YORK WATER CO

Previous wording

The primary business of the Company is to impound, purify to meet or exceed safe drinking water standards and distribute water. The Company also owns and operates three wastewater collection systems and ten wastewater collection and treatment systems. The Company operates within its franchised water and wastewater territory, which covers portions of 56 municipalities within four counties in south-central Pennsylvania. The Company is regulated by the Pennsylvania Public Utility Commission, or PPUC, for both water and wastewater in the areas of billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing and rate setting. The Company must obtain PPUC approval before changing any practices associated with the aforementioned areas.

Current wording

The primary business of the Company is to impound, purify to meet or exceed safe drinking water standards and distribute water. The Company also owns and operates three wastewater collection systems and ten wastewater collection and treatment systems. The Company operates within its franchised water and wastewater territory, which covers portions of 57 municipalities within four counties in south-central Pennsylvania. The Company is regulated by the Pennsylvania Public Utility Commission, or PPUC, for both water and wastewater in the areas of billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing and rate setting. The Company must obtain PPUC approval before changing any practices associated with the aforementioned areas.

Previous wording

Water service is supplied through the Company’s own distribution system. The Company obtains the bulk of its water supply for its primary system for York and Adams Counties from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of approximately 73.0 million gallons from a combined watershed area of approximately 117 square miles. The Company has two reservoirs on this primary system, Lake Williams and Lake Redman, which together hold up to approximately 2.5 billion gallons of water. The Company supplements these reservoirs with a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. The Company obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoguinet Creek, which has an average daily flow of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water. The Company also owns thirteen wells which are capable of providing a safe yield of approximately 808,000 gallons per day to supply water to the customers of its groundwater satellite systems in York, Adams, and Lancaster Counties. As of June 30, 2024, the Company’s average daily availability was 41.0 million gallons, and average daily consumption was approximately 21.7 million gallons. The Company’s service territory had an estimated population of 209,000 as of December 31, 2023. Industry within the Company’s service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells, and motorcycles.

Current wording

Water service is supplied through the Company’s own distribution system. The Company obtains the bulk of its water supply for its primary system for York and Adams Counties from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of approximately 73.0 million gallons from a combined watershed area of approximately 117 square miles. The Company has two reservoirs on this primary system, Lake Williams and Lake Redman, which together hold up to approximately 2.5 billion gallons of water. The Company supplements these reservoirs with a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. The Company obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoguinet Creek, which has an average daily flow of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water. The Company also owns fifteen wells which are capable of providing a safe yield of approximately 923,000 gallons per day to supply water to the customers of its groundwater satellite systems in York, Adams, and Lancaster Counties. As of September 30, 2024, the Company’s average daily availability was 41.1 million gallons, and average daily consumption was approximately 22.4 million gallons. The Company’s service territory had an estimated population of 209,000 as of December 31, 2023. Industry within the Company’s service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells, and motorcycles.

Previous wording

Net income for the first six months of 2024 was $9,320, a decrease of $857, or 8.4%, from net income of $10,177 for the same period of 2023. The primary contributing factors to the decrease were higher operating expenses and higher interest on debt which were partially offset by higher operating revenues and lower pension costs.

Current wording

Net income for the third quarter of 2024 was $5,863, a decrease of $1,705, or 22.5%, from net income of $7,568 for the same period of 2023. The primary contributing factors to the decrease were higher operating expenses, a lower allowance for funds used during construction, and higher income taxes, which were partially offset by higher operating revenues.

Previous wording

Operating revenues for the second quarter of 2024 decreased $17, or 0.1%, from $18,767 for the three months ended June 30, 2023 to $18,750 for the corresponding 2024 period. The primary reason for the decrease was per capita consumption. Total per capita consumption for 2024 was approximately 2.8% lower than the same period of last year. Growth in the customer base mostly offset the decrease. The average number of water customers served in 2024 increased as compared to 2023 by 1,007 customers, from 71,297 to 72,304 customers. The average number of wastewater customers served in 2024 increased as compared to 2023 by 560 customers, from 5,939 to 6,499 customers, primarily due to acquisitions.

