues are affected by the cost of gas, higher gas costs, as well as general economic conditions, may cause customers to conserve usage, or seek alternative energy sources.
Since regulated natural gas revenues are affected by the cost of gas, higher gas costs, as well as general economic conditions, may cause customers to conserve usage, or seek alternative energy sources. In addition, higher gas costs result in an increase to our purchased gas inventory, which requires additional borrowings under credit facilities, resulting in higher interest expense.
The proposal is currently open for public comment and recommendations to provide feedback for consideration by the commission before finalizing these proposed revisions. Illinois, Indiana, New Jersey, North Carolina, Ohio, Virginia, and Texas also have legislation that allows the use of fair market value under varying rules and circumstances.
Illinois, Indiana, New Jersey, North Carolina, Ohio, Virginia, and Texas also have legislation that allows the use of fair market value under varying rules and circumstances.
On occasion, drought warnings and water use restrictions are issued by governmental authorities for portions of our service territories in response to extended periods of dry weather conditions. The timing and duration of the warnings and restrictions can have an impact on our water revenues and net income.
The various state utility commissions have generally recognized the operating and capital costs associated with these improvements in setting water rates. On occasion, drought warnings and water use restrictions are issued by governmental authorities for portions of our service territories in response to extended periods of dry weather conditions.
Regulations issued pursuant to the Safe Drinking Water Act set standards regarding the amount of microbial and chemical contaminants and radionuclides in drinking water.
Regulations issued pursuant to the Safe Drinking Water Act set standards regarding the amount of microbial and chemical contaminants and radionuclides in drinking water. On April 10, 2024, the EPA announced the final NPDWR for the treatment of six per- and polyfluoroalkyl substances or compounds (PFAS).
Information concerning revenues, net income, identifiable assets and related financial information for the Regulated Water and Regulated Natural Gas segments and Other and eliminations for 2023, 2022, and 2021, is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 18 – Segment Information in the Notes to Consolidated Financial Statements which is contained in Item 8 of this Annual Report. 2 Table of Contents The following table summarizes our operating revenues, by utility customer class, for the Regulated Water and Regulated Natural Gas segments and Other and eliminations for the year ended December 31, 2023: Operating Revenues (000's) Operating Revenues (%) Residential water $ 641,351 31.2% Commercial water 180,731 8.8% Fire protection 41,257 2.0% Industrial water 33,949 1.7% Other water 51,527 2.5% Total water 948,815 46.2% Wastewater 187,394 9.0% Other utility 17,167 0.8% Regulated Water segment total 1,153,376 56.0% Residential gas 519,406 25.3% Commercial gas 111,272 5.5% Industrial gas 3,232 0.2% Gas transportation 184,598 9.0% Other utility 45,251 2.2% Regulated Natural Gas segment total 863,759 42.2% Other and eliminations 36,689 1.8% Consolidated $ 2,053,824 100.0% Customers Our water utility customer base is diversified among residential water, commercial water, fire protection, industrial water, other water, wastewater customers, and other utility customers (consisting of contracted services that are associated with the utility operations).
Information concerning revenues, net income, significant segment expenses and related financial information for the Regulated Water and Regulated Natural Gas segments and Other and eliminations for 2024, 2023, and 2022, is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 18 – Segment Information in the Notes to Consolidated Financial Statements which is contained in Item 8 of this Annual Report. 2 Table of Contents The following table summarizes our operating revenues, by utility customer class, for the Regulated Water and Regulated Natural Gas segments and Other and eliminations for the year ended December 31, 2024: Operating Revenues (000's) Operating Revenues (%) Residential water $ 662,909 31.8% Commercial water 186,534 8.9% Fire protection 42,409 2.0% Industrial water 34,831 1.7% Other water 80,964 3.9% Total water 1,007,647 48.3% Wastewater 199,422 9.6% Other utility 14,811 0.7% Regulated Water segment total 1,221,880 58.6% Residential gas 504,426 24.2% Commercial gas 100,662 4.8% Industrial gas 2,279 0.1% Gas transportation 194,413 9.3% Other utility 41,211 2.0% Regulated Natural Gas segment total 842,991 40.4% Other and eliminations 21,242 1.0% Consolidated $ 2,086,113 100.0% Customers and Seasonality of Business Our water utility customer base is diversified among residential water, commercial water, fire protection, industrial water, other water, wastewater customers, and other utility customers (consisting of contracted services that are associated with the utility operations).
The following table reports our operating revenues, by principal state, for our Regulated Water segment, which includes both water and wastewater utility services, Regulated Natural Gas segment, and Other and eliminations for the year ended December 31, 2023: Operating Revenues (000's) Operating Revenues (%) Pennsylvania $ 643,604 31.3% Ohio 125,574 6.1% Texas 98,441 4.8% Illinois 96,833 4.7% North Carolina 82,065 4.0% Other states (1) 106,859 5.2% Regulated Water segment total 1,153,376 56.1% Pennsylvania 798,831 38.9% Other states (2) 64,928 3.2% Regulated Natural Gas segment total 863,759 42.1% Other and eliminations 36,689 1.8% Consolidated $ 2,053,824 100.0% (1) Includes our water operating subsidiaries in the following states: New Jersey, Indiana, and Virginia.
The following table reports our operating revenues, by principal state, for our Regulated Water segment, which includes both water and wastewater utility services, Regulated Natural Gas segment, and Other and eliminations for the year ended December 31, 2024: Operating Revenues (000's) Operating Revenues (%) Pennsylvania $ 674,051 32.3% Ohio 136,600 6.5% Texas 107,519 5.2% Illinois 101,194 4.9% North Carolina 88,604 4.2% Other states (1) 113,912 5.5% Regulated Water segment total 1,221,880 58.6% Pennsylvania 786,722 37.7% Kentucky 56,269 2.7% Regulated Natural Gas segment total 842,991 40.4% Other and eliminations 21,242 1.0% Consolidated $ 2,086,113 100.0% (1) Includes our water operating subsidiaries in the following states: New Jersey, Indiana, and Virginia.
These capital improvements result from the adoption by state regulatory agencies of revised formulas for calculating the magnitude of a possible maximum flood event. The most significant capital improvement remaining to be performed in our dam improvement program is on one dam in Pennsylvania at a total estimated cost of $15,400,000.
We performed studies of our dams that identified five high hazard dams in Pennsylvania and one high hazard dam in Ohio requiring capital improvements. These capital improvements result from the adoption by state regulatory agencies of revised formulas for calculating the magnitude of a possible maximum flood event.
Our natural gas utility customer base is diversified among residential gas, commercial gas, industrial gas, gas transportation, and other utility. Substantially all of our natural gas utility customers are metered, which allows us to measure and bill for our customers’ natural gas usage.
Substantially all of our natural gas utility customers are metered, which allows us to measure and bill for our customers’ natural gas usage. Natural gas usage per customer is affected by local weather conditions during the year, especially during the fall, winter, and early spring.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following are the types of forward-looking statements we make throughout this Annual Report, including in these Risk Factors, and a summary of the types of risks that could impact us and cause actual results to differ from those described in such forward-looking statements: opportunities for future acquisitions, both within and outside the water and wastewater industries, the success of pending acquisitions and the impact of future acquisitions; acquisition-related costs and synergies; the impact of decisions of governmental and regulatory bodies, including decisions to raise or lower rates and decisions regarding potential acquisitions; the sale of water, wastewater, and gas subsidiaries; the impact of conservation awareness of customers and more efficient fixtures and appliances on water and natural gas usage per customer; the impact of our business on the environment, and our ability to meet our environmental, social, and governance goals; our authority to carry on our business without unduly burdensome restrictions; our capability to pursue timely rate increase requests; the capacity of our water supplies, water facilities, wastewater facilities, and natural gas supplies and storage facilities; the impact of public health threats, or the measures implemented by the Company as a result of these threats; the impact of cybersecurity attacks or other cyber-related events; developments, trends and consolidation in the water, wastewater, and natural gas utility and infrastructure industries; the impact of changes in and compliance with governmental laws, regulations and policies, including those dealing with the environment, health and water quality, taxation, and public utility regulation; the development of new services and technologies by us or our competitors; the availability of qualified personnel; the condition of our assets; recovery of capital expenditures and expenses in rates; projected capital expenditures and related funding requirements; the availability and cost of capital financing, including impacts of increasing financing costs and interest rates; dividend payment projections; the impact of geographic diversity on our exposure to unusual weather; the continuation of investments in strategic ventures; our ability to obtain fair market value for condemned assets; the impact of fines and penalties; the impact of legal proceedings; general economic conditions, including inflation; the impairment of goodwill resulting in a non-cash charge to earnings; the impact of federal and/or state tax policies and the regulatory treatment of the effects of those policies; and the amount of income tax deductions for qualifying utility asset improvements and the Internal Revenue Service’s ultimate acceptance of the deduction methodology. 19 Table of Contents Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to: the success in the closing of, and the profitability of future acquisitions; changes in general economic, business, credit and financial market conditions; our ability to manage the expansion of our business; changes in environmental conditions, including the effects of climate change; our ability to integrate and otherwise realize all of the anticipated benefits of businesses, technologies or services which we may acquire; the decisions of governmental and regulatory bodies, including decisions on regulatory filings, including rate increase requests and decisions regarding potential acquisitions; our ability to file rate cases on a timely basis to minimize regulatory lag; the impact of inflation on our business and on our customers; abnormal weather conditions, including those that result in water use restrictions or reduced or elevated natural gas consumption; the seasonality of our business; our ability to treat and supply water or collect and treat wastewater; our ability to source sufficient natural gas to meet customer demand in a timely manner; the continuous and reliable operation of our information technology systems, including the impact of cybersecurity attacks or other cyber-related events, and risks associated with new systems implementation or integration; impacts from public health threats, including on consumption, usage, supply chain, and collections. changes in governmental laws, regulations and policies, including those dealing with taxation, the environment, health and water quality, and public utility regulation; the extent to which we are able to develop and market new and improved services; the effect of the loss of major customers; our ability to retain the services of key personnel and to hire qualified personnel as we expand; labor disputes; increasing difficulties in obtaining insurance and increased cost of insurance; cost overruns relating to improvements to, or the expansion of, our operations; inflation in the costs of goods and services; the effect of natural gas price volatility, including the potential impact of high commodity prices on usage or rate case outcomes; civil disturbance or terroristic threats or acts; changes to the rules or our assumptions underlying our determination of what qualifies for an income tax deduction for qualifying utility asset improvements; changes in, or unanticipated, capital requirements; changes in our credit rating or the market price of our common stock; changes in valuation of strategic ventures; changes in accounting pronouncements; litigation and claims; and restrictions on our subsidiaries’ ability to make dividends and other distributions. 20 Table of Contents Risks Related to Acquisitions One of the important elements of our growth strategy is the acquisition of regulated utility systems.
Biggest changeBecause forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to: the success in the closing of, and the profitability of future acquisitions; changes in general economic, political, business, credit, and financial market conditions and interest rates; our ability to manage the expansion of our business; changes in environmental conditions, including the effects of climate change; our ability to integrate and otherwise realize all of the anticipated benefits of businesses, technologies or services which we may acquire; the decisions of governmental and regulatory bodies, including decisions on regulatory filings, such as rate increase requests and decisions regarding potential acquisitions; our ability to file rate cases on a timely basis to minimize regulatory lag; the impact of inflation on our business and on our customers and potential opposition to rate increases; abnormal weather conditions and natural disasters, including those that result in water use restrictions or reduced or elevated natural gas consumption; the seasonality of our business; our ability to source, treat, and supply water, including in times of drought, or collect and treat wastewater; our ability to source sufficient natural gas to meet customer demand in a timely manner; the continuous and reliable operation of our information technology systems, including the impact of cybersecurity attacks or other cyber-related events, and risks associated with new systems implementation or integration; impacts from public health threats, including on consumption, usage, supply chain, and collections. changes in governmental laws, regulations and policies, including those dealing with taxation, the environment, health and water quality, data and consumer privacy, and public utility regulation; the extent to which we are able to develop and market new and improved services; the effect of the loss of major customers; our ability to retain the services of key personnel and to hire qualified personnel as we expand; labor disputes; increasing difficulties in obtaining insurance and increased cost of insurance; cost overruns relating to improvements to, or the expansion of, our operations; inflation and potential impact of proposed tariffs on the availability and costs of goods and services; the effect of natural gas price volatility, including the potential impact of high commodity prices on usage or rate case outcomes; civil disturbance or terroristic threats or acts; changes to the rules or our assumptions underlying our determination of what qualifies for an income tax deduction for qualifying utility asset improvements; changes in, or unanticipated, capital requirements; changes in our credit rating or outlook of credit rating agencies with respect to our Company and subsidiaries, or the market price of our common stock; changes in valuation of strategic ventures; changes in accounting pronouncements; litigation and claims; and restrictions on our subsidiaries’ ability to make dividend payments and other distributions. 18 Table of Contents Risks Related to the Operation and Regulation of our Business General economic conditions may affect our financial condition and results of operations.
Changes in the price of natural gas due to, for example, extreme weather events, geopolitical forces, or regulatory policy changes, and the amount of natural gas needed to supply customers’ needs due to, for example, colder than expected seasonal temperatures, could significantly affect the price and amount of natural gas we are required to purchase and the timing of such purchases, and, in turn, affect our borrowing requirements and liquidity position.
Extreme weather events, geopolitical forces, or regulatory policy changes, and the amount of natural gas needed to supply customers’ needs due to, for example, colder than expected seasonal temperatures, could significantly affect the price and amount of natural gas we are required to purchase and the timing of such purchases, and, in turn, affect our borrowing requirements and liquidity position.
Such cybersecurity attacks or other events may result in: the loss or compromise of customer, financial, employee, or operational data; disruption of billing, collections or normal field service activities; disruption of electronic monitoring and control of operational systems; delays in financial reporting and other normal management functions; and disruption in normal system operations.
