MIDDLESEX WATER CO

Previous wording

Middlesex Water Company (Middlesex or the Company) has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992. We are in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and fire protection purposes. We operate water and wastewater systems under contract for governmental entities and private entities primarily in New Jersey and Delaware and provide regulated wastewater services in New Jersey. We are regulated by state public utility commissions as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater service we provide and as to certain other matters in the states in which our regulated subsidiaries operate. Only our Utility Service Affiliates, Inc. (USA), Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White Marsh) subsidiaries are not regulated public utilitiesas related to rates and services quality. All municipal or commercial entities whose utility operations are managed by these entities however, are subject to environmental regulation at the federal and state levels.

Current wording

Middlesex Water Company (Middlesex or the Company) has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992. We are in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and fire protection purposes. We operate water and wastewater systems under contract for governmental entities and private entities primarily in New Jersey and Delaware and provide regulated wastewater services in New Jersey. We are regulated by state public utility commissions as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater service we provide and as to certain other matters in the states in which our regulated subsidiaries operate. Only our Utility Service Affiliates, Inc. (USA), Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White Marsh) subsidiaries are not regulated public utilities as related to rates and services quality. All municipal or commercial entities whose utility operations are managed by these entities, however, are subject to environmental regulation at the federal and state levels.

Previous wording

Middlesex Base Water Rate Increase Approval - The approval by the New Jersey Board of Public Utilities (NJBPU) in February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual operating revenues by $15.4 million effective March 1, 2024. The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of service. In August 2023, Middlesex and 3M Company (3M) executed a settlement agreement (Settlement Agreement) to resolve a lawsuit Middlesex previously initiated claiming 3M introduced Perfluoroalkyl Substances (PFAS), which includes Perfluorooctanoic Acid, into the Company’s water supply for its Park Avenue Wellfield Treatment Plant (Park Avenue Plant). The rate case settlement provides that the net proceeds from the 3M Settlement Agreement were to be used to mitigate the increase in customer rates and reimburse Middlesex for previously incurred costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. This resulted in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction on the March 31, 2024 balance sheet. The Company also recognized for the quarter ended March 31, 2024 the recovery of $0.9 million for depreciation and $3.2 million for carrying costs associated with the Park Avenue Plant PFAS treatment upgrades, as well as the recovery of $1.4 million of previously incurred operating treatment costs while the Park Avenue Plant PFAS treatment upgrades were in process.

Current wording

Middlesex Base Water Rate Increase Approval - The approval by the New Jersey Board of Public Utilities (NJBPU) in February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual operating revenues by $15.4 million effective March 1, 2024. The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of service.

Previous wording

**Tidewater DSIC-**In December 2023, the Delaware Public Service Commission (DEPSC) approved Tidewater’s application to implement a new DSIC. Effective January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate revenue of approximately $1.3 million annually. A Delaware DISC is subject to a semi-annual reset with an overall maximum rate of 7.5%.

Current wording

**Tidewater DSIC -**Effective July 1, 2024, Tidewater increased its Delaware Public Service Commission (DEPSC)-approved DSIC rate, which is expected to generate revenue of approximately $1.6 million annually.

Previous wording

United States Environmental Protection Agency (USEPA) Issues Final PFAS Regulations - In April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection MCLs adhered to by the Company. Under the new USEPA regulations, effective April 2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing compliance monitoring. Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows that drinking water levels exceed these MCLs.

Current wording

United States Environmental Protection Agency (USEPA) Issues Final Perfluoroalkyl Substances (PFAS) Regulations - In April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection MCLs adhered to by the Company. Under the new USEPA regulations, effective April 2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing compliance monitoring. Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows that drinking water levels exceed these MCLs.

Previous wording

In anticipation of these new USEPA standards, in 2023, the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performing preliminary engineering studies to ensure that effective PFAS treatment approaches are implemented.

Current wording

In anticipation of these new USEPA standards, in 2023, the Company began, and continues, implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performing preliminary engineering studies to ensure that effective PFAS treatment approaches are implemented.

Previous wording

**Capital Construction Program -**The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of assets to maintain and improve service for the current and future generations of water and wastewater customers. The Company plans to invest approximately $78 million in 2024 in connection with projects that include, but are not limited to:

Current wording

**Capital Construction Program -**The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of assets to maintain and improve service for the current and future generations of water and wastewater customers. The 2024 projects include, but are not limited to:

Previous wording

We continue to make investments in system infrastructure and our operating costs continue to increase in 2024 in a variety of categories. These factors, among others, may require base rate increase request filings for Tidewater, Pinelands Water and Pinelands Wastewater later in 2024.

Current wording

We continue to make investments in system infrastructure and our operating costs continue to increase in 2024 in a variety of categories. These factors, among others, will require a base rate increase request filing for Tidewater in the third quarter of 2024 and may require base rate increase request filings for Pinelands Water and Pinelands Wastewater in the near term.

Previous wording

Operating revenues for the three months ended March 31, 2024 increased $2.4 million from the same period in 2023 due to the following factors:

Current wording

Operating revenues for the three months ended June 30, 2024 increased $6.3 million from the same period in 2023 due to the following factors:

Previous wording

Other taxes for the three months ended March 31, 2024 increased $0.4 million from the same period in 2023 primarily due to higher gross receipts taxes on higher revenues in our Middlesex System and higher payroll related taxes on increased labor costs in our Middlesex System.

