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 ~~September 30, 2023~~March 31, 2024

☐	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 Jersey 08830

(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 ☐~~

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 ~~November 9, 2023:~~May 8, 2024: Common Stock, No Par Value: ~~17,806,696~~17,828,604 shares outstanding.

INDEX

PART I.	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements (Unaudited):

	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	1816

Item 3.	Quantitative and Qualitative Disclosures of Market Risk	2823

Item 4.	Controls and Procedures	2924

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3026

Item 1A.	Risk Factors	3026

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3026

Item 3.	Defaults upon Senior Securities	3026

Item 4.	Mine Safety Disclosures	3026

Item 5.	Other Information	3026

Item 6.	Exhibits	3127

SIGNATURES		3228

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023

Operating Revenues	$	46,715	$	47,732	$	127,672	$	123,611	$	40,524	$	38,156

Operating Expenses:
Operations and Maintenance		22,581		20,312		64,042		59,007		20,465		20,257
Depreciation		6,376		5,814		18,546		17,107		5,396		5,986
Other Taxes		4,936		5,031		14,104		13,543		4,798		4,423

Total Operating Expenses		33,893		31,157		96,692		89,657		30,659		30,666

Gain on Sale of Subsidiary		—		—		—		5,232

Operating Income		12,822		16,575		30,980		39,186		9,865		7,490

Other Income (Expense):
Other Income:
Allowance for Funds Used During Construction		496		627		2,162		1,553		176		813
Other Income (Expense), net		936		1,412		3,124		4,185
Other Income, net										5,189		898

Total Other Income, net		1,432		2,039		5,286		5,738		5,365		1,711

Interest Charges		3,518		2,355		9,364		6,574		3,269		2,595

Income before Income Taxes		10,736		16,259		26,902		38,350		11,961		6,606

Income Taxes		746		1,968		1,143		3,092		1,279		738

Net Income		9,990		14,291		25,759		35,258		10,682		5,868

Preferred Stock Dividend Requirements		30		30		90		90		30		30

Earnings Applicable to Common Stock	$	9,960	$	14,261	$	25,669	$	35,168	$	10,652	$	5,838

Earnings per share of Common Stock:
Basic	$	0.56	$	0.81	$	1.45	$	2.00	$	0.60	$	0.33
Diluted	$	0.56	$	0.80	$	1.44	$	1.99	$	0.59	$	0.33

Average Number of
Common Shares Outstanding :
Average Number of Common Shares Outstanding:
Basic		17,758		17,628		17,708		17,583		17,819		17,652
Diluted		17,873		17,743		17,823		17,698		17,934		17,767

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

September 30, December 31,
ASSETS 2023 2022
UTILITY PLANT: Water Production $ 299,187 $ 249,153
Transmission and Distribution 784,194 735,138
General 99,933 97,581
Construction Work in Progress 32,308 53,570
TOTAL 1,215,622 1,135,442
Less Accumulated Depreciation 230,124 214,891
UTILITY PLANT - NET 985,498 920,551

CURRENT ASSETS: Cash and Cash Equivalents 2,970 3,828
Accounts Receivable, net of allowance for uncollectible accounts of $2,055 and $2,326, respectively 18,990 16,018
Litigation Settlement Receivable 93,163 —
Unbilled Revenues 11,316 8,659
Materials and Supplies (at average cost) 6,405 6,177
Prepayments 2,918 2,624
TOTAL CURRENT ASSETS 135,762 37,306

OTHER ASSETS: Operating Lease Right of Use Asset 3,338 3,826
Preliminary Survey and Investigation Charges 2,372 2,806
Regulatory Assets 94,485 90,046
Non-utility Assets - Net 11,383 11,207
Employee Benefit Plans 10,527 8,689
Other 51 19
TOTAL OTHER ASSETS 122,156 116,593
TOTAL ASSETS $ 1,243,416 $ 1,074,450

CAPITALIZATION AND LIABILITIES
CAPITALIZATION: Common Stock, No Par Value $ 243,250 233,054
Retained Earnings 176,333 167,274
TOTAL COMMON EQUITY 419,583 400,328
Preferred Stock 2,084 2,084
Long-term Debt 354,276 290,280
TOTAL CAPITALIZATION 775,943 692,692

CURRENT Current Portion of Long-term Debt 7,444 17,462
LIABILITIES: Notes Payable 42,250 55,500
Accounts Payable 28,604 24,847
Litigation Settlement Payable 27,949 —
Accrued Taxes 8,143 12,162
Accrued Interest 2,546 2,535
Unearned Revenues and Advanced Service Fees 1,459 1,365
Other 2,908 3,988
TOTAL CURRENT LIABILITIES 121,303 117,859

COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)

OTHER LIABILITIES: Customer Advances for Construction 21,464 21,382
Lease Obligations 3,221 3,706
Accumulated Deferred Income Taxes 87,763 77,783
Regulatory Liabilities 112,815 46,734
Other 681 919
TOTAL OTHER LIABILITIES 225,944 150,524

CONTRIBUTIONS IN AID OF CONSTRUCTION 120,226 113,375
TOTAL CAPITALIZATION AND LIABILITIES $ 1,243,416 $ 1,074,450

		March 31,		December 31,
ASSETS		2024		2023
UTILITY PLANT:	Water Production	$	306,884	$	303,791
	Transmission and Distribution		816,933		809,862
	General		101,047		100,593
	Construction Work in Progress		24,056		19,636
	TOTAL		1,248,920		1,233,882
	Less Accumulated Depreciation		239,630		235,540
	UTILITY PLANT - NET		1,009,290		998,342

CURRENT ASSETS:	Cash and Cash Equivalents		2,855		2,390
	Accounts Receivable, net of allowance for credit losses of $2,134 and $2,137, respectively		15,732		18,172
	Litigation Settlement Receivable		69,872		69,872
	Unbilled Revenues		11,312		9,297
	Materials and Supplies (at average cost)		7,072		6,972
	Prepayments		4,371		1,833
	TOTAL CURRENT ASSETS		111,214		108,536

OTHER ASSETS:	Operating Lease Right of Use Asset		3,027		3,185
	Preliminary Survey and Investigation Charges		1,952		1,932
	Regulatory Assets		90,046		90,694
	Non-utility Assets - Net		11,780		11,522
	Employee Benefit Plans		22,757		21,779
	Other		39		62
	TOTAL OTHER ASSETS		129,601		129,174
	TOTAL ASSETS	$	1,250,105	$	1,236,052

CAPITALIZATION AND LIABILITIES
CAPITALIZATION:	Common Stock, No Par Value	$	246,551	$	246,764
	Retained Earnings		181,141		176,227
	TOTAL COMMON EQUITY		427,692		422,991
	Preferred Stock		2,084		2,084
	Long-term Debt		356,960		358,153
	TOTAL CAPITALIZATION		786,736		783,228

CURRENT	Current Portion of Long-term Debt		7,831		7,740
LIABILITIES:	Notes Payable		58,000		42,750
	Accounts Payable		23,243		27,618
	Litigation Settlement Payable		6,237		6,237
	Accrued Taxes		14,719		10,535
	Accrued Interest		2,650		3,138
	Unearned Revenues and Advanced Service Fees		1,365		1,390
	Other		3,111		4,421
	TOTAL CURRENT LIABILITIES		117,156		103,829

COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)

OTHER LIABILITIES:	Customer Advances for Construction		21,091		21,313
	Lease Obligations		2,904		3,063
	Accumulated Deferred Income Taxes		89,693		88,736
	Regulatory Liabilities		57,818		113,021
	Other		498		592
	TOTAL OTHER LIABILITIES		172,004		226,725

CONTRIBUTIONS IN AID OF CONSTRUCTION			174,209		122,270
	TOTAL CAPITALIZATION AND LIABILITIES	$	1,250,105	$	1,236,052

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2023			2022			2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	25,759		$	35,258		$	10,682		$	5,868
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization		22,106			20,135			5,979			7,201
Provision for Deferred Income Taxes and Investment Tax Credits		(4,685	)		(4,312	)		1,382			(611	)
Equity Portion of Allowance for Funds Used During Construction (AFUDC)		(1,300	)		(914	)		(102	)		(446	)
Cash Surrender Value of Life Insurance		(144	)		474			(113	)		(102	)
Stock Compensation Expense		1,790			1,270			(465	)		360
Gain on Sale of Subsidiary		—			(5,232	)
Changes in Assets and Liabilities:
Accounts Receivable		(2,972	)		(2,770	)		2,440			492
Unbilled Revenues		(2,657	)		(3,749	)		(2,015	)		(1	)
Materials and Supplies		(228	)		(434	)
Materials & Supplies								(100	)		(382	)
Prepayments		(294	)		(789	)		(2,538	)		(1,290	)
Accounts Payable		3,757			4,748			(4,375	)		2,776
Accrued Taxes		(4,019	)		3,964			4,184			3,834
Accrued Interest		11			188			(488	)		(37	)
Employee Benefit Plans		(1,487	)		(1,973	)		(867	)		(477	)
Unearned Revenue and Advanced Service Fees		94			146
Unearned Revenue & Advanced Service Fees								(25	)		(54	)
Recovered Costs - Litigation Settlement								(6,027	)		—
Other Assets and Liabilities		4,255			(1,769	)		(900	)		(1,161	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		39,986			44,241			6,652			15,970
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures, Including AFUDC of $862 in 2023 and $639 in 2022		(73,074	)		(65,939	)
Proceeds from Sale of Subsiary		—			3,122
Utility Plant Expenditures, Including AFUDC of $74 in 2024, $367 in 2023								(14,389	)		(24,515	)

NET CASH USED IN INVESTING ACTIVITIES		(73,074	)		(62,817	)		(14,389	)		(24,515	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt		(16,460	)		(6,397	)		(1,539	)		(1,553	)
Proceeds from Issuance of Long-term Debt		70,640			2,663			425			40,972
Net Short-term Bank Borrowings		(13,250	)		27,500
Net Short-term Bank Borrowings (Payments)								15,250			(27,000	)
Deferred Debt Issuance Expense		(123	)		(612	)		—			(49	)
Common Stock Issuance Expense		(10	)		(25	)
Payment of Grantee Witholding Taxes in Exchange for Restricted Stock		(619	)		—
Payment of Grantee Withholding Taxes in Exchange for Restricted Stock								(868	)		—
Proceeds from Issuance of Common Stock		9,025			10,064			252			2,342
Payment of Common Dividends		(16,600	)		(15,298	)		(5,738	)		(5,513	)
Payment of Preferred Dividends		(90	)		(90	)		(30	)		(30	)
Construction Advances and Contributions-Net		(283	)		146			450			410