Such cybersecurity attacks or other events may result in: the loss or compromise of customer, financial, employee, or operational data; disruption of billing, collections, payments, or normal field service activities; disruption of electronic monitoring and control of operational systems; delays in financial reporting and other normal management functions; and disruption in normal system operations.
Transporting, distributing and storing natural gas involves numerous risks that may result in accidents and other operating risks and costs. Natural gas transportation, distribution and storage activities inherently involve a variety of hazards and operational risks, such as leaks, accidental explosions, damage caused by third parties and mechanical problems, which could cause substantial financial losses.
Transporting, distributing and storing natural gas involves numerous risks that may result in accidents and other operating risks and costs. Natural gas transportation, distribution and storage activities inherently involve a variety of hazards and operational risks, such as leaks, accidental explosions, well failure, damage caused by third parties and mechanical problems, which could cause substantial financial losses.
Our Chief Information Officer and Information Security Director provides updates on cybersecurity risks, threats, key developments in policies and practices, and related risk exposures to the RP Committee at least quarterly, and more often as needed. When covered during an RP Committee meeting, the Chairperson of the RP Committee reports on its discussions to the full Board of Directors.
Our Chief Information Officer provides updates on cybersecurity risks, threats, key developments in policies and practices, and related risk exposures to the RP Committee at least quarterly, and more often as needed. When covered during an RP Committee meeting, the Chairperson of the RP Committee reports on its discussions to the full Board of Directors.
Acquisitions by us could also result in: dilutive issuances of our equity securities; incurrence of debt, contingent liabilities, and environmental liabilities; unanticipated capital expenditures; failure to maintain effective internal control over financial reporting; recording goodwill and other intangible assets for which we may never realize their full value and may result in an asset impairment that may negatively affect our results of operations; fluctuations in quarterly and/or annual results; other acquisition related expenses; and exposure to unknown or unexpected risks and liabilities.
Acquisitions by us could also result in: dilutive issuances of our equity securities; incurrence of debt, contingent liabilities, and environmental liabilities; unanticipated capital expenditures; failure to maintain effective internal control over financial reporting; recording goodwill and other intangible assets for which we may never realize their full value and may result in an asset impairment that may negatively affect our results of operations; fluctuations in quarterly and/or annual results; 32 Table of Contents other acquisition related expenses; and exposure to unknown or unexpected risks and liabilities.
A number of states have also adopted energy strategies or plans with goals that include the reduction of greenhouse gas emissions. For example, Pennsylvania has a methane reduction framework for the natural gas industry, which has resulted in permitting changes with the stated goal of reducing methane emissions from well sites, compressor stations, and pipelines.
A number of states have also adopted energy strategies or plans with goals that include the reduction of GHG. For example, Pennsylvania has a methane reduction framework for the natural gas industry, which has resulted in permitting changes with the stated goal of reducing methane emissions from well sites, compressor stations, and pipelines.
Such impacts may include: a reduction in discretionary and recreational water use by our residential water customers, particularly during the summer months when such discretionary usage is normally at its highest; a reduction in natural gas use by our residential customers, particularly during the winter months when such usage is normally at its highest; a decline in usage by industrial and commercial customers as a result of decreased business activity or a shift to alternative energy sources; an increased incidence of customers’ inability to pay or delays in paying their utility bills, or an increase in customer bankruptcies, which may lead to higher bad debt expense, increased financing costs, and reduced cash flow; a lower natural customer growth rate due to a decline in new housing starts; and a decline in the number of active customers due to housing vacancies.
Such impacts may include: a reduction in discretionary and recreational water use by our residential water customers, particularly during the summer months when such discretionary usage is normally at its highest; a reduction in natural gas use by our residential customers, particularly during the winter months when such usage is normally at its highest; a decline in usage by industrial and commercial customers as a result of decreased business activity or a shift to alternative energy sources; an increased incidence of customers’ inability to pay or delays in paying their utility bills, or an increase in customer bankruptcies, which may lead to higher bad debt expense, increased financing costs, and reduced cash flow; opposition by customers and statutory advocates to rate increases; a lower natural customer growth rate due to a decline in new housing starts; and a decline in the number of active customers due to housing vacancies.
In addition, our information technology systems may be vulnerable to damage or interruption from the following types of cybersecurity attacks or other events: power loss, computer systems failures, and internet, telecommunications or data network failures; operator negligence or improper operation by, or supervision of, employees; physical and electronic loss of data; computer viruses, cybersecurity attacks, intentional security breaches, hacking, denial of service actions, misappropriation of data and similar events; difficulties in the implementation of upgrades or modification to our information technology systems; and hurricanes, fires, floods, earthquakes and other natural disasters.
In addition, our information technology systems may be vulnerable to damage or interruption from the following types of cybersecurity attacks or other events: power loss, computer systems failures, and internet, telecommunications or data network failures; operator negligence or improper operation by, or supervision of, employees; 21 Table of Contents physical and electronic loss of data; computer viruses, cybersecurity attacks, intentional security breaches, hacking, denial of service actions, misappropriation of data and similar events; difficulties in the implementation of upgrades or modification to our information technology systems; and hurricanes, fires, floods, earthquakes and other natural disasters.
Peoples’ revenues are seasonal and temperature sensitive and vary from year-to-year, depending on weather conditions, with a substantial portion of Peoples’ revenue occurring in the first and fourth quarters of the year due to colder temperatures and increased heating needs. In 2023, this amounted to 73%, for the first and fourth quarters.
Peoples’ revenues are seasonal and temperature sensitive and vary from year-to-year, depending on weather conditions, with a substantial portion of Peoples’ revenue occurring in the first and fourth quarters of the year due to colder temperatures and increased heating needs. In 2024, this amounted to 73%, for the first and fourth quarters.
Additionally, management provides an update to the full Board of Directors at least once a year, and more often as needed. The Board of Directors annually reviews and approves the capital and operating budgets, ultimately reviewing and approving the amount spent on cybersecurity measures. 37 Table of Contents
Additionally, management provides an update to the full Board of Directors at least once a year, and more often as needed. The Board of Directors annually reviews and approves the capital and operating budgets, ultimately reviewing and approving the amount spent on cybersecurity measures. 34 Table of Contents
Regulatory actions or changes in significant assumptions, including discount and growth rates, utility sector market performance and comparable transaction multiples, projected operating and capital cash flows, and fair value of debt, could also potentially result in future impairments which could be material. 21 Table of Contents We compete with governmental entities, other regulated utilities, and strategic and financial buyers, for acquisition opportunities.
Regulatory actions or changes in significant assumptions, including discount and growth rates, utility sector market performance and comparable transaction multiples, projected operating and capital cash flows, and fair value of debt, could also potentially result in future impairments which could be material. We compete with governmental entities, other regulated utilities, and strategic and financial buyers, for acquisition opportunities.
Moreover, standards and expectations for ESG matters continue to evolve and may be subject to varying interpretations, which may result in significant revisions to our goals or progress. We may also be unable to satisfactorily meet evolving standards, regulations, and disclosure requirements related to ESG.
Moreover, standards and expectations for sustainability matters continue to evolve and may be subject to varying interpretations, which may result in significant revisions to our goals or progress. We may also be unable to satisfactorily meet evolving standards, regulations, and disclosure requirements related to sustainability.
Any failure, or perceived failure, to meet evolving stakeholder expectations, additional regulations and industry standards and disclosures, or achieve our ESG goals and targets could have an adverse effect on our business, results of operations, financial condition, or stock price.
Any failure, or perceived failure, to meet evolving stakeholder expectations, additional regulations and industry standards and disclosures, or achieve our sustainability goals and targets could have an adverse effect on our business, results of operations, financial condition, or stock price.
These risks are most acute during periods of substantial rainfall or flooding, which are the main causes of wastewater overflow and system failure. Liabilities resulting from such damages and injuries could harm our business, financial condition, and results of operations. 31 Table of Contents Work stoppages and other labor relations matters could harm our operating results.
These risks are most acute during periods of substantial rainfall or flooding, which are the main causes of wastewater overflow and system failure. Liabilities resulting from such damages and injuries could harm our business, financial condition, and results of operations. Work stoppages and other labor relations matters could harm our operating results.
A disruption or prolonged delays in obtaining important supplies or services, such as maintenance services, purchased water, chemicals, utility pipe, valves, hydrants, electricity, or other materials, could harm our utility services and our ability to operate in compliance with all regulatory requirements, which could harm our business, financial condition, and results of operations.
A disruption or prolonged delays in obtaining important supplies or services, such as maintenance services, purchased water, chemicals, utility pipe, valves, hydrants, electricity, or other materials, could harm our utility services and our ability to 25 Table of Contents operate in compliance with all regulatory requirements, which could harm our business, financial condition, and results of operations.
We have paid dividends consecutively for 79 years, and our Board of Directors recognizes the value that our common shareholders place on both our historical payment record and on our future anticipated dividend payments.
We have paid dividends consecutively for 80 years, and our Board of Directors recognizes the value that our common shareholders place on both our historical payment record and on our future anticipated dividend payments.
Approximately 50% of our Regulated Water and Regulated Natural Gas segments’ workforce is unionized under 22 labor contracts with labor unions, which expire between at various times up until 2028. In light of rising costs for healthcare and retirement benefits, contract negotiations in the future may be difficult.
Approximately 50% of our Regulated Water and Regulated Natural Gas segments’ workforce is unionized under 23 labor contracts with labor unions, which expire at various times up until 2028. In light of rising costs for healthcare and retirement benefits, contract negotiations in the future may be difficult.
We cannot predict any future trends in the rate of inflation and interest rates, and a significant increase in inflation, to the extent we are unable to recover higher costs through rate cases, could negatively impact our business, financial condition and results of operation. The rates we charge our customers are subject to regulation.
We cannot predict any future trends in the rate of inflation and interest rates, and a significant increase in inflation, to the extent we are unable to recover higher costs through rate cases, could negatively impact our business, financial condition, and results of operation. 19 Table of Contents The rates we charge our customers are subject to regulation.
If we are unable to maintain access to a reliable and adequate natural gas supply or sufficient pipeline capacity to deliver that supply, we may be unable to meet our customers’ requirements, resulting in a loss of customers and an adverse effect on our financial conditions and results of operations.
If we are unable to maintain access to a reliable and adequate natural gas supply or sufficient 20 Table of Contents pipeline capacity to deliver that supply, we may be unable to meet our customers’ requirements, resulting in a loss of customers and an adverse effect on our financial conditions and results of operations.
In Illinois, our operating subsidiary has adopted a revenue stability mechanism which allows us to recognize state PUC authorized revenue for a period which is not based upon the volume of water sold during that period, and effectively reduces the impact of weather and consumption variability.
In Illinois, our operating subsidiary has adopted a revenue stability mechanism which allows us to recognize state public utility commission (PUC) authorized revenue for a period which is not based upon the volume of water sold during that period, and effectively reduces the impact of weather and consumption variability.
Even during periods of moderate inflation, the effects of inflation can have a negative impact on our operating results. The ability to control operating expenses is an important factor that will influence future results. Inflation could adversely impact our ability to control costs, including operating expenses and capital costs.
Even during periods of moderate inflation, the effects of inflation can have a negative impact on our operating results. The ability to control operating expenses is an important factor that will influence future results. Inflation, and the potential impact of proposed tariffs, could adversely impact our ability to control costs, including operating expenses and capital costs.
Although these expenditures and costs may be recovered in the form of higher rates, there can be no assurance that the various state utility commissions that regulate our business would approve rate increases to enable us to 29 Table of Contents recover such expenditures and costs.
Although these expenditures and costs may be recovered in the form of higher rates, there can be no assurance that the various state utility commissions that regulate our business would approve rate increases to enable us to recover such expenditures and costs.
We monitor our control effectiveness in an increasing threat landscape and continuously take action to improve our security posture. We cannot assure you that, despite such measures, a form of system failure or data security breach will not have a material adverse effect on our financial condition and results of operations.
We have a cybersecurity controls framework in place. We monitor our control effectiveness in an increasing threat landscape and continuously take action to improve our security posture. We cannot assure you that, despite such measures, a form of system failure or data security breach will not have a material adverse effect on our financial condition and results of operations.
Some possible reasons for a delay or disruption in the supply of important goods and services include: our suppliers may not provide materials that meet our specifications in sufficient quantities; our suppliers may provide us with water that does not meet applicable quality standards or is contaminated; our suppliers may provide us with natural gas not meeting quality standards or is of insufficient volume or pressure; our suppliers may face production or shipping delays due to public health threats, natural disasters, strikes, lock-outs, political disputes, or other such actions; one or more suppliers could make strategic changes in the lines of products and services they offer; and some of our suppliers, such as small companies, may be more likely to experience financial and operational difficulties than larger, well-established companies, because of their limited financial and other resources.
Some possible reasons for a delay or disruption in the supply of important goods and services include: our suppliers may not provide materials that meet our specifications in sufficient quantities; our suppliers may provide us with water that does not meet applicable quality standards or is contaminated; our suppliers may provide us with natural gas not meeting quality standards or is of insufficient volume or pressure; our suppliers may face production or shipping delays due to public health threats, natural disasters, strikes, lock-outs, geopolitical or trade disputes, or other such actions; one or more suppliers could make strategic changes in the lines of products and services they offer; and some of our suppliers, such as small companies, may be more likely to experience financial and operational difficulties than larger, well-established companies, because of their limited financial and other resources; proposed tariffs could result in supply chain disruptions.
Changes in our reported earnings, however, may differ from changes in our rate base in a given period due to several factors, including rate case timing and the terms of such rate cases; over-or under-earnings in a given period due to changes in operating costs; the effects of tax rates or tax treatment of capital investments, including the effect of repair tax; capital expenditures that are not eligible for a DSIC between rate cases; acquisitions which have not yet been included in rate base; and issuances of equity.
