2024 ANNUAL REPORT
2024 Year in Review
Our Impact
4,500
employee
volunteer hours
$5M
in charitable
donations
550+
community organizations
supported
Our Footprint
9
states
5.5 million
people served
1.9 million
customer connections
3,200+
employees
$27 million
invested in
PFAS mitigation
$23 million
invested in lead service
line remediation
$1.3+ billion
in infrastructure improvement
1,670
lead service
lines replaced
425
miles of pipeline
replaced or retired
$10.7 million
invested in smart
natural gas meters
Our Investment
2 ³
➤ 3
2024 ANNUAL REPORT
With optimism and resolve,
Christopher H. Franklin
Chairman and CEO,
Essential Utilities, Inc.
A Word From Our Chairman & CEO
Reflecting on the past year, I am reminded of the dynamic
landscape in which we live. The water, wastewater and
natural gas sectors face pressing challenges —PFAS
contamination, aging infrastructure and unusual weather—
all while we work to keep customer rates affordable. These
challenges also present opportunities to lead with purpose
and shape a future rooted in sustainability, innovation,
resilience and best-in-class service for our customers.
Our theme, “Leading Today, Shaping Tomorrow,” captures
our dual focus: solving today’s challenges while building
a sustainable future. With pride and confidence, I share
our 2024 achievements and vision for the future of our
138-year-old company.
This year, our strong financial results reflected a disciplined
approach to operating and capital expense management,
ensuring consistent returns for shareholders. Operational
excellence is central to our success. In fact, “the pursuit of
excellence” is one of the three corporate values we hold
and display proudly at each facility around the company.
Regulatory Milestones
In the utility business, regulatory reputation is critical. It
begins with how we treat customers and deliver on our
service commitments. It’s also why we are proud of our
2024 regulatory accomplishments in our home state of
Pennsylvania. The successful conclusion of our water and
natural gas rate cases included approval of a weather
normalization mechanism—a regulatory tool that stabilizes
natural gas customer bills and company revenue amid
weather fluctuations.
Tackling Pressing Challenges
This year we were appointed receiver for 10 water and
wastewater systems that were undercapitalized and, in
some cases, dilapidated. We stabilized operations and
improved the long-term viability of the systems. We used
our patent-pending PFAS treatment and lead service line
replacements to protect public health and comply with
emerging federal regulations. The deployment of smart
meters in our gas business has the potential to save lives
in cases of over-pressurization. These initiatives were
accomplished while we reduced greenhouse gas emissions
through extensive natural gas pipeline replacement
and explored hydrogen energy as a cleaner alternative,
positioning us at the forefront of energy innovation.
Customer-Centric Innovations
Innovation is key to meeting evolving customer needs.
Our ePortal and smart metering systems provide customers
with greater convenience and deeper insights into
consumption, reinforcing our commitment to an improved
customer experience.
Dear Shareholders,
Business Resilience
Our work to mitigate risk in the natural gas business led us
to accelerate gas pipeline replacements and address aging
underground storage wells to make them safer and cleaner
for the environment. We also implemented Supervisory
Control and Data Acquisition (SCADA) monitoring systems to
ensure water safety and reliability.
By staying ahead of potential challenges, our customers and
employees are safer.
Steady Growth
In Pennsylvania, we recognized that the acquisition of
municipal water and wastewater systems were receiving
some opposition, so we worked closely with the PUC to
bring reform to the Pennsylvania fair market value (FMV)
statute. The new regulation will provide greater certainty for
municipal transactions, support rate affordability and advance
regionalization, where Essential Utilities can be a solution.
The current buzz in the utility industry is the rise of data
centers and the resulting AI-driven power demand. While
some investors see greater growth in electric utilities, we
offer a unique advantage: stability as the second largest
investor-owned water utility in the U.S., and growth potential
from data centers in our natural gas service territory. We are
currently in discussions with developers planning over 5 GW
of power demand in our region.
Above all, we remain committed to sustainable growth and
long-term stability—delivering value to our shareholders
while ensuring future generations benefit from our
operations and strategies.
None of this would be possible without our dedicated team,
strong partnerships with communities and regulators, and
trust of our customers.
To our shareholders, thank you for your continued confidence
and investment. The foundation we have built positions us to
continue leading with purpose and delivering value for years
to come.
In thousands of dollars, except per-share amounts
2024
2023
% Change
Operating Revenues
$2,086,113
$2,053,824
1.6%
Regulated Segments:
Regulated Water Segment Revenues
$1,221,880
$1,153,376
5.9%
Regulated Natural Gas Segment Revenues
$842,991
$863,759
-2.4%
Operations and Maintenance Expense
$587,250
$575,518
2.0%
Net income
$595,314
$498,226
19.5%
Capital Expenditures
$1,329,747
$1,199,103
10.9%
Diluted net income per common share
$2.17
$1.86
16.7%
Annualized dividend rate per common share (12/31)
$1.3020
$1.2284
6.0%
Total Assets
$18,026,554
$16,841,459
7.0%
Number of utility customers served (12/31)
1,869,306
1,857,461
0.6%
2024 Financial Highlights
4 ³
2024 ANNUAL REPORT
$1.86
$2.17
2020(1)(2)
2021
2022
2023
2024
$1.27
$1.67
$1.77
(3)
$889.1
$1,020.5
$1,062.8
$1,199.1
$1,329.7
2020(4)
2021
2022
2023
2024
$1.003
$1.073
$1.148
$1.228
$1.302
2020
2021
2022
2023
2024
751,502
1,047,301
753,244
1,066,805
756,341
1,095,245
743,746
1,113,715
745,439
1,123,867
Natural Gas
Water
2020
2021
2022
2023
2024
Capital Investment
(in millions of dollars)
Diluted Adjusted Income
per Common Share
Dividends per Share
(annualized)
Utility Customer Connections
(1) 2020 Net income per share was $1.12 (GAAP). 2020 adjusted for transaction costs and other items related to the Peoples transaction (Non-GAAP).
(2) Includes Peoples’ operating results as of the closing date of the Peoples acquisition on March 16, 2020.
(3) 2024 Adjusted Income per Common Share (Non-GAAP) was $1.97.
(4) 2020 Capital investment includes $53.5 million of capital invested by Peoples prior to closing.
Please see the investor relations page of Essential.co for a reconciliation of GAAP to non-GAAP financial measures.
➤ 5
2024 ANNUAL REPORT
Leading the Way
Through Operational and
Environmental Excellence
In 2024, we upheld our commitment to protecting and providing Earth’s most essential
resources with a focus on infrastructure modernization, environmental stewardship,
and exceptional service. With more than $1.3 billion invested and plans for more than
$7.8 billion in long-term projects through 2029, we are addressing today’s challenges
while preparing for tomorrow’s needs.
Our approach reflects a balance of operational agility
and forward-thinking vision, from advancing water
safety through PFAS innovations and lead service line
replacements to enhancing system reliability with
advanced monitoring and energy initiatives. These
achievements earned us Newsweek’s “America’s Most
Responsible Companies” award for the fourth consecutive
year, a testament to our leadership and impact.
Our influence extends beyond operations. By sharing our
expertise at major industry conferences, including National
Association of Water Companies, American Water Works
Association, American Gas Association, and the Energy
Solutions Center, we continue to lead critical conversations
shaping the future of water and energy management.
Through 2029, Essential
will invest more than
$7.8 billion
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2024 ANNUAL REPORT
PFAS Solutions: Innovation Meets Affordability
PFAS contamination presents one of the most pressing environmental
challenges of our time. Our proactive adoption of advanced treatment
technologies while seeking access to low interest loans and grants ensures
regulatory compliance while minimizing the financial impact on customers.
In North Carolina, our team secured $5.8 million in grant funding to
construct PFAS mitigation projects at eight sites across our service territory.
These advanced treatment facilities will use modular ion exchange filters
to remove PFAS from drinking water for approximately 37,000 customers.
The proprietary modular system known as PFAS Guard, developed by our
team, not only meets the anticipated new federal PFAS standards but also
reduces initial capital costs and improves long-term maintenance efficiency.
“Our innovative and
scalable approach to
PFAS treatment allows
us to rapidly address
these contaminants in
the many community-
based well systems we
serve statewide.”
SHANNON BECKER, PRESIDENT,
AQUA NORTH CAROLINA
Setting the Standard in
Water Industry Leadership
The water and wastewater industry faces transformative challenges as regulatory
demands evolve to ensure higher standards for safety and quality. We are meeting these
challenges with adaptability, expertise, and a relentless focus on operational excellence.
³7
2024 ANNUAL REPORT
Progress in Lead
Service Line Replacement
Our lead service line replacement initiatives
underscore our commitment to public health
and regulatory compliance. Through meticulous
planning and community collaboration, we
are making tangible progress in modernizing
water infrastructure and safeguarding drinking
water. To date, we have replaced 4,800 lead
or galvanized service lines across our service
territory, with more than 1,600 in 2024 alone.
In Pennsylvania, we have successfully replaced lead
and galvanized service lines at more than 1,000
homes and businesses across 62 municipalities, just
one year into our major statewide initiative. These
projects focus on customer-owned service lines—the
pipes running from the curb to homes and businesses.
In 2024 alone, we replaced 241 lead and 777
galvanized service lines in Bradford, Bucks and
Chester Counties. Much of the work in Chester
County was supported by a low-interest loan
administered by the Pennsylvania Infrastructure
Investment Authority (PENNVEST).
This initiative goes beyond compliance, reflecting
a proactive approach to infrastructure renewal
and customer safety as we work to remove
all lead and galvanized service lines from our
distribution system across our service territories.
Enhanced Monitoring for
Safety and Reliability
With expanded Supervisory Control and Data
Acquisition (SCADA) systems, we can monitor water
quality and operating performance in real time,
ensuring compliance, reliability and transparency.
In North Carolina, we continue to expand SCADA
implementation with nearly 50 new installations each
year. This includes enhancing pump control operations,
upgrading legacy cellular alarm notification units, installing
alarm notifications for high differential pressure, and
integrating SCADA alarms for new plant operations.
In Texas, we are innovating virtual inspections, providing
supervisors and area managers greater operational
visibility across the state’s vast service area. Using tablet-
based technology, operators conduct inspections in real-
time, enabling supervisors to review equipment remotely
and ensure compliance throughout the diverse system.
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2024 ANNUAL REPORT
Innovation in Action:
Programs That Lead the Way
³ Hydrogen Pilot Program: Partnering with H Quest and the University
of Pittsburgh, we are pioneering zero-emission hydrogen energy at
scale, positioning us at the forefront of cleaner energy solutions.
³ Vision RNG Facility in Kentucky: Transforming waste into
renewable natural gas (RNG) at this state-of-the-art facility is an
example of our commitment to a circular energy economy, where
resources are reused and environmental impacts minimized.
³ Intelis Meters Deployment: Our deployment of advanced Intelis
smart meters reflects a significant step forward in natural gas safety
and efficiency. These meters feature built-in sensors that automatically
shut off the gas supply in potentially dangerous conditions such as fires
or system overpressurization, mitigating risks before they escalate.
Advancing Energy Leadership
As a leading natural gas provider, our responsibility extends beyond delivering safe,
reliable service to our customers today. We are committed to shaping the future
of natural gas—redefining how it is produced, managed, and safely utilized to
support a more sustainable and secure energy landscape. Through forward-thinking
strategies, innovative pilot programs and strategic investments, we are driving
solutions that address today’s needs while positioning us for long-term success.
Peoples Employee with an Intelis Meter
³9
2024 ANNUAL REPORT
320 miles
of natural gas pipeline replaced
or retired from service in 2024
Modernizing Natural
Gas Infrastructure
Our extensive modernization efforts include replacing
aging pipelines, upgrading underground storage
wells, and enhancing system integrity to prioritize
safety, reduce emissions, and meet evolving regulatory
standards. These investments ensure that our
infrastructure is ready for the future while enhancing
the reliability and security our customers depend on.
Recognition for
Climate Leadership
Our dedication to advancing energy
sustainability earned us a spot on USA
Today’s Climate Leaders list, a recognition
of our measurable achievements in
reducing greenhouse gas emissions.
This honor underscores our role as a
responsible energy provider, committed
to making meaningful contributions to
environmental progress while ensuring
the long-term viability of natural gas as
part of a diversified energy portfolio.
n
10 ³
2024 ANNUAL REPORT
Trusted to Deliver
In 2024, our water segment was appointed the receiver for a significant number of utilities,
a responsibility entrusted to us by state authorities to assume operations for struggling water
and wastewater systems. This recognition reflects our reputation as a leader in operational
excellence, a trusted partner to regulators, and a proven problem-solver for communities in need.
Receiverships are not just about stepping in; they are about stepping up. We bring the expertise,
resources, and commitment necessary to stabilize critical infrastructure, restore reliable service, and
provide safe, clean water to underserved communities. These appointments underscore our ability to
confront complex challenges head-on and deliver tangible results that improve customers’ lives.