Current wording

Operating revenues for the third quarter of 2024 increased $948 or 5.1%, from $18,767 for the three months ended September 30, 2023 to $19,715 for the corresponding 2024 period. The increase was primarily due to revenues from the distribution system improvement charge, or DSIC, allowed by the PPUC of $131. The DSIC allows the Company to add a charge to customers’ water bills for qualified replacement costs of certain infrastructure without submitting a rate filing. Growth in the customer base also added to revenues. The average number of water customers served in 2024 increased as compared to 2023 by 1,062 customers, from 71,521 to 72,583 customers. The average number of wastewater customers served in 2024 increased as compared to 2023 by 567 customers, from 6,018 to 6,585 customers, primarily due to acquisitions. Total per capita consumption for the third quarter of 2024 was approximately 0.9% higher than the same period of last year.

Previous wording

Operating expenses for the second quarter of 2024 increased $1,437, or 14.0%, from $10,251 for the second quarter of 2023 to $11,688 for the corresponding 2024 period. The increase was primarily due to higher expenses of approximately $321 for distribution system maintenance, $280 for an increased allowance for uncollectible accounts, $248 for depreciation and amortization, $223 for wages and benefits, $220 for wastewater treatment, $68 for purchased power, and $57 for billing and revenue collection services. Other operating expenses increased by a net of $194. The increased expenses were partially offset by reduced expenses of $174 for insurance.

Current wording

Operating expenses for the third quarter of 2024 increased $1,326, or 12.8%, from $10,334 for the third quarter of 2023 to $11,660 for the corresponding 2024 period. The increase was primarily due to higher expenses of approximately $353 for depreciation and amortization, $303 for wages and benefits, $203 for wastewater treatment, $153 for insurance, $140 for an increased allowance for uncollectible accounts, $101 for water treatment, and $78 for purchased power. Other operating expenses increased by a net of $169. The increase was partially offset by reduced fuel expenses of $174 for the prior year pumping of raw water from the Susquehanna River, not repeated this year.

Previous wording

Interest on debt for the second quarter of 2024 increased $505, or 30.1%, from $1,678 for the second quarter of 2023 to $2,183 for the corresponding 2024 period. The increase was primarily due to an increase in long-term debt outstanding and higher interest rates upon issuance of the 5.67% Senior Notes. The average debt outstanding under the line of credit was $712 for the second quarter of 2024 and $5,103 for the second quarter of 2023. The weighted average interest rate on the line of credit was 4.50% for the quarter ended June 30, 2024 and 5.50% for the quarter ended June 30, 2023.

Current wording

Interest on debt for the third quarter of 2024 increased $393, or 21.2%, from $1,850 for the third quarter of 2023 to $2,243 for the corresponding 2024 period. The increase was primarily due to an increase in long-term debt outstanding and higher interest rates upon issuance of the 5.67% Senior Notes. The average debt outstanding under the line of credit was $6,201 for the third quarter of 2024 and $15,350 for the third quarter of 2023. The weighted average interest rate on the line of credit was 6.47% for the quarter ended September 30, 2024 and 6.42% for the quarter ended September 30, 2023.

Previous wording

Allowance for funds used during construction decreased $497, from $844 in the second quarter of 2023 to $347 in the corresponding 2024 period due to a lower volume of eligible construction.

Current wording

Allowance for funds used during construction decreased $830, from $1,131 in the third quarter of 2023 to $301 in the corresponding 2024 period due to a lower volume of eligible construction.

Previous wording

Other pension costs for the second quarter of 2024 reflect decreased expense of $675 as compared to the same period of 2023 due to a lower contribution to the pension plans.

Current wording

Other pension costs for the third quarter of 2024 reflect decreased expense of $398 as compared to the same period of 2023 due to a lower contribution to the pension plans.

