UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~June~~September 30, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________to ___________

Commission File Number 0-422

MIDDLESEX WATER COMPANY

(Exact name of registrant as specified in its charter)

New Jersey	22-1114430
(State of incorporation)	(IRS employer identification no.)

485C Route One South, Iselin,New Jersey08830

(Address of principal executive offices, including zip code)

(732) 634-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MSEX	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐
	Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

The number of shares outstanding of each of the registrant's classes of Common Stock, as of ~~July 29,~~October 28, 2022: Common Stock, No Par Value: ~~17,609,794~~17,638,595 shares outstanding.

INDEX

	PAGE
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited):	1
Condensed Consolidated Statements of Income	1
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Cash Flows	3
Condensed Consolidated Statements of Capital Stock and Long-Term Debt	4
Condensed Consolidated Statements of Common Stockholders’ Equity	5
Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations	1716

Item 3.Quantitative and Qualitative Disclosures of Market Risk	26

Item 4.Controls and Procedures	27

PART II.OTHER INFORMATION

Item 1.Legal Proceedings	28

Item 1A.Risk Factors	28

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.Defaults upon Senior Securities	28

Item 4.Mine Safety Disclosures	28

Item 5.Other Information	28

Item 6.Exhibits	29

SIGNATURES	30

Index

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands except per share amounts)

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021			2022		2021			2022		2021

Operating Revenues	$	39,683	$	36,701		$	75,879	$	69,242		$	47,732	$	39,874		$	123,611	$	109,117

Operating Expenses:
Operations and Maintenance		19,557		17,959			38,695		36,315			20,312		18,950			59,007		55,265
Depreciation		5,670		5,187			11,292		10,019			5,814		5,504			17,107		15,523
Other Taxes		4,368		3,741			8,512		7,460			5,031		3,996			13,543		11,456

Total Operating Expenses		29,595		26,887			58,499		53,794			31,157		28,450			89,657		82,244

Gain on Sale of Subsidiary		0-		0-			5,232		0-			-		-		5232		-

Operating Income		10,088		9,814			22,612		15,448			16,575		11,424			39,186		26,873

Other Income (Expense):
Allowance for Funds Used During Construction		548		768			926		2,031			627		344			1,553		2,376
Other Income (Expense), net		1,396		790			2,773		1,564			1,412		744			4,185		2,308

Total Other Income, net		1,944		1,558			3,699		3,595			2,039		1,088			5,738		4,684

Interest Charges		2,369		2,070			4,219		3,808			2,355		2,101			6,574		5,910

Income before Income Taxes		9,663		9,302			22,092		15,235			16,259		10,411			38,350		25,647

Income Taxes		795		(1,621	)		1,124		(2,593	)		1,968		(1,065	)		3,092		(3,658	)

Net Income		8,868		10,923			20,968		17,828			14,291		11,476			35,258		29,305

Preferred Stock Dividend Requirements		30		30			60		60			30		30			90		90

Earnings Applicable to Common Stock	$	8,838	$	10,893		$	20,908	$	17,768		$	14,261	$	11,446		$	35,168	$	29,215

Earnings per share of Common Stock:
Basic	$	0.50	$	0.62		$	1.19	$	1.02		$	0.81	$	0.65		$	2	$	1.67
Diluted	$	0.50	$	0.62		$	1.18	$	1.01		$	0.8	$	0.65		$	1.99	$	1.66

Average Number of Common Shares Outstanding:
Basic		17,583		17,488			17,560		17,482			17,628		17,491			17,583		17,485
Diluted		17,698		17,603			17,675		17,597			17,743		17,606			17,698		17,600

			June 30,		December 31,				September 30,		December 31,
ASSETS			2022		2021				2022		2021
UTILITY PLANT:		Water Production	$	244,593	$	247,286		Water Production	$	246,426	$	247,286
		Transmission and Distribution		703,360		697,200		Transmission and Distribution		709,748		697,200
		General		95,782		95,658		General		96,433		95,658
		Construction Work in Progress		41,974		24,947		Construction Work in Progress		59,152		24,947
		TOTAL		1,085,709		1,065,091		TOTAL		1,111,759		1,065,091
		Less Accumulated Depreciation		206,781		199,723		Less Accumulated Depreciation		211,902		199,723
		UTILITY PLANT - NET		878,928		865,368		UTILITY PLANT - NET		899,857		865,368

CURRENT ASSETS:		Cash and Cash Equivalents		4,320		3,533		Cash and Cash Equivalents		2,908		3,533
		Accounts Receivable, net of allowance for uncollectible accounts of $2,656 and $2,574, respectively		14,629		15,311		Accounts Receivable, net of allowance for uncollectible accounts of $2,593 and $2,574, respectively		18,081		15,311
		Unbilled Revenues		10,289		7,273		Unbilled Revenues		11,022		7,273
		Materials and Supplies (at average cost)		5,707		5,358		Materials and Supplies (at average cost)		5,792		5,358
		Prepayments		4,075		2,880		Prepayments		3,669		2,880
		TOTAL CURRENT ASSETS		39,020		34,355		TOTAL CURRENT ASSETS		41,472		34,355

OTHER ASSETS:		Operating Lease Right of Use Asset		4,161		4,503		Operating Lease Right of Use Asset		3,992		4,503
		Preliminary Survey and Investigation Charges		2,639		3,540		Preliminary Survey and Investigation Charges		3,244		3,540
		Regulatory Assets		102,023		100,738		Regulatory Assets		104,903		100,738
		Non-utility Assets - Net		11,155		11,428		Non-utility Assets - Net		11,096		11,428
		Other		92		83		Other		105		83
		TOTAL OTHER ASSETS		120,070		120,292		TOTAL OTHER ASSETS		123,340		120,292
		TOTAL ASSETS	$	1,038,018	$	1,020,015		TOTAL ASSETS	$	1,064,669	$	1,020,015

CAPITALIZATION AND LIABILITIES	CAPITALIZATION AND LIABILITIES						CAPITALIZATION AND LIABILITIES
CAPITALIZATION:		Common Stock, No Par Value	$	229,037	$	221,919		Common Stock, No Par Value	$	232,423	$	221,919
		Retained Earnings		156,531		145,807		Retained Earnings		165,652		145,807
		TOTAL COMMON EQUITY		385,568		367,726		TOTAL COMMON EQUITY		398,075		367,726
		Preferred Stock		2,084		2,084		Preferred Stock		2,084		2,084
		Long-term Debt		305,411		306,520		Long-term Debt		301,238		306,520
		TOTAL CAPITALIZATION		693,063		676,330		TOTAL CAPITALIZATION		701,397		676,330

CURRENT		Current Portion of Long-term Debt		7,814		6,731		Current Portion of Long-term Debt		7,567		6,731
LIABILITIES:		Notes Payable		27,500		13,000		Notes Payable		40,500		13,000
		Accounts Payable		24,249		21,125		Accounts Payable		25,873		21,125
		Accrued Taxes		12,514		8,621		Accrued Taxes		12,585		8,621
		Accrued Interest		2,155		1,986		Accrued Interest		2,174		1,986
		Unearned Revenues and Advanced Service Fees		1,495		1,330		Unearned Revenues and Advanced Service Fees		1,477		1,330
		Other		3,102		3,826		Other		2,791		3,826
		TOTAL CURRENT LIABILITIES		78,829		56,619		TOTAL CURRENT LIABILITIES		92,967		56,619

COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)	COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)						COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)

OTHER LIABILITIES:		Customer Advances for Construction		22,919		23,529		Customer Advances for Construction		22,425		23,529
		Lease Obligations - Operating		4,036		4,367		Lease Obligations - Operating		3,871		4,367
		Accumulated Deferred Income Taxes		74,471		69,500		Accumulated Deferred Income Taxes		76,979		69,500
		Employee Benefit Plans		9,143		11,290		Employee Benefit Plans		8,062		11,290
		Regulatory Liabilities		46,418		49,431		Regulatory Liabilities		46,693		49,431
		Other		1,082		1,086		Other		1,004		1,086
		TOTAL OTHER LIABILITIES		158,069		159,203		TOTAL OTHER LIABILITIES		159,034		159,203

CONTRIBUTIONS IN AID OF CONSTRUCTION	CONTRIBUTIONS IN AID OF CONSTRUCTION			108,057		127,863	CONTRIBUTIONS IN AID OF CONSTRUCTION			111,271		127,863
		TOTAL CAPITALIZATION AND LIABILITIES	$	1,038,018	$	1,020,015		TOTAL CAPITALIZATION AND LIABILITIES	$	1,064,669	$	1,020,015

	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	20,968		$	17,828		$	35,258		$	29,305
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization		13,401			12,900			20,135			17,253
Provision for Deferred Income Taxes and Investment Tax Credits		(3,256	)		(7,852	)
Provision for Deferred Income Taxes								(4,312	)		(11,801	)
Equity Portion of Allowance for Funds Used During Construction (AFUDC)		(532	)		(1,171	)		(914	)		(1,356	)
Cash Surrender Value of Life Insurance		445			(109	)		474			(97	)
Stock Compensation Expense		909			760			1,270			1,033
Gain on Sale of Subsidiary		(5,232	)		0-			(5,232	)		-