In October 2024, Aqua Pennsylvania was appointed by the Pennsylvania Public Utility Commission (PUC) to act
as receiver for several water and wastewater companies. Many of these systems faced significant operational and
infrastructure challenges, such as outdated equipment, safety concerns, and a lack of certified operators.
Upon assuming operational responsibility, Aqua immediately began addressing these issues, including
upgrading infrastructure and ensuring compliance with DEP regulations. Aqua worked quickly to
issue and resolve boil water advisories to protect public health. By improving communications and
operations at these companies, Aqua has earned the trust of customers and regulators alike.
This trust from state partners speaks volumes about our operational capabilities and our unwavering dedication
to our mission: protecting and providing Earth’s most essential resources. With each receivership, we reaffirm
our role as a company that gets things done—driving transformative change where it’s needed most.
Governance for the Future
Our board-level risk committee is a distinctive feature of our governance structure, setting us apart
in the utility industry. This comprehensive oversight body ensures that our operations align with our
mission and values while proactively identifying, assessing, and mitigating potential risks. By elevating
risk management to the highest level of leadership, we reinforce our commitment to long-term
resilience, operational excellence, and stakeholder trust.
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2024 ANNUAL REPORT
We’re more than just a utility company; we’re a neighbor, deeply committed to uplifting the
communities we call home. We hold our responsibility to our customers in the highest regard,
and every day, we strive to go above and beyond—not only by enhancing the reliability
and quality of the resources we provide, but also by ensuring access to vital education,
innovative customer service tools, and financial assistance for those who need it most.
We view every interaction as an opportunity to serve, educate and
uplift. Whether it’s improving customer service tools, providing
financial assistance, or supporting life-changing community initiatives,
our dedication remains steadfast: to make a lasting difference in the
lives of our customers and the communities we proudly serve.
Improving the
Customer Experience
We are constantly evolving to meet and exceed the
needs of our customers. Through enhanced tools like
the ePortal, customers can seamlessly manage their
accounts, track payments, and stay informed about their
services. Our improved disruption map ensures real-
time updates during outages, offering transparency
and empowering customers to plan accordingly.
We go further by equipping our communities
with proactive resources. From safe digging
guidelines and hurricane readiness tips
to winter pipe protection education and
pipeline modernization updates, we aim to
prepare customers for every situation.
Empowering Our Customers,
Enriching Our Communities
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2024 ANNUAL REPORT
Creating a Better World
Our responsibility extends far beyond providing reliable service.
Through the Essential Foundation, we focus on improving
lives, protecting the environment, and strengthening the fabric
of our neighborhoods. In 2024 alone, we donated nearly
$5 million to organizations driving positive change.
Key initiatives include:
³ Essential Earth Day: A month-long celebration
of sustainability, where employees participate in tree
plantings, park clean-ups, and other activities aimed
at improving the health of our local ecosystems.
³ Fall for Food Banks: Every autumn, we unite as
a company to combat food insecurity by donating
resources and volunteering at local food banks.
³ Employee Giving Campaign: Our team members
contribute to causes they are passionate about, and
Essential matches their generosity, doubling the impact.
³ Water Safety Programs: Last year, we took a bold
step to address water safety in underserved communities,
donating $50,000 and significant time to educate and protect
children and families through our SureSplash Program.
These efforts are more than acts of corporate responsibility—they’re
a reflection of our values. By leveraging our resources and rallying
our people, we strive to create a better, brighter future for all.
Supporting Our
Customers in Need
Recognizing that life’s unpredictability can create financial challenges, we offer
Customer Assistance Programs for our water, wastewater, and natural gas
customers. These programs provide income-based discounts, flexible payment
plans, and other support to ensure essential services remain accessible for all.
Essential’s gas segment is leading the way in supporting customers’
access to essential resources through an innovative pilot with Peoples
Energy Analytics. Focused on Allegheny County, Pennsylvania, during
the 2024-25 winter heating season, the program uses advanced
algorithms to identify customers and areas for targeted outreach, helping
more households enroll in assistance programs that make bills more
manageable and secure vital resources for those who need them most.
Our
Need
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2024 ANNUAL REPORT
We believe that when our employees feel supported in
every aspect of their lives, they are inspired to excel and
contribute meaningfully to their work and communities.
Our comprehensive employee engagement initiatives
create a culture where our team members feel valued,
empowered and inspired to achieve extraordinary results.
To honor the individuals who make our mission possible, we launched our
“People Behind the Pipes” video series on social media. This campaign
highlights the ingenuity, perseverance, and dedication of our team across all
business units, sharing their stories of protecting and providing Earth’s most
essential resources. Through this series, we shine a light on the incredible
work being done every day by those who embody Essential’s values.
Developing Tomorrow’s
Leaders: Essential Executive
Development Program
In February 2024, we celebrated the graduation of the inaugural cohort
of Essential’s Executive Development Program, a transformative 16-month
initiative created in partnership with Drexel University’s LeBow College
of Business and Talogy Talent Assessment. This program reflects our
deep commitment to building a resilient leadership pipeline to guide
Essential through the challenges and opportunities of the future.
Through targeted development in strategic thinking, organizational growth,
and financial management, the program empowers high-potential leaders
to expand their perspectives and embrace new approaches to leadership.
The Essential Executive Development Program is more than an investment
in individual development; it’s a strategic initiative that strengthens
the foundations of our company and ensures its enduring success.
Our People:
The Heart of Essential
As we continue to make
strides to achieve our goal
of ensuring our corporate
makeup accurately reflects
the communities we serve,
we are honored to once
again receive the Champion
of Board Diversity award
from the Forum of Executive
Women. This recognition
reflects our commitment to
fostering an inclusive culture
at every level of leadership,
ensuring diverse voices and
perspectives are integral to
shaping our company’s future.
14 ³
2024 ANNUAL REPORT
the foundations of our company and ensures its enduring success.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(In thousands of dollars, except per share amounts)
1
3210
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report (the “Annual Report”), are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are made
based upon, among other things, our current assumptions, expectations, plans, and beliefs concerning future events
and their potential effect on us. These forward-looking statements involve risks, uncertainties and other factors,
many of which are outside our control that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by these forward-
looking statements. In some cases you can identify forward-looking statements where statements are preceded by,
followed by or include the words “believes,” “expects,” “estimates”, “anticipates,” “plans,” “future,” “potential,”
“probably,” “predictions,” “intends,” “will,” “continue,” “in the event” or the negative of such terms or similar
expressions.
Because forward-looking statements involve risks and uncertainties, there are important factors that could cause
actual results to differ materially from those expressed or implied by these forward-looking statements, including
but not limited to:
the success in the closing of, and the profitability of future acquisitions;
changes in general economic, political, business, credit, and financial market conditions and interest
rates;
our ability to manage the expansion of our business;
changes in environmental conditions, including the effects of climate change;
our ability to integrate and otherwise realize all of the anticipated benefits of businesses, technologies
or services which we may acquire;
the decisions of governmental and regulatory bodies, including decisions on regulatory filings, such as
rate increase requests and decisions regarding potential acquisitions;
our ability to file rate cases on a timely basis to minimize regulatory lag;
the impact of inflation on our business and on our customers and potential opposition to rate increases;
abnormal weather conditions and natural disasters, including those that result in water use restrictions
or reduced or elevated natural gas consumption;
the seasonality of our business;
our ability to source, treat, and supply water, including in times of drought, or collect and treat
wastewater;
our ability to source sufficient natural gas to meet customer demand in a timely manner;
the continuous and reliable operation of our information technology systems, including the impact of
cybersecurity attacks or other cyber-related events, and risks associated with new systems
implementation or integration;
impacts from public health threats, including on consumption, usage, supply chain, and collections.
changes in governmental laws, regulations and policies, including those dealing with taxation, the
environment, health and water quality, data and consumer privacy, and public utility regulation;
the extent to which we are able to develop and market new and improved services;
the effect of the loss of major customers;
our ability to retain the services of key personnel and to hire qualified personnel as we expand;
labor disputes;
increasing difficulties in obtaining insurance and increased cost of insurance;
cost overruns relating to improvements to, or the expansion of, our operations;
inflation and potential impact of proposed tariffs on the availability and costs of goods and services;
the effect of natural gas price volatility, including the potential impact of high commodity prices on
usage or rate case outcomes;
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
2
civil disturbance or terroristic threats or acts;
changes to the rules or our assumptions underlying our determination of what qualifies for an income tax
deduction for qualifying utility asset improvements;
changes in, or unanticipated, capital requirements;
changes in our credit rating or outlook of credit rating agencies with respect to our Company and
subsidiaries, or the market price of our common stock;
changes in valuation of strategic ventures;
changes in accounting pronouncements;
litigation and claims; and
restrictions on our subsidiaries’ ability to make dividend payments and other distributions.
Given these risks and uncertainties, you should not place undue reliance on any forward-looking statements. You
should read this Annual Report completely and with the understanding that our actual future results, performance and
achievements may be materially different from what we expect. These forward-looking statements represent
assumptions, expectations, plans, and beliefs only as of the date of this Annual Report. Except for our ongoing
obligations to disclose certain information under the federal securities laws, we are not obligated, and assume no
obligation, to update these forward-looking statements, even though our situation may change in the future. For
further information or other factors which could affect our financial results and such forward-looking statements, see
Item 1A – Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
OVERVIEW
The following discussion and analysis of our financial condition and results of operations should be read together with
our Consolidated Financial Statements and accompanying Notes included in this Annual Report. This discussion
contains forward-looking statements that are based on management’s current expectations, estimates, and projections
about our business, operations, and financial performance. All dollar amounts are in thousands of dollars, except per
share amounts.
The Company
Essential Utilities, Inc., (Essential Utilities, the Company, we, us, or our), a Pennsylvania corporation, is the holding
company for regulated utilities providing water, wastewater, or natural gas services to an estimated 5.5 million people
in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Kentucky under the Aqua
and Peoples brands. One of our largest operating subsidiaries, Aqua Pennsylvania, Inc. (Aqua Pennsylvania), provides
water or wastewater services to approximately one-half of the total number of water or wastewater customers we serve.
These customers are located in the suburban areas in counties north and west of the City of Philadelphia and in 27
other counties in Pennsylvania. Our other regulated water or wastewater utility subsidiaries provide similar services in
seven additional states. Our Peoples subsidiaries provide natural gas service to approximately 745,000 customers in
western Pennsylvania and Kentucky. Approximately 95% of the total number of natural gas utility customers we serve
are in western Pennsylvania. Lastly, the Company’s market-based activities are conducted through Aqua Resources,
Inc. and certain other non-regulated subsidiaries of Peoples. Aqua Resources offers, through a third-party, water and
sewer service line protection solutions and repair services to households. Other non-regulated subsidiaries of Peoples
provide utility service line protection services to households and operate gas marketing and production businesses.
In October 2023, the Company completed the sale of its regulated natural gas utility assets in West Virginia, which
represented approximately two percent of the Company’s regulated natural gas customers. The Company initially
received net cash proceeds of $39,965, subject to working capital and other adjustments. In March 2024, the Company
received an additional $1,213 from the buyer. In January 2024, the Company completed the sale of its interest in three
non-utility local microgrid and distributed energy projects for $165,000. These transactions are consistent with the
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
3
Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of
its utilities in states where it has scale. The Company used the proceeds from these transactions to finance its capital
expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances. See
Note 3 – Dispositions in the Notes to Consolidated Financial Statements for additional information.
Recent Developments
Water Quality Standards
On April 10, 2024, the U.S. Environmental Protection Agency (“EPA”) announced the final National Primary
Drinking Water Regulation (NPDWR) for the treatment of six per- and polyfluoroalkyl substances or compounds
(“PFAS”). The NPDWR established the maximum contaminant levels (MCLs) in drinking water and allows for a five-
year window to comply (Compliance Period). The Company performed its analysis of the NPDWR and estimated an
investment of at least $450,000 of capital expenditures to install additional treatment facilities over the Compliance
Period in order to comply (i.e., 2029 pending no delays due to lawsuits). This figure could increase as plans for
construction execution are refined or if additional sites require treatment in the future. Additionally, the Company
estimates annual operating expenses of approximately five percent of the installed capital expenditures, in today’s
dollars, related to testing, treatment, and disposal. These were preliminary estimates and actual capital expenditures
and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site requirements.
On October 30, 2024, the EPA issued the final Lead and Copper Rule Improvements (LCRI) which requires water
systems to identify and replace lead pipes by 2037, lowers the lead action level threshold, and requires more proactive
communications about lead pipes and plans for replacements, among other items. The LCRI builds upon the Lead and
Copper Rule Revisions (LCRR) issued in 2021 and the Lead and Copper Rule (LCR) issued in 1992. The Company
has been replacing lead service lines as part of its ongoing water main replacement and service line renewal programs,
and in accordance with applicable state regulations. Pursuant to the LCRR, the Company completed the submission of
its initial lead service line inventories on October 14, 2024. The Company estimates that approximately 6% of its
regulated water service systems contain some lead or galvanized service lines requiring replacement. The Company
currently has budgeted approximately $210,000 of capital expenditures over the next five years for lead and galvanized
service line replacement. Management is still reviewing the final LCRI and its impact to the Company.