Previous wording

Other income (expenses), net for the second quarter of 2024 reflects decreased expenses of $58 as compared to the same period of 2023. Lower retirement expenses of approximately $40 and higher earnings on life insurance policies of approximately $31 were the primary reasons for the increase. Other expenses increased by a net of $13.

Current wording

Other income (expenses), net for the third quarter of 2024 reflects decreased expenses of $17 as compared to the same period of 2023. Higher earnings on life insurance policies of approximately $7 were the primary reason for the increase. Other expenses decreased by a net of $10.

Previous wording

Income tax expense for the second quarter of 2024 decreased $192 as compared to the same period of 2023. The Company’s effective tax rate was 9.4% for the second quarter of 2024 and 9.9% for the second quarter of 2023.

Current wording

Income tax expense for the third quarter of 2024 increased $519 as compared to the same period of 2023 due to lower deductions for the Internal Revenue Service, or IRS, tangible property regulations, or TPR. The Company’s effective tax rate was 5.8% for the third quarter of 2024 and (2.2)% for the third quarter of 2023.

Previous wording

Net income for the second quarter of 2024 was $4,993, a decrease of $1,531, or 23.5%, from net income of $6,524 for the same period of 2023. The primary contributing factors to the decrease were higher operating expenses, higher interest on debt, and lower allowance for funds used during construction which were partially offset by lower pension costs.

Current wording

Net income for the first nine months of 2024 was $15,183, a decrease of $2,562, or 14.4%, from net income of $17,745 for the same period of 2023. The primary contributing factors to the decrease were higher operating expenses, higher interest on debt, and a lower allowance for funds used during construction, which were partially offset by higher operating revenues and lower pension costs.

Previous wording

Operating revenues for the first six months of 2024 increased $2,210, or 6.5%, from $34,168 for the six months ended June 30, 2023 to $36,378 for the corresponding 2024 period. The primary reason for the increase was a rate increase effective March 1, 2023. Growth in the customer base also added to revenues. The average number of water customers served in 2024 increased as compared to 2023 by 902 customers, from 71,224 to 72,126 customers. The average number of wastewater customers served in 2024 increased as compared to 2023 by 510 customers, from 5,917 to 6,427 customers, primarily due to acquisitions. The increased revenues were partially offset by a $237 decrease from a lower distribution system improvement charge, or DSIC, allowed by the PPUC. The DSIC reset to zero on March 1, 2023 when the rate order took effect. The Company began recognizing DSIC in June 2024 for bills rendered after July 1, 2024 that included June consumption. Total per capita consumption for 2024 was approximately 2.5% lower than the same period of last year. For the remainder of the year, the Company expects revenues to show a modest increase due to the DISC, higher summer demand, and an increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions, weather patterns, and economic conditions could impact results.

Current wording

Operating revenues for the first nine months of 2024 increased $3,158, or 6.0%, from $52,935 for the nine months ended September 30, 2023 to $56,093 for the corresponding 2024 period. The primary reason for the increase was a rate increase effective March 1, 2023. Growth in the customer base also added to revenues. The average number of water customers served in 2024 increased as compared to 2023 by 955 customers, from 71,323 to 72,278 customers. The average number of wastewater customers served in 2024 increased as compared to 2023 by 528 customers, from 5,951 to 6,479 customers, primarily due to acquisitions. The increased revenues were partially offset by a $106 decrease from the DSIC. The DSIC reset to zero on March 1, 2023 when the new rate order took effect and began again in June 2024 for bills rendered after July 1, 2024. Total per capita consumption for 2024 was approximately 1.3% lower than the same period of last year. For the remainder of the year, the Company expects revenues to show a modest increase due to the DSIC and an increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions, weather patterns, and economic conditions could impact results.