Changes in our reported earnings per share, however, may differ from changes in our rate base in a given period due to several factors, including rate case timing and the terms of such rate cases; over-or under-earnings in a given period due to changes in operating costs; the effects of tax rates or tax treatment of capital investments, including the effect of repair tax; capital expenditures that are not eligible for a DSIC between rate cases; acquisitions which have not yet been included in rate base; unrecovered short-term interest costs; and issuances of equity.
As a result, our financial results are largely subject to political, resource supply, labor, utility cost and regulatory risks, economic conditions, natural disasters, and other risks affecting Pennsylvania. Federal and state environmental laws and regulations impose substantial compliance requirements on our operations.
As a result, our financial results are largely subject to political, resource supply, labor, utility cost and regulatory risks, economic conditions, natural disasters, and other risks affecting Pennsylvania. 23 Table of Contents Federal and state environmental laws and regulations impose substantial compliance requirements on our operations.
However, the Company’s expectation is based upon numerous estimates and assumptions and is subject to numerous uncertainties. 35 Table of Contents Our business requires significant capital expenditures that are partially dependent on our ability to secure appropriate funding. Disruptions in the capital markets may limit our access to capital.
However, the Company’s expectation is based upon numerous estimates and assumptions and is subject to numerous uncertainties. Our business requires significant capital expenditures that are partially dependent on our ability to secure appropriate funding. Disruptions in the capital markets may limit our access to capital.
Our calculation of the provision for income taxes is subject to our interpretation of applicable business tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service and other taxing authorities.
Significant judgment is required in determining our provision for income taxes. Our calculation of the provision for income taxes is subject to our interpretation of applicable business tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service and other taxing authorities.
In the event we are unable to obtain sufficient capital, we may need to take steps to conserve cash by reducing our capital expenditures or dividend payments and our ability to pursue acquisitions may be limited.
In the event we are 31 Table of Contents unable to obtain sufficient capital, we may need to take steps to conserve cash by reducing our capital expenditures or dividend payments and our ability to pursue acquisitions may be limited.
An impairment in the carrying value of our goodwill could negatively impact our consolidated results of operations and net worth. We have significant amounts of goodwill resulting from the acquisition of utility systems and businesses. As of December 31, 2023, the net carrying value of goodwill amounted to $2,340,738,000 or 13.9% of our total assets.
An impairment in the carrying value of our goodwill could negatively impact our consolidated results of operations and net worth. We have significant amounts of goodwill resulting from the acquisition of utility systems and businesses. As of December 31, 2024, the net carrying value of goodwill amounted to $2,340,713,000 or 13.0% of our total assets.
Changes in the cost of providing our products and services, including price increases in operating and capital costs, as well as increases in labor costs or borrowing costs, may negatively impact our financial condition and results of operations.
Changes in the cost of providing our products and services, including price increases in operating and capital costs, as well as increases in labor costs or borrowing costs, have negatively impacted our financial condition and results of operations.
Inflation levels in excess of historical levels could also lead to regulatory lag and thus impact our earned returns and financial results. 25 Table of Contents Moreover, in recent years, inflation and rising interest rates have become areas of increasing economic concern.
Inflation levels in excess of historical levels could also lead to regulatory lag and thus impact our earned returns and financial results. Moreover, in recent years, inflation and higher interest rates have become areas of increasing economic concern.
We maintain insurance to help defray costs associated with cybersecurity attacks or other events, but we cannot provide assurance that such insurance will provide coverage for any particular type of incident or event or that such insurance will be adequate, and losses incurred may make it difficult for us to secure insurance in the future at acceptable rates. 30 Table of Contents We have a cybersecurity controls framework in place.
We maintain insurance to help defray costs associated with cybersecurity attacks or other events, but we cannot provide assurance that such insurance will provide coverage for any particular type of incident or event or that such insurance will be adequate, and losses incurred may make it difficult for us to secure insurance in the future at acceptable rates.
We incur substantial costs on an ongoing basis to comply with all laws and regulations. New or stricter laws and/or regulations could increase our costs. Although we may seek to recover these costs through an increase in customer rates, there is no guarantee that the various state regulators would approve such an increase.
New or stricter laws and/or regulations could increase our costs. Although we may seek to recover these costs through an increase in customer rates, there is no guarantee that the various state regulators would approve such an increase.
In these circumstances, on occasion, the municipally-owned system may attempt to offer service to customers who are connected to our mains, resulting in our mains becoming surplus or underutilized without compensation. The final determination of our income tax liability may be materially different from our income tax provision. Significant judgment is required in determining our provision for income taxes.
In these circumstances, on occasion, the municipally-owned system may attempt to offer service to customers who are connected to our mains, resulting in our mains becoming surplus or underutilized without compensation. 24 Table of Contents The final determination of our income tax liability may be materially different from our income tax provision.
Public health threats could, in the future, materially impact our business in numerous ways, including, but not limited to, those outlined below: reduced demand from our commercial customers and shifts in demand for our regulated utility services; delay the timeliness of our service to customers because of shutdowns and/or illness and travel restrictions among our employees or employees of other companies on whom we rely; negatively impact the financial condition of our customers and their ability to pay for our products and services, and our ability to disconnect service for non-payment may be limited, and state regulators may impose bill deferral programs; may limit or curtail significantly or entirely the ability of public utility commissions to approve or authorize applications and other requests we may make with respect to our regulated water and natural gas businesses; and delays in our supply chain and our ability to complete maintenance, repairs, and capital programs, which could result in disruptions and increased costs. 34 Table of Contents These and other impacts of global or regional health pandemics, epidemics or similar public health threats could also have the effect of heightening many of the other risks described in “Risk Factors” in this Annual Report and the other reports we file from time to time with the SEC.
Natural disasters, catastrophic events and public health threats could also, in the future, materially impact our business in numerous ways, including, but not limited to, those outlined below: reduced demand from our commercial customers and shifts in demand for our regulated utility services; delay the timeliness of our service to customers because of shutdowns and/or illness and travel restrictions among our employees or employees of other companies on whom we rely; negatively impact the financial condition of our customers and their ability to pay for our products and services, and our ability to disconnect service for non-payment may be limited, and state regulators may impose bill deferral programs; may limit or curtail significantly or entirely the ability of public utility commissions to approve or authorize applications and other requests we may make with respect to our regulated water and natural gas businesses; and delays in our supply chain and our ability to complete maintenance, repairs, and capital programs, which could result in disruptions and increased costs.
We depend on an adequate water supply to meet the present and future demands of our customers. Drought conditions could interfere with our sources of water supply and could harm our ability to supply water in sufficient quantities to our existing and future customers. An interruption in our water supply could harm our business, financial condition, and results of operations.
Drought conditions could interfere with our sources of water supply and could harm our ability to supply water in sufficient quantities to our existing and future customers. An interruption in our water supply could harm our business, financial condition, and results of operations.
Due to such review process, there is a risk of a disallowance of full recovery of these costs. We are also subject to regulations and standards regarding the amount of lost and unaccounted for gas that may be recovered from customers. Any material disallowance of purchased gas costs would adversely affect our financial condition and results of operations.
We are also subject to regulations and standards regarding the amount of lost and unaccounted for gas that may be recovered from customers. Any material disallowance of purchased gas costs would adversely affect our financial condition and results of operations.
Risks Related to the Operation and Regulation of our Business General economic conditions may affect our financial condition and results of operations. A general economic downturn may lead to a number of impacts on our business and may affect our financial condition and results of operations.
A general economic downturn may lead to a number of impacts on our business and may affect our financial condition and results of operations.
We could also be subject to: claims for consequences arising out of human exposure to contamination and/or hazardous substances in our water supplies, including toxic torts; claims for other environmental damage; claims for customers’ business interruption as a result of an interruption in water service; claims for breach of contract; criminal enforcement actions; regulatory fines; or other claims.
We could also be subject to: claims for consequences arising out of human exposure to contamination and/or hazardous substances in our water supplies, including toxic torts; claims for other environmental damage; claims for customers’ business interruption as a result of an interruption in water service; claims for breach of contract; criminal enforcement actions; regulatory fines; or other claims. 29 Table of Contents We incur substantial costs on an ongoing basis to comply with all laws and regulations.
We comply with governmental agency guidance that recommends the standard of protection from these contaminants, and we monitor proposed standards and other governmental agency guidance regarding these contaminants. On March 14, 2023, the U.S. Environmental Protection Agency (EPA) announced the proposed National Primary Drinking Water Regulation (NPDWR) for the treatment of six PFAS compounds.
We comply with governmental agency guidance that recommends the standard of protection from these contaminants, and we monitor proposed standards and other governmental agency guidance regarding these contaminants. On April 10, 2024, the EPA announced the final National Primary Drinking Water Regulation (NPDWR) for the treatment of six per- and polyfluoroalkyl substances or compounds (PFAS).
As of December 31, 2023, our aggregate long-term and short-term debt balance was $7,098,131,000.
As of December 31, 2024, our aggregate long-term and short-term debt balance was $7,745,638,000.
If certain factors arise, we may be required to record a significant non-cash charge to earnings in our consolidated financial statements during the period in which an impairment of our goodwill is determined. Any such non-cash charge could have a material adverse impact on our results of operations and net worth.
If certain factors arise, we may be required to record a significant non-cash charge to earnings in our consolidated financial statements during the period in which an impairment of our goodwill is determined.
Accordingly, we may experience delays in obtaining appropriate materials and services on a timely basis and in sufficient quantities from such alternative suppliers at a reasonable price, which could interrupt services to our customers and harm our business, financial condition, and results of operations. 32 Table of Contents We depend significantly on the services of the members of our management team, and the departure of any of those persons could cause our operating results to suffer.
Accordingly, we may experience delays in obtaining appropriate materials and services on a timely basis and in sufficient quantities from such alternative suppliers at a reasonable price, which could interrupt services to our customers and harm our business, financial condition, and results of operations.
If we are unable to compete effectively or if customers further reduce their gas needs, we may lose existing customers, sell less gas to our customers and/or fail to acquire new customers, which could have a material adverse effect on our business, financial condition, and results of operations. 28 Table of Contents Drought conditions and government-imposed water use restrictions may impact our ability to serve our current and future customers, and may impact our customers’ use of our water, which may harm our business, financial condition, and results of operations.
If we are unable to compete effectively or if customers further reduce their gas needs, we may lose existing customers, sell less gas to our customers and/or fail to acquire new customers, which could have a material adverse effect on our business, financial condition, and results of operations.
Our business is capital intensive and requires significant capital investments for additions to or replacement of property, plant and equipment. These capital investments create assets that are used and useful in providing regulated utility service, and as a result, increase our rate base, on which we generate earnings through the regulatory process.
These capital investments create assets that are used and useful in providing regulated utility service, and as a result, increase our rate base, on which we generate earnings through the regulatory process.
One element of our strategic plans is our growth through acquisition strategy. Acquisitions in the utility industry are time consuming and complex, with the number of regulatory approvals needed. A significant acquisition can require significant time and resources, including devotion of management time, to integrate the acquired business.
One element of our strategic plans is our growth through acquisition strategy. Acquisitions in the utility industry are time consuming and complex, with the number of regulatory approvals needed.
We have focused attention on ESG matters and the communication of our ESG goals, targets, and activities to investors. These goals and targets reflect our current plans and aspirations.
Climate change and other sustainability matters are increasingly important to many investors, including our current investors. We have focused attention on these matters and the communication of our goals, targets, and activities to investors. These goals and targets reflect our current plans and aspirations.
Risks Related to the Company’s Capital Needs and Common Stock We have substantial indebtedness, as a result, it may be more difficult for the Company to pay or refinance its debts or take other actions, and the Company may need to divert cash to fund debt service payments.
To the extent any of these events occur or regulations change, it could adversely affect our business, reputation, financial condition, and results of operations. 30 Table of Contents Risks Related to the Company’s Capital Needs and Common Stock We have substantial indebtedness, as a result, it may be more difficult for the Company to pay or refinance its debts or take other actions, and the Company may need to divert cash to fund debt service payments.
Subject to regulatory approval, as described below, changes in the cost of purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can therefore impact our financial condition and results of operations. 33 Table of Contents The state regulatory commissions approve the PGA changes on an interim basis, subject to refund and the outcome of a subsequent audit and prudence review.
Subject to regulatory approval, as described below, changes in the cost of purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can therefore impact our financial condition and results of operations.
Any business interruption or other losses might not be covered by insurance policies or be recoverable in rates, and such losses may make it difficult for us to secure insurance in the future at acceptable rates. 27 Table of Contents Our facilities could be the target of a possible terrorist or other deliberate attack which could harm our business, financial condition and results of operations.
Any business interruption or other losses might not be covered by insurance policies or be recoverable in rates, and such losses may make it difficult for us to secure insurance in the future at acceptable rates.
Any of the foregoing may also impair our ability to raise additional capital through the sale of our equity securities. 36 Table of Contents Item 1B Unresolved Staff Comments None Item 1C Cybersecur ity Risk Management and Strategy In connection with our enterprise risk management process, we identify, prioritize and monitor key risks that may affect the Company, including risks from cyber threats.
A significant acquisition can require significant time and resources, including devotion of management time, to integrate the acquired business. 33 Table of Contents Item 1B Unresolved Staff Comments None Item 1C Cybersecur ity Risk Management and Strategy In connection with our enterprise risk management process, we identify, prioritize and monitor key risks that may affect the Company, including risks from cyber threats.
Our water supplies, including water provided to our customers, are subject to possible contaminants, including those from: naturally occurring compounds or man-made substances; chemicals and other hazardous materials; lead and other materials; manufactured sources, such as pharmaceuticals and personal care products; and possible deliberate or terrorist attacks. 23 Table of Contents Depending on the nature of the water contamination, we may have to interrupt the use of that water supply until we are able to substitute, where feasible, the flow of water from an uncontaminated water source, including if practicable, the purchase of water from other suppliers, or continue the water supply under restrictions on use for drinking or broader restrictions against all use except for basic sanitation and essential fire protection.