Capital expenditures and operating costs required as a result of water quality standards have traditionally been
recognized by state utility commissions as appropriate for inclusion in establishing rates. Various federal and state
funding programs are also available to help reduce costs for rate payers. The Company has been actively applying for
grants and low interest loans, whenever possible, to reduce the overall cost to customers.
Comprehensive Environmental Response, Compensation, and Liability Act
On April 19, 2024, the EPA announced a final rule that designated two PFAS chemicals, perfluorooctanoic acid
(“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), as hazardous substances under the under the Comprehensive
Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as Superfund. This final action
will address PFOA and PFOS contamination by enabling investigation and cleanup of these harmful chemicals and
ensuring that leaks, spills, and other releases are reported. In addition to the final rule, the EPA issued a separate
CERCLA enforcement discretion policy that makes it clear that the EPA will focus enforcement on parties who
significantly contributed to the release of PFAS chemicals into the environment, including parties that have
manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties. The
policy identifies examples for operators of public water systems and wastewater systems or entities performing a
public service role in providing safe drinking water, handling municipal solid waste, treating or managing stormwater
and wastewater, disposing of pollution control residuals, or ensuring beneficial application of wastewater products as a
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
4
fertilizer substitute. The potential liabilities to the Company, if any, resulting from this rule are currently being
evaluated. Multiple lawsuits were filed by various companies and industry groups against the EPA's PFAS rule and are
awaiting court action.
The Company continues to advocate for actions to hold polluters accountable and is part of the Multi-District
Litigation and other legal actions against multiple PFAS manufacturers and polluters to attempt to ensure that the
ultimate responsibility for the cleanup of these contaminants is attributed to the polluters and is seeking damages and
other costs to address the contamination of its public water supply systems by PFAS. The Company is also monitoring
ongoing litigation and settlement activity with manufacturers of PFAS in these proceedings. For more information, see
Note 9 – Commitments, in the Notes to Consolidated Financial Statements.
Economic Regulation
Most of our utility operations are subject to regulation by their respective state utility commissions, which have broad
administrative power and authority to regulate billing rates, determine franchise areas and conditions of service,
approve acquisitions, and authorize the issuance of securities. The utility commissions also generally establish
uniform systems of accounts and approve the terms of contracts with affiliates and customers, business combinations
with other utility systems, and loans and other financings. The policies of the utility commissions often differ from
state to state and may change over time. A small number of our operations are subject to rate regulation by county or
city government. Over time, the regulatory party in a particular state may change. The profitability of our utility
operations is influenced to a great extent by the timeliness and adequacy of rate allowances in the various states in
which we operate. One consideration we may undertake in evaluating on which states to focus our growth and
investment strategy is whether a state provides for consolidated rates, a surcharge for replacing and rehabilitating
infrastructure, fair value treatment of acquired utility systems, and other regulatory policies that promote infrastructure
investment and efficiency in processing rate cases.
The mission of the regulated utility industry is to provide quality and reliable utility service at reasonable rates to
customers, while earning a fair return for shareholders. We strive to achieve the industry’s mission by effective
planning, efficient investments, and productive use of our resources. We maintain a rate case management capability
to pursue timely and adequate returns on the capital investments that we make in improving our distribution system,
treatment plants, information technology systems, and other infrastructure. This capital investment creates assets that
are used and useful in providing utility service and is commonly referred to as rate base. In pursuing our rate case
strategy, we consider the amount of net utility plant additions and replacements made since the previous rate decision,
the changes in the cost of capital, changes in our capital structure, and changes in operating and other costs. Based on
these assessments, our utility operations periodically file rate increase requests with their respective state utility
commissions or local regulatory authorities. In general, as a regulated enterprise, our utility rates are established to
provide full recovery of utility operating costs, taxes, interest on debt used to finance capital investments, and a return
on equity used to finance capital investments. There may be a regulatory lag between the time when operating costs
increases, customer usage changes, and capital investments occur and when those items are incorporated into rates. On
occasion, our regulated utility companies may enter into rate settlement agreements, which require us to wait for a
period of time to file the next base rate increase request.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
5
Presented below are some of the approved constructive regulatory practices that are available in the states in which we
operate:
Regulatory Mechanism
States Allowed
Consolidated Tariff (a)
IL, IN, KY, NC, NJ, OH, PA, TX, VA
Future or Fully Projected Test Year (b)
IL, IN, KY, NC, NJ, OH, PA, VA
Infrastructure Surcharge Mechanism (c)
IL, IN, KY, NC, NJ, OH, PA, TX, VA
Purchased Gas Riders (d)
KY, PA
Revenue Stability Mechanism (e)
KY, PA, IL
Deferred Accounting (f)
IL, IN, KY, NC, NJ, OH, PA, TX, VA
D Our water and wastewater operations are comprised of 38 rate divisions, and our natural gas operations are
comprised of two rate divisions. Each of our utility rate divisions requires a separate rate filing for the evaluation of
the cost of service and recovery of investments in connection with the establishment of tariff rates for that rate
division. When feasible and beneficial to our utility customers, we have sought approval from the applicable state
utility commission to consolidate rate divisions to achieve a more even distribution of costs over a larger customer
base. All eight states in which we operate water and wastewater utilities currently permit us to file a revenue
requirement using some form of consolidated rates for some or all of the rate divisions in that state.
(b) Most of the states in which we operate allow us to use a future or fully projected test year in our rate filings, which
allows current or projected revenues, expenses and capital investments to be collected on a more timely basis. In some
cases, interim rate relief is allowed in the event of regulatory lag. Some states also permit our subsidiaries to use a
surcharge or credit on their bills to reflect allowable changes in costs, such as changes in state tax rates, other taxes,
and purchased water costs, until such time as the new costs are fully incorporated in base rates.
(c) Each of the states in which we operate water, wastewater, and natural gas utilities, permit us to add an infrastructure
rehabilitation surcharge to their respective bills, between rate cases, to offset the additional depreciation and capital
costs associated with capital expenditures related to replacing and rehabilitating infrastructure systems.
G Our natural gas utility business is affected by the cost of natural gas, and we are able to generally pass the cost of gas
to our customers without markup under purchased gas cost adjustment mechanisms; consequently, increases in the cost
of gas are offset by a corresponding increase in revenues.
H The natural gas utility business is subject to seasonal fluctuations with the peak usage period occurring in the heating
season, which generally runs from October to March. We have in place a weather-normalization adjustment (WNA)
mechanism for our natural gas customers served in Kentucky, and, beginning in October 2024, for our natural gas
customers in Pennsylvania. The WNA serves to minimize the effects of weather on the Company’s results for its
residential and small commercial natural gas customers. This regulatory mechanism reduces the delivery charge
component of customers’ bills for the additional volumes used when actual heating degree days (HDDs) exceed
normalized HDDs and increases the delivery charge component of customers’ bills for the reduced volumes when
actual HDDs are less than normal HDDs. For a given day, the number of HDDs is calculated by subtracting the
average of the high and low temperatures for the day from 65 degrees Fahrenheit. Normal HDDs are established
through rate proceedings in each of our jurisdictions.
In Illinois, our operating subsidiary has a revenue stability mechanism which allows us to recognize state PUC-
authorized revenue for a period which is not based upon the volume of water sold during that period, thereby reducing
the impact of weather and consumption variability.
I We are permitted to apply for deferred cost accounting treatment and set up a regulatory asset for future recovery of
certain costs until the next base rate case.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
6
Timely and adequate rate relief is important to our continued profitability and in providing a fair return to our
shareholders. We continue to pursue enhancements to our regulatory practices to facilitate the efficient recovery of the
increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory
lag associated with traditional rate making processes.
Presented in the table below are annualized incremental revenues by state, assuming a constant sales volume and
customer count, resulting from base rate case authorizations that became effective in 2024:
State
Segment
Effective Date
Annualized Revenue Increase
Ohio
Water
1/1/2024; 8/1/2024
$
1,637
Wastewater
7/1/2024
490
North Carolina*
Water
1/1/2024
2,632
Wastewater
1/1/2024
1,111
Virginia
Water
2/5/2024
4,830
Wastewater
2/5/2024
660
Pennsylvania
Gas
9/27/2024
93,000
New Jersey
Water
10/15/2024
2,250
Illinois
Water
12/5/2024
4,726
Wastewater
12/5/2024
6,906
Total Base Rate Case Authorizations in 2024
$
118,242
* Base rate case - step increase for Year 2
On February 7, 2025, the Pennsylvania Public Utility Commission (“PAPUC”) issued an order approving, with certain
minor modifications, the joint petition for non-unanimous partial settlement filed by Aqua Pennsylvania, Office of
Consumer Advocate, and other groups, that allowed a base rate increase designed to increase total annual operating
revenues by $73,000. New rates went into effect on February 22, 2025. At the time the rate order was received, the
rates in effect also included $37,940 in Distribution System Improvement Charges (“DSIC”), which was 6.73% above
prior base rates. Consequently, the aggregate annual base rates increased by $110,940 since the last base rate increase
and DSIC was reset to zero.
Our operating subsidiaries received rate increases representing estimated annualized revenues of $118,242 in 2024
resulting from twelve base rate decisions, $28,426 in 2023 resulting from seven base rate decisions, and $81,610 in
2022 resulting from seven base rate decisions. Annualized revenues in aggregate from all of the rate increases realized
in the year of grant were $34,832 in 2024, $10,109 in 2023, and $51,163 in 2022. Refer to Note 17 – Rate Activity in
this Annual Report for further information.
Growth Through Acquisitions and Capital Investment
The Company continues to focus on rate base growth opportunities to create a resilient and sustainable future. This is
achieved through (i) acquisitions to expand the Company’s service areas and increase customers, and (ii) delivering on
its environmental reliability commitments through continued investment in replacing aging infrastructure,
contaminant mitigation, and emissions reductions, among others.
Acquisitions
Part of our strategy to meet the industry challenges is to actively explore opportunities to expand our utility operations
through acquisitions of water, wastewater, and other utilities either in areas adjacent to our existing service areas or in
new service areas, and to explore acquiring market-based businesses that are complementary to our regulated utility
operations. To complement our growth strategy, we routinely evaluate the operating performance of our individual
utility systems, and in instances where limited economic growth opportunities exist or where we are unable to achieve
favorable operating results or a return on equity that we consider acceptable, we will seek to sell the utility system and
reinvest the proceeds in other utility systems. Consistent with this strategy, we are focusing our acquisitions and
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
7
resources in states where we have critical mass of operations in an effort to achieve economies of scale and increased
efficiency. Our growth-through-acquisition strategy allows us to operate more efficiently by sharing operating
expenses over more utility customers and provides new locations for future earnings growth through capital
investment. Another element of our growth strategy is the consideration of opportunities to expand by acquiring other
utilities, including those that may be in a new state if they provide promising economic growth opportunities and a
return on equity that we consider acceptable. Our ability to successfully execute this strategy historically and to meet
the industry challenges has largely been due to our core competencies, financial position, and our qualified and trained
workforce, which we strive to retain by treating employees fairly and providing our employees with development and
growth opportunities.
During 2024, we completed two acquisitions of water and wastewater systems, which along with the organic growth in
our existing systems, represent 9,391 new customers. During 2023, we completed seven acquisitions of water and
wastewater systems, which along with the organic growth in our existing systems, represents 19,659 new customers.
During 2022, we completed three acquisitions of water and wastewater systems, which along with the organic growth
in our existing systems, represents 31,537 new customers.
As of December 31, 2024, the Company has seven signed purchase agreements for additional water and wastewater
systems that are expected to serve approximately 213,000 equivalent retail customers or equivalent dwelling units and
total approximately $362,000 in purchase price in three of our existing states. This includes the Company’s agreement
to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,000. DELCORA,
a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the Philadelphia suburbs.
Refer to Note 2 – Acquisitions in this Annual Report for further discussion.
As of December 31, 2024, the pipeline of potential water and wastewater municipal acquisitions the company is
actively pursuing represents approximately 400,000 total customers or equivalent dwelling units. The Company
remains on track to, over the long term, annually increase customers between 2% and 3% through acquisitions and
organic customer growth.
On January 31, 2025, the Company closed on the acquisition of Greenville Sanitary Authority’s wastewater utility
assets, which serves approximately 2,300 customers in Greenville, Pennsylvania for $18,000.