NET CASH PROVIDED BY FINANCING ACTIVITIES		32,230			17,951			8,202			9,579
NET CHANGES IN CASH AND CASH EQUIVALENTS		(858	)		(625	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,828			3,533
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,970		$	2,908
NET CHANGES IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH								465			1,034
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD								2,390			3,828
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD							$	2,855		$	4,862


SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Utility Plant received as Construction Advances and Contributions	$	5,954		$	5,705		$	2,143		$	2,234
Non-Cash Consideration for Sale of Subsidiary	$	—		$	2,100
Litigation Settlement Receivable	$	93,163		$	—
Litigation Settlement Payable	$	27,949		$	—

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Cash Paid During the 3 Months for:
Interest	$	9,589		$	6,793		$	3,943		$	2,812
Interest Capitalized	$	862		$	639		$	74		$	367
Income Taxes	$	2,716		$	2,125

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND LONG-TERM DEBT

(Unaudited)

(In thousands)

	September 30,			December 31,			March 31,			December 31,
	2023			2022			2024			2023
Common Stock, No Par Value:
Common Stock, No Par Value
Shares Authorized - 40,000
Shares Outstanding - 2023 - 17,771; 2022 - 17,642	$	243,250		$	233,054

Shares Outstanding - 2024 - 17,814; 2023 - 17,821							$	246,551		$	246,764
Retained Earnings		176,333			167,274			181,141			176,227
TOTAL COMMON EQUITY	$	419,583		$	400,328		$	427,692		$	422,991

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	$	278,374		$	252,269
First Mortgage Bonds, 0.00%-5.50%, due 2024-2059							$	277,619		$	278,374
Amortizing Secured Notes, 3.94%-7.05%, due 2028-2046		70,396			44,918			69,049			69,724
State Revolving Trust Notes, 2.00%-4.03%, due 2025-2044		11,797			9,200			16,954			16,638
SUBTOTAL LONG-TERM DEBT		360,567			306,387			363,622			364,736
Add: Premium on Issuance of Long-term Debt		6,577			6,873			6,481			6,529
Less: Unamortized Debt Expense		(5,424	)		(5,518	)		(5,312	)		(5,372	)
Less: Current Portion of Long-term Debt		(7,444	)		(17,462	)		(7,831	)		(7,740	)
TOTAL LONG-TERM DEBT	$	354,276		$	290,280		$	356,960		$	358,153

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands except per share amounts)

Common Common
Stock Stock Retained
Shares Amount Earnings Total

For the Three Months Ended September 30, 2022
Balance at July 1, 2022 17,604 $ 229,037 $ 156,530 $ 385,567
Net Income — — 14,291 14,291
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 3 160 — 160
Stock Award - Board of Directors 3 280 — 280
Cash Dividends on Common Stock ($0.8700 per share) — — (15,298 ) (15,298 )
Cash Dividends on Preferred Stock — — (90 ) (90 )
Common Stock Expenses — — (25 ) (25 )
Balance at September 30, 2022 17,638 $ 232,423 $ 165,652 $ 398,075

For the Three Months Ended September 30, 2023
Balance at July 1, 2023 17,729 $ 239,545 $ 171,932 $ 411,477
Net Income — — 9,990 9,990
Middlesex Water Company Invesment Plan 42 3,281 — 3,281
Restricted Stock Award - Net - Employees — 424 — 424
Cash Dividends on Common Stock ($0.3125 per share) — — (5,549 ) (5,549 )
Cash Dividends on Preferred Stock — — (30 ) (30 )
Common Stock Expenses — — (10 ) (10 )
Balance at September 30, 2023 17,771 $ 243,250 $ 176,333 $ 419,583

For the Nine Months Ended September 30, 2023
Balance at January 1, 2023 17,642 $ 233,054 $ 167,274 $ 400,328
Net Income — — 25,759 25,759
Middlesex Water Company Invesment Plan 117 9,025 — 9,025
Restricted Stock Award - Net - Employees 7 811 — 811
Stock Award - Board of Directors 5 360 — 360
Cash Dividends on Common Stock ($0.9375 per share) — — (16,600 ) (16,600 )
Cash Dividends on Preferred Stock — — (90 ) (90 )
Common Stock Expenses — — (10 ) (10 )
Balance at September 30, 2023 17,771 $ 243,250 $ 176,333 $ 419,583

	Common			Common
	Stock			Stock			Retained
	Shares			Amount			Earnings			Total

Balance at January 1, 2023		17,642		$	233,054		$	167,274		$	400,328
Net Income		—			—			5,868			5,868
Dividend Reinvestment & Common Stock Purchase Plan		29			2,342			—			2,342
Restricted Stock Award - Net - Employees		—			360			—			360
Cash Dividends on Common Stock ($0.3125 per share)		—			—			(5,513	)		(5,513	)
Cash Dividends on Preferred Stock		—			—			(30	)		(30	)
Balance at March 31, 2023		17,671		$	235,756		$	167,599		$	403,355

Balance at January 1, 2024		17,821		$	246,764		$	176,227		$	422,991
Net Income		—			—			10,682			10,682
Dividend Reinvestment & Common Stock Purchase Plan		5			252			—			252
Restricted Stock Award - Net - Employees		(12	)		(465	)		—			(465	)
Cash Dividends on Common Stock ($0.3250 per share)		—			—			(5,738	)		(5,738	)
Cash Dividends on Preferred Stock		—			—			(30	)		(30	)
Balance at March 31, 2024		17,814		$	246,551		$	181,141		$	427,692

See Notes to Condensed Consolidated Financial Statements.

MIDDLESEX WATER COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Recent Developments

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 ~~2022~~2023 Annual Report on Form ~~10-K/A~~10-K (the ~~2022~~2023 Form ~~10-K/A)~~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 ~~September 30, 2023,~~March 31, 2024, the results of operations for the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ and cash flows for the ~~nine~~three month periods ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. Information included in the Condensed Consolidated Balance Sheet as of December 31, ~~2022,~~2023, has been derived from the Company’s December 31, ~~2022~~2023 audited financial statements included in the ~~2022~~2023 Form ~~10-K/A.~~10-K.

Recent Developments

~~Middlesex President and Chief Executive Officer Retirement Announcement -~~ On May 16, 2023, President and Chief Executive Officer, Dennis W. Doll announced a plan to retire upon turning age 65. Mr. Doll’s retirement is planned for the later of December 31, 2023 or, the date when a successor is duly named and effectively transitioned into the position. Mr. Doll will remain Chairman of the Middlesex Board of Directors (Board) through the expiration of his current term in May 2024. A search for Mr. Doll’s successor is being led by the Compensation Committee of the Board in collaboration with a nationally-recognized executive search firm.

~~Regulatory Notice of Non-Compliance –~~ United States Environmental Protection Agency (USEPA) Issues Final Perfluoroalkyl Substances (PFAS) Regulations - In ~~September 2021,~~April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection ~~(NJDEP) issued a Notice of Non-Compliance (Notice)~~MCLs adhered 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 standard promulgated in a NJDEP regulation that became effective in 2021. Middlesex was required by the ~~regulation~~Company. Under the new USEPA regulations effective April 2024, water systems must monitor for Regulated PFAS and have three years to ~~notify its affected customers and complied within~~complete initial monitoring (by April 2027), followed by ongoing compliance monitoring. Water systems must also provide the ~~required Notice period~~public with information on the levels of Regulated PFAS in ~~November 2021.~~their drinking water beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows that drinking water levels exceed these MCLs.

~~The Notice further required~~Beginning in April 2029, water systems that have Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in their drinking water and must provide notification to the Company to take any action necessary to comply with the new standard by September 7, 2022. Consequently, in November 2021, the Company implemented an interim solution to meet the Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status and obtaining alternate sources of supply. In June 2022, the Company accelerated the in-service date for a portionpublic of the enhanced treatment project based on engineering analysis that allowed a restart of the Park Avenue Wellfield Treatment Plant to ensure continued compliance with all state and federal drinking water standards.

On September 13, 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP, which required the Company to take whatever actions necessary to achieve and maintain compliance with applicable regulations. As prescribed in the ACO, the Company was to issue periodic public notifications until the ACO was closed.violation.

In ~~June~~anticipation of these new USEPA standards, in 2023, the Company ~~completed the permanent construction of the entire Park Avenue Wellfield~~began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performing preliminary engineering studies to ensure that effective PFAS treatment upgrades and placed the upgrades into operation in full compliance with the NJDEP PFOA standards. The Company received confirmation from the NJDEP that it has complied with all requirements of the ACO and consequently, the ACO has been closed.

The Company had previously initiated a lawsuit against 3M Company (3M), in connection with the Company’s claim that 3M introduced perfluoroalkyl substances (commonly known as “PFAS”), which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.approaches are implemented.

~~On August 29, 2023, Middlesex and 3M executed a settlement agreement (the Settlement Agreement) to resolve the lawsuit. The Settlement Agreement provides that:~~

●

3M will pay Middlesex $93.2 million in two installments, one payment of $23.3 million in December 2023 and one payment of $69.9 million in July 2024. Middlesex is obligated to pay 30% of the proceeds received to its lawyers as legal fees, or $27.9 million in total;

●

Middlesex anticipates its receipt of the Settlement Agreement payments will have the effect of mitigating future increases in customer rates, the determination of which are based, in part, on Middlesex’s investments in utility infrastructure. For additional details, see “Item 1. Business – Regulation - Regulation of Rates and Services” in Middlesex’s 2022 Form 10-K;

●

Middlesex, by nature of its status as a U.S. water purveyor impacted by PFAS, was automatically included in a Multi-District Litigation Settlement before the United States District Court for the District of South Carolina in which 3M and other companies (Non-3M Companies) are participants. Middlesex agreed as part of this settlement to remain a member of the plaintiff class in order to be eligible to obtain future additional compensation from 3M and the Non-3M Companies for the remediation of its water treatment facilities; and

●

Middlesex and 3M agreed to enter into a joint mediation, scheduled for November 2023, to resolve two PFOA-related class action lawsuits against Middlesex seeking restitution for medical, water replacement and other claimed related costs. Both Middlesex and 3M are defendants in these lawsuits. These lawsuits remain in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.