Depending on the nature of the water contamination, we may have to interrupt the use of that water supply until we are able to substitute, where feasible, the flow of water from an uncontaminated water source, including if practicable, the purchase of water from other suppliers, or continue the water supply under restrictions on use for drinking or broader restrictions against all use except for basic sanitation and essential fire protection.
Decreased residential customer water and natural gas usage as a result of conservation efforts, and the impact of more efficient appliances and furnaces, may harm demand for our utility services and may reduce our revenues and earnings.
This mechanism is designed to help stabilize collection of fixed costs by adjusting customer billings based on temperature variances from average weather. 22 Table of Contents Decreased residential customer water and natural gas usage as a result of conservation efforts, and the impact of more efficient appliances and furnaces, may harm demand for our utility services and may reduce our revenues and earnings.
Our liquidity and, in certain circumstances, results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.
Should we fail to comply with applicable statutes and related rules, regulations and orders, we could be subject to significant penalties and fines. 26 Table of Contents Our liquidity and, in certain circumstances, results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.
If the request is denied completely or in part, we could be required to refund to customers some or all of the revenue billed to date, and write-off some or all of the deferred expenses. 26 Table of Contents Changes in our earnings may differ from changes in our rate base .
The revenue recognized and the expenses deferred by us reflect an estimate as to the final outcome of the ruling. If the request is denied completely or in part, we could be required to refund to customers some or all of the revenue billed to date, and write-off some or all of the deferred expenses.
Finally, significantly colder-than-normal weather conditions can materially increase natural gas usage, resulting in challenges for our operations and our ability to serve our customers.
Finally, significantly colder-than-normal weather conditions can materially increase natural gas usage, resulting in challenges for our operations and our ability to serve our customers. Effective October 2024, the weather impact on cash flow is mitigated by a weather normalization adjustment (“WNA”) in Peoples’ Pennsylvania rate jurisdiction.
If we are unable to provide utility services to our customers, our financial results would be impacted by lost revenues, and we would have to seek regulatory approval to recover restoration costs.
If we are unable to provide utility services to our customers, our financial results would be impacted by lost revenues, and we would have to seek regulatory approval to recover restoration costs. 28 Table of Contents Climate change and other sustainability matters are increasingly important to many investors, and we may fail to provide information desired by all investors or achieve our sustainability goals.
Additionally, the Company estimates annual operating expenses of approximately five percent of the installed capital expenditures, in today’s dollars, related to testing, 24 Table of Contents treatment, and disposal. These are preliminary estimates and actual capital expenditures and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site requirements.
These are preliminary estimates and actual capital expenditures and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site requirements.
In accordance with customary industry practices, we maintain insurance against a significant portion, but not all, of these risks and losses. To the extent any of these events occur or regulations change, it could adversely affect our business, reputation, financial condition, and results of operations.
In accordance with customary industry practices, we maintain insurance against a significant portion, but not all, of these risks and losses.
Our success depends significantly on the continued individual and collective contributions of our management team. The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could harm our business, financial condition, and results of operations.
The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could harm our business, financial condition, and results of operations. We may incur significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs.
Governance Role of Management - Our cybersecurity program is overseen by a cross-functional committee of senior business leaders and led by our Chief Information Officer and Information Security Director. This management committee meets bimonthly and is charged with overseeing our cybersecurity strategy, ensuring that cyber risk is managed, and that the program is aligned to business goals and objectives.
Refer to Item 1A – Risk Factors for additional information. Governance Role of Management - Our cybersecurity program is overseen by a cross-functional committee of senior business leaders and led by our Chief Information Officer.
In addition, we rely on our systems to track our utility assets and to manage maintenance and construction projects, materials and supplies, and our human resource functions.
In addition, we rely on our systems to track our utility assets and to manage maintenance and construction projects, materials and supplies, and our human resource functions. To date, risks from cybersecurity threats and incidents have not materially affected the Company, including its business strategy, financial condition, or results of operations.
We may incur significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs. Certain of Peoples’ pipeline operations are subject to pipeline safety laws and regulations.
Certain of Peoples’ pipeline operations are subject to pipeline safety laws and regulations.
Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures. Should we fail to comply with applicable statutes and related rules, regulations and orders, we could be subject to significant penalties and fines.
Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures.
The Company performed its initial analysis of the NPDWR and estimates an investment of at least $450,000,000 of capital expenditures to install additional treatment facilities over the Compliance Period in order to comply with the proposed NPDWR. This figure could increase as plans for construction execution are refined or if additional sites require treatment in the future.
This figure could increase as plans for construction execution are refined or if additional sites require treatment in the future. Additionally, the Company estimates annual operating expenses of approximately five percent of the installed capital expenditures, in today’s dollars, related to testing, treatment, and disposal.
Any of these factors could have a negative impact on our business, outlook, financial condition, and results of operations, which impact could be material.
Our facilities could be the target of a possible terrorist or other deliberate attack which could harm our business, financial condition and results of operations.
Both our Chief Information Officer and Information Security Director have formal education in information technology; have combined, extensive experience working in the Company’s information and technology function; and receive periodic training and education on cybersecurity-related topics.
This management committee meets bimonthly and is charged with overseeing our cybersecurity strategy, ensuring that cyber risk is managed, and that the program is aligned to business goals and objectives. Our Chief Information Officer has formal education in information technology; has multi-year experience working in the Company’s information and technology function; and receives periodic training and education on cybersecurity-related topics.
Inflation, higher interest rates and supply chain pressures resulted in an increase in certain operating and capital spending requirements in 2022 and 2023, which we expect will continue into 2024. To the extent inflation remains elevated, we may experience further cost increases for our operations, as well as increased labor costs.
To the extent inflation remains elevated and higher tariffs are imposed, we may experience further cost increases for our operations.
Removed
Risks Related to Health and Safety and Environmental Concerns Some scientific experts are predicting a worsening of weather volatility in the future, possibly created by climate change due to greenhouse gases. Changing severe weather patterns could require additional expenditures to reduce the risk associated with any increasing storm, flood, and drought occurrences.
Added
The following are the types of forward-looking statements we make throughout this Annual Report, including in these Risk Factors, and a summary of the types of risks that could impact us and cause actual results to differ from those described in such forward-looking statements:  opportunities for future acquisitions, both within and outside the water and wastewater industries, the success of pending acquisitions and the impact of future acquisitions;  acquisition-related costs and synergies;  the impact of decisions of governmental and regulatory bodies, including decisions to raise or lower rates and decisions regarding potential acquisitions;  the sale of water, wastewater, and gas subsidiaries;  the impact of conservation awareness of customers and more efficient fixtures and appliances on water and natural gas usage per customer;  the impact of our business on the environment, and our ability to meet our environmental, social, and governance goals;  our authority to carry on our business and successfully achieve our operational growth projections without unduly burdensome restrictions;  our capability to pursue timely rate increase requests;  the capacity of our water supplies, water facilities, wastewater facilities, and natural gas supplies and storage facilities;  the impact of public health threats, or the measures implemented by the Company as a result of these threats;  the impact of cybersecurity attacks or other cyber-related events;  developments, trends and consolidation in the water, wastewater, and natural gas utility and infrastructure industries;  the impact of changes in and compliance with governmental laws, regulations and policies, including those dealing with the environment, health and water quality, taxation, and public utility regulation;  the development of new services and technologies by us or our competitors;  the availability of qualified personnel;  the condition of our assets, including the risk of explosion from our natural gas operations and the failure of our natural gas storage facilities;  recovery of capital expenditures and expenses in rates;  projected capital expenditures and related funding requirements;  the availability and cost of capital financing, including impacts of increasing financing costs and interest rates;  dividend payment projections;  the impact of geographic diversity on our exposure to unusual weather;  the continuation of investments in strategic ventures;  our ability to obtain fair market value for condemned assets;  the impact of fines and penalties;  the impact of legal proceedings;  general economic conditions, including inflation;  the impairment of goodwill resulting in a non-cash charge to earnings;  the impact of federal and/or state tax policies and the regulatory treatment of the effects of those policies; and 17 Table of Contents  the amount of income tax deductions for qualifying utility asset improvements and the Internal Revenue Service’s ultimate acceptance of the deduction methodology.
Removed
Without adequate rate recovery, our costs of complying with climate change weather related measures may negatively impact our business, financial condition, or results of operations.
Added
The operation of our business and the execution of our capital projects require significant expenditures for labor, production costs, property and equipment, and services. Recent inflationary pressures have increased our expenses and capital costs, and those costs may continue to increase.
Removed
For example, in August 2022, the Inflation Reduction Act was signed into law, which includes a methane charge that is expected to be applicable to the reported annual methane emissions of certain oil and gas facilities, 22 Table of Contents that exceed certain methane emission thresholds, starting in calendar year 2024.
Added
Changes in our earnings per share may differ from changes in our rate base . Our business is capital intensive and requires significant capital investments for additions to or replacement of property, plant and equipment.
Removed
Climate change and other environmental, social, and governance matters are increasingly important to many investors, and we may fail to provide information desired by all investors or achieve our ESG goals. Climate change and other environmental, social, and governance, or ESG, matters are increasingly important to many investors, including our current investors.
Added
Drought conditions and government-imposed water use restrictions may impact our ability to serve our current and future customers, and may impact our customers’ use of our water, which may harm our business, financial condition, and results of operations. We depend on an adequate water supply to meet the present and future demands of our customers.
Removed
In 2019, we initiated a “do not consume” advisory for some of our customers served by our Illinois subsidiary, which resulted in a loss of revenues and increased operating costs and for which we anticipate an additional recovery of other costs and losses.
Added
We depend significantly on the services of the members of our management team, and the departure of any of those persons could cause our operating results to suffer. Our success depends significantly on the continued individual and collective contributions of our management team.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table indicates our net property, plant and equipment, in thousands of dollars, as of December 31, 2023 in the principal states where we operate: Net Property, Plant and Equipment Pennsylvania $ 8,621,092 71.3% Ohio 709,169 5.9% Illinois 649,669 5.4% North Carolina 548,807 4.5% Texas 676,130 5.5% Other (1) 892,205 7.4% Consolidated $ 12,097,072 100.0% (1) Consists primarily of our operating subsidiaries in the following states: New Jersey, Indiana, Virginia, and Kentucky.
Biggest changeThe following table indicates our net property, plant and equipment, in thousands of dollars, as of December 31, 2024 in the principal states where we operate: Net Property, Plant and Equipment Pennsylvania $ 9,305,441 70.8% Ohio 756,201 5.8% Illinois 699,938 5.3% North Carolina 590,991 4.5% Texas 806,382 6.1% Other (1) 984,523 7.5% Consolidated $ 13,143,476 100.0% (1) Consists primarily of our operating subsidiaries in the following states: New Jersey, Indiana, Virginia, and Kentucky.
For some properties that we acquired through the exercise of the power of eminent domain and other properties we purchased, we hold title for water supply purposes only. We own, operate and maintain approximately 14,450 miles of transmission and distribution mains, 24 surface water treatment plants, many well treatment stations, and 203 wastewater treatment plants.
For some properties that we acquired through the exercise of the power of eminent domain and other properties we purchased, we hold title for water supply purposes only. We own, operate and maintain approximately 14,500 miles of transmission and distribution mains, 24 surface water treatment plants, many well treatment stations, and 203 wastewater treatment plants.
A small portion of the properties are leased under long-term leases. Our Regulated Natural Gas properties consist of approximately 15,400 miles of natural gas distribution mains, varying in size from one-half inch to 36 inches in diameter, 1,700 miles of gathering pipeline, and 300 miles of intrastate transmission/storage pipeline.
A small portion of the properties are leased under long-term leases. Our Regulated Natural Gas properties consist of approximately 15,000 miles of natural gas distribution mains, varying in size from one-half inch to 30 inches in diameter, 1,700 miles of gathering pipeline, 300 miles of intrastate transmission/storage pipeline, and both active and inactive gas storage wells.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the results of legal proceedings cannot be predicted with certainty, except for the matter described below, there are no other pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our properties is the subject that we believe are material or are expected to materially harm our business, operating results, reputation, or financial condition.
Biggest changeAlthough the results of legal proceedings cannot be predicted with certainty, there are no pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our properties is the subject that we believe are material or are expected to materially harm our business, operating results, reputation, or financial condition.
Removed
PFAS Litigation Several of the Company’s subsidiaries are parties to several lawsuits against manufacturers of certain PFAS compounds for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS compounds in public water supply systems owned and operated by these utility subsidiaries and throughout its service area.
Removed
One such suit, to which the Company is a party, is a multi-district litigation, or MDL, lawsuit which 38 Table of Contents commenced on December 7, 2018, in the United States District Court for the District of South Carolina.
Removed
In August 2023, a potential class action settlement involving defendants The Chemours Company, Corteva, Inc., and DuPont de Nemours, Inc. to resolve claims brought in the MDL against them by public water systems, including the Company, and a similar class action settlement with defendant 3M Company received preliminary approval from the MDL court.
Removed
The Company is monitoring and evaluating the ongoing litigation and settlement activity with the PFAS manufacturers for potential impacts to the various claims that the Company has asserted.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table shows the cash dividends per share for the periods indicated: First Quarter Second Quarter Third Quarter Fourth Quarter Year 2023 Dividend paid per common share $ 0.2870 $ 0.2870 $ 0.3071 $ 0.3071 $ 1.1882 Dividend declared per common share 0.2870 - 0.3071 0.6142 * 1.2083 2022 Dividend paid per common share $ 0.2682 $ 0.2682 $ 0.2870 $ 0.2870 $ 1.1104 Dividend declared per common share 0.2682 0.2682 0.2870 0.5740 * 1.3974 * includes dividends declared in December that are payable to shareholders on March 1 of the subsequent year We have paid dividends consecutively for 79 years.