Changes in Assets and Liabilities:
Accounts Receivable		682			1,289			(2,770	)		(2,459	)
Unbilled Revenues		(3,016	)		(1,752	)		(3,749	)		(2,009	)
Materials & Supplies		(349	)		451
Materials and Supplies								(434	)		(44	)
Prepayments		(1,195	)		(1,572	)		(789	)		(1,141	)
Accounts Payable		3,124			(7,343	)		4,748			(13,103	)
Accrued Taxes		3,893			2,082			3,964			2,550
Accrued Interest		170			31			188			(943	)
Employee Benefit Plans		(1,310	)		790			(1,973	)		1,187
Unearned Revenue & Advanced Service Fees		165			149			146			139
Other Assets and Liabilities		(2,006	)		(1,902	)		(1,769	)		124

NET CASH PROVIDED BY OPERATING ACTIVITIES		26,861			14,579			44,241			18,638
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures, Including AFUDC of $394 in 2022 and $860 in 2021		(39,343	)		(46,500	)
Proceeds from Sale of Subsiary		3,122			0-
Utility Plant Expenditures, Including AFUDC of $639 in 2022 and $1,020 in 2021								(65,939	)		(61,245	)
Proceeds from Sale of Subsidiary								3,122			-

NET CASH USED IN INVESTING ACTIVITIES		(36,221	)		(46,500	)		(62,817	)		(61,245	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt		(2,162	)		(2,332	)		(6,397	)		(28,655	)
Proceeds from Issuance of Long-term Debt		2,287			1,595			2,663			21,595
Net Short-term Bank Borrowings		14,500			29,500			27,500			48,000
Deferred Debt Issuance Expense		(82	)		(14	)		(612	)		(35	)
Common Stock Issuance Expense								(25	)		-
Proceeds from Issuance of Common Stock		7,039			596			10,064			885
Payment of Common Dividends		(10,184	)		(9,527	)		(15,298	)		(14,294	)
Payment of Preferred Dividends		(60	)		(60	)		(90	)		(90	)
Construction Advances and Contributions-Net		(1,191	)		7,946			146			10,079

NET CASH PROVIDED BY FINANCING ACTIVITIES		10,147			27,704			17,951			37,485
NET CHANGES IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		787			(4,217	)		(625	)		(5,122	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		3,533			10,406			3,533			10,404
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	4,320		$	6,189		$	2,908		$	5,282


SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Utility Plant received as Construction Advances and Contributions	$	4,321		$	3,357		$	5,705		$	4,279
Non-Cash Consideration for Sale of Subsidiary	$	2,100		$	0-			2,100			-

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest	$	4,245		$	3,975		$	6,793		$	7,091
Interest Capitalized	$	394		$	860		$	639		$	1,020
Income Taxes	$	575		$	2,320		$	2,125		$	3,235

	June 30,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
Common Stock, No Par Value
Shares Authorized - 40,000
Shares Outstanding - 2022 - 17,604; 2021 - 17,522	$	229,037		$	221,919
Shares Outstanding - 2022 - 17,638; 2021 - 17,522							$	232,423		$	221,919

Retained Earnings		156,531			145,807			165,652			145,807
TOTAL COMMON EQUITY	$	385,568		$	367,726		$	398,075		$	367,726

Cumulative Preferred Stock, No Par Value:
Shares Authorized - 120
Shares Outstanding - 20
Convertible:
Shares Outstanding, $7.00 Series - 10	$	1,005		$	1,005		$	1,005		$	1,005
Nonredeemable:
Shares Outstanding, $7.00 Series - 1		79			79			79			79
Shares Outstanding, $4.75 Series - 10		1,000			1,000			1,000			1,000
TOTAL PREFERRED STOCK	$	2,084		$	2,084		$	2,084		$	2,084

Long-term Debt:
First Mortgage Bonds, 0.00% - 5.50%, due 2023 - 2059	$	255,641		$	203,892
Amortizing Secured Notes, 3.94% - 7.05%, due 2028 - 2046		46,266			47,613
State Revolving Trust Notes, 2.00% - 4.22%, due 2022 - 2041		9,365			7,510
First Mortgage Bonds, 0.00%-5.50%, due 2023-2059							$	252,269		$	203,892
Amortizing Secured Notes, 3.94%-7.05%, due 2028-2046								45,592			47,613
State Revolving Trust Notes, 2.00%-4.22%, due 2022-2041								9,551			7,510
Construction Loans, 0.00%		0-			52,131			-			52,131
SUBTOTAL LONG-TERM DEBT		311,272			311,146			307,412			311,146
Add: Premium on Issuance of Long-term Debt		7,072			7,271			6,973			7,271
Less: Unamortized Debt Expense		(5,119	)		(5,166	)		(5,580	)		(5,166	)
Less: Current Portion of Long-term Debt		(7,814	)		(6,731	)		(7,567	)		(6,731	)
TOTAL LONG-TERM DEBT	$	305,411		$	306,520		$	301,238		$	306,520

	Common		Common									Common		Common
	Stock		Stock			Retained						Stock		Stock		Retained
	Shares		Amount			Earnings			Total			Shares		Amount		Earnings			Total

For the Three Months Ended June 30, 2021
Balance at April 1, 2021		17,478	$	217,977		$	130,873		$	348,850
For the Three Months Ended September 30, 2021
Balance at July 1, 2021													17,490	$	218,100	$	136,998		$	355,098
Net Income		-		0-			10,923			10,923			-		-		11,476			11,476
Dividend Reinvestment & Common Stock Purchase Plan		3		272			0-			272
Middlesex Water Company Invesment Plan													3		289		-			289
Restricted Stock Award - Net - Employees													-		273		-			273
Cash Dividends on Common Stock ($0.2725 per share)													-		-		(4,766	)		(4,766	)
Cash Dividends on Preferred Stock													-		-		(30	)		(30	)
Balance at September 30, 2021													17,493	$	218,662	$	143,678		$	362,340

For the Nine Months Ended September 30, 2021
Balance at January 1, 2021													17,473	$	217,451	$	128,757		$	346,208
Net Income													-		-		29,305			29,305
Middlesex Water Company Invesment Plan													11		885		-			885
Restricted Stock Award - Net - Employees		6		(394	)		0-			(394	)		6		81		-			81
Restricted Stock Award - Board of Directors		3		245			0-			245			3		245		-			245
Cash Dividends on Common Stock ($0.2725 per share)		-		0-			(4,768	)		(4,768	)
Cash Dividends on Common Stock ($0.8175 per share)													-		-		(14,294	)		(14,294	)
Cash Dividends on Preferred Stock		-		0-			(30	)		(30	)		-		-		(90	)		(90	)
Balance at June 30, 2021		17,490	$	218,100		$	136,998		$	355,098
Balance at September 30, 2021													17,493	$	218,662	$	143,678		$	362,340

For the Six Months Ended June 30, 2021
Balance at January 1, 2021		17,473	$	217,451		$	128,757		$	346,208
For the Three Months Ended September 30, 2022
Balance at July 1, 2022													17,604	$	229,037	$	156,530		$	385,567
Net Income		-		0-			17,828			17,828			-		-		14,291			14,291
Dividend Reinvestment & Common Stock Purchase Plan		8		596			0-			596
Middlesex Water Company Invesment Plan													34		3,025		-			3,025
Restricted Stock Award - Net - Employees													-		361		-			361
Cash Dividends on Common Stock ($0.2900 per share)													-		-		(5,114	)		(5,114	)
Cash Dividends on Preferred Stock													-		-		(30	)		(30	)
Common Stock Expenses													-		-		(25	)		(25	)
Balance at September 30, 2022													17,638	$	232,423	$	165,652		$	398,075

For the Nine Months Ended September 30, 2022
Balance at January 1, 2022													17,522	$	221,919	$	145,807		$	367,726
Net Income													-		-		35,258			35,258
Middlesex Water Company Invesment Plan													110		10,064		-			10,064
Restricted Stock Award - Net - Employees		6		(192	)		0-			(192	)		3		160		-			160
Restricted Stock Award - Board of Directors		3		245						245			3		280		-			280
Cash Dividends on Common Stock ($0.5450 per share)		-		0-			(9,527	)		(9,527	)
Cash Dividends on Common Stock ($0.8700 per share)													-		-		(15,298	)		(15,298	)
Cash Dividends on Preferred Stock		-		0-			(60	)		(60	)		-		-		(90	)		(90	)
Balance at June 30, 2021		17,490	$	218,100		$	136,998		$	355,098