Capital Investment
In 2024, the Company invested $1,329,747 to improve its regulated water and natural gas infrastructure systems and to
enhance customer service across its operations. From 2025 through 2029, the company plans to invest approximately
$7,800,000 to improve water and natural gas systems and better serve customers through improved information
technology. The Company’s investments include addressing PFAS with at least $450,000 in capital projects, replacing
and expanding its water and wastewater utility infrastructure, and replacing and upgrading its natural gas utility
infrastructure, with the latter leading to significant reductions in methane emissions that occur in aged gas pipes. The
capital investments made to rehabilitate and expand the infrastructure of the communities the Company serves are
critical to its mission of safely and reliably delivering Earth’s most essential resources.
Rate Base Growth
Since 2020, the Company’s combined rate base grew by 44%. The Company expects its regulated water and natural
gas rate bases to grow at a compound annual rate of around 6% and 11%, respectively, through 2029. The combined
rate base is expected to grow at a compound annual rate of 8% through 2029.
As of December 31, 2024, the Company’s rate base is estimated to be $11,500,000, which is comprised of:
$7,300,000 in the Regulated Water segment; and
$4,200,000 in the Regulated Natural Gas segment.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
8
As of December 31, 2024, the regulatory status of the Company’s rate base is estimated to be as follows:
$10,300,000 filed with respective state utility commissions or local regulatory authorities; and
$1,200,000 not yet filed with respective state utility commissions or local regulatory authorities.
RESULTS OF OPERATIONS
Consolidated financial and operational highlights for the years ended December 31, 2024, 2023, and 2022 are
presented below. For discussion of our results of operations and cash flows for 2023 compared with 2022, refer to Part
II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual
Report on Form 10-K for our fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
Years ended December 31,
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
Operating revenues:
Regulated water segment
$
1,221,880 $ 1,153,376
$ 1,082,972 $
68,504
$
70,404
Regulated natural gas segment
842,991
863,759
1,143,362
(20,768)
(279,603)
Other and eliminations
21,242
36,689
61,698
(15,447)
(25,009)
Consolidated operating revenues
$
2,086,113 $
2,053,824 $ 2,288,032 $
32,289
$
(234,208)
Operations and maintenance expense
$
587,250 $
575,518 $
613,649 $
11,732
$
(38,131)
Net income
$
595,314 $
498,226 $
465,237 $
97,088
$
32,989
Capital expenditures
$
1,329,747 $
1,199,103 $ 1,062,763 $
130,644 $
136,340
Operating Statistics
Selected operating results as a percentage of operating
revenues:
Operations and maintenance
28.2%
28.0%
26.8%
0.2%
1.2%
Depreciation and amortization
17.7%
16.7%
14.0%
1.0%
2.7%
Taxes other than income taxes
4.5%
4.4%
3.9%
0.1%
0.5%
Interest expense, net of interest income
14.3%
13.6%
10.2%
0.7%
3.4%
Net income
28.5%
24.3%
20.3%
4.2%
4.0%
Return on Essential Utilities stockholders' equity
9.6%
8.4%
8.7%
1.2%
-0.3%
Ratio of capital expenditures to depreciation expense
3.7
3.5
3.4
0.2
0.1
Effective tax rate
(3.8%)
(15.4%)
(3.2%)
11.6%
(12.2%)
Consolidated Results of Operations Comparison for 2024 and 2023
Operating revenues - Operating revenues increased by $32,289 or 1.6% for the year ended December 31, 2024
compared to the year ended December 31, 2023. Revenues from our Regulated Water segment increased by $68,504,
Regulated Natural Gas segment revenues decreased by $20,768 and Other business segment revenues decreased by
$15,447. A detailed discussion of the factors contributing to the changes in segment operating revenues is included
below under the section, Segment Results of Operations.
Our Other business segment revenues consist of market-based revenues at Aqua Resources and our non-regulated
natural gas operations amounting to $21,242 in 2024, $36,689 in 2023, and $61,698 in 2022. The decrease in Other
business segment revenues in 2024 compared to 2023 is primarily due to lower revenues from our non-regulated
natural gas operations as a result of lower average gas prices and lower gas usage in the current period as compared to
the prior period.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
9
Operating expenses - Operations and maintenance expenses increased in 2024, as compared to 2023, by $11,732 or
2.0%, primarily due to:
an increase in customer assistance surcharge costs of $8,140 in our Regulated Natural Gas segment, which has
an equivalent offsetting amount in revenues;
an increase in employee related costs of $7,828, primarily resulting from higher salary costs, healthcare costs,
and contributions to the Company’s defined contribution plan, offset by lower pension cost;
an increase in production costs for water and wastewater operations of $5,880, primarily due to higher
purchased water, wastewater, and power costs;
additional operating costs associated with acquired and pending acquisitions of water and wastewater utility
systems and higher customer base of $2,788;
an insurance recovery of $2,448 in 2023 associated with clean-up costs and other expenses incurred during
Hurricane Ida; and,
an increase in materials and supplies of $2,026; offset by
a decrease in legal expenses of $4,137;
a decrease in bad debt expense of $1,344;
a decrease in transportation expenses of $1,548; and,
lower operations and maintenance expense of $12,411 as a result of our sale of the assets of Peoples West
Virginia in October 2023 and our interest in three non-utility local microgrid and distributed energy projects in
January 2024.
Purchased gas decreased by $75,297 or 21.4% in 2024 compared to 2023. Purchased gas represents the cost of gas sold
by Peoples for the regulated and non-regulated gas business and has a corresponding offset in revenue. This expense
decreased for the regulated natural gas business and non-regulated business by $60,322 and $14,975, respectively. The
decrease in 2024 is the result of the impact of lower average cost of gas of $55,236, lower gas usage of $11,380 due to
warmer weather conditions, and a decrease of $8,681 from the sale of Peoples West Virginia in October 2023 and our
three non-utility local microgrid and distributed energy projects in January 2024.
Depreciation and amortization expense increased by $25,857 or 7.5%, in 2024 over 2023, principally due to continued
capital expenditures to expand and improve our utility facilities, upgrade our information systems, our acquisitions of
new utility systems, and additional rate case filings. Expenses associated with filing rate cases are deferred and
amortized over periods that generally range from one to three years.
Taxes other than income taxes increased by $4,426 or 4.9% in 2024 as compared to 2023 largely due to an increase in
property taxes, payroll taxes, and pumping fees.
Other expense, net - Interest expense, net of interest income, increased by $15,406 in our Regulated Water segment
and by $668 for our Regulated Natural Gas segment. Refer to Segment Results of Operations below for further
details. Interest expense, net of interest income, in Other relates to our corporate operations, and this increased by
$3,114. The weighted average cost of fixed rate long-term debt was 4.03% at December 31, 2024 and 3.86% at
December 31, 2023. The weighted average cost of fixed and variable rate long-term debt was 4.14% at December 31,
2024 and 4.14% at December 31, 2023.
Allowance for funds used during construction (AFUDC) was $21,310 in 2024 and $16,967 in 2023, and varies as a
result of changes in the average balance of utility plant construction work in progress, to which AFUDC is applied,
changes in the AFUDC rate which is based predominantly on short-term interest rates, changes in the balance of short
term-debt, and changes in the amount of AFUDC related to equity. The increase in 2024 is primarily due to an
increase in the average balance of utility plant construction work in progress, to which AFUDC is applied. The
amount of AFUDC related to equity was $13,938 in 2024 and $11,726 in 2023.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
10
Gain on sale of other assets totaled $92,224 in 2024 and $65 in 2023. During the first quarter of 2024, the Company
completed the sale of its interest in three non-utility local microgrid and distributed energy projects and recognized a
gain of $91,236.
Other, net was income of $1,425 in 2024 and $2,613 in 2023, and largely consists of the non-service cost component
of our net benefit cost for our pension and post-retirement benefits and unrealized gains and losses on investments
associated with our non-qualified pension plan. The change is primarily due to the increase in the pension and post-
retirement benefit non-service cost component of net periodic benefit expense in 2024 in our Regulated Water
segment.
Income tax benefit - Our effective income tax rate was a benefit of 3.8% in 2024 and 15.4% in 2023. The Company’s
provision for income taxes represents an income tax benefit due to the effects of tax deductions recognized for certain
qualifying infrastructure investments. The decrease in the income tax benefit is primarily attributed to the gain
recognized from the sale of the Company’s interest in three non-utility local microgrid and distributed energy projects
in the first quarter of 2024 and decrease in tax benefit associated with the repairs tax deduction for qualifying utility
infrastructure investments in our Regulated Natural Gas segment.
Net income -
Years ended December 31,
2024
2023
2022
Operating income
$
757,668 $
692,097 $
661,187
Net income
$
595,314 $
498,226 $
465,237
Diluted net income per share
$
2.17 $
1.86 $
1.77
The changes in diluted net income per share in 2024 over the previous year were due to the aforementioned changes.
Although we have experienced increased income in the recent past, continued adequate rate increases reflecting
increased operating costs and new capital improvements are important to the future realization of improved
profitability.
Segment Results of Operations Comparison for 2024 and 2023
We have identified eleven operating segments, and we have two reportable segments based on the following:
Eight segments are composed of our water and wastewater regulated utility operations in the eight states where
we provide these services. These operating segments are aggregated into one reportable segment, Regulated
Water, since each of these operating segments has the following similarities: economic characteristics, nature of
services, production processes, customers, water distribution and/or wastewater collection methods, and the
nature of the regulatory environment.
Our Regulated Natural Gas segment is composed of natural gas utility companies in three states acquired in the
Peoples Gas Acquisition. These utilities provide natural gas distribution services, and their operating results
subsequent to the March 16, 2020 acquisition date are reported in the Regulated Natural Gas segment. In
October 2023, the Company sold its regulated natural gas utility assets in West Virginia, which represented
approximately two percent of the Company’s regulated natural gas customers. The sale concluded the
Company’s regulated utility operations in West Virginia.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
11
Two segments are not quantitatively significant to be reportable and are composed of our non-regulated natural
gas operations and Aqua Resources. These segments are included as a component of “Other,” in addition to
corporate costs that have not been allocated to the Regulated Water and Regulated Natural Gas segments,
because they would not be recoverable as a cost of utility service, and intersegment eliminations. Corporate
costs include general and administrative expenses, and interest expense.
Regulated Water Segment
The following tables present the selected operating results and customers served for our Regulated Water segment, for
the year ended December 31:
2024
2023
2022
2024 vs.
2023
2023 vs.
2022
Sendout (a) (in millions of gallons)
Pennsylvania
43,794
42,525
42,666
1,269
(141)
Ohio
13,979
13,560
14,604
419
(1,044)
Illinois
8,774
8,421
8,784
353
(363)
Texas
8,038
8,703
8,606
(665)
97
North Carolina
5,809
5,824
5,934
(15)
(110)
Other states
6,705
6,526
6,272
179
254
Subtotal
87,099
85,559
86,866
1,540
(1,307)
Elimination
(94)
(122)
(141)
28
19
Total sendout by state
87,005
85,437
86,725
1,568
(1,288)
Utility customers:
Residential water
865,028
859,331
850,673
5,697
8,658
Commercial water
43,969
43,853
43,119
116
734
Industrial water
1,275
1,283
1,286
(8)
(3)
Other water
19,774
19,123
18,446
651
677
Wastewater
193,821
190,119
181,721
3,702
8,398
Total water and wastewater utility customers
1,123,867
1,113,709
1,095,245
10,158
18,464
Operating revenues:
Residential water
$
662,909
$
641,351
$
607,473 $
21,558
$
33,878
Commercial water
186,534
180,731
168,460
5,803
12,271
Industrial water
34,831
33,949
32,581
882
1,368
Other water
123,373
92,784
94,359
30,589
(1,575)
Wastewater
199,157
187,462
165,312
11,695
22,150
Other utility
15,076
17,099
14,787
(2,023)
2,312
Total operating revenues
$
1,221,880
$
1,153,376
$
1,082,972 $
68,504
$
70,404
Operating expenses:
Operations and maintenance expense
$
381,088
$
368,843
$
370,850 $
12,245
$
(2,007)
Depreciation and amortization
$
232,338
$
217,593
$
201,392 $
14,745
$
16,201
Taxes other than income taxes
$
68,006
$
62,759
$
64,472 $
5,247
$
(1,713)
Other expense, net
$
121,292
$
105,674
$
84,396 $
15,618
$
21,278
Provision for income taxes
$
68,851
$
57,546
$
47,510 $
11,305
$
10,036
Segment net income
$
350,305
$
340,961
$
314,352 $
9,344
$
26,609
(a) Sendout represents the quantity of treated water delivered to our distribution systems. We use sendout as an indicator of
customer demand.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
12
Operating revenues - The growth in our Regulated Water segment’s revenues over the past three years is primarily a
result of increases in our water and wastewater rates and our customer base. Water and wastewater rate increases,
including infrastructure rehabilitation surcharges, implemented during the past three years have provided additional
operating revenues of $50,639 in 2024, $57,924 in 2023, and $63,367 in 2022. The number of customers increased at
an annual compound rate of 1.8% over the past three years due to acquisitions and organic growth, adjusted to exclude
customers associated with utility system dispositions. Acquisitions in our Regulated Water segment have provided
additional water and wastewater revenues of $4,182 in 2024, $9,646 in 2023, and $16,145 in 2022.