It is the Company’s intent that any financial benefit which may result from the Settlement Agreement, net of any litigation costs to Middlesex, will ultimately inure to the benefit of the Middlesex customers in the form of mitigating future customer rate increases. As such, the anticipated net Settlement Agreement proceeds of $65.2 million have been recorded as a Regulatory Liability in the Company’s September 30, 2023 Consolidated Balance Sheet.

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.

~~Coronavirus (COVID-19) Pandemic~~ – On May 11, 2023, the United States Department of Health and Human Services declared the end of the COVID-19 Pandemic nationwide health emergency. 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 has approved the tracking of COVID-19 related incremental costs for potential recovery in customer rates in future rate proceedings. In May 2023, Middlesex filed a petition to defer consideration of rate recovery of COVID-19 related incremental costs incurred until its next base rate case. The Company has increased its allowance for doubtful accounts for expected higher 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 results of operations, financial condition and liquidity.

Recent Accounting Guidance

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.

Note 2 – Rate and Regulatory Matters

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

The Middlesex Lead Service Line Replacement (LSLR) Plan, which was approved by the NJBPU in January 2024, has commenced and Middlesex expects to submit a customer surcharge filing with the NJBPU in July 2024 to recover costs incurred replacing Middlesex customer-owned lead service lines. The surcharge is for costs to be incurred through June 2024 and is required to be reset every six months over the life of the LSLR Plan. The current estimates for replacement of Middlesex and Middlesex customer-owned lead service lines under the LSLR Plan are approximately $46 million to $77 million over a nine-year period. Cost recovery for replacing Company-owned lead service lines are recoverable through traditional base rate case filings.

As allowed under its NJBPU approved Distribution System Improvement Charge (DSIC) Foundation Filing, in April 2024, Middlesex filed a petition with the NJBPU, seeking ~~permission~~ to ~~increase~~establish a DSIC tariff rate that would result in $0.5 million of annual ~~base water revenues by approximately $34 million.~~revenues. The ~~request was necessitated predominantly by capital infrastructure investments Middlesex has made, or has committed~~tariff rate, if approved, would apply to ~~make, to upgrade or replace utility assets to support continued regulatory compliance~~General Service customers and ~~overall quality of service.~~would be based on meter size. We cannot predict when and whether the NJBPU will ultimately approve, deny, or reduce the amount of the request. ~~Under New Jersey statute, the NJPBU must render a decision within nine months of filing a base rate change petition.~~

~~Replacement of Middlesex and Middlesex customer-owned lead service lines is required by~~Tidewater - In December 2023, the ~~New Jersey Lead~~Delaware Public Service ~~Line Replacement Law. In May 2023, Middlesex filed~~Commission (DEPSC) approved Tidewater’s application to implement a petition seeking NJBPU approval of Middlesex’s proposed cost recovery of its Lead Service Line Replacement Plan and cost recovery of project costs associated with replacing Middlesex customer-owned lead service lines. Under this legislation, these costs would be recovered through future customer surcharges. Middlesex currently estimates that replacement of Middlesex and Middlesex customer-owned lead service lines will be approximately $46 million to $77 million over a nine-year period. A decision in this matter is expected in the fourth quarter of 2023. We cannot predict if the NJBPU will ultimately approve, deny, or amend this petition.

~~In May 2023, Middlesex filed a petition with the NJBPU seeking approval of a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing~~new DSIC. Effective January 1, 2024, Tidewater implemented a DSIC rate ~~that allows water utilities~~of 3.71%, which is expected to ~~recover investments in, and~~ generate a return on, qualifying capital improvements to their water distribution system made between base rate proceedings. This petition was approved by the NJBPU in October 2023 and will result in future rate increases for future DSIC qualifying projects.

~~In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional costs~~revenue of ~~$2.7~~approximately $1.3 million ~~for the purchase of treated water from a non-affiliated water utility.~~annually. A ~~PWAC~~Delaware DISC is ~~a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings. The increase, effective October 1, 2022, was on an interim basis and~~ subject to ~~refund~~a semi-annual reset with ~~interest, pending final resolution~~an overall maximum rate of ~~this matter, which the NJBPU provided in August 2023. In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero in October 2023.~~7.5%.

~~Pinelands –~~ On April 12, 2023, Pinelands Water and Pinelands Wastewater concluded their base rate case matters when the NJBPU approved a combined $1.0 million increase in annual base rates, effective April 15, 2023. The requests were necessitated by capital infrastructure investments the companies have made as well as increased operations and maintenance costs.

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, the parent company of Twin Lakes, 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 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 Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the 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 (Appeal Petition) 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’ claims that because the $1.7 million escrow requirement placed on Middlesex violated Middlesex’s constitutional rights, Middlesex’s refusal to submit this escrow payment would jeopardize the relief Twin Lakes was otherwise entitled to in the appointment of the Receiver Utility. In March 2023, the Supreme Court of Pennsylvania issued a decision denying Twin Lakes’ Appeal Petition without addressing this claim on the merits. As a result of the Pennsylvania Courts’ failure to address Twin Lakes’ claim, Middlesex has subsequently filed a Complaint with the United States District Court for the Middle District of Pennsylvania (US District Court) to address the issue of whether the PAPUC’s Order violated Middlesex’s rights under the United States Constitution. ~~We are currently awaiting~~On January 18, 2024, the US District Court issued a decision dismissing Middlesex’s complaint without addressing Middlesex’s claims on the merits. On January 31, 2024, Middlesex filed a Notice of Appeal of the US District Court’s ~~decision.~~decision with the United States Court of Appeals for the Third Circuit (Third Circuit Court). The Third Circuit Court has issued a briefing schedule that will extend into July 2024 and it is expected that oral arguments will be scheduled before a three-judge panel of the Third Circuit Court following the completion of the briefing schedule.

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

Note 3 – Capitalization

Common Stock – During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ there were ~~118,501~~4,775 common shares (approximately ~~$9.0~~$0.3 million) and ~~110,614~~29,810 common shares (approximately ~~$10.0~~$2.3 million) respectively, issued under the Middlesex Water Company Investment ~~Plan (the Investment Plan).~~Plan.

~~In April 2023,~~ Middlesex has received approval from the NJBPU to issue and sell up to 1.0 million shares of its common stock, without par value, through December 31, 2025. Sales of additional shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program. As described below in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing plan.

In March 2023, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering will continue until 200,000 shares are purchased at the discounted price or December 1, 2023, whichever event occurs first. The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment.

~~In May 2023, Middlesex received approval from the NJBPU to increase the number of authorized shares under the Investment Plan by 0.7 million shares.~~

Long-term Debt – Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility plant. To the extent possible and fiscally prudent, the Company finances qualifying capital projects under State Revolving Fund (SRF) loan programs in New Jersey and Delaware. These government programs provide financing at interest rates typically below rates available in the broader financial markets. A portion of the borrowings under the New Jersey SRF is interest-free.

Middlesex has received approval from the NJBPU to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025. The Company expects to issue debt securities in a series of one or more transaction offerings over a multi-year period to help fund Middlesex’s multi-year capital construction program.

Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) at a below market interest rate. When construction on the qualifying project is substantially complete, NJIB will coordinate the conversion of the construction loan into a long-term securitized loan with a portion of the principal balance having a stated interest rate of zero percent (0%) and a portion of the principal balance at a market interest rate at the time of closing using the credit rating of the State of New Jersey.

~~Although~~Under the ~~Company has no current projects in~~Delaware SRF program, borrowers 1) enter into a long-term note agreement for a term not to exceed twenty years, 2) submit requisitions for cost reimbursements during the ~~NJIB loan program, it~~construction period for up to two years after the agreement is ~~seeking to have several projects added to~~executed and 3) as the ~~qualified list in order to borrow under~~proceeds are received from the ~~NJIB loan program.~~requisitions, borrowers record a corresponding debt obligation amount.

In April ~~2023, Middlesex received approval from~~2024, the NJBPU to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025. The Company expects to issue debt securities in a series of one or more transaction offerings over a multi-year period to help fund Middlesex’s multi-year capital construction program.

In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce the Company’s outstanding balances under its bank lines of credit.

~~In May 2023,~~DEPSC approved four Tidewater closed on a $20.0 million loan from CoBank, ACB (CoBank) with an interest rate of 5.71% and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.

~~In April 2023, Tidewater closed on three Delaware Public Service Commission (DEPSC)-approved~~ Delaware SRF loans totaling ~~$10.2 million, all at interest rates of 2.0% with maturity dates in 2043 and 2044.~~$6.6 million. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Tidewater expects to close on these loans in the 2^nd quarter of 2024. Each project has its own construction timetable with the last spending set to occur in 2026.

Separately, Tidewater has three active construction projects funded by prior year Delaware SRF loans totaling $13.3 million with remaining availability of funds for borrowing. These loans are for the construction of a one million gallon elevated storage tank and construction, relocation, improvement, and/or interconnection of transmission mains. Tidewater has drawn a total of ~~$1.5~~$9.7 million through ~~September 30, 2023~~March 31, 2024 and expects that the requisitions will continue through mid-2025.

In December 2021, Tidewater closed on a DEPSC-approved $5.0 million Delaware SRF loan at an interest rate of 2.0%. The loan was for construction of a one million gallon elevated storage tank. Through September 30, 2023, Tidewater has drawn a total of $4.2 million and expects that the requisitions will continue through the first quarter of 2024. The final maturity date on the loan is 2044.

Under the Delaware SRF Program, borrowers submit reimbursement requisitions during the construction period. As the proceeds are received from the requisitions, Tidewater records a corresponding debt obligation amount.

In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for each loan. Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital projects.

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, accounts receivable, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of ~~FMBs in~~First Mortgage Bonds (FMBs) and SRF Bonds (collectively, the ~~table below~~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 FMBs in the table below are classified as Level 2 measurements. The carrying amount and fair value of the FMBs were as follows:

	(Thousands of Dollars)
	March 31, 2024				December 31, 2023
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
FMBs	$	132,619	$	129,092	$	133,374	$	131,745

(Thousands of Dollars)
September 30, 2023 December 31, 2022
Carrying Fair Carrying Fair
Amount Value Amount Value
FMBs $ 133,374 $ 123,235 $ 147,269 $ 138,756

It was not practicable to estimate the 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 Notes” and “State Revolving Trust Notes” on the Condensed Consolidated Statements of Capital Stock and Long-Term ~~Debt).~~Debt. The carrying amount of these instruments was ~~$227.2~~$231.0 million and ~~$159.1~~$231.3 million at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. Customer advances for construction have carrying amounts of ~~$21.5~~$21.1 million and ~~$21.4~~$21.3 million at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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.