For the Three Months Ended June 30, 2022
Balance at April 1, 2022		17,551	$	225,092		$	152,790		$	377,882
Net Income		-		0-			8,868			8,868
Dividend Reinvestment & Common Stock Purchase Plan		47		4,134			0-			4,134
Restricted Stock Award - Net - Employees		3		(469	)		0-			(469	)
Restricted Stock Award - Board of Directors		3		280			0-			280
Cash Dividends on Common Stock ($0.2900 per share)		-		0-			(5,097	)		(5,097	)
Cash Dividends on Preferred Stock		-		0-			(30	)		(30	)
Balance at June 30, 2022		17,604	$	229,037		$	156,531		$	385,568

For the Six Months Ended June 30, 2022
Balance at January 1, 2022		17,522	$	221,919		$	145,807		$	367,726
Net Income		-		0-			20,968			20,968
Dividend Reinvestment & Common Stock Purchase Plan		76		7,039			0-			7,039
Restricted Stock Award - Net - Employees		3		(201	)		0-			(201	)
Restricted Stock Award - Board of Directors		3		280			-			280
Cash Dividends on Common Stock ($0.5800 per share)		-		0-			(10,184	)		(10,184	)
Cash Dividends on Preferred Stock		-		0-			(60	)		(60	)
Balance at June 30, 2022		17,604	$	229,037		$	156,531		$	385,568
Common Stock Expenses													-		-		(25	)		(25	)
Balance at September 30, 2022													17,638	$	232,423	$	165,652		$	398,075

Middlesex Water Company (Middlesex or the Company) is the parent company and sole shareholder of Tidewater Utilities, Inc. (Tidewater), Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA), and Utility Service Affiliates (Perth Amboy) Inc. (USA-PA). Southern Shores Water Company, LLC (Southern Shores) and White Marsh Environmental Systems, Inc. (White Marsh) are wholly-owned subsidiaries of Tidewater. The financial statements for Middlesex and its wholly-owned subsidiaries are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

The consolidated notes within the 2021 Annual Report on Form 10-K (the 2021 Form 10-K) are applicable to these financial statements and, in the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary (including normal recurring accruals) to present fairly the financial position as of ~~June~~September 30, 2022, the results of operations for the three month and ~~six~~nine month periods ended ~~June~~September 30, 2022 and 2021 and cash flows for the ~~six~~nine month periods ended ~~June~~September 30, 2022 and 2021. Information included in the Condensed Consolidated Balance Sheet as of December 31, 2021, has been derived from the Company’s December 31, 2021 audited financial statements included in the 2021 Form 10-K.

Regulatory Notice of Non-Compliance –In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in South Plainfield, New Jersey exceeded a recently promulgated NJDEP standard effective in 2021. The NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level of 14 parts per trillion. Neither the NJDEP nor Middlesex has characterized this exceedance as an acute health threat. However, Middlesex was required to notify its affected customers and complied in November 2021 as required by the regulation. ~~Further, the~~

The Notice further required the Company to take any action necessary to comply with the new standard by September 7, 2022. ~~Middlesex has provided current sampling results to the NJDEP indicating compliance with the new standard and is awaiting confirmation from the NJDEP.~~

The ~~NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level of 14 parts per trillion. Construction~~Company began construction of an enhanced treatment process at the Park Avenue Wellfield Treatment Plant to comply with the new standard ~~had already begun~~ prior to the regulation being enacted. Since completion is not expected until mid-2023, in December 2021, the Company implemented an interim solution to meet the Notice requirements. The Park Avenue Wellfield Treatment Plant was taken off-line and alternate sources of supply have been obtained. Simultaneously, the Company ~~began design~~accelerated a portion of ~~an acceleration of~~the enhanced treatment project to allow a ~~portion~~restart of the Park Avenue Wellfield ~~treatment upgrades to meet anticipated increases in the~~Treatment Plant ahead of historical higher water demand periods during the summer months.

In June 2022, ~~Phase 1~~ construction of ~~an advanced treatment facility at its Park Avenue Wellfield~~the accelerated portion was completed and the ~~treatment facility~~Park Avenue Wellfield Treatment Plant is effectively treating ground water to ensure compliance with all state and federal drinking water standards. Working in coordination with the NJDEP, ~~Middlesex has begun a phased, start-up of its~~the Company successfully restarted the Park Avenue Wellfield Treatment Plant and ~~is successfully introducing treated~~introduced wellfield water into the distribution system. Water being delivered to customers is in compliance with all ~~USEPA~~United States Environmental Protection Agency and NJDEP drinking water standards, including the newly established water quality standard for PFOA.

On September 13, 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP, which requires the Company to take whatever actions are necessary to achieve and maintain compliance with the Safe Drinking Water Act, N.J.S.A, 58:12A-1 et seq., and the Safe Drinking Water Act regulations N.J.A.C. 7:10-1 et seq., including applicable public notifications. The Company’s agreement to enter into an ACO avoided any further Notice regarding the fact that the permanent treatment solution was not in service by September 7, 2022. The Company must issue the public notifications by February 22, 2023 and continue to complete and distribute public information as prescribed in the ACO. In addition, in accordance with the ACO:

On or before June 30, 2023, the Company shall complete the permanent construction of the Park Avenue ~~wells had been turned off since December 2021 when~~Wellfield treatment upgrades, place the treatment upgrades into operation, and all water at the Park Avenue Wellfield Treatment Plant shall be treated to comply with the PFOA NJDEP standards.

The Company must perform required sample testing and reporting for PFOA subsequent to completion of the Park Avenue Wellfield treatment upgrades.

The Company shall submit to the NJDEP quarterly progress reports detailing the Company’s compliance with the ACO.

The Company’s failure to comply with the compliance schedule and/or progress reporting requirements of the ACO could lead to penalties up to $500 per day. In addition, the NJDEP could penalize the Company ~~had begun providing additional water from its surface water treatment plant and~~for other ~~sources. This plan to turn on, and treat, certain wells to support normal heightened seasonal demand was met with full approval from state regulatory agencies.~~violations, if any, of the ACO.

In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other claimed related costs. These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time. The Company’s insurance provider has acknowledged coverage of potential liability which may result from these lawsuits. In May 2022, the Company impleaded 3M Company (3M) as a third-party defendant in one of these class action lawsuits. The Company has taken this action in addition to a separate lawsuit the Company initiated against 3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances, which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.

In January 2022, the Company filed a petition with the New Jersey Board of Public Utilities (NJBPU) seeking to establish a regulatory asset and deferred accounting treatment until its next base rate setting proceeding for all costs associated with the interim solution to comply with the Notice. The Company is currently awaiting a decision on this matter from the NJBPU.

While the Company believes monetary penalties are unlikely, the issuance of the Notice does not preclude the State of New Jersey or any of its agencies from initiating formal administrative and/or judicial enforcement action, including assessment of penalties of up to $25,000 per day per offense if the Company is unable to maintain compliance with the requirements of the Notice by September 7, 2022.

Sale of Subsidiary– In January 2022, Middlesex closed on the Delaware Public Service Commission (DEPSC) approved sale of 100% of the common stock of its subsidiary Tidewater Environmental Services, Inc. to Artesian Wastewater Management, Inc. for $6.4 million in cash and other consideration, resulting in a $5.2 million pre-tax gain. The Company will continue to own and operate its non-regulated water and wastewater contract operations business in Delaware.

Borough of Avalon, New JerseyContract Renewal – In August 2022, USA, Middlesex’s non-regulated subsidiary, was awarded a competitively-bid 10-year operations and maintenance contract with the Borough of Avalon, New Jersey (Avalon) under which USA will continue to operate Avalon’s water utility, sewer utility and storm water system. USA is also required to manage capital projects funded by Avalon. USA previously operated Avalon’s water utility, sewer utility and storm water system under a 10-year contract that expired in August 2022. The new contract commenced September 1, 2022.

Coronavirus (COVID-19) Pandemic– On ~~April~~October 13, 2022, the United States Secretary of Health and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic. While the Company’s operations and capital construction program have not been materially disrupted to date from the pandemic, the COVID-19 impact on economic conditions nationally continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future. In New Jersey, the declared COVID-19 State of Emergency ended in March 2022. In Delaware, the declared COVID-19 State of Emergency Order ended in July 2021.

The NJBPU and the DEPSC have approved the tracking of COVID-19 related incremental costs for potential recovery in customer rates in future rate proceedings. Neither jurisdiction has established a timetable or definitive formal procedures for seeking cost recovery. ~~Since March 2020, the~~The Company has increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of COVID-19 on customers. Since the ultimate rate treatment to be determined by the NJBPU and the DEPSC regarding incremental costs related to COVID-19 is not definitively known at this time, the Company has not deferred any such costs. We will continue to monitor the effects of COVID-19 and evaluate its impact on the Company’s results of operations, financial condition and liquidity.

There is no new adopted or proposed accounting guidance that the Company is aware of that could have a material impact on the Company’s financial statements.

Middlesex –- In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million. The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase is being implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January 1, 2023. As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings, was reset to zero.