Our Regulated Water segment also includes operating revenues of $11,226 in 2024, $14,863 in 2023, and $11,477 in
2022, associated with revenues earned primarily from fees received from telecommunication operators that have put
cellular antennas on our water towers, fees earned from municipalities for our operation of their water or wastewater
treatment services or to perform billing services, and fees earned from developers for accessing our water mains.
Operating expenses - Operations and maintenance expense increased by $12,245 or 3.3% primarily due to the
following:
an increase in production costs for water and wastewater operations of $5,880;
an insurance recovery of $2,448 in 2023 associated with clean-up costs and other expenses incurred during
Hurricane Ida;
an increase in employee related costs of $2,529 resulting from higher salary costs, healthcare costs, and
contributions to the Company’s defined contribution plan, offset by lower pension cost;
additional operating costs resulting from acquired water and wastewater utility systems and higher customer
base of $2,788; offset by
a decrease in legal fees of $1,192; and,
a decrease in bad debt expense of $467.
Depreciation and amortization increased by $14,745 or 6.8% primarily due to continued capital investment to expand
and improve our utility facilities and our acquisitions of new utility systems.
Taxes other than income taxes increased by $5,247 or 8.4% in 2024 as compared to 2023 largely due to an increase in
property taxes, payroll taxes and pumping fees.
Other expense, net – Interest expense, net of interest income, increased by $15,406 or 12.4% primarily due to the
increase in average borrowings and increased borrowing costs.
AFUDC increased by $1,927 or 13.0% due to the increase in the average balance of utility plant construction work in
progress, to which AFUDC is applied.
Other, net, was an income of $1,445 in 2024 and an income of $3,596 in 2023, and largely consists of the non-service
cost component of our net benefit cost for pension and post-retirement benefits, and unrealized gains and losses on
investments associated with our non-qualified pension plan. The change is primarily due to the increase in the pension
and post-retirement benefit non-service cost component of net periodic benefit expense in 2024. The credit arising
from the expected return of plan assets assumption was lower in 2024 as compared to 2023.
Provision for income tax – The effective income tax rate for our Regulated Water segment was an expense of 16.4%
in 2024, compared to an expense of 14.4% in 2023. The increase in the effective tax rate is primarily the result of
changes in the jurisdictional earnings mix, decrease in the amortization of certain regulatory liabilities associated with
deferred taxes, and decrease in the income tax benefit associated with the repairs tax deduction for qualifying utility
infrastructure investments.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
13
Regulated Natural Gas Segment
The following tables present the selected operating results and customers served for our Regulated Natural Gas
segment for and as of the year ended December 31:
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
Gas utility customers:
Residential gas
685,591
683,811
695,198
1,780
(11,387)
Commercial gas
59,296
59,384
59,684
(88)
(300)
Industrial gas
552
551
1,459
1
(908)
Total gas utility customers
745,439
743,746
756,341
1,693
(12,595)
Delivered volumes - retail and transportation (thousand
cubic feet)
Residential gas
50,669,829
51,698,440
61,093,372
(1,028,611)
(9,394,932)
Commercial gas
33,641,589
33,151,308
37,240,382
490,281
(4,089,074)
Industrial gas
47,959,164
48,323,846
49,017,036
(364,682)
(693,190)
Total delivered volumes
132,270,582
133,173,594
147,350,790
(903,012)
(14,177,196)
Heating Degree Days (a)
4,288
4,558
5,648
(270)
(1,090)
Average Heating Degree Days (b)
5,240
5,427
5,438
(187)
(11)
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
Operating revenues:
Residential gas
$
504,426 $
519,406 $
720,490 $
(14,980) $
(201,084)
Commercial gas
100,662
111,272
149,653
(10,610)
(38,381)
Industrial gas
2,279
3,232
5,636
(953)
(2,404)
Gas transportation
194,413
184,598
205,825
9,815
(21,227)
Other utility
41,211
45,251
61,758
(4,040)
(16,507)
Total operating revenues
$
842,991 $
863,759 $
1,143,362 $
(20,768) $
(279,603)
Operating expenses:
Operations and maintenance expense
$
207,176 $
209,073 $
239,506 $
(1,897) $
(30,433)
Purchased gas
$
267,226 $
327,548 $
551,009 $
(60,322) $
(223,461)
Depreciation and amortization
$
135,814 $
125,263 $
118,955 $
10,551 $
6,308
Taxes other than income taxes
$
22,985 $
23,846 $
22,642 $
(861) $
1,204
Other expense, net
$
(3,834) $
90,819 $
87,916 $
(94,653) $
2,903
Income tax benefit
$
(79,993) $
(113,353) $
(61,942) $
33,360 $
(51,411)
Segment net income
$
293,617 $
200,563 $
185,276 $
93,054 $
15,287
(a) Unit of measure reflecting temperature-sensitive natural gas consumption, calculated by subtracting the average of a day’s high
and low temperatures from 65 degrees Fahrenheit; measured at Pittsburgh, PA.
(b) Based on historical twenty-year average heating degree days, as calculated from data provided by the National Weather Service
for the same geographic location.
Operating revenues – Operating revenues from the Regulated Natural Gas segment decreased by $20,768 or 2.4%
primarily due to:
a decrease in purchased gas costs of $60,322; refer to purchased gas costs discussion below for further
information;
the decrease in distribution revenues of $4,043 as a result of our sale of the assets of Peoples West Virginia;
a decrease in other utility revenues of $7,100 resulting from the sale of the Company’s interest in three non-
utility local microgrid and distributed energy projects; offset by
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
14
an increase of $32,432 due to higher rates and other surcharges;
an increase in customer assistance surcharge of $8,140, which has an equivalent offsetting amount in
operations and maintenance expense; and
a weather normalization adjustment of $9,243, which had the effect of increasing revenues.
The Regulated Natural Gas segment is subject to seasonal fluctuations with the peak usage period occurring in the
heating season which generally runs from October to March. A heating degree day (HDD) is each degree that the
average of the high and low temperatures for a day is below 65 degrees Fahrenheit in a specific geographic
location. Particularly during the heating season, this measure is used to reflect the demand for natural gas needed for
heating based on the extent to which the average temperature falls below a reference temperature above which no
heating is required (65 degrees Fahrenheit). During the year ended December 31, 2024, we experienced actual HDDs
of 4,288 days, which was warmer by 5.9% than the actual HDDs of 4,558 days in 2023 for Pittsburgh, Pennsylvania,
which we use as a proxy for our western Pennsylvania service territory. A weather normalization adjustment (“WNA”)
mechanism is in place for our natural gas customers served in Kentucky, and, beginning in October 2024, for our
natural gas customers in Pennsylvania. The WNA serves to minimize the effects of weather on the Company’s ability
to collect revenues to cover operating expenses for its residential and small commercial natural gas customers.
Operating expenses – Operations and maintenance expense for the year ended December 31, 2024 decreased by
$1,897 or 0.9% primarily due to the following:
lower operations and maintenance expense of $12,411 as a result of our sale of the assets of Peoples West
Virginia in October 2023 and our interest in three non-utility local microgrid and distributed energy projects in
January 2024;
a decrease in legal fees of $3,266;
a decrease in transportation expense of $1,429;
a decrease in bad debt expense of $905; offset by
an increase in customer assistance surcharge costs of $8,140, which has an equivalent offsetting amount in
revenues;
an increase in materials and supplies of $1,805; and
an increase in labor and employee benefits of $5,719 resulting from higher salary costs, healthcare costs, and
contributions to the Company’s defined contribution plan, offset by lower pension cost.
Our Regulated Natural Gas segment is affected by the cost of natural gas, which is passed through to customers using a
purchased gas adjustment clause and includes commodity price, transportation and storage costs. These costs are
reflected in the consolidated statement of operations and comprehensive income as purchased gas expenses.
Therefore, fluctuations in the cost of purchased gas impact operating revenues on dollar-for-dollar basis. Purchased
gas decreased by $60,322 or 18.4% in 2024 compared to 2023. The decrease is the result of lower average cost of gas
of $44,044, and lower gas usage of $10,761 due to warmer weather conditions and $5,517 due to the sale of Peoples
West Virginia in October 2023 and our three non-utility local microgrid and distributed energy projects in January
2024.
Depreciation and amortization increased by $10,551 or 8.4% primarily due to continued capital investment in pipe
replacement.
Taxes other than income taxes decreased by $861 or 3.6% mainly due to lower sales and use taxes during the periodǤ
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
15
Other expense, net – Interest expense, net of interest income, increased by $668 or 0.7% for 2024 compared to 2023.
AFUDC increased by $2,416 or 110.8% due to the increase in the average balance of utility plant construction work in
progress, to which AFUDC is applied.
Gain on sale of assets was $91,581 for the year ended December 31, 2024 and a loss on sale of assets was $559 for the
year ended December 31, 2023. During the first quarter of 2024, the Company completed the sale of its interest in
three non-utility local microgrid and distributed energy projects and recognized a gain of $91,236.
Income tax benefit – The effective income tax rate was a benefit of 37.4% in 2024, compared to a benefit of 130.0%
in 2023. The decrease in the income tax benefit is primarily attributed to the gain recognized from the sale of the
Company’s interest in three non-utility local microgrid and distributed energy projects in the first quarter of 2024 and a
decrease in tax benefit associated with the repairs tax deduction for qualifying utility infrastructure investments in our
Regulated Natural Gas segment.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Cash Flow and Capital Expenditures
Net operating cash flows, dividends paid on common stock, capital expenditures, including allowances for funds used
during construction, and expenditures for acquiring utility systems were as follows for the years ended December 31:
Net Operating Cash
Flows
Dividends
Capital Expenditures
Acquisitions
2022
$
600,306 $
288,632 $
1,062,763
$
116,891
2023
933,587
316,806
1,199,103
45,303
2024
770,343
346,392
1,329,747
665
$
2,304,236 $
951,830 $
3,591,613
$
162,859
Net cash provided by operating activities decreased by $163,244 during the year ended December 31, 2024, when
compared to the same period in 2023. Our operating cash flow can be significantly affected by changes in operating
working capital, especially during periods with significant changes in natural gas commodity prices and also the timing
of our natural gas inventory purchases. The net change in working capital and other assets and liabilities resulted in a
decrease in cash from operations of $96,799 in 2024 and an increase in cash from operations of $157,387 in 2023.
The decrease in cash flows from operations associated with working capital during 2024, when compared to 2023, was
primarily due to higher gas cost collections from customers brought about by higher average gas prices in 2023. In
addition, accounts receivable and unbilled receivables were higher as of December 31, 2024 as compared with the
same period in 2023 due to increased billings as a result of greater heating degree days for the month of December
2024 as compared with 2023.
Included in capital expenditures for the three year period are: expenditures for the rehabilitation of existing utility
systems, the expansion of our utility systems, modernization and replacement of existing treatment facilities, meters,
office facilities, information technology, vehicles, and equipment. During this three year period, we received $55,259
of customer advances and contributions in aid of construction to finance new utility mains and related facilities that are
not included in the capital expenditures presented in the above table. In addition, during this period, we have made
repayments of debt, which includes the net effect of borrowings and repayments under our long-term revolving credit
facility of $1,732,026 and have refunded $22,041 of customers’ advances for construction. Dividends increased
during the past three years as a result of annual increases in the dividends declared and paid and increases in the
number of shares outstanding.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
16
Our planned 2025 capital program, excluding the costs of new mains financed by advances and contributions in aid of
construction is estimated to be approximately $1,469,000 in infrastructure improvements for the communities we
serve. The 2025 capital program is expected to include approximately $1,037,000 for infrastructure rehabilitation
surcharge qualified projects. Our planned 2025 capital program in Pennsylvania for our water and natural gas utilities
is estimated to be approximately $1,032,000, a portion of which is expected to be eligible as a deduction for qualifying
utility asset improvements for Federal income tax purposes. Our overall 2025 capital program along with $142,807 of
debt repayments and $454,049 of other contractual cash obligations, as reported in the section captioned
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual
Obligations”, has been, or is expected to be, financed through internally-generated funds, our revolving credit
facilities, and the issuance of long-term debt and equity.
Future utility construction in the period 2026 through 2027, including addressing PFAS, lead and galvanized services
line replacement, and recurring programs, such as the ongoing replacement or rehabilitation of utility meters and
mains, water treatment plant upgrades, storage facility renovations, pipes, service lines, and additional transmission
mains to meet customer demands, excluding the costs of new mains financed by advances and contributions in aid of
construction, is estimated to require aggregate expenditures of approximately $3,042,000. We anticipate that more than
one half of these expenditures will require external financing. We expect to refinance $1,173,486 of long-term debt
during this period as it becomes due with funds from new issues of long-term debt, issuances of equity, internally-
generated funds, and our revolving credit facilities. The estimates discussed above do not include any amounts for
possible future acquisitions of utility systems or the financing necessary to support them.