Biggest changeThe following table shows the cash dividends per share for the periods indicated: First Quarter Second Quarter Third Quarter Fourth Quarter Year 2024 Dividend paid per common share $ 0.3071 $ 0.3071 $ 0.3255 $ 0.3255 $ 1.2652 Dividend declared per common share 0.3071 $ - 0.3255 0.6510 * 1.2836 2023 Dividend paid per common share $ 0.2870 $ 0.2870 $ 0.3071 $ 0.3071 $ 1.1882 Dividend declared per common share 0.2870 - 0.3071 0.6142 ** 1.2083 * includes dividends declared in December 2024 that are payable to shareholders on March 3 of the subsequent year ** includes dividends declared in December 2023 that are payable to shareholders on March 1 of the subsequent year We have paid dividends consecutively for 80 years.
We presently intend to pay quarterly cash dividends in the future, on March 1, June 1, September 1, and December 1, subject to our earnings and financial condition, restrictions set forth in our debt instruments, regulatory requirements and such other factors as our Board of Directors may deem relevant. In 2023, our dividends paid represented 63.6% of net income.
We presently intend to pay quarterly cash dividends in the future, on March 1, June 1, September 1, and December 1, subject to our earnings and financial condition, restrictions set forth in our debt instruments, regulatory requirements, and such other factors as our Board of Directors may deem relevant. In 2024, our dividends paid represented 58.2% of net income.
Item 5. Market for the Registrant's Common Stock, Related Stockholder Matters and Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the ticker symbol WTRG. As of February 23, 2024, there were approximately 19,173 holders of record of our common stock.
Item 5. Market for the Registrant's Common Stock, Related Stockholder Matters and Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the ticker symbol WTRG. As of February 24, 2025, there were approximately 17,045 holders of record of our common stock.
On August 1, 2023, our Board of Directors authorized an increase of 7.0% in the September 1, 2023 quarterly dividend over the dividend Essential Utilities paid in the previous quarter. As a result of this authorization, beginning with the dividend payment in September 2023, the annualized dividend rate increased to $1.2284 per share.
On July 31, 2024, our Board of Directors authorized an increase of 6.0% in the September 3, 2024 quarterly dividend over the dividend Essential Utilities paid in the previous quarter. As a result of this authorization, beginning with the dividend payment in September 2024, the annualized dividend rate increased to $1.302 per share.
This is the 33rd dividend increase in the past 32 years and the 25th consecutive year that we have increased our dividend in excess of five percent.
This is the 34th dividend increase in the past 33 years and the 26th consecutive year that we have increased our dividend in excess of five percent.
During the fourth quarter of 2023, the Company did not repurchase any of its equity securities under any repurchase plan or program. Item 6. [RESERVED] 39 Table of Contents (In thousands of dollars, except per share amounts) 3210
During the fourth quarter of 2024, the Company did not repurchase any of its equity securities under any repurchase plan or program. Item 6. [RESERVED] 36 Table of Contents 3210

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOther Information 120 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 120 Part III Item 10. Directors, Executive Officers and Corporate Governance 120 Item 11. Executive Compensation 122 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 122 Item 13 Certain Relationships and Related Transactions, and Director Independence 123 Item 14.
Biggest changeOther Information 113 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 113 Part III Item 10. Directors, Executive Officers and Corporate Governance 113 Item 11. Executive Compensation 114 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 114 Item 13 Certain Relationships and Related Transactions, and Director Independence 115 Item 14.
Form 10-K Summary 124 Exhibit Index 125 Signatures 132 Schedule 1 – Condensed Parent Company Financial Statements 134 0 Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K, or this Annual Report, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are made based upon, among other things, our current assumptions, expectations, plans, and beliefs concerning future events and their potential effect on us.
Form 10-K Summary 116 Exhibit Index 117 Signatures 124 Schedule 1 – Condensed Parent Company Financial Statements 126 0 Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K, or this Annual Report, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are made based upon, among other things, our current assumptions, expectations, plans, and beliefs concerning future events and their potential effect on us.
Item 6. Reserved 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 65 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 119 Item 9A. Controls and Procedures 119 Item 9B.
Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplementary Data 60 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 112 Item 9A. Controls and Procedures 112 Item 9B.
Principal Accountant Fees and Services 123 Part IV Item 15. Exhibits and Financial Statement Schedules 124 Item 16.
Principal Accountant Fees and Services 115 Part IV Item 15. Exhibits and Financial Statement Schedules 116 Item 16.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOperating expenses - Operations and maintenance expenses decreased in 2023, as compared to 2022, by $38,131 or 6.2%, primarily due to: decrease in customer assistance surcharge costs of $18,710 in our Regulated Natural Gas segment, which has an equivalent offsetting amount in revenues; decrease in employee related costs of $5,381, primarily due to lower post-retirement benefit costs, higher capitalization in 2023 due to greater capital expenditures, and a one-time compensation payment for non-officer level employees in 2022; decrease in charitable contributions to the Essential Foundation and other organizations of $15,360; 47 Table of Contents (In thousands of dollars, except per share amounts) decrease in bad debt expense of $4,422; decrease in outside services, maintenance expenses, and other operating expenses of $7,707, primarily due to lower water main break activity and higher capitalization as a result of greater capital expenditures during the period in our Regulated Water segment; insurance recovery of $2,448 associated with clean-up and additional expenses incurred during Hurricane Ida; an asset impairment charge recognized in the first quarter of 2022 of $1,801 to write down a portion of the right of use asset of our Regulated Natural Gas segment’s office space to fair value; offset by an increase in production costs for water and wastewater operations of $12,208, primarily due to higher chemical prices and an increase in wholesale purchased water costs; additional operating costs associated with acquired and pending acquisitions of water and wastewater utility systems and higher customer base of $5,767; increase in insurance expense of $1,741 due to higher reserve for claims and insurance premiums in 2023; increase in legal expenses of $2,427; lower operation and maintenance expense of $837 as a result of the sale and cessation of our regulated natural gas operations in West Virginia in October 2023; and lower operating expenses driven by various cost-saving measures.
Biggest changeOperating expenses - Operations and maintenance expenses increased in 2024, as compared to 2023, by $11,732 or 2.0%, primarily due to: an increase in customer assistance surcharge costs of $8,140 in our Regulated Natural Gas segment, which has an equivalent offsetting amount in revenues; an increase in employee related costs of $7,828, primarily resulting from higher salary costs, healthcare costs, and contributions to the Company’s defined contribution plan, offset by lower pension cost; an increase in production costs for water and wastewater operations of $5,880, primarily due to higher purchased water, wastewater, and power costs; additional operating costs associated with acquired and pending acquisitions of water and wastewater utility systems and higher customer base of $2,788; an insurance recovery of $2,448 in 2023 associated with clean-up costs and other expenses incurred during Hurricane Ida; and, an increase in materials and supplies of $2,026; offset by a decrease in legal expenses of $4,137; a decrease in bad debt expense of $1,344; a decrease in transportation expenses of $1,548; and, lower operations and maintenance expense of $12,411 as a result of our sale of the assets of Peoples West Virginia in October 2023 and our interest in three non-utility local microgrid and distributed energy projects in January 2024.
All of the eight states in which we operate water and wastewater utilities currently permit us to file a revenue requirement using some form of consolidated rates for some or all of the rate divisions in that state.
All eight states in which we operate water and wastewater utilities currently permit us to file a revenue requirement using some form of consolidated rates for some or all of the rate divisions in that state.
A heating degree day (HDD) is each degree that the average of the high and the low temperatures for a day is below 65 degrees Fahrenheit in a specific geographic location.
A heating degree day (HDD) is each degree that the average of the high and low temperatures for a day is below 65 degrees Fahrenheit in a specific geographic location.
This includes the Company ’ s agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,500. DELCORA, a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the Philadelphia suburbs. Refer to Note 2 – Acquisitions in this Annual Report for further discussion.
This includes the Company ’ s agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,000. DELCORA, a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the Philadelphia suburbs. Refer to Note 2 – Acquisitions in this Annual Report for further discussion.
The Company used the net proceeds from the issuance of Senior Notes to (1) to repay $49,700 of borrowings under Aqua Pennsylvania’s 364-day revolving credit facility and $410,000 of borrowings under the Company’s existing five year unsecured revolving credit facility, and (2) for general corporate purposes.
The Company used the net proceeds from the issuance of 2022 Senior Notes to (1) to repay $49,700 of borrowings under Aqua Pennsylvania’s 364-day revolving credit facility and $410,000 of borrowings under the Company’s existing five year unsecured revolving credit facility, and (2) for general corporate purposes.
Particularly during the heating season, this measure is used to reflect the demand for natural gas needed for heating based on the extent to which the average temperature falls below a reference temperature for which no heating is required (65 degrees Fahrenheit).
Particularly during the heating season, this measure is used to reflect the demand for natural gas needed for heating based on the extent to which the average temperature falls below a reference temperature above which no heating is required (65 degrees Fahrenheit).
Portions of these refund amounts are payable annually through 2033 and amounts not paid by the contract expiration dates become non-refundable. Asset Retirement Obligations – We recognize asset retirement obligations associated with retirements of production, storage wells and other pipeline components at fair value, as incurred, or when sufficient information becomes available to determine a reasonable estimate of the fair value of the retirement activities to be performed.
Portions of these refund amounts are payable annually through 2034 and amounts not paid by the contract expiration dates become non-refundable. Asset Retirement Obligations – We recognize asset retirement obligations associated with retirements of production, storage wells and other pipeline components at fair value, as incurred, or when sufficient information becomes available to determine a reasonable estimate of the fair value of the retirement activities to be performed.
Our loan and debt agreements require us to comply with certain financial covenants, which among other things, subject to specific exceptions, limit the Company’s ratio of consolidated total indebtedness to consolidated total capitalization, and require a minimum level of earnings coverage over interest expense. During 2023, we were in compliance with our debt covenants under our credit facilities.
Our loan and debt agreements require us to comply with certain financial covenants, which among other things, subject to specific exceptions, limit the Company’s ratio of consolidated total indebtedness to consolidated total capitalization, and require a minimum level of earnings coverage over interest expense. During 2024, we were in compliance with our debt covenants under our credit facilities.
Growth-Through-Acquisition Strategy Part of our strategy to meet the industry challenges is to actively explore opportunities to expand our utility operations through acquisitions of water, wastewater, and other utilities either in areas adjacent to our existing service areas or in new service areas, and to explore acquiring market-based businesses that are complementary to our regulated utility operations.
Acquisitions Part of our strategy to meet the industry challenges is to actively explore opportunities to expand our utility operations through acquisitions of water, wastewater, and other utilities either in areas adjacent to our existing service areas or in new service areas, and to explore acquiring market-based businesses that are complementary to our regulated utility operations.
In addition, some states permit our subsidiaries to use a surcharge or credit on their bills to reflect allowable changes in costs, such as changes in state tax rates, other taxes and purchased water costs, until such time as the new costs are fully incorporated in base rates.
Some states also permit our subsidiaries to use a surcharge or credit on their bills to reflect allowable changes in costs, such as changes in state tax rates, other taxes, and purchased water costs, until such time as the new costs are fully incorporated in base rates.
Our other regulated water or wastewater utility subsidiaries provide similar services in seven additional states. Our Peoples subsidiaries provide natural gas service to approximately 744,000 customers in western Pennsylvania and Kentucky. Approximately 95% of the total number of natural gas utility customers we serve are in western Pennsylvania.
Our other regulated water or wastewater utility subsidiaries provide similar services in seven additional states. Our Peoples subsidiaries provide natural gas service to approximately 745,000 customers in western Pennsylvania and Kentucky. Approximately 95% of the total number of natural gas utility customers we serve are in western Pennsylvania.
Segment Results of Operations Comparison for 2023 and 2022 We have identified eleven operating segments, and we have two reportable segments based on the following: Eight segments are composed of our water and wastewater regulated utility operations in the eight states where we provide these services.
Segment Results of Operations Comparison for 2024 and 2023 We have identified eleven operating segments, and we have two reportable segments based on the following: Eight segments are composed of our water and wastewater regulated utility operations in the eight states where we provide these services.
The decrease in Other business segment revenues is primarily due to lower revenues from our non-regulated natural gas operations as a result of lower average gas prices and lower gas usage in the current period as compared to the prior period.
The decrease in Other business segment revenues in 2024 compared to 2023 is primarily due to lower revenues from our non-regulated natural gas operations as a result of lower average gas prices and lower gas usage in the current period as compared to the prior period.
One consideration we may undertake in evaluating on which states to focus our growth and investment strategy is whether a state provides for consolidated rates, a surcharge for replacing and rehabilitating infrastructure, fair value treatment of acquired utility systems, and other regulatory policies that promote infrastructure investment and efficiency in processing rate cases.
One consideration we may undertake in evaluating on which states to focus our growth and investment strategy is whether a state provides for consolidated rates, a surcharge for replacing and rehabilitating infrastructure, fair value treatment of 38 Table of Contents acquired utility systems, and other regulatory policies that promote infrastructure investment and efficiency in processing rate cases.
Our cash flow from operations, or internally-generated funds, is impacted by the timing of rate relief, utility operating revenues, and changes in Federal tax laws, and accelerated tax depreciation or deductions for utility construction projects. We fund our capital and typical acquisitions through internally-generated funds, supplemented by short-term lines of credit.
Our cash flow from operations, or internally-generated funds, is impacted by the timing of rate relief, utility operating revenues, and changes in Federal tax laws, and accelerated tax depreciation or deductions for utility construction projects. We fund our capital and typical acquisitions through internally-generated funds, supplemented by short-term or long term credit facilities.
Adjustments to the carrying value of these assets would be made in instances where their inclusion in the rate-making process is unlikely. For utility plant in service, we would recognize an impairment loss for any amount disallowed by the respective utility commission.