Note 4 – Earnings Per Share

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)
Three Months Ended September 30,
2023 2022
Basic: Income Shares Income Shares
Net Income $ 9,990 17,758 $ 14,291 17,628
Preferred Dividend (30 ) (30 )
Earnings Applicable to Common Stock $ 9,960 17,758 $ 14,261 17,628

Basic EPS $ 0.56 $ 0.81

Diluted:
Earnings Applicable to Common Stock $ 9,960 17,758 $ 14,261 17,628
$7.00 Series Preferred Dividend 17 115 17 115
Adjusted Earnings Applicable to Common Stock $ 9,977 17,873 $ 14,278 17,743

Diluted EPS $ 0.56 $ 0.80

(In Thousands Except per Share Amounts)
Nine Months Ended September 30,
2023 2022
Basic: Income Shares Income Shares
Net Income $ 25,759 17,708 $ 35,258 17,583
Preferred Dividend (90 ) (90 )
Earnings Applicable to Common Stock $ 25,669 17,708 $ 35,168 17,583

Basic EPS $ 1.45 $ 2.00

Diluted:
Earnings Applicable to Common Stock $ 25,669 17,708 $ 35,168 17,583
$7.00 Series Preferred Dividend 51 115 51 115
Adjusted Earnings Applicable to Common Stock $ 25,720 17,823 $ 35,219 17,698

Diluted EPS $ 1.44 $ 1.99

	(In Thousands Except per Share Amounts)
	Three Months Ended March 31,
	2024					2023
Basic:	Income			Shares		Income			Shares
Net Income	$	10,682			17,819	$	5,868			17,652
Preferred Dividend		(30	)				(30	)
Earnings Applicable to Common Stock	$	10,652			17,819	$	5,838			17,652

Basic EPS	$	0.60				$	0.33

Diluted:
Earnings Applicable to Common Stock	$	10,652			17,819	$	5,838			17,652
$7.00 Series Preferred Dividend		17			115		17			115
Adjusted Earnings Applicable to Common Stock	$	10,669			17,934	$	5,855			17,767

Diluted EPS	$	0.59				$	0.33

Note 5 – Business Segment Data

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.

(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
Operations by Segments: 2023 2022 2023 2022
Revenues:
Regulated $ 43,763 $ 44,861 $ 118,625 $ 115,222
Non – Regulated 3,251 3,431 9,649 9,316
Inter-segment Elimination (299 ) (560 ) (602 ) (927 )
Consolidated Revenues $ 46,715 $ 47,732 $ 127,672 $ 123,611

Operating Income:
Regulated $ 12,008 $ 15,750 $ 28,543 $ 36,793
Non – Regulated 814 825 2,437 2,393
Consolidated Operating Income $ 12,822 $ 16,575 $ 30,980 $ 39,186

Net Income:
Regulated $ 9,384 $ 13,683 $ 24,017 $ 33,496
Non – Regulated 606 608 1,742 1,762
Consolidated Net Income $ 9,990 $ 14,291 $ 25,759 $ 35,258

Capital Expenditures:
Regulated $ 22,415 $ 26,588 $ 72,994 $ 65,722
Non – Regulated 24 8 80 217
Total Capital Expenditures $ 22,439 $ 26,596 $ 73,074 $ 65,939

As of As of
September 30, 2023 December 31, 2022
Assets:
Regulated $ 1,241,123 $ 1,079,180
Non – Regulated 7,382 6,999
Inter-segment Elimination (5,089 ) (11,729 )
Consolidated Assets $ 1,243,416 $ 1,074,450

	(In Thousands)
	Three Months Ended
	March 31,
Operations by Segments:	2024			2023
Revenues:
Regulated	$	37,465		$	34,953
Non – Regulated		3,204			3,342
Inter-segment Elimination		(145	)		(139	)
Consolidated Revenues	$	40,524		$	38,156

Operating Income:
Regulated	$	8,999		$	6,715
Non – Regulated		866			775
Consolidated Operating Income	$	9,865		$	7,490

Net Income:
Regulated	$	10,049		$	5,324
Non – Regulated		633			544
Consolidated Net Income	$	10,682		$	5,868

Capital Expenditures:
Regulated	$	14,376		$	24,465
Non – Regulated		13			50
Total Capital Expenditures	$	14,389		$	24,515

	As of			As of
	March 31, 2024			December 31, 2023
Assets:
Regulated	$	1,247,041		$	1,235,549
Non – Regulated		8,264			8,068
Inter-segment Elimination		(5,200	)		(7,565	)
Consolidated Assets	$	1,250,105		$	1,236,052

Note 6 – Short-term Borrowings

The Company maintains lines of credit aggregating $140.0 million.

	(Millions)								(Millions)
	As of September 30, 2023								As of March 31, 2024
	Outstanding		Available		Maximum		Credit Type	Renewal Date	Outstanding		Available		Maximum		Credit Type	Renewal Date
Bank of America	$	4.0	$	56.0	$	60.0	Uncommitted	January 25, 2024	$	—	$	60.0	$	60.0	Uncommitted	January 24, 2025
PNC Bank		35.3	$	32.7		68.0	Committed	July 31, 2025		51.0	$	17.0		68.0	Committed	January 31, 2026
CoBank		3.0		9.0		12.0	Committed	May 20, 2026
CoBank, ACB										7.0		5.0		12.0	Committed	May 20, 2026
	$	42.3	$	97.7	$	140.0			$	58.0	$	82.0	$	140.0

The interest rates are set for borrowings under the Bank of America and PNC Bank lines of credit using the ~~Bloomberg Short-Term Bank Yield Index and the~~ Secured Overnight Financing Rate (SOFR)~~, respectively,~~ and then adding a specific financial institution credit spread. The interest rate for borrowings under the CoBank, ACB (CoBank) line of credit are set weekly using CoBank’s internal cost of funds index that is similar to the SOFR 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 ~~September 30, 2023~~March 31, 2024 under these credit lines is ~~6.51%~~6.46%.

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

(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2023 2022 2023 2022
Average Daily Amounts Outstanding $ 25,015 $ 33,750 $ 32,860 $ 22,648
Weighted Average Interest Rates 6.37% 3.34% 5.89% 2.48%

	Three Months Ended
	March 31,
	2024			2023
Average Daily Amounts Outstanding	$	49,992		$	54,561
Weighted Average Interest Rates		6.42	%		5.52	%

~~The maturity dates for~~All borrowings outstanding under the ~~$42.3 million outstanding~~lines of credit as of ~~September 30, 2023 were in October 2023~~March 31, 2024 mature daily and ~~continue through December 2023 and were or~~ are ~~expected to be extended at the discretion of the Company.~~currently being rolled over on a daily basis.

Note 7 – Commitments and Contingent Liabilities

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~~2048. This agreement with the NJWSA provides for an average purchase of 27 million gallons a day (mgd). ~~The agreement renewal process is underway and~~with a ~~new agreement is expected~~peak up to ~~be in place prior to the expiration date of the existing agreement. Middlesex does not expect the agreement terms and conditions to vary.~~47.0 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 also has an agreement with a non-affiliated ~~regulated~~NJBPU-regulated water utility for the purchase of treated water. This agreement, which expires February 27, 2026, provides for the minimum purchase of 33.0 mgd of treated water with provisions for additional ~~purchases.~~purchases if needed.

Tidewater contracts with the City of Dover, Delaware to purchase 15treated water of up to 60.0 million gallons ~~of treated water~~ annually.

Purchased water costs are shown below:

	(In Thousands)								(In Thousands)
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2023		2022		2023		2022		2024		2023

Treated	$	1,607	$	936	$	4,353	$	2,467	$	909	$	1,383
Untreated		812		835		2,352		2,384		850		802
Total Costs	$	2,419	$	1,771	$	6,705	$	4,851	$	1,759	$	2,185

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 ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $0.6 million for each of the nine months ended September 30, 2023 and 2022,~~ respectively.

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

	(In Millions)						(In Millions)
	As of						As of
	September 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
ROU Asset at Lease Inception	$	7.3		$	7.3		$	7.3		$	7.3
Accumulated Amortization		(4.0	)		(3.5	)		(4.3	)		(4.1	)
Current ROU Asset	$	3.3		$	3.8		$	3.0		$	3.2

The Company’s future minimum operating lease commitments as of ~~September 30, 2023~~March 31, 2024 are as follows:

	(In Millions)			(In Millions)
2023	$	0.2
2024		0.8		$	0.6
2025		0.8			0.8
2026		0.9			0.9
2027		0.9			0.9
2028					0.9
Thereafter		1.8			0.9
Total Lease Payments	$	5.4		$	5.0
Imputed Interest		(1.6	)		(1.5	)
Present Value of Lease Payments		3.8			3.5
Less Current Portion*		(0.6	)		(0.6	)
Non-Current Lease Liability	$	3.2		$	2.9

*Included in Other Current Liabilities

Construction – The Company ~~has forecasted~~expects to spend approximately ~~$96~~$78 million for its construction program in ~~2023.~~2024. The Company has entered into several construction contracts that, in the aggregate, obligate expenditure of an estimated $8$14 million in the future. The actual amount and timing of capital expenditures is dependent on the need for upgrade or 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. With continued upward pressure on mortgage interest rates, as well as other financial market uncertainties, 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~~Middlesex and 3M agreed to enter into a joint mediation on these lawsuits ~~are in the early stages of the legal process~~ and their ultimate resolution ~~cannot be predicted~~is not known at this time. For further ~~discussion of this matter,~~information on the 3M Settlement Agreement, see Note ~~1 -~~2, Rate and Regulatory ~~Notice of Non-Compliance~~Matters, Middlesex.

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 its executive officers that provide compensation and benefits in the event of termination of employment under certain conditions in connection with a change in control of the Company.

Note 8 – Employee Benefit Plans

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, based upon a percentage of the participants’ annual paid compensation. For each of the ~~nine~~three month periods ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company did not make cash contributions to the Pension Plan. The Company expects to make cash contributions of approximately ~~$1.9~~$0.9 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 $0.5 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 ~~nine~~three month periods ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company did not make cash contributions to its Other Benefits Plan. The Company expects to make additional Other Benefits Plan cash contributions of $0.9 million over the remainder of the current year.