Previous wording

Operating expenses for the first six months of 2024 increased $2,867, or 14.2%, from $20,234 for the first six months of 2023 to $23,101 for the corresponding 2024 period. The increase was primarily due to higher expenses of approximately $730 for distribution system maintenance, $517 for depreciation and amortization, $516 for wages and benefits, $300 for an increased allowance for uncollectible accounts, $295 for wastewater treatment, $118 for purchased power, $96 for outside services, and $72 for billing and revenue collection services. Other operating expenses increased by a net of $223. For the remainder of the year, the Company expects depreciation and amortization expense to continue to rise due to additional investment in utility plant, and other expenses to increase as costs to treat water and wastewater, and to maintain and extend the distribution system, continue to rise. Weather patterns could further increase operating expenses.

Current wording

Operating expenses for the first nine months of 2024 increased $4,193, or 13.7%, from $30,568 for the first nine months of 2023 to $34,761 for the corresponding 2024 period. The increase was primarily due to higher expenses of approximately $870 for depreciation and amortization, $819 for wages and benefits, $748 for distribution system maintenance, $498 for wastewater treatment, $440 for an increased allowance for uncollectible accounts, $196 for purchased power, $154 for water treatment, $97 for insurance, and $67 for billing and revenue collection services. Other operating expenses increased by a net of $474. The increase was partially offset by reduced fuel expenses of $170 for the prior year pumping of raw water from the Susquehanna River, not repeated this year. For the remainder of the year, the Company expects depreciation and amortization expense to continue to rise due to additional investment in utility plant, and other expenses to increase as costs to treat water and wastewater, and to maintain and extend the distribution system, continue to rise. Weather patterns could further increase operating expenses.

Previous wording

Interest on debt for the first six months of 2024 increased $1,115, or 34.9%, from $3,191 for the first six months of 2023 to $4,306 for the corresponding 2024 period. The increase was primarily due to an increase in long-term debt outstanding and higher interest rates upon issuance of the 5.67% Senior Notes. The average debt outstanding under the line of credit was $10,794 for the first six months of 2024 and $12,715 for the first six months of 2023. The weighted average interest rate on the line of credit was 4.29% for the six months ended June 30, 2024 and 4.24% for the six months ended June 30, 2023. Interest expense for the remainder of the year is expected to increase due to the increase in long-term debt outstanding.

Current wording

Interest on debt for the first nine months of 2024 increased $1,508, or 29.9%, from $5,041 for the first nine months of 2023 to $6,549 for the corresponding 2024 period. The increase was primarily due to an increase in long-term debt outstanding and higher interest rates upon issuance of the 5.67% Senior Notes. The average debt outstanding under the line of credit was $9,252 for the first nine months of 2024 and $13,603 for the first nine months of 2023. The weighted average interest rate on the line of credit was 5.02% for the nine months ended September 30, 2024 and 4.97% for the nine months ended September 30, 2023. Interest expense for the remainder of the year is expected to increase due to the increase in long-term debt outstanding.

Previous wording

Allowance for funds used during construction decreased $112, from $1,593 in the first six months of 2023 to $1,481 in the corresponding 2024 period due to a lower volume of eligible construction. Allowance for funds used during construction for the remainder of the year is expected to decrease based on the completion of the Lake Williams dam project and a projected decrease in the amount of eligible construction.

Current wording

Allowance for funds used during construction decreased $942, from $2,724 in the first nine months of 2023 to $1,782 in the corresponding 2024 period due to a lower volume of eligible construction. Allowance for funds used during construction for the remainder of the year is expected to decrease based on the completion of the Lake Williams dam project and a projected decrease in the amount of eligible construction.

Previous wording

Other pension costs for the first six months of 2024 reflect decreased expense of $809 as compared to the same period of 2023 due to a lower contribution to the pension plans. No additional expense is expected to be recorded in 2024.

Current wording

Other pension costs for the first nine months of 2024 reflect decreased expense of $1,207 as compared to the same period of 2023 due to a lower contribution to the pension plans. No additional expense is expected to be recorded in 2024.