Adjustments to the carrying value of these assets would be made in instances where their inclusion in the rate-making process is not probable. For utility plant in service, we would recognize an impairment loss for any amount disallowed by the respective utility commission.
We establish reserves for uncertain tax positions based upon management’s judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits.
We establish reserves for uncertain tax positions based upon management’s 57 Table of Contents judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits.
Our typical acquisitions are expected to be financed with short-term debt with subsequent repayment from the proceeds of long-term debt, retained earnings, or equity issuances. Assets Held for Sale and Dispositions We routinely review and evaluate areas of our business and operating divisions and, over time, may sell utility systems or portions of systems.
Our typical acquisitions are expected to be financed with short-term debt with subsequent repayment from the proceeds of long-term debt, retained earnings, or equity issuances. Dispositions We routinely review and evaluate areas of our business and operating divisions and, over time, may sell utility systems or portions of systems.
The sale concluded the Company’s regulated utility operations in West Virginia. Two segments are not quantitatively significant to be reportable and are composed of our non-regulated natural gas operations and Aqua Resources.
The sale concluded the Company’s regulated utility operations in West Virginia. 44 Table of Contents Two segments are not quantitatively significant to be reportable and are composed of our non-regulated natural gas operations and Aqua Resources.
Rate Case Management Capability – The mission of the regulated utility industry is to provide quality and reliable utility service at reasonable rates to customers, while earning a fair return for shareholders. We strive to achieve the industry’s mission by effective planning, efficient investments, and productive use of our resources.
The mission of the regulated utility industry is to provide quality and reliable utility service at reasonable rates to customers, while earning a fair return for shareholders. We strive to achieve the industry’s mission by effective planning, efficient investments, and productive use of our resources.
In Illinois, our operating subsidiary has a revenue stability mechanism which allows us to recognize state PUC-authorized revenue for a period which is not based upon the volume of water sold during that period, and effectively lessens the impact of weather and consumption variability.
In Illinois, our operating subsidiary has a revenue stability mechanism which allows us to recognize state PUC-authorized revenue for a period which is not based upon the volume of water sold during that period, thereby reducing the impact of weather and consumption variability.
The balance remaining available for use under the acquisition shelf registration as of December 31, 2023 is $487,155.
The balance remaining available for use under the acquisition shelf registration as of December 31, 2024 is $487,155.
As of December 31, 2023, the expected return on plan assets is based on a targeted allocation of 20% to 40% return seeking assets and 30% to 70% liability hedging assets for our pension plan, and a targeted allocation of 50% to 70% return seeking assets and 30% to 50% liability hedging assets for our other post-retirement benefit plans.
As of December 31, 2024, the expected return on plan assets is based on a targeted allocation of 20% to 40% return seeking assets and 60% to 80% liability hedging assets for our pension plan, and a targeted allocation of 50% to 70% return seeking assets and 30% to 50% liability hedging assets for our other post-retirement benefit plans.
During this three year period, we received $50,960 of customer advances and contributions in aid of construction to finance new utility mains and related facilities that are not included in the capital expenditures presented in the above table.
During this three year period, we received $55,259 of customer advances and contributions in aid of construction to finance new utility mains and related facilities that are not included in the capital expenditures presented in the above table.
As of the December 2023 dividend payment, holders of 4.3% of the common shares outstanding participated in the dividend reinvestment portion of the Plan. The shares issued under the Plan are either original issue shares or shares purchased by the Company’s transfer agent in the open-market.
As of the December 2024 dividend payment, holders of 4.0% of the common shares outstanding participated in the dividend reinvestment portion of the Plan. The shares issued under the Plan are either original issue shares or shares purchased by the Company’s transfer agent in the open-market.
Sources of Capital Since net operating cash flow plus advances and contributions in aid of construction have not been sufficient to fully fund our cash requirements including capital expenditures and our growth through acquisitions program, we issued $2,786,632 of long-term debt, and obtained other short-term borrowings during the past three years.
Sources of Capital Since net operating cash flow plus advances and contributions in aid of construction have not been sufficient to fully fund our cash requirements including capital expenditures and our growth through acquisitions program, we issued $3,377,430 of long-term debt, and obtained other short-term borrowings during the past three years.
Expected obligations are not included in the above table because the amounts and timing are dependent upon several variables, which cannot be accurately estimated. Uncertain tax positions – We have uncertain tax positions of $7,898.
Expected obligations are not included in the above table because the amounts and timing are dependent upon several variables, which cannot be accurately estimated. Uncertain tax positions – We have uncertain tax positions of $8,207.
Our planned 2024 capital program in Pennsylvania for our water and natural gas utilities is estimated to be approximately $915,000, a portion of which is expected to be eligible as a deduction for qualifying utility asset improvements for Federal income tax purposes.
Our planned 2025 capital program in Pennsylvania for our water and natural gas utilities is estimated to be approximately $1,032,000, a portion of which is expected to be eligible as a deduction for qualifying utility asset improvements for Federal income tax purposes.
As of December 31, 2023, the pipeline of potential water and wastewater municipal acquisitions the company is actively pursuing represents approximately 400,000 total customers or equivalent dwelling units. The Company remains on track to, on average, annually increase customers between 2% and 3% through acquisitions and organic customer growth.
As of December 31, 2024, the pipeline of potential water and wastewater municipal acquisitions the company is actively pursuing represents approximately 400,000 total customers or equivalent dwelling units. The Company remains on track to, over the long term, annually increase customers between 2% and 3% through acquisitions and organic customer growth.
For discussion of our results of operations and cash flows for 2022 compared with 2021, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2022 , filed with the SEC on March 1, 2023.
For discussion of our results of operations and cash flows for 2023 compared with 2022, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2023 , filed with the SEC on February 29, 2024.
Acquisitions As part of the Company’s growth-through-acquisition strategy, as of December 31, 2023, the Company has entered into purchase agreements to acquire the water or wastewater utility system assets of five municipalities and a private company for a total combined purchase price in cash of approximately $380,000.
Acquisitions As part of the Company’s growth-through-acquisition strategy, as of December 31, 2024, the Company has entered into purchase agreements to acquire the water or wastewater utility system assets of six municipalities and a private company for a total combined purchase price in cash of approximately $362,000.
During 2023, we completed seven acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represents 19,659 new customers. During 2022, we completed three acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represents 31,537 new customers.
During 2022, we completed three acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represents 31,537 new customers..
Our planned 2024 capital program, excluding the costs of new mains financed by advances and contributions in aid of construction is estimated to be approximately $1,365,000 in infrastructure improvements for the communities we serve. The 2024 capital program is expected to include approximately $935,000 for infrastructure rehabilitation surcharge qualified projects.
Our planned 2025 capital program, excluding the costs of new mains financed by advances and contributions in aid of construction is estimated to be approximately $1,469,000 in infrastructure improvements for the communities we serve. The 2025 capital program is expected to include approximately $1,037,000 for infrastructure rehabilitation surcharge qualified projects.
Amounts reported may differ from actual due to future refinancing of debt. (2) Represents minimum lease payments for long-term operating leases of land, office facilities, office equipment, and vehicles. 58 Table of Contents (In thousands of dollars, except per share amounts) (3) Represents our commitment to purchase minimum quantities of water as stipulated in agreements with other water purveyors.
Amounts reported may differ from actual due to future refinancing of debt. 53 Table of Contents (2) Represents minimum lease payments for long-term operating leases of land, office facilities, office equipment, and vehicles. (3) Represents our commitment to purchase minimum quantities of water as stipulated in agreements with other water purveyors.
These segments are included as a component of “Other,” in addition to corporate costs that have not been allocated to the Regulated Water and Regulated Natural Gas segments, because they would not be recoverable as a cost of utility service, and intersegment eliminations.
These segments are included as a component of “Other,” in addition to corporate costs that have not been allocated to the Regulated Water and Regulated Natural Gas segments, because they would not be recoverable as a cost of utility service, and intersegment eliminations. Corporate costs include general and administrative expenses, and interest expense.
Included in the short-term lines of credit is an Aqua Pennsylvania $100,000 364-day unsecured revolving credit facility and a Peoples Natural Gas $300,000 364-day unsecured revolving credit facility. These short-term lines of credit are subject to renewal on an annual basis.
In addition, Aqua Pennsylvania has a $100,000 364-day unsecured revolving credit facility and Peoples Natural Gas has a $300,000 364-day unsecured revolving credit facility. These short-term lines of credit are subject to renewal on an annual basis.
The Company intends to use the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. Refer to Note 3 – Asset Held for Sale and Dispositions in this Annual Report for additional information.
The Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. Refer to Note 3 – Dispositions in this Annual Report for additional information.
Revenue Surcharges – Each of our states in which we operate water, wastewater, and natural gas utilities, permit us to add an infrastructure rehabilitation surcharge to their respective bills to offset the additional depreciation and capital costs associated with capital expenditures related to replacing and rehabilitating infrastructure systems.
(c) Each of the states in which we operate water, wastewater, and natural gas utilities, permit us to add an infrastructure rehabilitation surcharge to their respective bills, between rate cases, to offset the additional depreciation and capital costs associated with capital expenditures related to replacing and rehabilitating infrastructure systems.
We anticipate that more than one half of these expenditures will require external financing. We expect to refinance $168,875 of long-term debt during this period as it becomes due with funds from new issues of long-term debt, issuances of equity, internally-generated funds, and our revolving credit facilities.
We anticipate that more than one half of these expenditures will require external financing. We expect to refinance $1,173,486 of long-term debt during this period as it 49 Table of Contents becomes due with funds from new issues of long-term debt, issuances of equity, internally-generated funds, and our revolving credit facilities.
During the past three years, we have sold 1,173,589 original issue shares of common stock for net proceeds of $49,423 through the dividend reinvestment portion of the Plan, and we used the proceeds to invest in our operating subsidiaries, to repay short-term debt, and for general corporate purposes.
During the past three years, we have sold 1,232,453 original issue shares of common stock for net proceeds of $48,099 through the dividend reinvestment portion of the Plan, and we used the proceeds to invest in our operating subsidiaries, to repay short-term debt, and for general corporate purposes.
The estimates discussed above do not include any amounts for possible future acquisitions of utility systems or the financing necessary to support them. 54 Table of Contents (In thousands of dollars, except per share amounts) Our primary sources of liquidity are cash flows from operations (including the allowed deferral of Federal income tax payments), borrowings under various short-term lines of credit and other credit facilities, and customer advances and contributions in aid of construction.
The estimates discussed above do not include any amounts for possible future acquisitions of utility systems or the financing necessary to support them. Our primary sources of liquidity are cash flows from operations (including the allowed deferral of Federal income tax payments), borrowings under various short-term and long-term credit facilities, and customer advances and contributions in aid of construction.
Our overall 2024 capital program along with $67,415 of debt repayments and $322,176 of other contractual cash obligations, as reported in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations ”, has been, or is expected to be, financed through internally-generated funds, our revolving credit facilities, and the issuance of long-term debt and equity.
Our overall 2025 capital program along with $142,807 of debt repayments and $454,049 of other contractual cash obligations, as reported in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations ”, has been, or is expected to be, financed through internally-generated funds, our revolving credit facilities, and the issuance of long-term debt and equity.
Water and wastewater rate increases, including infrastructure rehabilitation surcharges, implemented during the past three years have provided additional operating revenues of $57,924 in 2023, $63,367 in 2022, and $27,421 in 2021.
Water and wastewater rate increases, including infrastructure rehabilitation surcharges, implemented during the past three years have provided additional operating revenues of $50,639 in 2024, $57,924 in 2023, and $63,367 in 2022.
In 2023, 2022 and 2021, we sold 430,487, 368,278, and 374,824 original issues shares of common stock for net proceeds of $16,005, $16,619, and $16,799, respectively, through the dividend reinvestment portion of the plan. Credit Risk As of December 31, 2023, our credit ratings remained at investment grade levels.
In 2024, 2023, and 2022, we sold 433,688, 430,487, and 368,278 original issues shares of common stock for net proceeds of $15,476, $16,005, and $16,619, respectively, through the dividend reinvestment portion of the plan. Credit Risk As of December 31, 2024, our credit ratings remained at investment grade levels.
Also, unanticipated changes in circumstances and/or revisions to the assessed probability of the outcomes of legal matters could result in expenses being incurred in future periods as well as an increase in actual cash required to resolve the legal matter. 59 Table of Contents (In thousands of dollars, except per share amounts) Capitalization The following table summarizes our capitalization as of December 31, 2023 and 2022: December 31, 2023 2022 Long-term debt (1) 54.1% 55.2% Essential Utilities stockholders' equity 45.9% 44.8% 100.0% 100.0% (1) Includes current portion, as well as our borrowings under a variable rate revolving credit agreement of $720,000 at December 31, 2023, and $490,000 at December 31, 2022.
Also, unanticipated changes in circumstances and/or revisions to the assessed probability of the outcomes of legal matters could result in expenses being incurred in future periods as well as an increase in actual cash required to resolve the legal matter. 54 Table of Contents Capitalization The following table summarizes our capitalization as of December 31, 2024 and 2023: December 31, 2024 2023 Long-term debt (1) 54.9% 54.1% Essential Utilities stockholders' equity 45.1% 45.9% 100.0% 100.0% (1) Includes current portion, as well as our borrowings under a variable rate revolving credit agreement of $413,000 at December 31, 2024, and $720,000 at December 31, 2023.
Future utility construction in the period 2025 through 2026, including recurring programs, such as the ongoing replacement or rehabilitation of utility meters and mains, water treatment plant upgrades, storage facility renovations, pipes, service lines, and additional transmission mains to meet customer demands, excluding the costs of new mains financed by advances and contributions in aid of construction, is estimated to require aggregate expenditures of approximately $2,769,000.