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

(In Thousands)
Pension Benefits Other Benefits
Three Months Ended September 30,
2023 2022 2023 2022

Service Cost $ 388 $ 591 $ 98 $ 200
Interest Cost 1,067 761 402 331
Expected Return on Assets (1,466 ) (1,760 ) (771 ) (887 )
Amortization of Unrecognized Losses 164 418 (48 ) —
Net Periodic Benefit Cost (Benefit)* $ 153 $ 10 $ (319 ) $ (356 )
(In Thousands)
(In Thousands) Pension Benefits Other Benefits
Pension Benefits Other Benefits Three Months Ended March 31,
Nine Months Ended September 30, 2024 2023 2024 2023
2023 2022 2023 2022
Service Cost $ 1,163 $ 1,772 $ 293 $ 599 $ 318 $ 388 $ 80 $ 98
Interest Cost 3,202 2,282 1,206 994 1,070 1,067 328 402
Expected Return on Assets (4,399 ) (5,281 ) (2,312 ) (2,660 ) (1,580 ) (1,466 ) (846 ) (771 )
Amortization of Unrecognized Losses 493 1,255 (143 ) — 38 164 (275 ) (48 )
Net Periodic Benefit Cost (Benefit)* $ 459 $ 28 $ (956 ) $ (1,067 ) $ (154 ) $ 153 $ (713 ) $ (319 )

*Service cost is included Operations and Maintenance expense on the consolidated statements of income; all other amounts are included in Other Income (Expense), net.

Note 9 – Revenue Recognition from Contracts with Customers

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 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~~credit losses based on historical write-offs combined with an evaluation of current economic conditions within its service territories.

The Company’s contracts do not contain any significant financing components.

The Company’s operating revenues are comprised of the following:

(In Thousands) (In Thousands)
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2023 2022 2023 2022 2024 2023
Regulated Tariff Sales
Residential $ 25,070 $ 25,108 $ 66,726 $ 65,767 $ 20,331 $ 19,004
Commercial 6,926 7,167 18,553 16,796 5,976 5,379
Industrial 3,396 3,208 9,041 8,504 3,133 2,839
Fire Protection 3,203 3,248 9,453 9,541 3,292 3,104
Wholesale 4,958 5,644 14,479 13,905 4,673 4,553
Non-Regulated Contract Operations 3,137 3,321 9,309 8,986 3,088 3,229
Total Revenue from Contracts with Customers $ 46,690 $ 47,696 $ 127,561 $ 123,499 $ 40,493 $ 38,108
Other Regulated Revenues 210 486 373 709 60 74
Other Non-Regulated Revenues 114 110 340 330 116 113
Inter-segment Elimination (299 ) (560 ) (602 ) (927 ) (145 ) (139 )
Total Revenue $ 46,715 $ 47,732 $ 127,672 $ 123,611 $ 40,524 $ 38,156

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, ~~2022, including Amendment No. 1 to such Annual Report on Form 10-K.~~2023.
Forward-Looking Statements
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:

- expected financial condition, performance, prospects and earnings of the Company;
- strategic plans for growth;
- the amount and timing of rate increases and other regulatory matters, including the recovery of certain costs recorded as regulatory assets;
- the Company’s expected liquidity needs during the upcoming fiscal year and beyond and the sources and availability of funds to meet its liquidity needs;
- expected customer rates, consumption volumes, service fees, revenues, margins, expenses and operating results;
- financial projections;
- the expected amount of cash contributions to fund the Company’s retirement benefit plans, anticipated discount rates and rates of return on plan assets;
- the ability of the Company to pay dividends;
- the Company’s compliance with environmental laws and regulations and estimations of the materiality of any related costs;
- the safety and reliability of the Company’s equipment, facilities and operations;
- the Company’s plans to renew municipal franchises and consents in the territories it serves;
- trends; and
- the availability and quality of our water supply.
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:

- effects of general economic conditions;
- increases in competition for growth in non-franchised markets to be potentially served by the Company;
- ability of the Company to adequately control selected operating expenses which are necessary to maintain safe and proper utility services, and which may be beyond the Company’s control;
- availability of adequate supplies of quality water;
- actions taken by government regulators, including decisions on rate increase requests;
- new or modified water quality standards and compliance with related legal and regulatory requirements;
- weather variations, including climate variability, and other natural phenomena impacting utility operations;
- financial and operating risks associated with acquisitions and/or privatizations;
- acts of war or terrorism;
- cyber-attacks;
- changes in the pace of new housing development;
- availability and cost of capital resources;
- timely availability of materials and supplies for operations and critical infrastructure projects;
- effectiveness of internal control over financial reporting;
- impact of ~~the Novel Coronavirus (COVID-19) pandemic;~~pandemics; and
- other factors discussed elsewhere in this report.

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/A~~10-K for the fiscal year ended December 31, ~~2022.~~2023.

Overview

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 60,000 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 ~~59,000~~60,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately ~~4,500 customers~~4,300 households 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 expiring in 2032. USA also 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 2030. In addition to performing day-to-day service operations, USA is responsible for emergency response and management of capital projects funded by Avalon and Highland Park.

Under a marketing agreement with HomeServe USA Corp. (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 matters associated with HomeServe’s service contracts. USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities.

Recent Developments

Middlesex Base Water Rate Increase ~~Request~~Approval - ~~In May 2023, Middlesex filed a petition with~~The approval by the New Jersey Board of Public Utilities (NJBPU) ~~seeking permission~~in February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual ~~base water~~operating revenues by ~~approximately $34 million.~~$15.4 million effective March 1, 2024. The ~~request was necessitated predominantly by~~approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure investments ~~Middlesex has made, or has committed to make,~~ to ensure ~~proper maintenance, development~~prudent upgrade and ~~improvement~~replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of service. In August 2023, Middlesex and 3M Company (3M) executed a settlement agreement (Settlement Agreement) to resolve a lawsuit Middlesex previously initiated claiming 3M introduced Perfluoroalkyl Substances (PFAS), which includes Perfluorooctanoic Acid, into the Company’s water supply for its Park Avenue Wellfield Treatment Plant (Park Avenue Plant). The rate case settlement provides that the net proceeds from the 3M Settlement Agreement were to be used to mitigate the increase in customer rates and reimburse Middlesex for previously incurred costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. This resulted in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction on the March 31, 2024 balance sheet. The Company also recognized for the quarter ended March 31, 2024 the recovery of $0.9 million for depreciation and $3.2 million for carrying costs associated with the Park Avenue Plant PFAS treatment upgrades, as well as the recovery of $1.4 million of previously incurred operating treatment costs while the Park Avenue Plant PFAS treatment upgrades were in process.
Middlesex Distribution System Improvement Charge (DSIC) - As allowed under its NJBPU approved Distribution System Improvement Charge (DSIC) Foundation Filing, in April 2024, Middlesex filed a petition with the NJBPU, seeking to establish a DSIC tariff rate that would result in $0.5 million of annual revenues. The tariff rate, if approved, would apply to General Service customers and would be based on meter size. We cannot predict when and whether the NJBPU will ultimately approve, deny, or reduce the amount of the request. ~~Under New Jersey statute, the NJPBU must render a decision within nine months of filing a base rate change petition.~~

~~Middlesex President and Chief Executive Officer Retirement Announcement –~~Tidewater DSIC- In ~~May~~December 2023, ~~President and Chief Executive Officer (CEO)~~the Delaware Public Service Commission (DEPSC) approved Tidewater’s application to implement a new DSIC. Effective January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, ~~Dennis W. Doll announced~~which is expected to generate revenue of approximately $1.3 million annually. A Delaware DISC is subject to a ~~plan~~semi-annual reset with an overall maximum rate of 7.5%.
United States Environmental Protection Agency (USEPA) Issues Final PFAS Regulations - In April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection MCLs adhered to retire upon turning age 65. Mr. Doll’s retirement is planned for the later of December 31, 2023 or, the date when a successor is duly named and effectively transitioned into the position. Mr. Doll will remain Chairman of the Middlesex Board of Directors (Board) through the expiration of his current term in May 2024. A search for Mr. Doll’s successor is being led by the ~~Compensation Committee~~Company. Under the new USEPA regulations, effective April 2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing compliance monitoring. Water systems must also provide the public with information on the levels of ~~the Board~~Regulated PFAS in ~~collaboration with a nationally-recognized executive search firm.~~their drinking water beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows that drinking water levels exceed these MCLs.

~~Pinelands’ Base Rate Increases Approved -~~ OnBeginning in April ~~12,~~2029, water systems that have Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in their drinking water and must provide notification to the public of the violation.
In anticipation of these new USEPA standards, in 2023, ~~Pinelands Water~~the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and ~~Pinelands Wastewater concluded their base rate case matters when the NJBPU approved a combined $1.0 million increase in annual base rates,~~is currently performing preliminary engineering studies to ensure that effective ~~April 15, 2023. The requests were necessitated by capital infrastructure investments the companies have made as well as increased operations and maintenance costs.~~PFAS treatment approaches are implemented.

Financings

~~Middlesex~~Tidewater -– In April ~~2023, Middlesex received approval from~~2024, the NJBPU to issue and sell up to 1.0 million shares of its common stock, without par value, through December 31, 2025. Additionally, in April 2023, Middlesex received approval from the NJBPU to borrow up to $300.0 million from the New JerseyDEPSC approved four Tidewater Delaware State Revolving Fund (SRF) Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025. The Company expects to issue equity and debt securities in a series of transaction offerings over a multi-year period to help fund Middlesex’s multi-year capital construction program.
In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce the Company’s outstanding balances under its bank lines of credit.
~~In May 2023, Middlesex received approval from the NJBPU to increase the number of authorized shares under the Middlesex Water Company Investment Plan (the Investment Plan) by 0.7 million shares.~~
~~Tidewater~~- ~~In April 2023, Tidewater closed on three Delaware Public Service Commission (DEPSC)-approved SRF~~ loans totaling ~~$10.2 million, all at interest rates of 2.0% with maturity dates in 2043 and 2044.~~$6.6 million. These loans are for the construction, relocation, improvement, and/or interconnection of transmission ~~mains.~~mains and construction of a water treatment facility. Tidewater expects to close on these loans in the 2nd quarter of 2024. Each project has ~~drawn a total of $1.5 million through September 30, 2023 and expects that~~its own construction timetable with the ~~requisitions will continue through mid-2025.~~last spending set to occur in 2026.

In May 2023, Tidewater closed on a $20.0 million loan from CoBank, ACB (CoBank) with an interest rate of 5.71% and a 2033 maturity date. Proceeds from the loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.
~~Pinelands~~ - In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for each loan. Proceeds from the loans were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital projects.

