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 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.

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 eleven 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 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.

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 March 31, 2025, the Company’s average daily availability was 41.1 million gallons, and average daily consumption was approximately 23.7 million gallons. The Company’s service territory had an estimated population of 212,000 as of December 31, 2024. 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 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.

Current wording

Net income for the first quarter of 2025 was $3,638, a decrease of $689, or 15.9%, from net income of $4,327 for the same period of 2024. The primary contributing factors to the decrease were a lower allowance for funds used during construction, higher operating expenses, and higher interest on debt, which were partially offset by higher operating revenues and lower pension costs.

Previous 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.

Current wording

Operating revenues for the first quarter of 2025 increased $828, or 4.7%, from $17,628 for the three months ended March 31, 2024 to $18,456 for the corresponding 2025 period. The primary reason for the increase was growth in the customer base. The average number of water customers served in 2025 increased as compared to 2024 by 1,238 customers, from 71,948 to 73,186 customers. The average number of wastewater customers served in 2025 increased as compared to 2024 by 358 customers, from 6,354 to 6,712 customers, primarily due to acquisitions. There was increased revenues from the distribution system improvement charge, or DSIC, allowed by the PPUC of $386. 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. Total per capita consumption for 2025 was approximately 3.2% higher 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 revenues from the DSIC. An increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory are also expected to add to revenues. Other regulatory actions, weather patterns, and economic conditions could impact results.

Previous 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.

Current wording

Operating expenses for the first quarter of 2025 increased $760, or 6.7%, from $11,413 for the first quarter of 2024 to $12,173 for the corresponding 2025 period. The increase was primarily due to higher expenses of approximately $481 for depreciation and amortization, $106 for distribution system maintenance, $76 for water treatment, $65 for wages and benefits, and $56 for purchased power. Other operating expenses increased by a net of $167. The increase was partially offset by reduced insurance expense of $191. 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 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.

Current wording

Interest on debt for the first quarter of 2025 increased $296, or 13.9%, from $2,123 for the first quarter of 2024 to $2,419 for the corresponding 2025 period. The increase was primarily due to higher interest rates. The average debt outstanding under the line of credit was $19,163 for the first quarter of 2025 and $20,875 for the first quarter of 2024. The weighted average interest rate on the line of credit was 5.49% for the quarter ended March 31, 2025 and 4.08% for the quarter ended March 31, 2024. Interest expense for the remainder of the year is expected to increase due to the higher interest rates on long-term debt outstanding.

Previous 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.

Current wording

Allowance for funds used during construction decreased $949, from $1,134 in the first quarter of 2024 to $185 in the corresponding 2025 period due to a lower volume of eligible construction. Allowance for funds used during construction for the remainder of the year is expected to increase based on a projected increase in the amount of eligible construction.

Previous 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.

Current wording

Other income (expenses), net for the first quarter of 2025 reflects increased expenses of $5 as compared to the same period of 2024. The increase was primarily due to higher retirement expenses of approximately $11, which were partially offset by higher earnings on life insurance policies of approximately $5. Other expenses decreased by a net of $1. 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 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.

Current wording

Income tax expense for the first quarter of 2025 decreased $130 as compared to the same period of 2024 due to lower taxable income. The Company’s effective tax rate was 11.5% for the first quarter of 2025 and 12.2% for the first quarter of 2024. The Company’s effective tax rate for the remainder of the 2025 will largely be 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 quarter, lowering the effective tax rate.

Previous wording

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

Current wording

Effective April 1, 2025, the Company’s tariff included a DSIC on revenues of 3.19%.

Previous wording

The Company does not expect to file a rate increase request in 2024.

Current wording

The Company expects to file a rate increase request in 2025.

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 fourth quarter of 2024 at which time the Company will add approximately 100 water customers.

Current wording

On January 24, 2025, the Company signed an agreement to purchase the water assets of Eagle View Manufactured Housing Community in Berwick 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 2025 at which time the Company will add approximately 140 water customers.

Previous 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.

Current wording

For the three months ended March 31, 2025, the Company invested $9,280 in construction expendituresfor main extensions and an upgrade to the enterprise software system, 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 $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.

Current wording

The Company anticipates construction expenditures for the remainder of 2025 of approximately $36,700 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 additional main extensions, wastewater treatment plant construction, and an upgrade to the enterprise software system, 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 2025. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, during 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 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.

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 March 31, 2025, the Company borrowed $21,843 on its line of credit and incurred a cash overdraft on its cash management account of $958. 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 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.

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 March 31, 2025, slightly lower revenue levels as compared to the three months ended December 31, 2024, resulted in a slight decrease 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 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.

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 three months of 2025, the Company generated $6,005 internally from operations as compared to the $6,138 it generated during the first three months of 2024. 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 53.2% 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.

Current wording

Common stockholders’ equity as a percent of the total capitalization was 52.0% as of March 31, 2025, compared with 52.6% as of December 31, 2024. 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 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.

Current wording

Historically, the Company has borrowed under its line of credit before refinancing with long-term debt or equity capital. As of March 31, 2025, 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 $21,843 in borrowings under its line of credit as of March 31, 2025. The interest rate on the line of credit borrowing as of March 31, 2025 was 5.49%. The Company expects to extend the maturity for this line of credit into 2027 under similar terms and conditions.

Previous wording

The Company has taken steps to manage the risk of reduced credit availability. It has established a committed line of credit with a 2-year revolving maturity that cannot be called on demand. There is no guarantee that the Company will be able to obtain sufficient lines of credit with favorable terms in the future. If the Company is unable to obtain sufficient lines of credit or to refinance its line of credit borrowings with long-term debt or equity when necessary, it may have to eliminate or postpone capital expenditures. Management believes the Company will have adequate capacity under its current line of credit to meet anticipated financing needs throughout 2024 and 2025.

Current wording

The Company has taken steps to manage the risk of reduced credit availability. It has established a committed line of credit with a 2-year revolving maturity that cannot be called on demand. There is no guarantee that the Company will be able to obtain sufficient lines of credit with favorable terms in the future. If the Company is unable to obtain sufficient lines of credit or to refinance its line of credit borrowings with long-term debt or equity when necessary, it may have to eliminate or postpone capital expenditures. Management believes the Company will have adequate capacity under its current line of credit to meet anticipated financing needs throughout 2025.

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 46.8% 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.

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 48.0% as of March 31, 2025, compared with 47.4% as of December 31, 2024. 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

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.

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 $1,987 and $1,961 through March 31, 2025 and December 31, 2024, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $2,100. This estimate is subject to adjustment as more facts become available.

Previous wording

On November 1, 2024, Pennsylvania state officials declared a drought watch for 33 counties in Pennsylvania, including all four counties in the Company’s service territory. The watch calls for a voluntary reduction in nonessential water use of 5 to 10 percent. The watch conditions could potentially impact future revenues and net income depending on the length and severity of the dry conditions.

Current wording

On April 2, 2025, Pennsylvania state officials maintained a drought watch for all four counties in the Company’s service territory. The watch calls for a voluntary reduction in nonessential water use of 5 to 10 percent. The watch conditions could potentially impact future revenues and net income depending on the length and severity of the dry conditions.