In ~~March~~September 2022, ~~Middlesex filed a petition with~~ the NJBPU ~~seeking approval~~approved Middlesex's Emergency Relief Motion to ~~set~~reset its PWAC tariff rate to recover additional costs of $~~3.7~~2.7 million for the purchase of treated water from a non-affiliated regulated water ~~utility regulated by the NJBPU. We cannot predict whether the NJBPU will ultimately approve, deny or reduce the amount~~utility. The increase, effective October 1, 2022, is on an interim basis and subject to refund with interest, pending final resolution of ~~our request.~~this matter.

Tidewater –- On August 31, 2022, DEPSC issued an Order requiring Tidewater to reduce its base rates charged to general metered and private fire customers by 6%, effective for service rendered on and after September 1, 2022. In June ~~23,~~ 2022, the Delaware Division of the Public Advocate filed a petition with the DEPSC requesting that Tidewater’s rates be reduced based on the claim that Tidewater ~~has~~had been earning above its authorized rate of return. ~~Tidewater intends to vigorously defend against this proposed~~The rate reduction ~~based on current and near-term anticipated increases in operating costs and capital investments. Tidewater cannot predict whether the DEPSC will ultimately approve, deny or~~is expected to reduce ~~the amount of the requested rate reduction.~~annual revenues by approximately $2.2million.

In June 2022, Tidewater notified the DEPSC of its intention to likely file for a base water rate increase in the first quarter of 2023 based on projected increases in operational expenses and capital ~~spending.~~construction expenditures.

Pinelands - In September 2022, Pinelands Water and Pinelands Wastewater filed separate petitions with the NJBPU seeking permission to increase base rates by approximately $0.6 million and $0.4 million per year, respectively. These requests were necessitated by capital infrastructure investments both companies have made, or have committed to make, and increased operations and maintenance costs. We cannot predict whether the NJBPU will ultimately approve, deny, or reduce the amount of the requests. A decision by the NJBPU in either matter is not expected before the first quarter of 2023.

Twin Lakes Utilities, Inc. (Twin Lakes) - Twin Lakes provides water services to approximately 115 residential customers in Shohola, Pennsylvania. Pursuant to the Pennsylvania Public Utility Code, Twin Lakes filed a petition requesting the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by a capable public utility. The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a recommended decision (Recommended Decision) to the PAPUC. As part of this legal proceeding the PAPUC also issued an Order in January 2021 appointing a large Pennsylvania based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system until the petition is fully adjudicated by the PAPUC. In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to acquire the Twin Lakes water system and for Middlesex to submit $1.7 million into an escrow account within 30 days. Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania (the ~~Pennsylvania~~Commonwealth Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States Constitution. In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the ~~Pennsylvania~~Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the ~~Pennsylvania~~Commonwealth Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the Commonwealth Court issued an opinion upholding PAPUC’s November 2021 Order in its entirety. In September 2022, Twin Lakes filed a Petition For Allowance of Appeal to the Supreme Court of Pennsylvania seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the grounds that the Commonwealth Court erred in failing to address Twin Lakes’ constitutional claims. The timing of the final decision by the Supreme Court of Pennsylvania ~~Court~~ and the final adjudication of this matter cannot be predicted at this time.

The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.

Common Stock –- During the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, there were ~~76,550~~110,614 common shares (approximately ~~$7.0~~$10.1 million) and ~~7,787~~10,641 common shares (approximately ~~$0.6~~$0.9 million) respectively, issued under the Middlesex Water Company Investment Plan (the Investment Plan). The 3% purchase discount offering period on the Company’s common stock through the Investment Plan ~~is set to expire~~expired on August 1, 2022. 200,000 shares were originally allocated to the offering and there remains approximately 93,000 shares available as of June 30, 2022. The discount applies to all common stock purchases made under the Investment Plan during the discount period, whether by optional cash payment or by dividend reinvestment.

Long-term Debt –- In May 2022, Middlesex repaid its two outstanding New Jersey Infrastructure Bank (NJIB) construction loans by issuing First Mortgage Bonds (FMBs) to the NJIB under two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million). The interest rate on the Series 2022A bond is zero and the interest rate on the Series 2022B bond ranges between 2.7% and 3.0%. The final maturity date for both FMBs is August 1, 2056, with scheduled debt service payments over the life of these loans.

In November 2021, Tidewater received approval from the DEPSC to borrow up to $5.0 million under the Delaware State Revolving Fund (SRF) Program for construction of a one million gallon elevated storage tank. Tidewater closed on the $5.0 million loan at an interest rate of 2.0% in December 2021 and began receiving disbursements in January 2022. Through ~~June~~September 30, 2022, Tidewater has drawn a total of $~~2.2~~2.6 million and expects borrowing under this loan to continue through mid-2023. The final maturity date on the loan is 2044.

Fair Value of Financial Instruments - The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade receivables, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of FMBs and SRF Bonds (collectively, the Bonds) issued by Middlesex is based on quoted market prices for similar publicly traded issues. Under the fair value hierarchy, the fair value of cash and cash equivalents is classified as a Level 1 measurement and the fair value of notes payable and the Bonds in the table below are classified as Level 2 measurements. The carrying amount and fair value of the Bonds were as follows:

	(Thousands of Dollars)
FMBs	$150,642	$149,500	$98,828	$107,781

	(Thousands of Dollars)
FMBs	$147,269	$139,285	$98,828	$107,781

It was not practicable to estimate their fair value on our outstanding long-term debt for which there is no quoted market price and there is not an active trading market. For details, including carrying value, interest rates and due dates on these series of long-term debt, please refer to those series noted as “Amortizing Secured Note”, “State Revolving Trust Note”, “State Revolving Trust Bond”, “Construction Loans” on the Condensed Consolidated Statements of Capital Stock and Long-Term Debt). The carrying amount of these instruments was $~~160.6~~160.1 million and $212.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively. Customer advances for construction have carrying

amounts of $~~22.9~~22.4 million and $23.5 million at ~~June~~September 30, 2022 and December 31, 2021, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases.

Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants. The Company is in compliance with all of its mortgage covenants and restrictions.

Basic earnings per share (EPS) are computed on the basis of the weighted average number of shares outstanding during the period presented. Diluted EPS assumes the conversion of the Convertible Preferred Stock $7.00 Series.

	(In Thousands Except per Share Amounts)										(In Thousands Except per Share Amounts)
	Three Months Ended June 30,										Nine Months Ended September 30,
	2022					2021					2022					2021
Basic:	Income			Shares		Income			Shares		Income			Shares		Income			Shares
Net Income	$	8,868			17,583	$	10,923			17,488	$	35,258			17,583	$	29,305			17,485
Preferred Dividend		(30	)				(30	)				(90	)				(90	)
Earnings Applicable to Common Stock	$	8,838			17,583	$	10,893			17,488	$	35,168			17,583	$	29,215			17,485

Basic EPS	$	0.50				$	0.62				$	2.00				$	1.67

Diluted:
Earnings Applicable to Common Stock	$	8,838			17,583	$	10,893			17,488	$	35,168			17,583	$	29,215			17,485
$7.00 Series Preferred Dividend		17			115		17			115		51			115		50			115
Adjusted Earnings Applicable to Common Stock	$	8,855			17,698	$	10,910			17,603	$	35,219			17,698	$	29,265			17,600

Diluted EPS	$	0.50				$	0.62				$	1.99				$	1.66

The Company has identified two reportable segments. One is the regulated business of collecting, treating and distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection customers in parts of New Jersey and Delaware. This segment also includes regulated wastewater systems in New Jersey and Delaware. The Company is subject to regulations as to its rates, services and other matters by New Jersey and Delaware with respect to utility services within these states. The other segment is primarily comprised of non-regulated contract services for the operation and maintenance of municipal and private water and wastewater systems

in New Jersey and Delaware. Inter-segment transactions relating to operational costs are treated as pass-through expenses. Finance charges on inter-segment loan activities are based on interest rates that are below what would normally be charged by a third party lender.