Previous wording

Other income (expenses), net for the first six months of 2024 reflects decreased expenses of $85 as compared to the same period of 2023. Higher earnings on life insurance policies of approximately $83 was the primary reason for the decrease. Other expenses decreased by a net of $2. For the remainder of the year, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

Current wording

Other income (expenses), net for the first nine months of 2024 reflects decreased expenses of $102 as compared to the same period of 2023. Higher earnings on life insurance policies of approximately $90 was the primary reason for the decrease. Other expenses decreased by a net of $12. For the remainder of the year, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

Previous wording

Income tax expense for the first six months of 2024 decreased $133 as compared to the same period of 2023. The Company’s effective tax rate was 10.8% for the first six months of 2024 and 11.0% for the first six months of 2023. The Company’s effective tax rate for the remainder of 2024 will be largely determined by the level of eligible asset improvements expensed for tax purposes under Internal Revenue Service tangible property regulations, or TPR, each period. The Company expects the level to be higher in the remainder of the year than the first six months, lowering the effective tax rate.

Current wording

Income tax expense for the first nine months of 2024 increased $386 as compared to the same period of 2023 due to lower deductions for the IRS TPR. The Company’s effective tax rate was 8.9% for the first nine months of 2024 and 5.8% for the first nine months of 2023. The Company’s effective tax rate for the remainder of 2024 will be largely determined by the level of eligible asset improvements expensed for tax purposes under the IRS TPR each period. The Company expects the effective tax rate to remain consistent with the first nine months for the remainder of the year.

Previous wording

Effective July 1, 2024, the Company’s tariff included a distribution system improvement charge on revenues of 0.64%. A partial month of this surcharge is included in results of operations for the three and six months ended June 30, 2024 for bills rendered after July 1, 2024 that included June consumption.

Current wording

Effective October 1, 2024, the Company’s tariff included a DSIC on revenues of 1.14%.

Previous wording

On July 17, 2023, the Company signed an agreement to purchase the wastewater collection and treatment assets of York Haven Sewer Authority in York Haven Borough, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 230 wastewater customers.

Current wording

On July 17, 2023, the Company signed an agreement to purchase the wastewater collection and treatment assets of York Haven Sewer Authority in York Haven Borough, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the fourth quarter of 2024 at which time the Company will add approximately 230 wastewater customers.

Previous wording

On May 23, 2023, the Company signed an agreement to purchase the Brookhaven Mobile Home Park water assets of ATG Properties, LLC in Hellam Township, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 150 water customers.

Current wording

On May 23, 2023, the Company signed an agreement to purchase the Brookhaven Mobile Home Park water assets of ATG Properties, LLC in Hellam Township, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the fourth quarter of 2024 at which time the Company will add approximately 150 water customers.

Previous wording

On March 27, 2023, the Company signed an agreement to purchase the water assets of Pine Run Retirement Community in Hamilton Township, Adams County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 100 water customers.

Current wording

On March 27, 2023, the Company signed an agreement to purchase the water assets of Pine Run Retirement Community in Hamilton Township, Adams County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the fourth quarter of 2024 at which time the Company will add approximately 100 water customers.

Previous wording

For the six months ended June 30, 2024, the Company invested $20,867 in construction expenditures forarmoring and replacing the spillway of the Lake Williams dam, wastewater treatment plant construction, as well as various replacements and improvements to infrastructure and routine items. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions from developers, municipalities, customers, or builders.

Current wording

For the nine months ended September 30, 2024, the Company invested $32,993 in construction expenditures forarmoring and replacing the spillway of the Lake Williams dam, wastewater treatment plant construction, as well as various replacements and improvements to infrastructure and routine items. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions from developers, municipalities, customers, or builders.

Previous wording

The Company anticipates construction expenditures for the remainder of 2024 of approximately $21,300 exclusive of any potential acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated expenditures will be for completion ofarmoring and replacing the spillway of the Lake Williams dam, additional main extensions, wastewater treatment plant construction, as well as various replacements and improvements to infrastructure and routine items. The Company intends to use primarily internally-generated funds for its anticipated construction and fund the remainder through line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions. Customer advances and contributions are expected to account for between 5% and 10% of funding requirements during the remainder of 2024. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, during 2024 and 2025, to fund anticipated construction and acquisition expenditures.