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 ~~$23~~$78 million in ~~the last quarter of 2023~~2024 in connection with projects that include, but are not limited to:

● Completion of construction of a facility to provide an enhanced treatment process at the Company’s largest wellfield located in South Plainfield, New Jersey to comply with new state water quality regulations related to perfluoroalkyl substances (PFAS), and integrate surge protection to mitigate spikes in water pressures along with enhancements to corrosion control and chlorination processes;
● Replacement of approximately ~~24,000~~17,000 linear feet of cast iron 6" water main in the ~~Borough of Carteret and the~~ Port Reading ~~section~~and Carteret sections of Woodbridge, New Jersey;
● Replacement of ~~Company~~control room and ~~customer owned lead and galvanized steel service lines;~~electrical distribution equipment at our Carl J. Olsen Surface Water Treatment Plant (CJO Plant);
● ~~Interconnecting Tidewater’s Angola and Meadows Districts which will provide redundant capacity~~Supply and storage ~~for both districts;~~improvements and installation of emergency generators at several of our Tidewater Delaware facilities;
● Construction of residual removal equipment and chemical feed improvements, pumps and a surge mitigation tank as well as other improvements and upgrades at our Park Avenue Plant;
● Upgrades and improvements to our Enterprise Resource Planning System; and
● Various water main replacements and improvements.

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 standard promulgated in a NJDEP regulation that became effective in 2021. Middlesex was required by the regulation to notify its affected customers and complied within the required Notice period in November 2021.
The Notice further required the Company to take any action necessary to comply with the new standard by September 7, 2022. Consequently, in November 2021, the Company implemented an interim solution to meet the Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status and obtaining alternate sources of supply. In June 2022, the Company accelerated the in-service date for a portion of the enhanced treatment project based on engineering analysis that allowed a restart of the Park Avenue Wellfield Treatment Plant to ensure continued compliance with all state and federal drinking water standards.
On September 13, 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP, which required the Company to take whatever actions necessary to achieve and maintain compliance with applicable regulations. As prescribed in the ACO, the Company was to issue periodic public notifications until the ACO was closed.
In June 2023, the Company completed the permanent construction of the entire Park Avenue Wellfield treatment upgrades and placed the upgrades into operation in full compliance with the NJDEP PFOA standards. The Company received confirmation from the NJDEP that it has complied with all requirements of the ACO and consequently, the ACO has been closed.
The Company had previously initiated a lawsuit against 3M Company (3M), seeking to hold 3M accountable for the Company’s claim that 3M introduced perfluoroalkyl substances (commonly known as “PFAS”), which include PFOA, into the Company’s water supply at its Park Avenue Wellfield facility.
~~On August 29, 2023, Middlesex and 3M executed a settlement agreement (the Settlement Agreement) to resolve Middlesex’s lawsuit against 3M. The Settlement Agreement provides that:~~

● 3M will pay Middlesex $93.2 million in two installments, one payment of $23.3 million in December 2023 ($23.3 million) and one payment of $69.9 million in July 2024. Middlesex is obligated to pay 30% of the proceeds received to its lawyers as legal fees, or $27.9 million in total;
● Middlesex anticipates its receipt of the Settlement Proceeds will have the effect of mitigating future increases in customer rates, the determination of which are based, in part, on Middlesex’s investments in utility infrastructure. For additional details, see “Item 1. Business – Regulation - Regulation of Rates and Services” in Middlesex’s 2022 Form 10-K;
● Middlesex, by nature of its status as a U.S. water purveyor impacted by PFAS, was automatically included in a Multi-District Litigation Settlement before the United States District Court for the District of South Carolina in which 3M and other companies (Non-3M Companies) are participants. Middlesex agreed as part of this settlement to remain a member of the plaintiff class in order to be eligible to obtain future additional compensation from 3M and the Non-3M Companies for the remediation of its water treatment facilities; and
● Middlesex and 3M agreed to enter into a joint mediation, scheduled for November 2023, to resolve two PFOA-related class action lawsuits against Middlesex seeking restitution for medical, water replacement and other claimed related costs. Both Middlesex and 3M are defendants in these lawsuits. These lawsuits remain in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.
It is the Company’s intent that any financial benefit which may result from the Settlement Agreement, net of any litigation costs to Middlesex, will ultimately inure to the benefit of the Middlesex customers in the form of mitigating future customer rate increases. As such, the anticipated net Settlement Agreement proceeds of $65.2 million have been recorded as a Regulatory Liability in the Company’s September 30, 2023 Consolidated Balance Sheet.

Outlook

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 patterns may occur at any time, which can result in lower customer demand for water.

~~Our~~We continue to make investments in system infrastructure ~~continue to grow significantly~~ and our operating costs continue to increase in ~~2023~~2024 in a variety of categories. These factors, ~~led Middlesex to file for a~~among others, may require base rate increase request filings for Tidewater, Pinelands Water and Pinelands Wastewater later in ~~May 2023. Tidewater has not yet determined the need to file for a base rate increase but continues to monitor its requirements for a rate filing in 2023.~~2024.

Overall, organic residential customer growth continues in our Tidewater system ~~but is impacted by the~~(approximately 4% in 2023). However, current and evolving ~~macroeconomic~~economic market conditions ~~relative to residential housing. Builders and developers in our Delaware service territory are experiencing longer home sales closing cycles due to supply chain constraints, which~~ may ~~be further affected by inflationary trends and the federal government’s ongoing efforts to mitigate inflation through increases in interest rates.~~challenge that growth.

The Company has projected to spend approximately ~~$277~~$226 million for the ~~2023-2025~~2024-2026 capital investment program, including approximately ~~$18~~$15 million for ~~PFAS-related treatment upgrades,~~replacement of a thirty inch main in our Middlesex System, $9 million for Lead ~~and Copper Rule~~Service Line Replacement compliance in the Middlesex System, $34 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System, ~~and $4~~$6 million for ~~construction~~evaluation of ~~elevated storage tanks in~~PFAS treatment at our ~~Tidewater~~CJO Plant and ~~Middlesex Systems.~~$7 million for control room and electrical distribution equipment at our CJO Plant.

Our strategy for profitable growth is focused on the following key areas:

● Invest in projects, products and services that complement our core water and wastewater competencies;
● Timely and adequate recovery of infrastructure investments and other costs to maintain service quality;
● Prudent acquisitions of investor and municipally-owned water and wastewater utilities; and
● Operation of municipal and industrial water and wastewater systems on a contract basis which meet our risk profile.
The calendar year 2023 is a period of significant transition for the Company based on the items noted above and elsewhere in this document, including the transition of the CEO and other elements of the Company’s succession plan, various rate case and other regulatory proceedings and various construction and financing initiatives. The timing and extent of these matters, both individually and collectively, may impact financial results in 2023. No such items however, are expected to have a material adverse effect on revenues or earnings.

Operating Results by Segment

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.

Results of Operations – Three Months Ended ~~September 30, 2023~~March 31, 2024

(In Thousands) (In Thousands)
Three Months Ended September 30, Three Months Ended March 31,
2023 2022 2024 2023
Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total Regulated Non-
Regulated Total
Revenues $ 43,578 $ 3,137 $ 46,715 $ 44,411 $ 3,321 $ 47,732 $ 37,436 $ 3,088 $ 40,524 $ 34,926 $ 3,230 $ 38,156
Operations and maintenance expenses 20,376 2,205 22,581 17,935 2,377 20,312 18,364 2,101 20,465 17,930 2,327 20,257
Depreciation expense 6,311 65 6,376 5,754 60 5,814 5,329 67 5,396 5,921 65 5,986
Other taxes 4,883 53 4,936 4,972 59 5,031 4,744 54 4,798 4,360 63 4,423
Operating income $ 12,008 $ 814 $ 12,822 $ 15,750 $ 825 $ 16,575 $ 8,999 $ 866 $ 9,865 $ 6,715 $ 775 $ 7,490

Other income, net 1,354 78 1,432 1,967 72 2,039 5,306 59 5,365 1,668 43 1,711
Interest expense 3,518 — 3,518 2,355 — 2,355
Interest charges 3,269 — 3,269 2,595 — 2,595
Income taxes 460 286 746 1,679 289 1,968 987 292 1,279 464 274 738
Net income $ 9,384 $ 606 $ 9,990 $ 13,683 $ 608 $ 14,291 $ 10,049 $ 633 $ 10,682 $ 5,324 $ 544 $ 5,868

Operating Revenues

Operating revenues for the three months ended ~~September 30, 2023 decreased $1.0~~March 31, 2024 increased $2.4 million from the same period in ~~2022~~2023 due to the following factors:

● Middlesex System revenues ~~decreased $0.2~~increased $1.6 million due to ~~lower customer demand offset somewhat by~~ the ~~implementation of the final phase of the 2021~~approved base rate ~~case~~ increase ~~on January~~effective March 1, ~~2023;~~2024 and higher commercial and industrial customer billings; and
● Tidewater System revenues increased $0.8 million due to increased customers and higher customer demand.

● ~~Tidewater System revenues decreased $0.7 million due to lower customer demand and lower revenue from a 2022 DEPSC-ordered rate reduction partially offset by an increase in customers; and~~
● ~~All other revenue categories decreased $0.1 million.~~
Operation and Maintenance Expense

Operation and maintenance expenses for the three months ended ~~September 30, 2023~~March 31, 2024 increased ~~$2.3~~$0.2 million from the same period in ~~2022~~2023 due to the following factors:

● ~~Higher purchased water costs and~~An enhanced water treatment ~~costs in our Middlesex system~~process at Middlesex’s Park Avenue Plant resulted in $0.4 million of increased ~~production costs of $1.4 million;~~costs;
● Labor and employee benefit cost increased $1.1 million due to wage and 401k Plan contribution increases and executive management transition costs;
● Outside professional support service costs for legal, finance and regulatory matters rose by ~~$0.4 million primarily due~~$0.2 million;
● Recovery of prior year water treatment operating costs at the Park Avenue Plant and amortization of proceeds from the 3M Settlement Agreement reduced costs $1.6 million. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to ~~production instrumentation calibration activities;~~recover costs, including certain prior year operating expenses, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2, Rate and Regulatory Matters, Middlesex; and
● All other operation and maintenance expense categories increased ~~$0.5~~$0.1 million.

Depreciation

Depreciation expense for the three months ended ~~September 30, 2023 increased~~March 31, 2024 decreased $0.6 million from the same period in ~~2022~~2023 due to the recovery of prior year depreciation related to upgrades at Middlesex’s Park Avenue Plant partially offset by a higher level of utility plant in service. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including deprecation, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2, Rate and Regulatory Matters, Middlesex.