~~Index~~

	(In Thousands)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Operations by Segments:	2022			2021			2022			2021
Revenues:
Regulated	$	44,861		$	37,396		$	115,222		$	100,426
Non – Regulated		3,431			2,995			9,316			9,657
Inter-segment Elimination		(560	)		(517	)		(927	)		(966	)
Consolidated Revenues	$	47,732		$	39,874		$	123,611		$	109,117

Operating Income:
Regulated	$	15,750		$	10,654		$	36,793		$	24,082
Non – Regulated		825			770			2,393			2,791
Consolidated Operating Income	$	16,575		$	11,424		$	39,186		$	26,873

Net Income:
Regulated	$	13,683		$	10,924		$	33,496		$	27,271
Non – Regulated		608			552			1,762			2,034
Consolidated Net Income	$	14,291		$	11,476		$	35,258		$	29,305

Capital Expenditures:
Regulated	$	26,588		$	14,743		$	65,722		$	61,097
Non – Regulated		8			2			217			148
Total Capital Expenditures	$	26,596		$	14,745		$	65,939		$	61,245

	(In Thousands)												As of			As of
	Three Months Ended						Six Months Ended						September 30, 2022			December 31, 2021
	June 30,						June 30,
Operations by Segments:	2022			2021			2022			2021
Revenues:
Assets:
Regulated	$	37,037		$	33,609		$	70,361		$	63,030		$	1,066,755		$	1,022,116
Non – Regulated		2,875			3,405			5,885			6,662			6,963			7,811
Inter-segment Elimination		(229	)		(313	)		(367	)		(450	)		(9,049	)		(9,912	)
Consolidated Revenues	$	39,683		$	36,701		$	75,879		$	69,242

Operating Income:
Regulated	$	9,336		$	8,711		$	21,043		$	13,427
Non – Regulated		752			1,103			1,569			2,021
Consolidated Operating Income	$	10,088		$	9,814		$	22,612		$	15,448

Net Income:
Regulated	$	8,314		$	10,108		$	19,814		$	16,347
Non – Regulated		554			815			1,154			1,481
Consolidated Net Income	$	8,868		$	10,923		$	20,968		$	17,828

Capital Expenditures:
Regulated	$	22,549		$	24,391		$	39,134		$	46,354
Non – Regulated		163			76			209			146
Total Capital Expenditures	$	22,712		$	24,467		$	39,343		$	46,500
Consolidated Assets													$	1,064,669		$	1,020,015

The interest rate for borrowings under the Bank of America and PNC Bank lines of credit is set using the Bloomberg Short-Term Bank Yield Index and adding a credit spread, which varies by financial institution. The interest rate for borrowings under the CoBank line of credit are set weekly using CoBank’s internal cost of funds index that is similar to the Standard Overnight Financing Rate and adding a credit spread. There is no requirement for a compensating balance under any of the established lines of credit.

The weighted average interest rate on the outstanding borrowings at ~~June~~September 30, 2022 under these credit lines is ~~2.16~~3.81%.

The weighted average daily amounts of borrowings outstanding under the Company’s lines of credit and the weighted average interest rates on those amounts were as follows:

The maturity dates for the $~~27.5~~40.5 million outstanding as of ~~June~~September 30, 2022 are in ~~July~~October 2022 ~~and~~to ~~August~~December 2022, and were or are expected to be extended at the discretion of the Company.

Water Supply - Middlesex has an agreement with the New Jersey Water Supply Authority (NJWSA) for the purchase of untreated water through November 30, 2023, which provides for an average purchase of 27 million gallons a day (mgd). Pricing is set annually by the NJWSA through a public rate making process. The agreement has provisions for additional pricing in the event Middlesex overdrafts or exceeds certain monthly and annual thresholds.

Middlesex has an agreement with a non-affiliated regulated water utility for the purchase of treated water. This agreement, which expires February 27, 2026, provides for the minimum purchase of 3 mgd of treated water with provisions for additional purchases.

Tidewater contracts with the City of Dover, Delaware to purchase 15 million gallons of treated water annually.

Guarantees - As part of an agreement with the County of Monmouth, New Jersey (County), prior to 2020 Middlesex had served as guarantor of the performance of an unaffiliated wastewater treatment contractor and partner (Contractor), to operate a County-owned leachate pretreatment facility.

In November 2019, Middlesex was notified that the County terminated its Agreement with the Contractor. The Contractor had initiated legal action against the County that, in part, contests the County’s exercise of this termination. The County filed a counter-claim against the Contractor’s parent company and has brought Middlesex into the suit as a third-party defendant. Our ongoing monitoring of this litigation has led to the conclusion that we do not anticipate the ultimate outcome will have a material impact, if any, on the Company’s results of operations or financial condition.

Leases - The Company determines if an arrangement is a lease at inception. Generally, a lease agreement exists if the Company determines that the arrangement gives the Company control over the use of an identified asset and obtains substantially all of the benefits from the identified asset.

The Company has entered into an operating lease of office space for administrative purposes, expiring in 2030. The Company has not entered into any finance leases. The exercise of a lease renewal option for the Company’s administrative offices is solely at the discretion of the Company.

The right-of-use (ROU) asset recorded represents the Company’s right to use an underlying asset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company’s operating lease does not provide an implicit discount rate and as such the Company used an estimated incremental borrowing rate (4.03%) based on the information available at the commencement date in determining the present value of lease payments.

Given the impacts of accounting for regulated operations, and the resulting recognition of expense at the amounts recovered in customer rates, expenditures for operating leases are consistent with lease expense and were $0.2 million for each of the three months ended ~~June~~September 30, 2022 and 2021, respectively and $~~0.4~~0.6 million for each of the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Information related to operating lease ROU assets and lease liabilities is as follows:

The Company’s future minimum operating lease commitments as of ~~June~~September 30, 2022 are as follows:

Construction - - The Company has forecasted to spend approximately ~~$90~~$85 million for its construction program in 2022. The Company has entered into several construction contracts that, in the aggregate, obligate expenditure of an estimated ~~$35~~$26 million in the future. The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling, supply chain issues and continued refinement of project scope and costs and could be impacted if the effects of new variants of COVID-19 pandemic arise and continue for an extended period of time (for further discussion of the impact of COVID-19 on the Company, see Note 1 - Coronavirus (COVID-19) Pandemic). There is no assurance that projected customer growth and residential new home construction and sales will occur.

PFOA Matter -– In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other related costs and economic damages. These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time. The Company’s insurance provider has acknowledged coverage of potential liability resulting from these lawsuits (for further discussion of this matter, see Note 1 - Regulatory Notice of Non-Compliance).

Contingencies -Based on our operations in the heavily-regulated water and wastewater industries, the Company is routinely involved in disputes, claims, lawsuits and other regulatory and legal matters, including responsibility for fines and penalties relative to regulatory compliance. At this time, Management does not believe the final resolution of any such matters, whether asserted or unasserted, will have a material adverse effect on the Company’s financial position, results of operations or cash flows. In addition, the Company maintains business insurance coverage that may mitigate the effect of any current or future loss contingencies.

Change in Control Agreements - The Company has Change in Control Agreements with certain of its officers that provide compensation and benefits in the event of termination of employment in connection with a change in control of the Company.

Pension Benefits - The Company’s defined benefit pension plan (Pension Plan) covers all active employees hired prior to April 1, 2007. Employees hired after March 31, 2007 are not eligible to participate in this plan, but do participate in a defined contribution plan that provides for a potential annual contribution in an amount at the discretion of the ~~Company,~~Company., based upon a percentage of the participants’ annual paid compensation. For each of the three- and ~~six-month~~nine-month periods ended ~~June~~September 30, 2022 and 2021, the Company did not make cash contributions to the Pension Plan. The Company expects to make cash contributions of approximately $3.4 million over the remainder of the current year. The Company also maintains an unfunded supplemental retirement benefit plan for certain active and retired Company officers and currently pays $0.4 million in annual benefits to the retired participants.

Other Postretirement Benefits- – The Company’s retirement plan other than pensions (Other Benefits Plan) covers substantially all currently eligible retired employees. Employees hired after March 31, 2007 are not eligible to participate in this plan. Coverage includes healthcare and life insurance. For each of the three- month and ~~six-month~~nine-month periods ended ~~June~~September 30, 2022 and 2021, the Company did not make cash contributions to its Other Benefits ~~Plan cash contributions.~~Plan. The Company does not expect to make any ~~additional~~cash contributions to its Other Benefits Plan ~~cash contributions~~ over the remainder of ~~the current calendar year.~~2022.

The following tables set forth information relating to the Company’s periodic costs (benefit) for its employee retirement benefit plans:

*Service cost is included in Operations and Maintenance expense on the Condensed Consolidated Statements of Income; all other amounts are included in Other Income/Expense, net.

The Company’s revenues are primarily generated from regulated tariff-based sales of water and wastewater services and non-regulated operation and maintenance contracts for services on water and wastewater systems owned by others. Revenue from contracts with customers is recognized when control of a promised good or service is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.

The Company’s regulated revenue from contracts with customers results from tariff-based sales from the provision of water and wastewater services to residential, industrial, commercial, fire-protection and wholesale customers. Residential customers are billed quarterly while most industrial, commercial, fire-protection and wholesale customers are billed monthly. Payments by customers are due between 15 and 30 days after the invoice date. Revenue is recognized as the water and wastewater services are delivered to customers as well as from accrual of unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional weather indicators and general economic conditions in the relevant service territories. Unearned Revenues and Advance Service Fees include fixed service charge billings in advance to Tidewater customers recognized as service is provided to the customer.

Non-regulated service contract revenues consist of base service fees, as well as fees for additional billable services provided to customers. Fees are billed monthly and are due within 30 days after the invoice date. The Company considers the amounts billed to represent the value of these services provided to customers. These contracts expire at various times through June ~~2030~~2032 and contain remaining performance obligations for which the Company expects to recognize revenue in the future. These contracts also contain termination provisions.

Substantially all of the amounts included in operating revenues and accounts receivable are from contracts with customers. The Company records its allowance for doubtful accounts based on historical write-offs combined with an evaluation of current economic conditions within its service territories.