Current wording

The Company anticipates construction expenditures for the remainder of 2024 of approximately $9,700 exclusive of any potential acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated expenditures will be for completion ofarmoring and replacing the spillway of the Lake Williams dam and additional main extensions, as well as various replacements and improvements to infrastructure and routine items. The Company intends to use primarily internally-generated funds for its anticipated construction and fund the remainder through line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions. Customer advances and contributions are expected to account for between 5% and 10% of funding requirements during the remainder of 2024. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, during 2024 and 2025, to fund anticipated construction and acquisition expenditures.

Previous wording

The Company manages its cash through a cash management account that is directly connected to its line of credit. Excess cash generated automatically pays down outstanding borrowings under the line of credit arrangement. If there are no outstanding borrowings, the cash is used as an earnings credit to reduce banking fees. Likewise, if additional funds are needed beyond what is generated internally for payroll, to pay suppliers, to fund capital expenditures, or to pay debt service, funds are automatically borrowed under the line of credit. As of June 30, 2024, the Company borrowed $1,461 on its line of credit and incurred a cash overdraft on its cash management account of $2,154. The cash management facility connected to the line of credit is expected to provide the necessary liquidity and funding for the Company’s operations, capital expenditures, and acquisitions for the foreseeable future.

Current wording

The Company manages its cash through a cash management account that is directly connected to its line of credit. Excess cash generated automatically pays down outstanding borrowings under the line of credit arrangement. If there are no outstanding borrowings, the cash is used as an earnings credit to reduce banking fees. Likewise, if additional funds are needed beyond what is generated internally for payroll, to pay suppliers, to fund capital expenditures, or to pay debt service, funds are automatically borrowed under the line of credit. As of September 30, 2024, the Company borrowed $8,732 on its line of credit and incurred a cash overdraft on its cash management account of $1,366. The cash management facility connected to the line of credit is expected to provide the necessary liquidity and funding for the Company’s operations, capital expenditures, and acquisitions for the foreseeable future.

Previous wording

The accounts receivable balance tends to follow the change in revenues but is also affected by the timeliness of payments by customers and the level of the reserve for doubtful accounts. In the three months ended June 30, 2024, consistent revenue levels as compared to the three months ended December 31, 2023, resulted in a consistent balance in accounts receivable – customers. A reserve is maintained at a level considered adequate to provide for expected credit losses. Expected credit losses are based on historical write-offs combined with an evaluation of current conditions and reasonable and supportable forecasts including inactive accounts with outstanding balances, the aging of balances in payment agreements, adverse situations that may affect a customer’s ability to pay, economic conditions, and other relevant factors applied to the current aging of receivables. Customer accounts are written off when collection efforts have been exhausted. If the status of the evaluated factors deteriorate, the Company may incur additional expenses for uncollectible accounts and experience a reduction in its internally-generated funds.

Current wording

The accounts receivable balance tends to follow the change in revenues but is also affected by the timeliness of payments by customers and the level of the reserve for doubtful accounts. In the three months ended September 30, 2024, higher revenue levels as compared to the three months ended December 31, 2023, resulted in an increase in accounts receivable – customers. A reserve is maintained at a level considered adequate to provide for expected credit losses. Expected credit losses are based on historical write-offs combined with an evaluation of current conditions and reasonable and supportable forecasts including inactive accounts with outstanding balances, the aging of balances in payment agreements, adverse situations that may affect a customer’s ability to pay, economic conditions, and other relevant factors applied to the current aging of receivables. Customer accounts are written off when collection efforts have been exhausted. If the status of the evaluated factors deteriorate, the Company may incur additional expenses for uncollectible accounts and experience a reduction in its internally-generated funds.