Our primary sources of liquidity are cash flows from operations (including the allowed deferral of Federal income tax
payments), borrowings under various short-term and long-term credit facilities, and customer advances and
contributions in aid of construction. Our cash flow from operations, or internally-generated funds, is impacted by the
timing of rate relief, utility operating revenues, and changes in Federal tax laws, and accelerated tax depreciation or
deductions for utility construction projects. We fund our capital and typical acquisitions through internally-generated
funds, supplemented by short-term or long term credit facilities. Over time, we partially repay or pay-down our short-
term lines of credit with long-term debt. The ability to finance our future construction programs, as well as our
acquisition activities, depends on our ability to attract the necessary external debt and equity financing and maintain
internally-generated funds. Timely rate orders permitting compensatory rates of return on invested capital will be
required by our operating subsidiaries to achieve an adequate level of earnings and cash flow to enable them to secure
the capital they will need to operate and to maintain satisfactory debt coverage ratios.
Acquisitions
As part of the Company’s growth-through-acquisition strategy, as of December 31, 2024, the Company has entered
into purchase agreements to acquire the water or wastewater utility system assets of six municipalities and a private
company for a total combined purchase price in cash of approximately $362,000. The purchase price for these pending
acquisitions is subject to certain adjustments at closing, and the pending acquisitions are subject to regulatory
approvals, including the final determination of the fair value of the rate base acquired. This includes the Company’s
agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,000.
DELCORA, a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the
Philadelphia suburbs.
Aside from DELCORA, closings for these acquisitions, which occurred or are expected to occur in 2025, are subject to
the timing of the various regulatory approval processes and are expected to add approximately 15,000 equivalent retail
customers in three of the states in which the Company operates.
In January 2025, the Company acquired Greenville Sanitary Authority’s wastewater utility assets, which serves
approximately 2,300 customers in Greenville, Pennsylvania for $18,000.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
17
In October 2024, the Company acquired wastewater utility assets in Morgan County, Indiana, which serves
approximately 100 customers for $500. In May 2024, the Company acquired the wastewater utility assets of Westfield
HOA, which serves approximately 200 customers within Westfield Homeowners Subdivision in Glenview, Illinois for
a cash purchase price of $67.
In July 2023, the Company completed the following water utility asset acquisitions: Shenandoah Borough,
Pennsylvania, which serves approximately 2,900 customers for $12,291; La Rue, an Ohio municipality, which serves
approximately 300 customers for $2,253; and, Southern Oaks Water System, which serves approximately 800
customers in Texas for $3,321. In July 2023, the Company completed their acquisition of a portion of the water and
wastewater utility assets of the Village of Frankfort, an Illinois municipality, which serves approximately 1,500
customers for $1,424. In June 2023, the Company acquired the wastewater utility assets of Union Rome, Ohio, which
serves approximately 4,300 customers for a cash purchase price of $25,547. Additionally, in March 2023, the
Company acquired the North Heidelberg Sewer Company in Berks County, Pennsylvania, which serves approximately
300 customer connections for a cash purchase price of $136.
In November 2022, the Company acquired the water system of Oak Brook, DuPage County, Illinois, which serves
2,037 customers, for a cash purchase price of $12,500. In August 2022, the Company acquired the municipal
wastewater assets of East Whiteland Township, Chester County, Pennsylvania, which serves 4,018 customers, for a
cash purchase price of $54,374. In March 2022, the Company acquired the wastewater system of Lower Makefield
Township, which serves 11,323 customer connections in Lower Makefield, Falls, and Middletown townships, and
Yardley Borough, Bucks County, Pennsylvania, for a cash purchase price of $53,000.
Subsequent to the August 2022 closing on the acquisition of the municipal wastewater assets of East Whiteland
Township, a party filed an appeal to the Pennsylvania Public Utility Commission’s order of approval. On July 31,
2023, a decision was issued by the Pennsylvania Commonwealth Court that agreed with the party’s appeal and
reversed the order which approved the acquisition. In an effort to resolve the matter, the Company pursued and is
continuing to pursue certain legal actions. Management believes the final resolution of this matter is not expected to
have a material adverse effect on the Company’s financial position, results of operations or cash flows. Refer to Note
2 – Acquisitions in this Annual Report for additional information.
During the past three years, we have expended cash of $162,859 related to the acquisition of both water and
wastewater utility systems. We continue to pursue the acquisition of water and wastewater utility systems and explore
other utility acquisitions that may be in a new state. Our typical acquisitions are expected to be financed with short-
term debt with subsequent repayment from the proceeds of long-term debt, retained earnings, or equity issuances.
Dispositions
We routinely review and evaluate areas of our business and operating divisions and, over time, may sell utility systems
or portions of systems. In October 2023, the Company completed the sale of its regulated natural gas utility assets in
West Virginia, which represented approximately two percent of the Company’s regulated natural gas customers. The
Company initially received net cash proceeds of $39,965, subject to working capital and other adjustments. In March
2024, the Company received an additional $1,213 from the buyer. In January 2024, the Company completed the sale
of its interest in three non-utility local microgrid and distributed energy projects for $165,000. This sale resulted in the
recognition of a gain of $91,236 during 2024 which is included in other expense (income) in the consolidated
statement of operations. These transactions are consistent with the Company’s long-term strategy of focusing on its
core business and will allow the Company to prioritize the growth of its utilities in states where it has scale. The
Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater
acquisitions, in place of external funding from equity and debt issuances. Refer to Note 3 – Dispositions in this
Annual Report for additional information.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
18
Sources of Capital
Since net operating cash flow plus advances and contributions in aid of construction have not been sufficient to fully
fund our cash requirements including capital expenditures and our growth through acquisitions program, we issued
$3,377,430 of long-term debt, and obtained other short-term borrowings during the past three years. At December 31,
2024, we have a $1,000,000 unsecured long-term revolving credit facility that expires in December 2027, of which
$16,774 was designated for letter of credit usage, $570,226 was available for borrowing, and $413,000 of borrowings
were outstanding at December 31, 2024. In addition, Aqua Pennsylvania has a $100,000 364-day unsecured revolving
credit facility and Peoples Natural Gas has a $300,000 364-day unsecured revolving credit facility. These short-term
lines of credit are subject to renewal on an annual basis. Although we believe we will be able to renew these facilities,
there is no assurance that they will be renewed, or what the terms of any such renewal will be.
On August 15, 2024, the Company issued $500,000 of senior notes, less expenses of $3,015, due in 2027, with an
interest rate of 4.80%. On January 8, 2024, the Company issued $500,000 of long-term debt, less expenses of $4,610,
due in 2034 with an interest rate of 5.375%. The Company used the net proceeds from the issuance of these notes (1)
to repay a portion of the borrowings under the Company’s existing five year unsecured revolving credit facility, and
(2) for general corporate purposes.
In August 2023, the Company’s subsidiary, Aqua Pennsylvania, issued $225,000 in aggregate principal amount of first
mortgage bonds. The bonds consisted of $175,000 of 5.48% first mortgage bonds due in 2053; and $50,000 of 5.56%
first mortgage bonds due in 2061. In January 2023 and October 2022, Aqua Pennsylvania issued $75,000 and
$125,000 of first mortgage bonds, due in 2043 and 2052, and with interest rates of 5.60% and 4.50%, respectively. The
proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes.
On May 20, 2022, the Company issued $500,000 of long-term debt (the “2022 Senior Notes”), less expenses of
$5,815, due in 2052 with an interest rate of 5.30%. The Company used the net proceeds from the issuance of 2022
Senior Notes to (1) to repay $49,700 of borrowings under Aqua Pennsylvania’s 364-day revolving credit facility and
$410,000 of borrowings under the Company’s existing five year unsecured revolving credit facility, and (2) for general
corporate purposes.
On August 13, 2024, the Company filed a prospectus supplement under the 2024 universal shelf registration statement
relating to a new at-the-market equity sales program (“ATM”), under which it may issue and sell shares of its common
stock up to an aggregate offering price of $1,000,000 (“2024 ATM”). This 2024 ATM replaced the Company’s
previous ATM filed on October 14, 2022 (“2022 ATM”). During the year ended December 31, 2024, the Company
issued 925,497 shares of common stock for net proceeds of $36,134 under the 2024 ATM. As of December 31, 2024,
the 2024 ATM had approximately $964,000 of equity available for issuance. During the year ended December 31,
2023, the Company issued 8,938,839 shares of common stock for net proceeds of $322,983 under the 2022 ATM.
During the year ended December 31, 2022, the Company issued 1,321,994 shares of common stock for net proceeds of
$63,040 under the 2022 ATM. There were no common stock sales under the 2022 ATM in 2024. The Company used
the net proceeds from the sales of shares through the 2022 and 2024 ATMs for working capital, capital expenditures,
water and wastewater utility acquisitions, and repaying a portion of outstanding indebtedness.
On June 12, 2024, Aqua Pennsylvania and Peoples Natural Gas Companies amended the terms of its respective
$100,000 and $300,000 364-day revolving credit agreements by extending the maturity dates to June 10, 2025 and
revised the interest rate index from the Bloomberg Short-Term Bank Yield Index (BSBY) to the Secured Overnight
Financing Rate (SOFR).
Our regulated water and gas business is capital intensive and requires a significant level of capital spending. Our
consolidated balance sheet historically has had a negative working capital position, whereby routinely our current
liabilities exceed our current assets. Management believes that internally-generated funds along with existing credit
facilities and the proceeds from the issuance of long-term debt and common equity will be adequate to provide
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
19
sufficient working capital to maintain normal operations and to meet our financing requirements for at least the next
twelve months.
Our loan and debt agreements require us to comply with certain financial covenants, which among other things, subject
to specific exceptions, limit the Company’s ratio of consolidated total indebtedness to consolidated total capitalization,
and require a minimum level of earnings coverage over interest expense. During 2024, we were in compliance with
our debt covenants under our credit facilities. Failure to comply with our debt covenants could result in an event of
default, which could result in us being required to repay or refinance our borrowings before their due date, possibly
limiting our future borrowings, and increasing our borrowing costs.
In March 2024, the Company filed a new universal shelf registration with the Securities and Exchange Commission
(SEC) to allow for the potential future offer and sale by the Company, from time to time, in one or more public
offerings, of an indeterminate amount of our common stock, preferred stock, debt securities, and other securities
specified therein at indeterminate prices. This registration statement is effective for three years and replaces a similar
filing that expired in the second quarter of 2024. During the past three years, we issued common stock and long-term
debt in offerings under this shelf registration statement. Refer to Note 11 – Long-term Debt and Loans Payable and
Note 13 – Stockholders’ Equity in this Annual Report for further information regarding these financings.
In addition, we have an acquisition shelf registration statement, which was filed with the SEC on February 27, 2015, to
permit the offering from time to time of an aggregate of $500,000 of our common stock and shares of preferred stock
in connection with acquisitions. The balance remaining available for use under the acquisition shelf registration as of
December 31, 2024 is $487,155.
We will determine the form and terms of any further securities issued under the universal shelf registration statement
and the acquisition shelf registration statement at the time of issuance.
We offer a Dividend Reinvestment and Direct Stock Purchase Plan (the Plan) that provides a convenient and
economical way to purchase shares of the Company. Under the direct stock purchase portion of the Plan, shares are
issued throughout the year. The dividend reinvestment portion of the Plan offers a five percent discount on the
purchase of shares of common stock with reinvested dividends. As of the December 2024 dividend payment, holders
of 4.0% of the common shares outstanding participated in the dividend reinvestment portion of the Plan. The shares
issued under the Plan are either original issue shares or shares purchased by the Company’s transfer agent in the open-
market. During the past three years, we have sold 1,232,453 original issue shares of common stock for net proceeds of
$48,099 through the dividend reinvestment portion of the Plan, and we used the proceeds to invest in our operating
subsidiaries, to repay short-term debt, and for general corporate purposes. In 2024, 2023, and 2022, we sold 433,688,
430,487, and 368,278 original issues shares of common stock for net proceeds of $15,476, $16,005, and $16,619,
respectively, through the dividend reinvestment portion of the plan.
Credit Risk
As of December 31, 2024, our credit ratings remained at investment grade levels. On March 19, 2024, S&P Global
Ratings (“S&P”) lowered its credit rating for the Company, Aqua Pennsylvania, and PNG Companies, LLC from A to
A-, citing weakening financial measures as a result of inflationary pressures and our significant capital spending; and
revised its outlook from negative to stable for the companies. However, as can be noted in their report, S&P continues
to assess our business risk profile as excellent, considering our low-risk and rate-regulated water and gas distribution
operations in credit-supportive regulatory environments, our geographic and regulatory diversity, our large and stable
residential and commercial customer base, and our solid and reliable operations. On October 3, 2024, Moody’s
Investors Service (“Moody’s”) affirmed the Company’s senior unsecured notes rating of Baa2 and changed its outlook
from stable to negative; and, changed PNG Companies, LLC’s senior secured notes rating from Baa1 to Baa2 and
maintained a negative outlook. The Company’s ability to maintain its credit rating depends, among other things, on
adequate and timely rate relief, its ability to fund capital expenditures in a balanced manner using both debt and equity,
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
20
and its ability to generate cash flow. A material downgrade of our credit rating may result in the imposition of
additional financial and/or other covenants, impact the market prices of equity and debt securities, increase our
borrowing costs, and adversely affect our liquidity, among other things. Management continues to enhance our
regulatory practices to address regulatory lag and recover capital project costs and increases in operating costs
efficiently and timely through various rate-making mechanisms.