Future utility construction in the period 2026 through 2027, including addressing PFAS, lead and galvanized services line replacement, and recurring programs, such as the ongoing replacement or rehabilitation of utility meters and mains, water treatment plant upgrades, storage facility renovations, pipes, service lines, and additional transmission mains to meet customer demands, excluding the costs of new mains financed by advances and contributions in aid of construction, is estimated to require aggregate expenditures of approximately $3,042,000.
We will determine the form and terms of any further securities issued under the universal shelf registration statement and the acquisition shelf registration statement at the time of issuance. 57 Table of Contents (In thousands of dollars, except per share amounts) We offer a Dividend Reinvestment and Direct Stock Purchase Plan (the Plan) that provides a convenient and economical way to purchase shares of the Company.
We will determine the form and terms of any further securities issued under the universal shelf registration statement and the acquisition shelf registration statement at the time of issuance. ‎ 52 Table of Contents We offer a Dividend Reinvestment and Direct Stock Purchase Plan (the Plan) that provides a convenient and economical way to purchase shares of the Company.
The Company continues to advocate for actions to hold polluters accountable and is part of the Multi-District Litigation and other legal 40 Table of Contents (In thousands of dollars, except per share amounts) actions against multiple PFAS manufacturers and polluters to attempt to ensure that the ultimate responsibility for the cleanup of these contaminants is attributed to the polluters and is seeking damages and other costs to address the contamination of its public water supply systems by PFAS.
The Company continues to advocate for actions to hold polluters accountable and is part of the Multi-District Litigation and other legal actions against multiple PFAS manufacturers and polluters to attempt to ensure that the ultimate responsibility for the cleanup of these contaminants is attributed to the polluters and is seeking damages and other costs to address the contamination of its public water supply systems by PFAS.
As of December 31, 2023, the regulatory status of the Company’s rate base is estimated to be as follows: $8,200,000 filed with respective state utility commissions or local regulatory authorities; and $2,200,000 not yet filed with respective state utility commissions or local regulatory authorities.
As of December 31, 2024, the regulatory status of the Company’s rate base is estimated to be as follows: $10,300,000 filed with respective state utility commissions or local regulatory authorities; and $1,200,000 not yet filed with respective state utility commissions or local regulatory authorities.
In April 2021, the Company filed a universal shelf registration statement through a filing with the SEC to allow for the potential future offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of our common stock, preferred stock, debt securities, and other securities specified therein at indeterminate prices.
In March 2024, the Company filed a new universal shelf registration with the Securities and Exchange Commission (SEC) to allow for the potential future offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of our common stock, preferred stock, debt securities, and other securities specified therein at indeterminate prices.
Depreciation and amortization expense increased by $22,518 or 7.0%, in 2023 over 2022, principally due to continued capital expenditures to expand and improve our utility facilities, upgrade our information systems, our acquisitions of new utility systems, and additional rate case filings.
Depreciation and amortization expense increased by $25,857 or 7.5%, in 2024 over 2023, principally due to continued capital expenditures to expand and improve our utility facilities, upgrade our information systems, our acquisitions of new utility systems, and additional rate case filings.
Other (income) expense totaled $(2,613) in 2023 and $494 in 2022, and largely consists of the non-service cost component of our net benefit cost for post-retirement benefits and unrealized gains and losses on investments associated with our non-qualified pension plan.
Other, net was income of $1,425 in 2024 and $2,613 in 2023, and largely consists of the non-service cost component of our net benefit cost for our pension and post-retirement benefits and unrealized gains and losses on investments associated with our non-qualified pension plan.
In addition, during this period, we have made repayments of debt, which includes the net effect of borrowings and repayments under our long-term revolving credit facility of $1,441,098 and have refunded $21,202 of customers’ advances for construction.
In addition, during this period, we have made repayments of debt, which includes the net effect of borrowings and repayments under our long-term revolving credit facility of $1,732,026 and have refunded $22,041 of customers’ advances for construction.
The bonds consisted of $175,000 of 5.48% first mortgage bonds due in 2053; and $50,000 of 5.56% first mortgage bonds due in 2061. In January 2023 and October 2022, Aqua Pennsylvania issued $75,000 and $125,000 of first mortgage bonds, due in 2043 and 2052, and with interest rates of 5.60% and 4.50%, respectively.
In January 2023 and October 2022, Aqua Pennsylvania issued $75,000 and $125,000 of first mortgage bonds, due in 2043 and 2052, and with interest rates of 5.60% and 4.50%, respectively.
After reviewing the hypothetical portfolio of bonds, we selected a discount rate of 5.17% for our pension plan, and 5.09% for our other post-retirement benefit plans as of December 31, 2023, which represent a 34 and 36 basis-point decrease as compared to the discount rates selected at December 31, 2022, respectively.
After reviewing the hypothetical portfolio of bonds, we selected a discount rate of 5.64% for our pension plan, and 5.65% for our other post-retirement benefit plans as of December 31, 2024, which represent a 47 and 56 basis-point decrease as compared to the discount rates selected at December 31, 2023, respectively.
Annualized revenues in aggregate from all of the rate increases realized in the year of grant were $10,109 in 2023, $51,163 in 2022, and $2,995 in 2021.
Annualized revenues in aggregate from all of the rate increases realized in the year of grant were $34,832 in 2024, $10,109 in 2023, and $51,163 in 2022.
We continue to pursue 42 Table of Contents (In thousands of dollars, except per share amounts) enhancements to our regulatory practices to facilitate the efficient recovery of the increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory lag associated with traditional rate making processes.
We continue to pursue enhancements to our regulatory practices to facilitate the efficient recovery of the increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory lag associated with traditional rate making processes.
The Company performed its initial analysis of the NPDWR and estimates an investment of at least $450,000 of capital expenditures to install additional treatment facilities over the Compliance Period in order to comply with the proposed NPDWR. This figure could increase as plans for construction execution are refined or if additional sites require treatment in the future.
The Company performed its analysis of the NPDWR and estimated an investment of at least $450,000 of capital expenditures to install additional treatment facilities over the Compliance Period in order to comply (i.e., 2029 pending no delays due to lawsuits). This figure could increase as plans for construction execution are refined or if additional sites require treatment in the future.
In an effort to resolve the matter, the Company pursued and is continuing to pursue certain legal actions. Management believes the final resolution of this matter is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Refer to Note 2 – Acquisitions in this Annual Report for additional information.
Management believes the final resolution of this matter is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Refer to Note 2 – Acquisitions in this Annual Report for additional information.
At December 31, 2023, we have a $1,000,000 unsecured long-term revolving credit facility that expires in December 2027, of which $16,838 was designated for letter of credit usage, $263,162 was available for borrowing, and $720,000 of borrowings were outstanding at December 31, 2023.
At December 31, 2024, we have a $1,000,000 unsecured long-term revolving credit facility that expires in December 2027, of which $16,774 was designated for letter of credit usage, $570,226 was available for borrowing, and $413,000 of borrowings were outstanding at December 31, 2024.
Our operating subsidiaries received rate increases representing estimated annualized revenues of $28,426 in 2023 resulting from seven base rate decisions, $81,610 in 2022 resulting from seven base rate decisions, and $3,390 in 2021 resulting from six base rate decisions.
Our operating subsidiaries received rate increases representing estimated annualized revenues of $118,242 in 2024 resulting from twelve base rate decisions, $28,426 in 2023 resulting from seven base rate decisions, and $81,610 in 2022 resulting from seven base rate decisions.
The weighted average cost of fixed and variable rate long-term debt was 4.14% at December 31, 2023 and 3.94% at December 31, 2022.
The weighted average cost of fixed rate long-term debt was 4.03% at December 31, 2024 and 3.86% at December 31, 2023.
Net income - Years ended December 31, 2023 2022 2021 Operating income $ 692,097 $ 661,187 $ 602,709 Net income 498,226 465,237 431,612 Diluted net income per share 1.86 1.77 1.67 The changes in diluted net income per share in 2023 over the previous year were due to the aforementioned changes.
Net income - Years ended December 31, 2024 2023 2022 Operating income $ 757,668 $ 692,097 $ 661,187 Net income $ 595,314 $ 498,226 $ 465,237 Diluted net income per share $ 2.17 $ 1.86 $ 1.77 The changes in diluted net income per share in 2024 over the previous year were due to the aforementioned changes.
The Company currently has six signed purchase agreements for additional water and wastewater systems that are expected to serve approximately 215,000 equivalent retail customers or equivalent dwelling units and total approximately $380,000 in purchase price in two of our existing states.
As of December 31, 2024, the Company has seven signed purchase agreements for additional water and wastewater systems that are expected to serve approximately 213,000 equivalent retail customers or equivalent dwelling units and total approximately $362,000 in purchase price in three of our existing states.
The Company intends to use the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. See Note 3 – Assets Held for Sale and Dispositions in the Notes to Consolidated Financial Statements for additional information.
The Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. See Note 3 – Dispositions in the Notes to Consolidated Financial Statements which is contained in Item 8 of this Annual Report for additional information.
However, to the extent the final tax outcome of these matters is different than our estimates recorded, we would then need to adjust our tax reserves which could result in additional income tax expense or benefits in the period that this information is known. 63 Table of Contents IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS We describe the impact of recent accounting pronouncements in Note 1 – Summary of Significant Accounting Policies in this Annual Report.
However, to the extent the final tax outcome of these matters is different than our estimates recorded, we would then need to adjust our tax reserves which could result in additional income tax expense or benefits in the period that this information is known.
During the past three years, we have expended cash of $198,520 related to the acquisition of both water and wastewater utility systems. We continue to pursue the acquisition of water and wastewater utility systems and explore other utility 55 Table of Contents (In thousands of dollars, except per share amounts) acquisitions that may be in a new state.
During the past three years, we have expended cash of $162,859 related to the acquisition of both water and wastewater utility systems. We continue to pursue the acquisition of water and wastewater utility systems and explore other utility acquisitions that may be in a new state.
Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be. On January 8, 2024, the Company issued $500,000 of long-term debt (the “2024 Senior Notes”), less expenses of $4,610, due in 2034 with an interest rate of 5.375%.
Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be. On August 15, 2024, the Company issued $500,000 of senior notes, less expenses of $3,015, due in 2027, with an interest rate of 4.80%.
Allowance for funds used during construction (AFUDC) was $16,967 in 2023 and $23,665 in 2022, and varies as a result of changes in the average balance of utility plant construction work in progress, to which AFUDC is applied, changes in the AFUDC rate which is based predominantly on short-term interest rates, changes in the balance of short term-debt, and changes in the amount of AFUDC related to equity.
The weighted average cost of fixed and variable rate long-term debt was 4.14% at December 31, 2024 and 4.14% at December 31, 2023. 43 Table of Contents Allowance for funds used during construction (AFUDC) was $21,310 in 2024 and $16,967 in 2023, and varies as a result of changes in the average balance of utility plant construction work in progress, to which AFUDC is applied, changes in the AFUDC rate which is based predominantly on short-term interest rates, changes in the balance of short term-debt, and changes in the amount of AFUDC related to equity.
Our water and wastewater operations are composed of 57 rate divisions, and our natural gas operations are comprised of four rate divisions. Each of our utility rate divisions require a separate rate filing for the evaluation of the cost of service and recovery of investments in connection with the establishment of tariff rates for that rate division.
Each of our utility rate divisions requires a separate rate filing for the evaluation of the cost of service and recovery of investments in connection with the establishment of tariff rates for that rate division.
Our targeted allocations are driven by our investment strategy to earn a reasonable rate of return while maintaining risk at acceptable levels through the diversification of investments across and within various asset categories.
Our targeted allocations are driven by our investment strategy to earn a reasonable rate of return while maintaining risk at acceptable levels through the diversification of investments across and within various asset categories. For 2024, we used a 6.2% expected return on plan assets assumption and are currently reviewing this assumption for 2025.
During 2021 we completed two acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represents 21,364 new customers.
During 2024, we completed two acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represent 9,391 new customers. During 2023, we completed seven acquisitions of water and wastewater systems, which along with the organic growth in our existing systems, represents 19,659 new customers.
The revenue billed and collected prior to the final ruling is subject to refund based on the commission’s final ruling. 60 Table of Contents (In thousands of dollars, except per share amounts) Valuation of Long-Lived Assets, Goodwill and Intangible Assets ─ We review our long-lived assets for impairment, including utility plant in service.
We monitor the applicable facts and circumstances regularly and revise the estimate as required. The revenue billed and collected prior to the final ruling is subject to refund based on the commission’s final ruling. 55 Table of Contents Valuation of Long-Lived Assets, Goodwill and Intangible Assets ─ We review our long-lived assets for impairment, including utility plant in service.