	(In Thousands)												(In Thousands)
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Regulated Tariff Sales
Residential	$	21,508		$	20,238		$	40,659		$	37,195		$	25,108		$	22,517		$	65,767		$	59,711
Commercial		5,203			4,108			9,630			7,684			7,167			4,903			16,796			12,587
Industrial		2,700			2,143			5,295			4,320			3,208			2,538			8,504			6,858
Fire Protection		3,173			3,161			6,294			6,265			3,248			3,171			9,541			9,436
Wholesale		4,297			3,718			8,260			7,256			5,644			3,822			13,905			11,079
Non-Regulated Contract Operations		2,765			3,298			5,665			6,449			3,321			2,888			8,986			9,336
Total Revenue from Contracts with Customers	$	39,646		$	36,666		$	75,803		$	69,169		$	47,696		$	39,839		$	123,499		$	109,007
Other Regulated Revenues		156			241			223			310			486			445			709			755
Other Non-Regulated Revenues		110			107			220			213			110			107			330			321
Inter-segment Elimination		(229	)		(313	)		(367	)		(450	)		(560	)		(517	)		(927	)		(966	)
Total Revenue	$	39,683		$	36,701		$	75,879		$	69,242		$	47,732		$	39,874		$	123,611		$	109,117

The Company’s federal income tax returns for the tax years 2014 through 2017 were selected for examination by the Internal Revenue Service (IRS), which included the tax year in which the Company had adopted the final IRS tangible property regulations and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. As a result of the audit examination, the Company agreed to certain modifications of its accounting method for expenditures that qualify as deductible repairs. In 2019, the Company paid $2.7 million in income taxes and $0.1 million in interest in connection with the conclusion of the 2014 through 2017 federal income tax return audits. AsThe statutory review period for 2018 and prior federal income tax returns has now closed, and as such, in the third quarter of ~~June 30,~~ 2022 the ~~Company’s~~Company reversed the income tax reserve provision and interest expense liability ~~are~~of $0.5 million and $0.2 million, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Middlesex Water Company (Middlesex or the Company) included elsewhere herein and with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Certain statements contained in this periodic report and in the documents incorporated by reference constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The Company intends that these statements be covered by the safe harbors created under those laws. They include, but are not limited to statements as to:

These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from anticipated results and outcomes include, but are not limited to:

Many of these factors are beyond the Company’s ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements, which only speak to the Company’s understanding as of the date of this report. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

For an additional discussion of factors that may affect the Company’s business and results of operations, see Item 1A. - Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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.

Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey. The Middlesex System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Our Bayview subsidiary provides water services in Downe Township, New Jersey. Our other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands) provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.

Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC, provide water services to approximately ~~56,000~~57,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately ~~7,200~~6,200 customers in Kent and Sussex Counties through various operations and maintenance contracts.

USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028. In addition to performing day-to day operations, USA-PA is also responsible for emergency response and management of capital projects funded by Perth Amboy.

USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a ten-year operations and maintenance contract ~~that expired on June 30, 2022.~~expiring in August 2032 (for further discussion of USA’s recent renewal of its operations and maintenance contract with Avalon, see “Recent Developments-Avalon Contract Renewal” below). USA participated in the public proposal process for Avalon’s procurement of a new contract and was awarded the expected ten-year contract to continue to operate Avalon’s water utility, sewer utility and storm water system. On June 28, 2022, USA and Avalon agreed to a 90-day continuance of the original contract until a new contract is finalized. In addition to performing day-to-day operations, USA is responsible for emergency response and management of capital projects funded by Avalon. USAalso operates the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater systems under a 10-year operations and maintenance contract expiring in June 2030. These contracts also require USA to manage capital projects funded by Avalon and Highland Park.

Under a marketing agreement with HomeServe USA (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater related services and home maintenance programs. HomeServe is a leading national provider of such home maintenance service programs. USA receives a service

fee for the billing, cash collection and other administrative functions associated with HomeServe’s service contracts.

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 ~~$90~~$85 million in 2022 in connection with projects that include, but are not limited to:

The actual amount and timing of capital expenditures is dependent on project scheduling and refinement of engineering estimates for certain capital projects.

Regulatory Notice of Non-Compliance – In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in South Plainfield, New Jersey exceeded a recently promulgated NJDEP standard effective in 2021. The NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level of 14 parts per trillion. Neither the NJDEP nor Middlesex has characterized this exceedance as an acute health threat. However, Middlesex was required to notify its affected customers and complied in November 2021 as required by the regulation. ~~Further, the~~

The ~~NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level of 14 parts per trillion. Construction~~Company began construction of an enhanced treatment process at the Park Avenue Wellfield Treatment Plant to comply with the new standard ~~had already begun~~ prior to the regulation being enacted. Since completion is not expected until mid-2023, in December 2021, the Company implemented an interim solution to meet the Notice requirements. The Park Avenue Wellfield Treatment Plant was taken off-line and alternate sources of supply have been obtained. Simultaneously, the Company ~~began design~~accelerated a portion of ~~an acceleration of~~the enhanced treatment project to allow a ~~portion~~restart of the Park Avenue Wellfield treatment ~~upgrades to meet anticipated increases in the~~Plant ahead of historical higher water demand periods during the summer months.

In June 2022, ~~Phase 1~~ construction of ~~an advanced treatment facility at its Park Avenue Wellfield~~the accelerated portion was completed and the ~~treatment facility~~Park Avenue Wellfield Treatment Plant is effectively treating ground water to ensure compliance with all state and federal drinking water standards. Working in coordination with the NJDEP, ~~Middlesex has begun a phased, start-up of its~~the Company successfully restarted the Park Avenue Wellfield Treatement Plant and ~~is successfully introducing treated~~introduced wellfield water into the distribution system. Water being delivered to customers is in compliance with all ~~USEPA~~United States Environmental Protection Agency and NJDEP drinking water standards, including the newly established water quality standard for PFOA. ~~The Park Avenue wells had been turned off since December 2021 when~~

On September 13, 2022, the Company ~~had begun providing additional water from its surface water~~entered into an Administrative Consent Order (ACO) with the NJDEP, which requires the Company to take whatever actions are necessary to achieve and maintain compliance with the Safe Drinking Water Act, N.J.S.A, 58:12A-1 et seq., and the Safe Drinking Water Act regulations N.J.A.C. 7:10-1 et seq., including applicable public notifications. The Company’s agreement to enter into an ACO avoided any further Notice regarding the fact that the permanent treatment ~~plant~~solution was not in service by September 7, 2022.

The Company must issue the public notifications by February 22, 2023 and continue to complete and distribute public information as prescribed in the ACO. In addition, in accordance with the ACO:

The Company’s failure to comply with the compliance schedule and/or progress reporting requirements of the ACO could lead to penalties up to $500 per day. In addition, the NJDEP could penalize the Company for other ~~sources. This plan to turn on, and treat, certain wells to support normal heightened seasonal demand was met with full approval from state regulatory agencies.~~violations, if any, of the ACO.

and their ultimate resolution cannot be predicted at this time. The Company’s insurance provider has acknowledged coverage of potential liability which may result from these lawsuits. In May 2022, the Company impleaded 3M Company (3M) as a third-party defendant in one of these class action lawsuits. The Company has taken this action in addition to a separate lawsuit the Company initiated against 3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances, which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.

Sale of Subsidiary – In January 2022, Middlesex closed on the Delaware Public Service Commission (DEPSC) approved sale of 100% of the common stock of its subsidiary Tidewater Environmental Services, Inc. to Artesian Wastewater Management, Inc. for $6.4 million in cash and other consideration, resulting in a $5.2 million pre-tax gain. The Company will continue to own and operate its non-regulated water and wastewater contract operations business in Delaware.

Avalon Contract Renewal – In August 2022, USA, Middlesex’s non-regulated subsidiary, was awarded a competitively-bid 10-year operations and maintenance contract with Avalon under which USA will continue to operate Avalon’s water utility, sewer utility and storm water system. USA is also required to manage capital projects funded by Avalon. USA previously operated Avalon’s systems under a 10-year contract that expired in August 2022. The new contract commenced September 1, 2022.

Middlesex – In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million. The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase is being implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January 1, 2023. As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings, was reset to zero.

In ~~March~~September 2022, ~~Middlesex filed a petition with~~ the NJBPU ~~seeking approval~~approved Middlesex's Emergency Relief Motion to ~~set~~reset its PWAC tariff rate to recover additional costs of ~~$3.7~~$2.7 million for the purchase of treated water from a non-affiliated regulated water ~~utility regulated by the NJBPU. We cannot predict whether the NJBPU will ultimately approve, deny or reduce the amount~~utility. The increase, effective October 1, 2022, is on an interim basis and subject to refund with interest pending final resolution of ~~our request.~~this matter.