Previous wording

The amount of internally-generated funds available for operations and construction depends on the Company’s ability to obtain timely and adequate rate relief, changes in regulations including taxes, customers’ water usage, weather conditions, customer growth and controlled expenses. During the first six months of 2024, the Company generated $12,841 internally from operations as compared to the $14,596 it generated during the first six months of 2023. The decrease was primarily due to higher interest and income taxes paid.

Current wording

The amount of internally-generated funds available for operations and construction depends on the Company’s ability to obtain timely and adequate rate relief, changes in regulations including taxes, customers’ water usage, weather conditions, customer growth and controlled expenses. During the first nine months of 2024, the Company generated $20,391 internally from operations as compared to the $23,407 it generated during the first nine months of 2023. The decrease was primarily due to higher interest and income taxes paid.

Previous wording

Common stockholders’ equity as a percent of the total capitalization was 53.8% as of June 30, 2024, compared with 54.8% as of December 31, 2023. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward until it approaches fifty percent before considering additional equity. It is the Company’s general intent to target equity between fifty and fifty-five percent of total capitalization.

Current wording

Common stockholders’ equity as a percent of the total capitalization was 53.2% as of September 30, 2024, compared with 54.8% as of December 31, 2023. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward until it approaches fifty percent before considering additional equity. It is the Company’s general intent to target equity between fifty and fifty-five percent of total capitalization.

Previous wording

Historically, the Company has borrowed under its line of credit before refinancing with long-term debt or equity capital. As of June 30, 2024, the Company maintained an unsecured line of credit in the amount of $50,000 at an interest rate of the Secured Overnight Financing Rate plus 1.17% with an unused commitment fee and an interest rate floor. The Company had $1,461 in borrowings under its line of credit as of June 30, 2024. The interest rate on the line of credit borrowing as of June 30, 2024 was 6.50%. The Company expects to extend the maturity for this line of credit into 2026 under similar terms and conditions.

Current wording

Historically, the Company has borrowed under its line of credit before refinancing with long-term debt or equity capital. As of September 30, 2024, the Company maintained an unsecured line of credit in the amount of $50,000 at an interest rate of the Secured Overnight Financing Rate plus 1.17% with an unused commitment fee and an interest rate floor. The Company had $8,732 in borrowings under its line of credit as of September 30, 2024. The interest rate on the line of credit borrowing as of September 30, 2024 was 6.37%. In the third quarter of 2024, the Company renewed its committed line of credit and extended the maturity date to September 2026. No other terms or conditions of the line of credit agreement were modified.

Previous wording

The Company’s total long-term debt as a percentage of the total capitalization, defined as total common stockholders’ equity plus total long-term debt, was 46.2% as of June 30, 2024, compared with 45.2% as of December 31, 2023. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward. A debt to total capitalization ratio between forty-five and fifty percent has historically been acceptable to the PPUC in rate filings.

Current wording

The Company’s total long-term debt as a percentage of the total capitalization, defined as total common stockholders’ equity plus total long-term debt, was 46.8% as of September 30, 2024, compared with 45.2% as of December 31, 2023. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward. A debt to total capitalization ratio between forty-five and fifty percent has historically been acceptable to the PPUC in rate filings.

Previous wording

Under the Internal Revenue Service TPR, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions. The Company expects to continue to expense these asset improvements in the future.

Current wording

Under the IRS TPR, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions. The Company expects to continue to expense these asset improvements in the future.

Previous wording

The Company was granted approval by the PPUC to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the date of the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $1,868 and $1,762 through June 30, 2024 and December 31, 2023, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $2,000. This estimate is subject to adjustment as more facts become available.

Current wording

The Company was granted approval by the PPUC to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the date of the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $1,921 and $1,762 through September 30, 2024 and December 31, 2023, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $2,000. This estimate is subject to adjustment as more facts become available.

Previous wording

On March 6, 2024, Pennsylvania state officials returned all counties to normal status. Measures taken during a drought could potentially impact future revenues, operating expenses, and net income depending on the length and severity of the dry conditions.

Current wording

On March 6, 2024, Pennsylvania state officials returned all counties to normal status.