Other Taxes

Other taxes for the three months ended ~~September 30, 2023 decreased $0.1~~March 31, 2024 increased $0.4 million from the same period in ~~2022~~2023 primarily due to ~~lower revenue~~higher gross receipts taxes on higher revenues in our Middlesex System and higher payroll related taxes on ~~decreased revenues~~increased labor costs in our Middlesex System.

Other Income, net

Other Income, net for the three months ended ~~September 30, 2023 decreased $0.6~~March 31, 2024 increased $3.7 million from the same period in ~~2022~~2023 due primarily to ~~lower~~the recovery of carrying costs on the PFAS treatment upgrades at Middlesex’s Park Avenue Plant and higher actuarially-determined retirement benefit plans non-service ~~benefit and lower~~benefit. Lower Allowance for Funds Used During Construction ~~(AFUDC)~~ resulting from a lower level of capital projects in ~~progress.~~progress partially offset these increases. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to recover costs, including carrying costs, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2, Rate and Regulatory Matters, Middlesex.

Interest Charges

Interest charges for the three months ended ~~September 30, 2023~~March 31, 2024 increased ~~$1.2~~$0.7 million from the same period in ~~2022~~2023 due to higher average debt outstanding and an increase in average borrowing rates.

Income Taxes

Income taxes for the three months ended ~~September 30, 2023 decreased~~March 31, 2024 increased by ~~$1.2~~$0.5 million from the same period in ~~2022,~~2023, primarily due to ~~greater~~higher pre-tax income and lower income tax benefits associated with ~~increased~~decreased repair expenditures on tangible property in the Middlesex System offset by the recovery of income taxes on the taxable portion of the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and ~~lower pre-tax income.~~Middlesex’s 2023 base rate matter, see Note 2, Rate and Regulatory Matters, Middlesex.

Net Income and Earnings Per Share

Net income for the three months ended ~~September 30, 2023 decreased $4.3~~March 31, 2024 increased $4.8 million as compared with the same period in ~~2022.~~2023. Basic earnings per share were ~~$0.56~~$0.60 and ~~$0.81~~$0.33 for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Diluted earnings per share were ~~$0.56~~$0.59 and ~~$0.80~~$0.33 for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively.~~

~~Results of Operations – Nine Months Ended September 30, 2023~~
(In Thousands)
Nine Months Ended September 30,
2023 2022
Regulated Non-
Regulated Total Regulated Non-
Regulated Total
Revenues $ 118,363 $ 9,309 $ 127,672 $ 114,625 $ 8,986 $ 123,611
Operations and maintenance expenses 57,548 6,494 64,042 52,780 6,227 59,007
Depreciation expense 18,350 196 18,546 16,925 182 17,107
Other taxes 13,922 182 14,104 13,359 184 13,543
Gain on Sale of Subsidiary — — — 5,232 — 5,232
  Operating income 28,543 2,437 30,980 36,793 2,393 39,186

Other income, net 5,126 160 5,286 5,531 207 5,738
Interest expense (benefit) 9,364 — 9,364 6,575 (1 ) 6,574
Income taxes 288 855 1,143 2,253 839 3,092
  Net income $ 24,017 $ 1,742 $ 25,759 $ 33,496 $ 1,762 $ 35,258
~~Operating Revenues~~
~~Operating revenues for the nine months ended September 30, 2023 increased $4.1 million from the same period in 2022 due to the following factors:~~
● ~~Middlesex System revenues increased $4.9 million due to the implementation of the final phase of the 2021 base rate case increase on January 1, 2023 offset somewhat by lower customer demand;~~
● ~~Tidewater System revenues decreased $1.2 million due to lower new connection fees and lower revenue from a 2022 DEPSC-ordered rate reduction partially offset by an increase in customers; and~~
● ~~Non-regulated revenues increased $0.3 million due to~~ ~~higher supplemental contract services; and~~
● ~~Pinelands revenue increased $0.1 million due to the implementation of a base rate increase effective April 15, 2023.~~
~~Operation and Maintenance Expense~~
~~Operation and maintenance expenses for the nine months ended September 30, 2023 increased $5.0 million from the same period in 2022 due to the following factors:~~
● ~~Higher purchased water costs and water treatment costs in our Middlesex system resulted in increased production costs of $3.4 million;~~
● ~~Labor costs also increased by $0.7 million due to wage increases;~~
● ~~Outside service costs rose by $0.7 million primarily due to production instrumentation calibration activities;~~
● ~~Business insurance costs increased $0.4 million due to higher policy premiums;~~
● ~~Lower weather-related main break activity in our Middlesex system during the winter months resulted in $0.8 million of decreased non-labor costs;~~
● ~~Non-regulated operation and maintenance expense increased $0.3 million due to higher supplemental contract services; and~~
● ~~All other operation and maintenance expense categories increased $0.3 million.~~
~~Depreciation~~
~~Depreciation expense for the nine months ended September 30, 2023 increased $1.4 million from the same period in 2022 due to a higher level of utility plant in service.~~

~~Other Taxes~~
Other taxes for the nine months ended September 30, 2023 increased $0.6 million from the same period in 2022 primarily due to higher revenue related taxes on increased revenues in our Middlesex System.
~~Gain on Sale of Subsidiary~~
~~Middlesex recognized a $5.2 million gain on the sale of its regulated Delaware wastewater subsidiary in January 2022.~~
~~Other Income, net~~
Other Income, net for the nine months ended September 30, 2023 decreased $0.5 million from the same period in 2022 primarily due to lower actuarially-determined retirement benefit plans non-service benefit partially offset by higher AFUDC resulting from a lower level of capital projects in progress.
~~Interest Charges~~
~~Interest charges for the nine months ended September 30, 2023 increased $2.8 million from the same period in 2022 due to higher average debt outstanding and an increase in average borrowing rates.~~
~~Income Taxes~~
Income taxes for the nine months ended September 30, 2023 decreased by $1.9 million from the same period in 2022, primarily due to greater income tax benefits associated with increased repair expenditures on tangible property in the Middlesex System and lower pretax income due to gain on the sale of a subsidiary in 2022.
~~Net Income and Earnings Per Share~~
Net income for the nine months ended September 30, 2023 decreased $9.5 million as compared with the same period in 2022. Basic earnings per share were $1.45 and $2.00 for the nine months ended September 30, 2023 and 2022, respectively. Diluted earnings per share were $1.44 and $1.99 for the nine months ended September 30, 2023 and 2022, respectively.respectively

Liquidity and Capital Resources

Operating Cash Flows

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 ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, cash flows from operating activities decreased ~~$4.3~~$9.3 million to ~~$40.0~~$6.7 million. The decrease in cash flows from operating activities primarily resulted from ~~lower net income~~timing of vendor payments and higher interest ~~and tax~~ payments.

Investing Cash Flows

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, cash flows used in investing activities ~~increased $10.3~~decreased $10.1 million to ~~$73.1~~$14.4 million due to ~~increased~~decreased utility plant expenditures in ~~2023 and cash received in January 2022 from the sale of Middlesex’s regulated wastewater subsidiary.~~2024.

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

Financing Cash Flows

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, cash flows from financing activities ~~increased $14.3~~decreased $1.4 million to ~~$32.2~~$8.2 million. The ~~increase~~decrease in cash flows provided by financing activities is due to ~~an increase in net borrowings partially offset by increased common stock dividend payments and~~ lower proceeds from the issuance of common stock under the Middlesex Water Company Investment ~~Plan.~~Plan (Investment Plan) offset by higher net borrowings.

Capital Expenditures and Commitments

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.~~program for the current year.

The capital investment program for ~~2023~~2024 is currently estimated to be approximately ~~$96~~$78 million. Through ~~September 30, 2023,~~March 31, 2024, we have expended ~~$73.1~~$14.4 million and expect to incur approximately ~~$23~~$64 million for capital projects for the remainder of ~~2023.~~2024.

We currently project that we may expend approximately ~~$181~~$149 million for capital projects in ~~2024~~2025 and ~~2025.~~2026. 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.

To pay for our capital program for the remainder of ~~2023,~~2024, we plan on utilizing some or all of the following:
● Internally generated funds;
● Short-term borrowings, as needed, through $140 million of bank lines of credit established with multiple financial institutions. As of ~~September 30, 2023,~~March 31, 2024, there was ~~$97.8~~$82.0 million of available credit under these lines (for further discussion on Company lines of credit, see Note 6 – Short Term Borrowings);
● Proceeds from long-term borrowing arrangements, including loans from private placement, CoBank, ~~and~~ACB and/or the Delaware SRF Program, which provides cost-effective financing for projects that meet certain water quality-related and/or system improvement criteria (for further discussion on long-term borrowings, see Recent Developments – Financings above); and
● Proceeds from sales of common stock under the Investment ~~Plan.~~Plan; and
● Proceeds from 3M Settlement Agreement. For further information on the 3M Settlement Agreement, see Note 2, Rate and Regulatory Matters, Middlesex.

In March 2023, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan. The discount offering will continue until 200,000 shares are purchased at the discounted price or December 1, 2023, whichever event occurs first.
~~In April 2023,~~ Middlesex has received approval from the NJBPU to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025. The Company expects to issue debt securities in a series of one or more transaction offerings over a multi-year period to help fund Middlesex’s multi-year capital construction program.
In ~~May 2023, Middlesex received approval from~~April 2024, the ~~NJBPU~~DEPSC approved four Tidewater Delaware SRF loans totaling $6.6 million. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Tidewater expects to ~~increase~~close on these loans in the ~~number~~2nd quarter of ~~authorized shares under~~2024. Each project has its own construction timetable with the ~~Investment Plan by 0.7 million shares.~~last spending set to occur in 2026.

In order to fully fund the ongoing investment program in our utility plant infrastructure and maintain a balanced capital structure consistent with regulators’ expectations 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 approved by the NJBPU, the Company is authorized to issue and sell up to 1.0 million shares of its common stock in one or more transactions through December 31, 2025.

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

Item 3. Quantitative and Qualitative Disclosures of Market Risk

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~~2024 to 2059. Over the next twelve months, approximately ~~$7.4~~$7.8 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.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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.