Off-Balance Sheet Financing Arrangements
We do not engage in any off-balance sheet financing arrangements. We do not have any interest in entities referred to
as variable interest entities, which includes special purpose entities and other structured finance entities.
Contractual Obligations
The following table summarizes our contractual cash obligations as of December 31, 2024:
Payments Due by Period
Total
Less than 1
year
1 - 3 years
3 - 5 years
More than 5
years
Long-term debt
$
7,559,096 $
142,807 $
1,173,486 $ 412,869 $
5,829,934
Interest on fixed-rate, long-term debt (1)
286,400
6,819
34,020
14,693
230,868
Operating leases (2)
44,694
9,144
14,777
7,946
12,827
Unconditional purchase obligations (3)
14,049
5,404
3,143
2,475
3,027
Gas purchase obligations (4)
2,148,368
238,353
485,193
474,767
950,055
Other purchase obligations (5)
138,438
138,438
-
-
-
Pension plan obligations (6)
3,945
3,945
-
-
-
Other obligations (7)
56,661
51,946
2,401
1,325
989
Total
$
10,251,651 $
596,856 $
1,713,020 $ 914,075 $
7,027,700
(1) Represents interest payable on fixed rate, long-term debt. Amounts reported may differ from actual due to future
refinancing of debt.
(2) Represents minimum lease payments for long-term operating leases of land, office facilities, office equipment, and
vehicles.
(3) Represents our commitment to purchase minimum quantities of water as stipulated in agreements with other water
purveyors. We use purchased water to supplement our water supply, particularly during periods of peak customer
demand. Our actual purchases may exceed the minimum required levels.
(4) Represents our commitment to purchase minimum quantities of natural gas stipulated in agreements with various
producers of natural gas to meet regulated customers’ natural gas requirements.
(5) Represents an approximation of the open purchase orders for goods and services purchased in the ordinary course
of business.
(6) Represents contributions to be made to the Company’s retirement plans.
(7) Represents expenditures estimated to be required under legal and binding contractual obligations.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
21
In addition to the contractual obligations table above, we have the following obligations:
Refunds of customer’s advances for construction – We pay refunds on customers’ advances for construction
over a specific period of time based on operating revenues related to developer-installed utility mains or as
new customers are connected to and take service from such mains. After all refunds are paid, any remaining
balance is transferred to contributions in aid of construction. The refund amounts are not included in the
above table because the refund amounts and timing are dependent upon several variables, including new
customer connections, customer consumption levels and future rate increases, which cannot be accurately
estimated. Portions of these refund amounts are payable annually through 2034 and amounts not paid by the
contract expiration dates become non-refundable.
Asset Retirement Obligations – We recognize asset retirement obligations associated with retirements of
production, storage wells and other pipeline components at fair value, as incurred, or when sufficient
information becomes available to determine a reasonable estimate of the fair value of the retirement activities
to be performed. Expected obligations are not included in the above table because the amounts and timing are
dependent upon several variables, which cannot be accurately estimated.
Uncertain tax positions – We have uncertain tax positions of $8,207. Although we believe our tax positions
comply with applicable law, we have made judgments as to the sustainability of each uncertain tax position
based on its technical merits. Due to the uncertainty of future cash outflows, if any, associated with our
uncertain tax positions, we are unable to make a reasonable estimate of the timing or amounts that may be
paid. See Note 7 – Income Taxes in this Annual Report for further information on our uncertain tax positions.
We will fund these contractual obligations with cash flows from operations and liquidity sources held by or available
to us.
The Company is routinely involved in legal matters, including both asserted and unasserted legal claims, during the
ordinary course of business. See Note 9 – Commitments and Contingencies in this Annual Report for a discussion of
the Company’s legal matters. It is not always possible for management to make a meaningful estimate of the potential
loss or range of loss associated with such litigation. Also, unanticipated changes in circumstances and/or revisions to
the assessed probability of the outcomes of legal matters could result in expenses being incurred in future periods as
well as an increase in actual cash required to resolve the legal matter.
Capitalization
The following table summarizes our capitalization as of December 31, 2024 and 2023:
December 31,
2024
2023
Long-term debt (1)
54.9%
54.1%
Essential Utilities stockholders' equity
45.1%
45.9%
100.0%
100.0%
(1) Includes current portion, as well as our borrowings under a variable rate revolving credit agreement of
$413,000 at December 31, 2024, and $720,000 at December 31, 2023.
Over the past two years, the changes in the capitalization ratios primarily resulted from the issuance of debt to finance
our acquisitions and capital program, changes in net income, the issuance of common stock, and the declaration of
dividends.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
22
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial condition and results of operations are impacted by the methods, assumptions, and estimates used in the
application of critical accounting policies. The following accounting policies are particularly important to our
financial condition or results of operations and require estimates or other judgments of matters of uncertainty.
Changes in the estimates or other judgments included within these accounting policies could result in a significant
change to the financial statements. We believe our most critical accounting policies include the use of regulatory
assets and liabilities, revenue recognition, the valuation of our long-lived assets (which consist primarily of utility plant
in service, regulatory assets, and goodwill), our accounting for post-retirement benefits, and our accounting for income
taxes. We have discussed the selection and development of our critical accounting policies and estimates with the
Audit Committee of the Board of Directors.
Regulatory Assets and Liabilities ─ We defeU Fosts and FUedits on tKe balanFe sKeet as UeJulatoU\ assets and liabilities
when it is probable that these costs and credits will be recognized in the rate-making process in a period different from
when the costs and credits were incurred. These deferred amounts, both assets and liabilities, are then recognized in
the consolidated statement of operations in the same period that they are reflected in our rates charged for utility
service. We make significant judgments and estimates to record regulatory assets and liabilities, such as for amounts
related to income taxes, pension and postretirement benefits, acquisitions and capital projects. For each regulatory
jurisdiction with regulated operations, we evaluate at the end of each reporting period, whether the regulatory assets
and liabilities continue to meet the probable criteria for future recovery or refund. The evaluation considers factors
such as regulatory orders or guidelines, in the same regulatory jurisdiction, of a specific matter or a similar matter, as
provided to us in the past or to other regulated utilities. In addition, the evaluation may be impacted by changes in the
regulatory environment and pending or new legislation that could impact the ability to recover costs through regulated
rates. There may be multiple participants to rate or transactional regulatory proceedings who might offer different
views on various aspects of such proceedings, and in these instances may challenge our prudence of business policies
and practices, seek cost disallowances or request other relief.
In the event that our assessment as to the probability of the inclusion in the rate-making process is incorrect, the
associated regulatory asset or liability would be adjusted to reflect the change in our assessment or change in
regulatory approval.
Revenue Recognition ─ 2uU utilit\ UeYenues UeFoJni]ed in an aFFountinJ peUiod inFlude amounts billed to FustomeUs
on a cycle basis and unbilled amounts based on estimated usage from the last billing to the end of the accounting
period. The estimated usage is based on our judgment and assumptions; our actual results could differ from these
estimates, which would result in operating revenues being adjusted in the period that the revision to our estimates is
determined.
In Virginia, North Carolina, and Kentucky, we may bill our utility customers, in certain circumstances, in accordance
with a rate filing that is pending before the respective regulatory commission, which would allow interim rates before
the final commission rate order is issued. The revenue recognized reflects an estimate based on our judgment of the
final outcome of the commission’s ruling. We monitor the applicable facts and circumstances regularly and revise the
estimate as required. The revenue billed and collected prior to the final ruling is subject to refund based on the
commission’s final ruling.
Valuation of Long-Lived Assets, Goodwill and Intangible Assets ─ We UeYieZ ouU lonJ-liYed assets foU impaiUment
including utility plant in service. We also review regulatory assets for the continued application of the FASB
accounting guidance for regulated operations. Our review determines whether there have been changes in
circumstances or events, such as regulatory disallowances, or abandonments, that have occurred that require
adjustments to the carrying value of these assets. Adjustments to the carrying value of these assets would be made in
instances where their inclusion in the rate-making process is not probable. For utility plant in service, we would
recognize an impairment loss for any amount disallowed by the respective utility commission.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
23
Our long-lived assets, which consist primarily of utility plant in service operating lease right-of-use assets and
intangible assets, are reviewed for impairment when changes in circumstances or events occur. These circumstances
or events could include a decline in the market value or physical condition of a long-lived asset, an adverse change in
the manner in which long-lived assets are used or planned to be used, a change in historical trends, operating cash
flows associated with the long-lived assets, changes in macroeconomic conditions, industry and market conditions, or
overall financial performance. When these circumstances or events occur, we determine whether it is more likely than
not that the fair value of those assets is less than their carrying amount. If we determine that it is more likely than not
(that is, the likelihood of more than 50 percent), we would recognize an impairment charge if it is determined that the
carrying amount of an asset exceeds the sum of the undiscounted estimated cash flows. In this circumstance, we
would recognize an impairment charge equal to the difference between the carrying amount and the fair value of the
asset. Fair value is estimated to be the present value of future net cash flows associated with the asset, discounted
using a discount rate commensurate with the risk and remaining life of the asset. This assessment requires significant
management judgment and estimates that are based on budgets, general strategic business plans, historical trends and
other data and relevant factors. These estimates include significant inherent uncertainties, since they involve
forecasting future events. If changes in circumstances or events occur, or estimates and assumptions that were used in
this review are changed, we may be required to record an impairment charge on our long-lived assets. Refer to Note 1
– Summary of Significant Accounting Policies – Impairment of Long-Lived Assets in this Annual Report for additional
information regarding the review of long-lived assets for impairment.
We test the goodwill attributable to each of our reporting units for impairment at least annually, or more often, if
circumstances indicate a possible impairment may exist. When testing goodwill for impairment, we may assess
qualitative factors, including macroeconomic conditions, industry and market considerations, changes to regulatory
environment, recent regulatory and legislative proceedings, cost factors, overall financial performance, and entity
specific events, for some or all of our reporting units to determine whether it’s more likely than not that the fair value
of a reporting unit is less than its carrying amount. Based on our assessment of the qualitative factors previously
noted, or at our discretion, we may perform a quantitative goodwill impairment test by determining the fair value of a
reporting unit by weighting the results from the income approach and the market approach. These valuation
approaches consider a number of factors that include, but are not limited to, prospective financial information (which
includes projected operating income, expected future capital expenditures, and projected regulatory rate base, among
others), growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our
industry and require us to make certain assumptions and estimates regarding industry economic factors and future
profitability of our business. If we perform a quantitative test and determine that the fair value of a reporting unit is
less than its carrying amount, we would record an impairment loss for the amount by which a reporting unit’s carrying
amount exceeds its fair value, not to exceed the carrying amount of goodwill. The assessment requires significant
management judgment and estimates that are based on budgets, general strategic business plans, historical trends and
other data and relevant factors. If changes in circumstances or events occur, or estimates and assumptions that were
used in our impairment test change, we may be required to record an impairment charge for goodwill. Refer to Note 1
– Summary of Significant Accounting Policies – Goodwill in this Annual Report for further information.
As part of the October 1, 2024 annual goodwill assessment, we elected to perform qualitative assessments for our
Regulated Water, Regulated Natural Gas, and Other reporting units. Based on our analysis, we determined that it is
more likely than not that the fair value of our reporting units is greater than their carrying amounts, and none of the
goodwill of our reporting units was impaired.
Accounting for Post-Retirement Benefits ─ We maintain a qualified and a non-qualified defined benefit pension plan
and plans that provide for post-retirement benefits other than pensions. Accounting for pension and other post-
retirement benefits requires an extensive use of assumptions including the discount rate, expected return on plan assets,
the rate of future compensation increases received by our employees, mortality, turnover and medical costs. Each
assumption is reviewed annually with assistance from our actuarial consultant, who provides guidance in establishing
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
24
the assumptions. The assumptions are selected to represent the average expected experience over time and may differ
in any one year from actual experience due to changes in capital markets and the overall economy. These differences
will impact the amount of pension and other post-retirement benefits expense that we recognize.