Tidewater – On August 31, 2022, the DEPSC issued an Order requiring Tidewater to reduce its base rates charged to general metered and private fire customers by 6%, effective for service rendered on and after September 1, 2022. In June ~~23,~~ 2022, the Delaware Division of the Public Advocate filed a petition with the DEPSC requesting that Tidewater’s rates be reduced based on the claim that Tidewater ~~has~~had been earning above its authorized rate of return. ~~Tidewater intends to vigorously defend against this proposed~~The rate reduction ~~based on current and near-term anticipated increases in operating costs and capital investments. Tidewater cannot predict whether the DEPSC will ultimately approve, deny or~~is expected to reduce ~~the amount of the requested rate reduction.~~annual revenues by approximately $2.2 million.

In June 2022, Tidewater notified the DEPSC of its intention to file for a base water rate increase in the first quarter of 2023 based on projected increases in operational expenses and capital ~~spending.~~construction expenditures.

Pinelands - In September 2022, Pinelands Water and Pinelands Wastewater filed separate petitions with the NJBPU seeking permission to increase base rates by approximately $0.6 million and $0.4 million per year, respectively. These requests were necessitated by capital infrastructure investments both companies have made, or have committed to make, and increased operations and maintenance costs. We cannot predict whether the NJBPU will ultimately approve, deny, or reduce the amount of the requests. A decision by the NJBPU in either matter is not expected before the first quarter of 2023.

COVID-19 – On ~~April~~October 13, 2022, the United States Secretary of Health and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic. While the Company’s operations and capital construction program have not been materially disrupted to-date from the pandemic, the COVID-19 impact on economic conditions nationally continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future. In New Jersey, the declared COVID-19 State of Emergency ended in March 2022. In Delaware, the declared COVID-19 State of Emergency Order ended in July 2021.

The NJBPU and the DEPSC have approved the tracking of COVID-19 related incremental costs for potential recovery in customer rates in future rate proceedings. Neither jurisdiction has established a timetable or definitive formal procedures for seeking cost recovery. Since March 2020, the Company has increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of COVID-19 on customers. We will continue to monitor the effects of COVID-19 and evaluate its impact on the Company’s business, results of operations, financial condition and liquidity.

Our ability to increase operating income and net income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management and customer growth. These factors are discussed in the Results of Operations section below. Unfavorable weather ~~pattern~~patterns may occur at any time, which can result in lower customer demand for water. Due to an extended period of dry and high temperature weather conditions in New Jersey, on July 21, 2022, the Company issued a request to its customers located in our Middlesex system located in central New Jersey to voluntarily limit non-essential water use until further notice.

~~Our investments in system infrastructure continue to grow significantly and our operating costs are anticipated to increase in 2022 in a variety of categories. Our~~The DEPSC issued an Order requiring Tidewater ~~subsidiary has objected to a request before the DEPSC~~ to reduce its base rates charged to general metered and private fire customers by 6% (for further discussion of the impact of this on the Company, see Rate and Regulatory Matters, Tidewater above). Our investments in system infrastructure continue to grow significantly and our operating costs are anticipated to increase in 2022 and 2023 in a variety of categories. These factors, among others, resulted in Pinelands filing for base rate increases in September 2022, will require Tidewater to file for a base rate increase in the first quarter of 2023 and may require the need to file ~~requests during 2022 and early 2023~~ for ~~increases~~an additional base rate increase for Middlesex in ~~customer rates.~~2023.

An additional factor that we continue to actively monitor is the impact of new variants of COVID-19 on the general economy, our suppliers and our workforce (for further discussion of the impact of COVID-19 on the Company, see “Recent ~~Developments, COVID-19~~Developments-COVID-19” above).

Overall, organic residential customer growth continues in our Tidewater system but is expected to be impacted by the current and evolving economic market conditions. Builders and developers are already experiencing longer home sales closing cycles due to supply chain issues, which may be further affected by inflationary trends and the government’s plan to address it through interest rates.

The Company has projected to spend approximately ~~$232~~$230 million for the 2022-2024 capital investment program, including approximately ~~$39~~$47 million for PFAS-related treatment upgrades in the Middlesex System, ~~$33~~$32 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System, ~~$13~~$15 million for construction of elevated storage tanks in our Tidewater and Middlesex Systems and ~~$10~~$4 million for the rehabilitation and other improvements associated with Middlesex’s primary field operations and inventory facilities.

The discussion of the Company’s operating results is on a consolidated basis and includes significant factors by subsidiary. The Company has two operating segments, Regulated and Non-Regulated. The operations of the Regulated segment are subject to regulations promulgated by state public utility commissions as to rates and level of service. Rates and level of service in the Non-Regulated segment are subject to the terms of individually-negotiated and executed contracts with municipal, industrial and other clients. Both segments are subject to

federal and state environmental, water and wastewater quality and other associated legal and regulatory requirements.

The segments in the tables included below consist of the following companies: Regulated-Middlesex, Tidewater, Pinelands and Southern Shores; Non-Regulated-USA, USA-PA, and White Marsh.

Operating revenues for the three months ended ~~June~~September 30, 2022 increased ~~$3.0~~$7.9 million from the same period in 2021 due to the following factors:

Operation and maintenance expenses for the three months ended ~~June~~September 30, 2022 increased ~~$1.6~~$1.4 million from the same period in 2021 due to the following factors:

Depreciation expense for the three months ended ~~June~~September 30, 2022 increased ~~$0.5~~$0.3 million from the same period in 2021 due to a higher level of utility plant in service.

Other taxes for the three months ended ~~June~~September 30, 2022 increased ~~$0.6~~$1.0 million from the same period in 2021 primarily due to higher revenue related taxes on increased revenues in our Middlesex system.

Other Income, net for the three months ended ~~June~~September 30, 2022 increased ~~$0.4~~$1.0 million from the same period in 2021 due primarily to ~~$0.6 million of~~ higher actuarially-determined retirement benefit plans non-service benefit ~~partially offset by $0.2 million of lower~~and higher Allowance for Funds Used During Construction (AFUDC) resulting from a ~~lower~~higher level of capital projects in progress.

Interest charges for the three months ended ~~June~~September 30, 2022 increased $0.3 million from the same period in 2021 due to higher average ~~short-term and~~ long-term debt outstanding and higher average interest rates in 2022 as compared to 2021.

Income taxes for the three months ended ~~June~~September 30, 2022 increased by ~~$2.4~~$3.0 million from the same period in 2021, primarily due to ~~lower~~higher pre-tax income ~~tax benefits caused by reduced repair expenditures on tangible property in the Middlesex system~~ and the expiration of income tax benefits associated with the adoption of Internal Revenue Service (“IRS”) tangible property regulations as Middlesex was required by the NJBPU to account for the benefit of adopting these regulations over 48 months beginning in 2018.

Net income for the three months ended ~~June~~September 30, 2022 ~~decreased $2.1~~increase $2.8 million as compared with the same period in 2021. Basic ~~and diluted~~ earnings per share were ~~$0.50~~$0.81 and ~~$0.62~~$0.65 for the three months ended ~~June~~September 30, 2022 and 2021, respectively. Diluted earnings per share were $0.80 and $0.65 for the three months ended September 30, 2022 and 2021, respectively.

Operating revenues for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$6.6~~$14.5 million from the same period in 2021 due to the following factors:

Operation and maintenance expenses for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$2.4~~$3.7 million from the same period in 2021 due to the following factors:

Depreciation expense for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$1.3~~$1.6 million from the same period in 2021 due to a higher level of utility plant in service.

Other taxes for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$1.1~~$2.1 million from the same period in 2021 primarily due to higher revenue related taxes on increased revenues in our Middlesex system.

Middlesex recognized a $5.2 million gain on the sale of its regulated Delaware wastewater subsidiary in January 2022.

Other Income, net for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$0.1~~$1.1 million from the same period in 2021 primarily due to ~~$1.2 million of~~ higher actuarially-determined retirement benefit plans non-service benefit ~~mostly~~partially offset by ~~$1.1 million of~~ lower AFUDC resulting from a reduced level of capital projects in progress.

Interest charges for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$0.4~~$0.7 million from the same period in 2021 due to higher average long-term outstanding and ~~short-term debt outstanding~~higher average interest rates in 2022 as compared to 2021.

Income taxes for the ~~six~~nine months ended ~~June~~September 30, 2022 increased by ~~$3.7~~$6.8 million from the same period in 2021, primarily due to income taxes on the gain on the sale of a subsidiary, higher pre-tax operating income and the expiration of income tax benefits associated with the adoption of IRS tangible property regulations as Middlesex was required by the NJBPU to account for the benefit of adopting these regulations over 48 months beginning in 2018. Partially offsetting these increases were greater income tax benefits associated with increased repair expenditures on tangible property in the Middlesex system.

Net income for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$3.1~~$6.0 million as compared with the same period in 2021. Basic earnings per share were ~~$1.19~~$2.00 and ~~$1.02~~$1.67 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Diluted earnings per share were ~~$1.18~~$1.99 and ~~$1.01~~$1.66 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Cash flows from operations are largely based on four factors: weather, adequate and timely rate increases, effective cost management and customer growth. The effect of those factors on net income is discussed in “Results of Operations.”