Current wording

Other Taxes for the three months ended June 30, 2024 increased $1.0 million from the same period in 2023 primarily due to higher gross receipts taxes on higher revenues in our Middlesex System and higher payroll related taxes on increased labor costs in our Middlesex System.

Previous wording

Other Income, net for the three months ended March 31, 2024 increased $3.7 million from the same period in 2023 due primarily to the recovery of carrying costs on the PFAS treatment upgrades at Middlesex’s Park Avenue Plant and higher actuarially-determined retirement benefit plans non-service benefit. Lower Allowance for Funds Used During Construction resulting from a lower level of capital projects in progress partially offset these increases. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including carrying costs, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2,Rate and Regulatory Matters, Middlesex.

Current wording

Other Income, net for the three months ended June 30, 2024 increased $0.5 million from the same period in 2023 due primarily to the recovery of carrying costs on the PFAS treatment at Middlesex’s Park Avenue Plant and higher actuarially-determined retirement benefit plans non-service benefit. Lower Allowance for Funds Used During Construction resulting from a lower level of capital projects in progress partially offset these increases. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including carrying costs, from the proceeds from the 3M Settlement Agreement. See Note 2 for additional details.

Previous wording

Interest charges for the three months ended March 31, 2024 increased $0.7 million from the same period in 2023 due to higher average debt outstanding and an increase in average borrowing rates.

Current wording

Interest Charges for the three months ended June 30, 2024 increased $0.8 million from the same period in 2023 due to higher average debt outstanding and an increase in average borrowing rates.

Previous wording

Income taxes for the three months ended March 31, 2024 increased by $0.5 million from the same period in 2023, primarily due to higher pre-tax income and lower income tax benefits associated with decreased repair expenditures on tangible property in the Middlesex System offset by the recovery of income taxes on the taxable portion of the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2,Rate and Regulatory Matters, Middlesex.

Current wording

Income Taxes for the three months ended June 30, 2024 increased by $3.7 million from the same period in 2023, primarily due to higher pre-tax income and lower income tax benefits associated with decreased repair expenditures on tangible property in the Middlesex System offset by the recovery of income taxes on the taxable portion of the proceeds from the 3M Settlement Agreement recognized in the current period. See Note 2 for additional details.

Previous wording

Depreciation expense for the three months ended March 31, 2024 decreased $0.6 million from the same period in 2023 due to the recovery of prior year depreciation related to upgrades at Middlesex’s Park Avenue Plant partially offset by a higher level of utility plant in service. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including deprecation, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2,Rate and Regulatory Matters, Middlesex.

Current wording

Depreciation for the six months ended June 30 decreased $0.5 million from the same period in 2023 due to the recovery of prior year depreciation related to upgrades at Middlesex’s Park Avenue Plant partially offset by additional utility plant in service. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including deprecation, from the proceeds from the 3M Settlement Agreement. See Note 2 for additional details.

Previous wording

For the three months ended March 31, 2024, cash flows from operating activities decreased $9.3 million to $6.7 million. The decrease in cash flows from operating activities primarily resulted from timing of vendor payments and higher interest payments.

Current wording

For the six months ended June 30, 2024, cash flows from operating activities decreased $11.4 million to $17.9 million. The decrease in cash flows from operating activities primarily resulted from accrued recovered costs from Middlesex’s 3M Settlement, timing of vendor payments and higher interest payments partially offset by the impact of Middlesex’s approved base rate increase effective March 1, 2024.

Previous wording

For the three months ended March 31, 2024, cash flows used in investing activities decreased $10.1 million to $14.4 million due to decreased utility plant expenditures in 2024.

Current wording

For the six months ended June 30, 2024, cash flows used in investing activities decreased $21.9 million to $28.7 million due to decreased utility plant expenditures in 2024.

Previous wording

For the three months ended March 31, 2024, cash flows from financing activities decreased $1.4 million to $8.2 million. The decrease in cash flows provided by financing activities is due to lower proceeds from the issuance of common stock under the Middlesex Water Company Investment Plan (Investment Plan) offset by higher net borrowings.

Current wording

For the three months ended June 30 , 2024, cash flows from financing activities decreased $5.4 million to $16.5 million. The decrease in cash flows provided by financing activities is due to lower proceeds from the issuance of common stock under the Middlesex Water Company Investment Plan (Investment Plan) and lower net borrowings.

Previous wording

To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and proceeds from sales offerings to the public of our common stock. See below for a more detailed discussion regarding the funding of our capital program for the current year.

Current wording

To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and proceeds from sales offerings to the public of our common stock. In addition, in July 2024, we received proceeds of $63.6 million from the 3M Settlement Agreement, which were used to pay down our lines of credit outstanding balance to further support the funding of our capital program.

Previous wording

In April 2024, the DEPSC approved four Tidewater Delaware SRF loans totaling $6.6 million. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Tidewater expects to close on these loans in the 2nd quarter of 2024. Each project has its own construction timetable with the last spending set to occur in 2026.

Current wording

In May 2024, Tidewater closed on four DEPSC-approved Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with expected maturity dates in 2044. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Each project has its own construction timetable with the last spending set to occur in 2026.