Years ended December 31, 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Operating revenues: Regulated water segment $ 1,153,376 $ 1,082,972 $ 980,203 $ 70,404 $ 102,769 Regulated gas segment 863,759 1,143,362 859,902 (279,603) 283,460 Other and eliminations 36,689 61,698 38,039 (25,009) 23,659 Consolidated operating revenues $ 2,053,824 $ 2,288,032 $ 1,878,144 $ (234,208) $ 409,888 Operations and maintenance expense $ 575,518 $ 613,649 $ 550,580 $ (38,131) $ 63,069 Net income $ 498,226 $ 465,237 $ 431,612 $ 32,989 $ 33,625 Capital expenditures $ 1,199,103 $ 1,062,763 $ 1,020,519 $ 136,340 $ 42,244 Operating Statistics Selected operating results as a percentage of operating revenues: Operations and maintenance 28.0% 26.8% 29.3% 1.2% -2.5% Depreciation and amortization 16.7% 14.0% 15.9% 2.7% -1.9% Taxes other than income taxes 4.4% 3.9% 4.6% 0.5% -0.7% Interest expense, net of interest income 13.6% 10.2% 10.9% 3.4% -0.7% Net income 24.3% 20.3% 23.0% 4.0% -2.7% Return on Essential Utilities stockholders' equity 8.4% 8.7% 8.3% -0.3% 0.4% Ratio of capital expenditures to depreciation expense 3.5 3.4 3.5 0.1 (0.1) Effective tax rate (15.4%) (3.2%) (2.3%) (12.2%) (0.9%) Consolidated Results of Operations Comparison for 2023 and 2022 Operating revenues - Operating revenues decreased by $234,208 or 10.2% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Years ended December 31, 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Operating revenues: Regulated water segment $ 1,221,880 $ 1,153,376 $ 1,082,972 $ 68,504 $ 70,404 Regulated natural gas segment 842,991 863,759 1,143,362 (20,768) (279,603) Other and eliminations 21,242 36,689 61,698 (15,447) (25,009) Consolidated operating revenues $ 2,086,113 $ 2,053,824 $ 2,288,032 $ 32,289 $ (234,208) Operations and maintenance expense $ 587,250 $ 575,518 $ 613,649 $ 11,732 $ (38,131) Net income $ 595,314 $ 498,226 $ 465,237 $ 97,088 $ 32,989 Capital expenditures $ 1,329,747 $ 1,199,103 $ 1,062,763 $ 130,644 $ 136,340 Operating Statistics Selected operating results as a percentage of operating revenues: Operations and maintenance 28.2% 28.0% 26.8% 0.2% 1.2% Depreciation and amortization 17.7% 16.7% 14.0% 1.0% 2.7% Taxes other than income taxes 4.5% 4.4% 3.9% 0.1% 0.5% Interest expense, net of interest income 14.3% 13.6% 10.2% 0.7% 3.4% Net income 28.5% 24.3% 20.3% 4.2% 4.0% Return on Essential Utilities stockholders' equity 9.6% 8.4% 8.7% 1.2% -0.3% Ratio of capital expenditures to depreciation expense 3.7 3.5 3.4 0.2 0.1 Effective tax rate (3.8%) (15.4%) (3.2%) 11.6% (12.2%) Consolidated Results of Operations Comparison for 2024 and 2023 Operating revenues - Operating revenues increased by $32,289 or 1.6% for the year ended December 31, 2024 compared to the year ended December 31, 2023.
These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of its utilities in states where it has scale.
In January 2024, the Company completed the sale of its interest in three non-utility local microgrid and distributed energy projects for $165,000. These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of its utilities in states where it has scale.
On July 12, 2023, S&P affirmed an A issuer credit rating for the Company, Aqua Pennsylvania and Peoples Natural Gas Companies, and revised its outlook from stable to negative for the companies, citing weakening financial measures as a result of inflationary pressures and our significant capital spending.
On March 19, 2024, S&P Global Ratings (“S&P”) lowered its credit rating for the Company, Aqua Pennsylvania, and PNG Companies, LLC from A to A-, citing weakening financial measures as a result of inflationary pressures and our significant capital spending; and revised its outlook from negative to stable for the companies.
Purchased gas decreased by $249,689 or 41.5% in 2023 compared to 2022. Purchased gas represents the cost of gas sold by Peoples for the regulated and non-regulated gas business and has a corresponding offset in revenue. This expense decreased for the regulated natural gas business and non-regulated business by $223,461 and $26,228, respectively.
Purchased gas decreased by $75,297 or 21.4% in 2024 compared to 2023. Purchased gas represents the cost of gas sold by Peoples for the regulated and non-regulated gas business and has a corresponding offset in revenue. This expense decreased for the regulated natural gas business and non-regulated business by $60,322 and $14,975, respectively.
In March 2022, the Company acquired the wastewater system of Lower Makefield Township, which serves 11,323 customer connections in Lower Makefield, Falls, and Middletown townships, and Yardley Borough, Bucks County, Pennsylvania, for a cash purchase price of $53,000.
In March 2022, the Company acquired the wastewater system of Lower Makefield Township, which serves 11,323 customer connections in Lower Makefield, Falls, and Middletown townships, and Yardley Borough, Bucks County, Pennsylvania, for a cash purchase price of $53,000. 50 Table of Contents Subsequent to the August 2022 closing on the acquisition of the municipal wastewater assets of East Whiteland Township, a party filed an appeal to the Pennsylvania Public Utility Commission’s order of approval.
The change in the effective tax rate is primarily due to a decrease in the amortization of certain regulatory liabilities associated with deferred taxes. 51 Table of Contents (In thousands of dollars, except per share amounts) Regulated Natural Gas Segment The following tables present the selected operating results and customers served for our Regulated Natural Gas segment for and as of the year ended December 31: 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Gas utility customers: Residential gas 683,811 695,198 692,174 (11,387) 3,024 Commercial gas 59,384 59,684 59,595 (300) 89 Industrial gas 551 1,459 1,475 (908) (16) Total gas utility customers 743,746 756,341 753,244 (12,595) 3,097 Delivered volumes (thousand cubic feet) Residential gas 51,698,440 61,093,372 56,542,038 (9,394,932) 4,551,334 Commercial gas 33,151,308 37,240,382 33,403,899 (4,089,074) 3,836,483 Industrial gas 48,323,846 49,017,036 49,726,237 (693,190) (709,201) Total delivered volumes 133,173,594 147,350,790 139,672,174 (14,177,196) 7,678,616 Heating Degree Days (a) 4,558 5,648 5,139 (1,090) 509 Average Heating Degree Days (b) 5,427 5,438 5,466 (11) (28) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Operating revenues: Residential gas $ 519,406 $ 720,490 $ 530,338 $ (201,084) $ 190,152 Commercial gas 111,272 149,653 99,596 (38,381) 50,057 Industrial gas 3,232 5,636 3,427 (2,404) 2,209 Gas transportation 184,598 205,825 198,195 (21,227) 7,630 Customer rate credits - - (5,000) - 5,000 Other utility 45,251 61,758 33,346 (16,507) 28,412 Total operating revenues $ 863,759 $ 1,143,362 $ 859,902 $ (279,603) $ 283,460 Operating expenses: Operations and maintenance expense $ 209,073 $ 239,506 $ 226,194 $ (30,433) $ 13,312 Purchased gas $ 327,548 $ 551,009 $ 313,390 $ (223,461) $ 237,619 Depreciation and amortization $ 125,263 $ 118,955 $ 113,238 $ 6,308 $ 5,717 Taxes other than income taxes $ 23,846 $ 22,642 $ 20,801 $ 1,204 $ 1,841 Other expense, net $ 90,819 $ 87,916 $ 78,099 $ 2,903 $ 9,817 Income tax benefit $ (113,353) $ (61,942) $ (40,013) $ (51,411) $ (21,929) Segment net income $ 200,563 $ 185,276 $ 148,193 $ 15,287 $ 37,083 (a) Unit of measure reflecting temperature-sensitive natural gas consumption, calculated by subtracting the average of a day’s high and low temperatures from 65 degrees Fahrenheit; measured at Pittsburgh, PA.
The increase in the effective tax rate is primarily the result of changes in the jurisdictional earnings mix, decrease in the amortization of certain regulatory liabilities associated with deferred taxes, and decrease in the income tax benefit associated with the repairs tax deduction for qualifying utility infrastructure investments. ‎ 46 Table of Contents Regulated Natural Gas Segment The following tables present the selected operating results and customers served for our Regulated Natural Gas segment for and as of the year ended December 31: 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Gas utility customers: Residential gas 685,591 683,811 695,198 1,780 (11,387) Commercial gas 59,296 59,384 59,684 (88) (300) Industrial gas 552 551 1,459 1 (908) Total gas utility customers 745,439 743,746 756,341 1,693 (12,595) Delivered volumes - retail and transportation (thousand cubic feet) Residential gas 50,669,829 51,698,440 61,093,372 (1,028,611) (9,394,932) Commercial gas 33,641,589 33,151,308 37,240,382 490,281 (4,089,074) Industrial gas 47,959,164 48,323,846 49,017,036 (364,682) (693,190) Total delivered volumes 132,270,582 133,173,594 147,350,790 (903,012) (14,177,196) Heating Degree Days (a) 4,288 4,558 5,648 (270) (1,090) Average Heating Degree Days (b) 5,240 5,427 5,438 (187) (11) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Operating revenues: Residential gas $ 504,426 $ 519,406 $ 720,490 $ (14,980) $ (201,084) Commercial gas 100,662 111,272 149,653 (10,610) (38,381) Industrial gas 2,279 3,232 5,636 (953) (2,404) Gas transportation 194,413 184,598 205,825 9,815 (21,227) Other utility 41,211 45,251 61,758 (4,040) (16,507) Total operating revenues $ 842,991 $ 863,759 $ 1,143,362 $ (20,768) $ (279,603) Operating expenses: Operations and maintenance expense $ 207,176 $ 209,073 $ 239,506 $ (1,897) $ (30,433) Purchased gas $ 267,226 $ 327,548 $ 551,009 $ (60,322) $ (223,461) Depreciation and amortization $ 135,814 $ 125,263 $ 118,955 $ 10,551 $ 6,308 Taxes other than income taxes $ 22,985 $ 23,846 $ 22,642 $ (861) $ 1,204 Other expense, net $ (3,834) $ 90,819 $ 87,916 $ (94,653) $ 2,903 Income tax benefit $ (79,993) $ (113,353) $ (61,942) $ 33,360 $ (51,411) Segment net income $ 293,617 $ 200,563 $ 185,276 $ 93,054 $ 15,287 (a) Unit of measure reflecting temperature-sensitive natural gas consumption, calculated by subtracting the average of a day’s high and low temperatures from 65 degrees Fahrenheit; measured at Pittsburgh, PA.
Our consolidated balance sheet historically has had a negative working capital position, whereby routinely our current liabilities exceed our current assets.
Our regulated water and gas business is capital intensive and requires a significant level of capital spending. Our consolidated balance sheet historically has had a negative working capital position, whereby routinely our current liabilities exceed our current assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+2 added−1 removed5 unchanged
Biggest changeVolatile equity market conditions arising from public health threats and global conflicts and sanctions imposed in response thereto, may result in our pension and other post-retirement plans’ assets market values suffering a decline, which could increase our required cash contributions to the plans and expense in subsequent years.
Biggest changeAs of December 31, 2024, the debt maturities by period, in thousands of dollars, and the weighted average interest rate for long-term debt are as follows: 2025 2026 2027 2028 2029 Thereafter Total Fair Value Long-term debt: Fixed rate $ 142,807 $ 24,089 $ 736,398 $ 8,036 $ 404,832 $ 5,829,934 $ 7,146,096 $ 6,018,777 Variable rate - - 413,000 - - - 413,000 413,000 Total $ 142,807 $ 24,089 $ 1,149,398 $ 8,036 $ 404,832 $ 5,829,934 $ 7,559,096 $ 6,431,777 Weighted average interest rate 4.77% 7.27% 5.02% 3.83% 3.55% 3.94% 4.14% Volatile equity market conditions arising from macroeconomic dynamics, public health threats, global conflicts, and sanctions imposed in response thereto, may result in our pension and other post-retirement plans’ assets market values suffering a decline, which could increase our required cash contributions to the plans and expense in subsequent years.
We also manage gas commodity price risk and supply risk by injecting natural gas into storage during the summer months and withdrawing the natural gas during the winter heating season. ‎ 64 Table of Contents
We also manage gas commodity price risk and supply risk by injecting natural gas into storage during the summer months and withdrawing the natural gas during the winter heating season. ‎ 58 Table of Contents
As a result, we are exposed to the risk of changes in equity prices for the marketable equity securities. As of December 31, 2023, we have assets of, in thousands of dollars, $26,442 to fund our deferred compensation and non-qualified pension plan liabilities.
From time to time, we make investments in marketable equity securities. As a result, we are exposed to the risk of changes in equity prices for the marketable equity securities. As of December 31, 2024, we have assets of, in thousands of dollars, $31,324 to fund our deferred compensation and non-qualified pension plan liabilities.
The exposure to changes in interest rates is a result of financings through the issuance of fixed rate long-term debt. Such exposure is typically related to financings between utility rate increases, since generally our rate increases include a revenue level to allow recovery of our current cost of capital.
The exposure to changes in interest rates is typically related to financings between utility rate increases, since generally our rate increases include a revenue level to allow recovery of our current cost of capital.
The market risk of the deferred compensation plan assets are borne by the participants in the deferred compensation plan. Our natural gas commodity price risk, driven mainly by price fluctuations of natural gas, is mitigated by our purchased-gas cost adjustment mechanisms.
The market risk of the deferred compensation plan assets are borne by the participants in the deferred compensation plan.
Removed
As of December 31, 2023, the debt maturities by period, in thousands of dollars, and the weighted average interest rate for long-term debt are as follows: 2024 2025 2026 2027 2028 Thereafter Total Fair Value Long-term debt: Fixed rate $ 67,415 $ 147,319 $ 21,556 $ 237,728 $ 7,032 $ 5,736,958 $ 6,218,008 $ 5,260,722 Variable rate - - - 720,000 - - 720,000 720,000 Total $ 67,415 $ 147,319 $ 21,556 $ 957,728 $ 7,032 $ 5,736,958 $ 6,938,008 $ 5,980,722 Weighted average interest rate 3.95% 4.76% 7.37% 5.83% 4.32% 3.82% 4.14% From time to time, we make investments in marketable equity securities.
Added
The Company reduces this risk through fixed income investments to manage interest rate exposures that impact the valuation of liabilities and through the diversification of investments across and within various asset categories. The Company’s risk is also reduced through its ability to recover pension and other benefit costs through rates.
Added
Our natural gas commodity price risk, driven mainly by price fluctuations of natural gas, is mitigated by our purchased-gas cost adjustment mechanisms, which provide a dollar-for-dollar offset to increases or decreases in the cost of natural gas and allows for recovery of purchased gas costs fluctuations on an ongoing basis without filing a rate case.

Other WTRG 10-K year-over-year comparisons