For the ~~six~~nine months ended ~~June~~September 30, 2022, cash flows from operating activities increased ~~$12.3~~$25.6 million to ~~$26.9~~$44.2 million. The increase in cash flows from operating activities primarily resulted from higher operating revenues from Middlesex’s January 1, 2022 rate increase and the timing of payments to ~~vendors and reduced income tax payments.~~vendors.

For the ~~six~~nine months ended ~~June~~September 30, 2022, cash flows used in investing activities ~~decreased $10.3~~increased $1.6 million to ~~$36.2~~$62.8 million. The ~~decrease~~increase in cash flows used in investing activities resulted from ~~decreased~~increased utility plant expenditures ~~and~~partially offset by cash received from the sale of Middlesex’s regulated wastewater subsidiary in January 2022.

For further discussion on the Company’s future capital expenditures and expected funding sources, see “Capital Expenditures and Commitments” below.

For the ~~six~~nine months ended ~~June~~September 30, 2022, cash flows from financing activities decreased ~~$17.6~~$19.5 million to ~~$10.1~~$18.0 million. The decrease in cash flows provided by financing activities is due to a reduction in net short-term bank borrowings and lower net customer advances and contributions partially offset by increased proceeds from the issuance of common stock under the Middlesex Water Company Investment Plan (the Investment Plan).

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.

The capital investment program for 2022 is currently estimated to be approximately ~~$90~~$85 million. Through ~~June~~September 30, 2022 we have expended ~~$39~~$65.9 million and expect to incur approximately ~~$51~~$19 million for capital projects for the remainder of 2022.

We currently project that we may expend approximately ~~$142~~$145 million for capital projects in 2023 and 2024. The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project

scope and costs and, could be impacted if new variants of the COVID-19 pandemic arise and continue for an extended period of time.

To pay for our capital program for the remainder of 2022, we plan on utilizing some or all of the following:

The 3% purchase discount offering period on the Company’s common stock through the Investment Plan is set to expire on August 1, 2022. 200,000 shares were originally allocated to the offering and there remains approximately 93 thousand shares available as of June 30, 2022.

In order to fully fund the ongoing large investment program in our utility plant infrastructure and maintain a balanced capital structure for a regulated water utility, Middlesex may offer for sale additional shares of its common stock. The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the level of additional debt financing and financial market conditions. ~~As previously approved by the NJBPU in 2019, the Company is authorized to issue and sell up to 0.7 million shares of its common stock in one or more transactions through December 31, 2022.~~

Recent Accounting Pronouncements – See Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements and guidance.

We are exposed to market risk associated with changes in interest rates and commodity prices. The Company is subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, short-term debt. The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2023 to 2059. Over the next twelve months, approximately ~~$7.8~~$7.6 million of the current portion of existing long-term debt instruments will mature. Applying a hypothetical change in the rate of interest charged by 10% on those borrowings, would not have a material effect on our earnings.

Our risks associated with price increases for chemicals, electricity and other commodities are reduced through contractual arrangements and the ability to recover price increases through rates charged to the Company’s regulated utility customers. Non-performance by these commodity suppliers could have a material adverse impact on our results of operations, financial position and cash flows.

We are exposed to credit risk for both our Regulated and Non-Regulated business segments. Our Regulated operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations engage in business activities with developers, government entities and other customers. Our primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances. Our credit risk is managed through established credit and collection policies which are in compliance with applicable regulatory requirements and involve monitoring of customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment arrangements. Our credit portfolio is diversified with no significant customer or industry concentrations. In addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible customer accounts receivable expenses and collection costs through customers’ rates.

The Company's retirement benefit plan assets are subject to fluctuating market prices of debt and equity securities. Changes to the Company's retirement benefit plan asset values can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements. Risk is mitigated by our ability to recover retirement benefit plan costs through rates for regulated utility services charged to our customers.

As required by Rule 13a-15 under the Securities and Exchange Act of 1934 (the Exchange Act), an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was conducted by the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Report. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding disclosure.

The following information updates and amends the information provided in the Company’s Annual Report on Form 10-K (the Form 10-K) for the year ended December 31, 2021 in Part I, Item 3—Legal Proceedings. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Company’s Form 10-K.

Vera et al. v. Middlesex Water Company – On April 21, 2022, the Judge granted Vera’s Motion for Class Certification and granted in part and denied in part Middlesex’s Motion to Dismiss. On May 4, 2022, the Company impleaded 3M Company (3M) as a third-party defendant in this lawsuit. The Company has taken this action in addition to a separate lawsuit the Company initiated against 3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances, which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility. On July 6, 2022, the Company filed a Motion to Remove this case from New Jersey Superior Court to the United States District Court for the District of New Jersey. Vera is currently challenging Middlesex’s Motion To Remove at the U.S. District Court for the District of New Jersey in an attempt to remand the case back to the Superior Court of New Jersey.

Lonsk et al. v. Middlesex Water Company and 3M Company - On March 4, 2022, Middlesex filed a Motion to Dismiss Plaintiffs’ complaint. On April 15, 2022, Plaintiffs filed an Amended Complaint. On July 7, 2022, this case was reassigned to a new trial judge at the United States District Court for the District of New Jersey. Motions To Dismiss and Answers to Plaintiffs’ Amended Complaint to be filed on rescheduling from the newly assigned judge.

The information about risk factors does not differ materially from those set forth in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	(Millions)										(Millions)
	As of June 30, 2022							Renewal Date			As of September 30, 2022														Renewal Date
	Outstanding		Available		Maximum		Credit Type			Outstanding				Available				Maximum				Credit Type			Renewal Date
Bank of America	$	2.0	$	58.0	$	60.0	Uncommitted	Renewal Date	January 26, 2023			$	7.0			$	53.0			$	60.0			Uncommitted		January 26, 2023
PNC Bank		25.5		42.5		68.0	Committed	January 31, 2024				30.5				37.5				68.0			Committed		January 31, 2024
CoBank		0-		12.0		12.0	Committed	November 30, 2023				3.0				9.0				12.0			Committed		November 30, 2023
	$	27.5	$	112.5	$	140.0					$	40.5			$	99.5			$	140.0

	(In Thousands)										(In Thousands)
	Three Months Ended					Six Months Ended					Three Months Ended					Nine Months Ended
	June 30,					June 30,					September 30,					September 30,
		2022		2021			2022		2021			2022		2021			2022		2021
Treated		$	785	$	871		$	1,531	$	1,748		$	936	$	889		$	2,467	$	2,641
Untreated			739		782			1,550		1,642			835		841			2,384		2,483
Total Costs		$	1,524	$	1,653		$	3,081	$	3,390		$	1,771	$	1,730		$	4,851	$	5,124

	(In Millions)						(In Millions) As of
	As of June 30, 2022			As of December 31, 2021			September 30, 2022			December 31, 2021
ROU Asset at Lease Inception	$	7.3		$	7.3		$	7.3		$	7.3
Accumulated Amortization		(3.1	)		(2.8	)		(3.3	)		(2.8	)
Current ROU Asset	$	4.2		$	4.5		$	4.0		$	4.5

	(In Thousands)												(In Thousands)
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
	Three Months Ended June 30,												Three Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021

Service Cost	$	591		$	674		$	200		$	229		$	591		$	674		$	200		$	229
Interest Cost		761			677			331			309			761			677			331			309
Expected Return on Assets		(1,760	)		(1,556	)		(887	)		(786	)		(1,760	)		(1,556	)		(887	)		(786	)
Amortization of Unrecognized Losses		418			717			0-			132			418			717			-			132
Net Periodic Benefit Cost (Benefit)*	$	10		$	512		$	(356	)	$	(116	)	$	10		$	512		$	(356	)	$	(116	)

	(In Thousands)												(In Thousands)
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
	Six Months Ended June 30,												Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021

Service Cost	$	1,181		$	1,348		$	399		$	458		$	1,772		$	2,022		$	599		$	687
Interest Cost		1,521			1,353			663			618			2,282			2,030			994			927
Expected Return on Assets		(3,520	)		(3,114	)		(1,773	)		(1,571	)		(5,281	)		(4,669	)		(2,660	)		(2,357	)
Amortization of Unrecognized Losses		837			1,434			0-			264			1,255			2,151			-			396
Net Periodic Benefit Cost (Benefit)*	$	19		$	1,021		$	(711	)	$	(231	)	$	28		$	1,534		$	(1,067	)	$	(347	)

	(Thousands of Dollars)
	June 30, 2022		December 31, 2021
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
FMBs	$150,642	$149,500	$98,828	$107,781

	MIDDLESEX WATER COMPANY

	By:	/s/A. Bruce O’Connor
		A. Bruce O’Connor
		Senior Vice President, Treasurer and
		Chief Financial Officer
		(Principal Accounting Officer)