As required by Rule 13a-15 under 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 for the quarter ended ~~September 30, 2023.~~March 31, 2024. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that no changes in internal control over financial reporting occurred during the quarter ended ~~September 30, 2023~~March 31, 2024 that has materially affected, or are reasonably likely to materially affect, internal control over financial reporting and that our disclosure controls and procedures were not effective as of ~~September 30, 2023~~March 31, 2024 due to the material weakness described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

In 2023, the Company’s independent registered public accounting firm, Baker Tilly US, LLP (Baker Tilly), conducted a routine internal quality review of its integrated audit of the Company’s 2022 consolidated financial statements and internal control over financial reporting as of December 31, 2022. As a result of this review, Baker Tilly re-examined the Company’s information technology general controls (ITGCs) in the areas of user access and change management over certain information technology (IT) systems that support the Company’s financial reporting processes. Certain of those controls were found to be deficient because of a lack of sufficient IT control processes designed to prevent or detect unauthorized changes in applications and data in selected IT environments. ~~It has therefore been concluded that automated and manual process controls dependent on ITGCs were not effective.~~ These ineffective controls create a possibility that material misstatements in financial reporting processes and financial statement accounts in our consolidated financial statements will not be prevented or detected on a timely basis and, therefore, based on the assessment, management has concluded that they represent a material weakness in our internal control over financial reporting and that the Company’s internal control over financial reporting was not effective as of ~~September 30, 2023.~~March 31, 2024.

Notwithstanding the ~~newly identified~~ material weakness referred to above, Management, including our Principal Executive Officer and Principal Financial Officer, believe that the financial statements contained in this Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2023~~March 31, 2024 fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company for all periods presented in accordance with accounting principles generally accepted in the United States of America.

We are committed to remediating the material weakness in a timely manner. Our remediation process includes, but is not limited to, enhancements to our ITGCs and automated auditing features of our IT systems as well increased monitoring of IT system changes made through certain user accounts. Since the material weakness was first identified, Management has implemented various auditing and monitoring solutions that provide greater transparency into changes made within our information technology (IT) systems. These control solutions are supported by a timely review process that focuses on the proper authorization and approval of IT system changes. We expect to implement additional internal controls during the second quarter of 2024 to further remediate the material weakness.

~~While the~~The Audit Committee of our Board of Directors and Company Management will continue to closely monitor ~~the remediation efforts, until~~ the remediation efforts discussed in this section, including any additional remediation efforts that our Management identifies as ~~necessary,~~necessary. When they are ~~complete,~~completed, tested and determined effective, we will ~~not~~ be able to conclude that the material weakness has been remediated.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

The following information updates and amends the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 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.

PFOA Regulatory Notice of Non-Compliance

Vera et al. v. Middlesex Water Company – ~~On March 21, 2023, the United States District Court for the District~~The deadline of ~~New Jersey issued an order remanding the case back to~~February 29, 2024 set by the Superior Court of New ~~Jersey. Discovery is underway in this matter. On August 29, 2023~~Jersey for the ~~Company executed~~parties to submit a final settlement agreement with the Court was cancelled to allow the parties additional time to reach a settlement.
Lonsk et al. v. Middlesex Water Company and 3M Company - The deadline of March 4, 2024 set by the Superior Court of New Jersey for the parties to ~~resolve~~submit a ~~lawsuit related~~final settlement agreement with the Court was cancelled to ~~perfluoroalkyl substances. For~~allow the parties additional ~~information see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Notice of Non-Compliance.”~~time to reach a settlement.

Item 1A. Risk Factors

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/A~~10-K for the year ended December 31, ~~2022 (filed November 8, 2023).~~2023.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) None.

(b) None.

(c) Insider Trading Arrangements and Policies - During the three months ended ~~September 30, 2023,~~March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits
Exhibits designated with a dagger (t) are management contracts or compensatory plans.

~~10.17(c)~~(t)10.12 ~~Promissory Note~~Employment Agreement, dated as of March 1, 2024, between the Company and ~~Supplement,~~Nadine Duchemin-Leslie, filed as Exhibit 99.2 of the Company’s Current Report on Form 8-K dated May 11, 2023, between Tidewater Utilities, Inc. and CoBank, ACB; Amendments to Combination Water Utility Real Estate Mortgage and Security Agreement, effective May 11, 2023, between Tidewater Utilities, Inc. and CoBank, ACB.January 23, 2024.

~~10.17(d)~~(t)10.12(a) ~~Sixth Amendment to Promissory Note and Supplement,~~Change in Control Termination Agreement, dated as of ~~May 11, 2023,~~March 1, 2024, between ~~Tidewater Utilities, Inc.~~the Company and ~~CoBank, ACB.~~Nadine Duchemin-Leslie, filed as Exhibit 99.3 of the Company’s Current Report on Form 8-K dated January 23, 2024.

~~10.53~~10.12 ~~Multiple Advance Term Promissory Note,~~Consulting Agreement, dated ~~May 22, 2023,~~March 1, 2024, between ~~Pinelands Water~~the Company and ~~CoBank, ACB.~~
~~10.54~~ ~~Multiple Advance Term Promissory Note,~~Dennis W. Doll, filed as Exhibit 99.4 of the Company’s Current Report on Form 8-K dated ~~May 22, 2023, between Pinelands Wastewater Company and CoBank, ACB.~~
10.55* ~~Settlement Agreement, dated as of August 28, 2023 between Middlesex Water Company and 3M Company~~January 23, 2024.

31.1 Section 302 Certification by ~~Dennis W. Doll~~Nadine Leslie pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.2 Section 302 Certification by A. Bruce O’Connor pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

32.1 Section 906 Certification by ~~Dennis W. Doll~~Nadine Leslie pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.2 Section 906 Certification by A. Bruce O’Connor pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.LAB XBRL Labels Linkbase Document
101.PRE XBRL Presentation Linkbase Document
101.DEF XBRL Definition Linkbase Document
104 Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
* Certain portions of this exhibit that constitute confidential information have been omitted in accordance with Regulation S-K, Item 601(b)(10)(iv) because it is both (i) not material and (ii) is the type of information the Company treats as private and confidential.

SIGNATURES

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.

MIDDLESEX WATER COMPANY

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

Date: ~~November 9, 2023~~May 8, 2024

~~iso4217:USD xbrli:shares~~0000066004 us-gaap:RetainedEarningsMember 2024-01-01 2024-03-31

	(In Thousands)
	Pension Benefits						Other Benefits
	Three Months Ended September 30,
	2023			2022			2023			2022

Service Cost	$	388		$	591		$	98		$	200
Interest Cost		1,067			761			402			331
Expected Return on Assets		(1,466	)		(1,760	)		(771	)		(887	)
Amortization of Unrecognized Losses		164			418			(48	)		—
Net Periodic Benefit Cost (Benefit)*	$	153		$	10		$	(319	)	$	(356	)

	●	~~Interconnecting Tidewater’s Angola and Meadows Districts which will provide redundant capacity~~Supply and storage ~~for both districts;~~improvements and installation of emergency generators at several of our Tidewater Delaware facilities;
	●	Construction of residual removal equipment and chemical feed improvements, pumps and a surge mitigation tank as well as other improvements and upgrades at our Park Avenue Plant;
	●	Upgrades and improvements to our Enterprise Resource Planning System; and

	●	Middlesex System revenues ~~decreased $0.2~~increased $1.6 million due to ~~lower customer demand offset somewhat by~~ the ~~implementation of the final phase of the 2021~~approved base rate ~~case~~ increase ~~on January~~effective March 1, ~~2023;~~2024 and higher commercial and industrial customer billings; and
	●	Tidewater System revenues increased $0.8 million due to increased customers and higher customer demand.

	●	Labor and employee benefit cost increased $1.1 million due to wage and 401k Plan contribution increases and executive management transition costs;
	●	Outside professional support service costs for legal, finance and regulatory matters rose by ~~$0.4 million primarily due~~$0.2 million;
	●	Recovery of prior year water treatment operating costs at the Park Avenue Plant and amortization of proceeds from the 3M Settlement Agreement reduced costs $1.6 million. The conclusion of Middlesex’s 2023 base rate increase request allowed Middlesex to ~~production instrumentation calibration activities;~~recover costs, including certain prior year operating expenses, from the proceeds from the 3M Settlement Agreement. For further information on the 3M Settlement Agreement and Middlesex’s 2023 base rate matter, see Note 2, Rate and Regulatory Matters, Middlesex; and

	●	Proceeds from sales of common stock under the Investment ~~Plan.~~Plan; and
	●	Proceeds from 3M Settlement Agreement. For further information on the 3M Settlement Agreement, see Note 2, Rate and Regulatory Matters, Middlesex.

Item 6.	Exhibits
	Exhibits designated with a dagger (t) are management contracts or compensatory plans.

~~10.17(c)~~(t)10.12	~~Promissory Note~~Employment Agreement, dated as of March 1, 2024, between the Company and ~~Supplement,~~Nadine Duchemin-Leslie, filed as Exhibit 99.2 of the Company’s Current Report on Form 8-K dated May 11, 2023, between Tidewater Utilities, Inc. and CoBank, ACB; Amendments to Combination Water Utility Real Estate Mortgage and Security Agreement, effective May 11, 2023, between Tidewater Utilities, Inc. and CoBank, ACB.January 23, 2024.

~~10.17(d)~~(t)10.12(a)	~~Sixth Amendment to Promissory Note and Supplement,~~Change in Control Termination Agreement, dated as of ~~May 11, 2023,~~March 1, 2024, between ~~Tidewater Utilities, Inc.~~the Company and ~~CoBank, ACB.~~Nadine Duchemin-Leslie, filed as Exhibit 99.3 of the Company’s Current Report on Form 8-K dated January 23, 2024.

~~10.53~~10.12	~~Multiple Advance Term Promissory Note,~~Consulting Agreement, dated ~~May 22, 2023,~~March 1, 2024, between ~~Pinelands Water~~the Company and ~~CoBank, ACB.~~

~~10.54~~	~~Multiple Advance Term Promissory Note,~~Dennis W. Doll, filed as Exhibit 99.4 of the Company’s Current Report on Form 8-K dated ~~May 22, 2023, between Pinelands Wastewater Company and CoBank, ACB.~~

10.55*	~~Settlement Agreement, dated as of August 28, 2023 between Middlesex Water Company and 3M Company~~January 23, 2024.

31.1	Section 302 Certification by ~~Dennis W. Doll~~Nadine Leslie pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.2	Section 302 Certification by A. Bruce O’Connor pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

32.1	Section 906 Certification by ~~Dennis W. Doll~~Nadine Leslie pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.2	Section 906 Certification by A. Bruce O’Connor pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


104	Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

	MIDDLESEX WATER COMPANY

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