Our discount rate assumption, which is used to calculate the present value of the projected benefit payments of our
post-retirement benefits, was determined by selecting a hypothetical portfolio of high quality corporate bonds
appropriate to match the projected benefit payments of the plans. The selected bond portfolio was derived from a
universe of Aa-graded corporate bonds. The discount rate was then developed as the rate that equates the market value
of the bonds purchased to the discounted value of the projected benefit payments of the plans. A decrease in the
discount rate would generally increase our post-retirement benefits expense and benefit obligation. After reviewing
the hypothetical portfolio of bonds, we selected a discount rate of 5.64% for our pension plan, and 5.65% for our other
post-retirement benefit plans as of December 31, 2024, which represent a 47 and 56 basis-point decrease as compared
to the discount rates selected at December 31, 2023, respectively. Our post-retirement benefits expense under these
plans is determined using the discount rate as of the beginning of the year, which was 5.17% for our pension plan and
5.09% for our other-postretirement benefit plan for 2024.
Our expected return on plan assets is determined by evaluating the asset class return expectations with our advisors as
well as actual, long-term, historical results of our asset returns. The Company’s market-related value of plan assets is
equal to the fair value of the plans’ assets as of the last day of its fiscal year and is a determinant for the expected
return on plan assets, which is a component of post-retirement benefits expense. The allocation of our plans’ assets
impacts our expected return on plan assets. As of December 31, 2024, the expected return on plan assets is based on a
targeted allocation of 20% to 40% return seeking assets and 60% to 80% liability hedging assets for our pension plan,
and a targeted allocation of 50% to 70% return seeking assets and 30% to 50% liability hedging assets for our other
post-retirement benefit plans. Our post-retirement benefits expense increases as the expected return on plan assets
decreases. We believe that our actual long-term asset allocations on average will approximate our targeted allocations.
Our targeted allocations are driven by our investment strategy to earn a reasonable rate of return while maintaining risk
at acceptable levels through the diversification of investments across and within various asset categories. For 2024, we
used a 6.2% expected return on plan assets assumption and are currently reviewing this assumption for 2025.
Funding requirements for qualified defined benefit pension plans are determined by government regulations and not by
accounting pronouncements. In accordance with funding rules and our funding policy, during 2025 our pension
contribution is expected to be $3,945. Future years’ contributions will be subject to economic conditions, plan
participant data and the funding rules in effect at such time as the funding calculations are performed, though we
expect future changes in the amount of contributions and expense recognized to be generally included in customer
rates.
Accounting for Income Taxes ─ We estimate tKe amount of inFome ta[ pa\able oU Uefundable foU tKe FuUUent \eaU and
the deferred income tax liabilities and assets that results from estimating temporary differences resulting from the
treatment of specific items, such as depreciation, for tax and financial statement reporting. Generally, these differences
result in the recognition of a deferred tax asset or liability on our consolidated balance sheet and require us to make
judgments regarding the probability of the ultimate tax impact of the various transactions we enter into. Based on
these judgments, we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect
the expected realization of future tax benefits. Actual income taxes could vary from these estimates and changes in
these estimates can increase income tax expense in the period that these changes in estimates occur.
Our determination of what qualifies as a capital cost versus a tax deduction, for qualifying utility asset improvements,
as it relates to our income tax accounting method, is subject to subsequent adjustment as well as IRS audits, changes in
income tax laws, including regulations regarding tax-basis depreciation as it applies to our capital expenditures, or
qualifying utility asset improvements, the expiration of a statute of limitations, or other unforeseen matters could
impact the tax benefits that have already been recognized. We establish reserves for uncertain tax positions based
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(In thousands of dollars, except per share amounts)
25
upon management’s judgment as to the sustainability of these positions. These accounting estimates related to the
uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based
on its technical merits. We believe our tax positions comply with applicable law and that we have adequately recorded
reserves as required. However, to the extent the final tax outcome of these matters is different than our estimates
recorded, we would then need to adjust our tax reserves which could result in additional income tax expense or
benefits in the period that this information is known.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
We describe the impact of recent accounting pronouncements in Note 1 – Summary of Significant Accounting Policies
in this Annual Report.
26
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Management’s Report On Internal Control Over Financial Reporting
Management of Essential Utilities, Inc. (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of our financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America. The
Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of
the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In assessing the effectiveness of internal control over financial reporting, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated
Framework (2013). As a result of management’s assessment and based on the criteria in the framework, management
has concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is
included herein.
Christopher H. Franklin
Daniel J. Schuller
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
February 27, 2025
27
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Essential Utilities, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets, including the consolidated statements of capitalization, of
Essential Utilities, Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated
statements of operations and comprehensive income, of equity and of cash flows for each of the three years in the period ended
December 31, 2024, including the related notes and schedule of condensed parent company financial statements as of December
31, 2024 and 2023 and for each of the three years in the period ended December 31, 2024 appearing after the signature pages
(collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
28
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for the Effects of Regulatory Matters
As described in Notes 1 and 6 to the consolidated financial statements, most of the operating companies of the Company that are
regulated public utilities are subject to regulation by the utility commissions of the states in which they operate. Some of the
operating companies that are regulated public utilities are also subject to rate regulation by county or city government. As of
December 31, 2024, regulatory assets were $1.94 billion and regulatory liabilities were $0.77 billion. Regulated public utilities
follow the accounting guidance for regulated operations, which provides for the recognition of regulatory assets and liabilities as
allowed by regulators for costs or credits that are reflected in current rates or are considered probable of being included in future
rates. The regulatory assets represent costs that are probable to be fully recovered from customers in future rates while regulatory
liabilities represent amounts that are expected to be refunded to customers in future rates or amounts recovered from customers in
advance of incurring the costs. The regulatory assets or liabilities are then relieved as the cost or credit is reflected in the
Company’s rates charged for utility service. If, as a result of a change in circumstances, it is determined that a regulated operating
company no longer meets the criteria to apply regulatory accounting, the operating company would have to discontinue regulatory
accounting and write-off the respective regulatory assets and liabilities.
The principal considerations for our determination that performing procedures relating to accounting for the effects of regulatory
matters is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related
to the probability of recovery of regulatory assets and refund of regulatory liabilities.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s assessment of regulatory proceedings, including controls over the probability of recovery of regulatory assets,
refund of regulatory liabilities, and the related accounting and disclosure impacts. These procedures also included, among others
(i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets and refund
of regulatory liabilities and (ii) testing, on a sample basis, regulatory assets and regulatory liabilities, based on the provisions and
formulas outlined in rate orders and other regulatory proceedings and correspondence, as well as application of relevant regulatory
precedents.
Philadelphia, Pennsylvania
February 27, 2025
We have served as the Company’s auditor since 2000.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
December 31,
2024
2023
Assets
Property, plant and equipment, at cost
$
16,275,377
$
14,977,021
Less: accumulated depreciation
3,131,901
2,879,949
Net property, plant and equipment
13,143,476
12,097,072
Current assets:
Cash and cash equivalents
9,156
4,612
Accounts receivable, net
166,522
144,300
Unbilled revenues
142,310
101,436
Inventory - materials and supplies
48,619
47,494
Inventory - gas stored
45,311
65,173
Prepayments and other current assets
41,139
99,884
Regulatory assets
32,854
29,080
Total current assets
485,911
491,979
Regulatory assets
1,907,786
1,766,892
Deferred charges and other assets, net
112,712
102,388
Funds restricted for construction activity
1,420
1,381
Goodwill
2,340,713
2,340,738
Operating lease right-of-use assets
31,263
37,416
Intangible assets
3,273
3,593
Total assets
$
18,026,554
$
16,841,459
See accompanying notes to consolidated financial statements.
29
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands of dollars, except per share amounts)
December 31,
2024
2023
Liabilities and Equity
Essential Utilities stockholders' equity:
Common stock at $0.50 par value, authorized 600,000,000 shares, issued
278,209,660 and 276,595,228 as of December 31, 2024 and December 31, 2023
$
139,105 $
138,297
Capital in excess of par value
4,199,836
4,137,696
Retained earnings
1,949,492
1,706,675
Treasury stock, at cost, 3,386,069 and 3,299,191 shares as of December 31, 2024
and December 31, 2023
(89,624)
(86,485)
Total stockholders' equity
6,198,809
5,896,183
Long-term debt, excluding current portion
7,416,289
6,870,593
Less: debt issuance costs
47,908
44,508
Long-term debt, excluding current portion, net of debt issuance costs
7,368,381
6,826,085
Commitments and contingencies (See Note 9)
Current liabilities:
Current portion of long-term debt
142,807
67,415
Loans payable
186,542
160,123
Accounts payable
258,615
221,191
Book overdraft
47,714
13,358
Accrued interest
72,281
53,084
Accrued taxes
38,219
40,641
Regulatory liabilities
1,770
31,270
Dividends payable
89,441
83,929
Other accrued liabilities
137,279
126,916
Total current liabilities
974,668
797,927
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits
1,831,868
1,628,324
Customers' advances for construction
113,323
128,755
Regulatory liabilities
764,745
820,910
Asset retirement obligations
860
848
Operating lease liabilities
27,447
34,425
Pension and other postretirement benefit liabilities
33,680
38,850
Other
23,928
24,086
Total deferred credits and other liabilities
2,795,851
2,676,198
Contributions in aid of construction
688,845
645,066
Total liabilities and equity
$
18,026,554 $
16,841,459
See accompanying notes to consolidated financial statements.
30
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
Years ended December 31,
2024
2023
2022
Operating revenues
$
2,086,113 $
2,053,824 $
2,288,032
Operating expenses:
Operations and maintenance
587,250
575,518
613,649
Purchased gas
277,009
352,306
601,995
Depreciation
363,906
338,655
315,811
Amortization
5,646
5,040
5,366
Taxes other than income taxes
94,634
90,208
90,024
Total operating expenses
1,328,445
1,361,727
1,626,845
Operating income
757,668
692,097
661,187
Other expense (income):
Interest expense
302,467
283,362
238,116
Interest income
(3,318)
(3,401)
(3,675)
Allowance for funds used during construction
(21,310)
(16,967)
(23,665)
Gain on sale of other assets
(92,224)
(65)
(991)
Other
(1,425)
(2,613)
494
Income before income taxes
573,478
431,781
450,908
Income tax benefit
(21,836)
(66,445)
(14,329)
Net income
$
595,314 $
498,226 $
465,237
Comprehensive income
$
595,314 $
498,226 $
465,237
Net income per common share:
Basic
$
2.17 $
1.86 $
1.77
Diluted
$
2.17 $
1.86 $
1.77
Average common shares outstanding during the period:
Basic
273,914
267,171
262,246
Diluted
274,421
267,659
262,868
See accompanying notes to consolidated financial statements.
31
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(In thousands of dollars, except per share amounts)
December 31,
2024
2023
Stockholders' equity:
Common stock, $0.50 par value
$
139,105 $
138,297
Capital in excess of par value
4,199,836
4,137,696
Retained earnings
1,949,492
1,706,675
Treasury stock, at cost
(89,624)
(86,485)
Total stockholders' equity
6,198,809
5,896,183
Long-term debt of subsidiaries (substantially collateralized by utility plant):
Interest Rate Range
Maturity Date Range
0.00% to 0.99%
2024 to 2053
2,637
2,935
1.00% to 1.99%
2030 to 2046
11,732
7,538
2.00% to 2.99%
2024 to 2058
206,297
207,917
3.00% to 3.99%
2024 to 2056
1,258,003
1,313,932
4.00% to 4.99%
2024 to 2059
1,239,032
1,245,727
5.00% to 5.99%
2028 to 2061
312,260
312,745
6.00% to 6.99%
2026 to 2036
31,000
31,000
7.00% to 7.99%
2025 to 2027
27,888
28,125
8.00% to 8.99%
2025
447
1,289
9.00% to 9.99%
2026
11,800
11,800
3,101,096
3,163,008
Notes payable to bank under revolving credit agreement, variable rate, due 2027
413,000
720,000
Unsecured notes payable:
Notes at 2.40% due 2031
400,000
400,000
Notes at 2.704% due 2030
500,000
500,000
Notes ranging from 3.01% to 3.59%, due 2029 through 2050
1,125,000
1,125,000
Notes at 4.276%, due 2049
500,000
500,000
Notes at 4.80%, due 2027
500,000
-
Notes at 5.30%, due 2052
500,000
500,000
Notes at 5.375%, due 2034
500,000
-
Notes at 5.95%, due 2024 through 2034
20,000
30,000
Total long-term debt
7,559,096
6,938,008
Current portion of long-term debt
142,807
67,415
Long-term debt, excluding current portion
7,416,289
6,870,593
Less: debt issuance costs
47,908
44,508
Long-term debt, excluding current portion, net of debt issuance costs
7,368,381
6,826,085
Total capitalization
$
13,567,190 $
12,722,268
See accompanying notes to consolidated financial statements.
32
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands of dollars, except per share amounts)
33
Common
stock
Capital in
excess of par
value
Retained
earnings
Treasury
stock
Total
Balance at December 31, 2021
$
128,050
$
3,705,814
$
1,434,201
$
(83,615)
$
5,184,450
Net income
-
-
465,237
-
465,237
Dividends declared and paid ($1.1104 per share)
-
-
(288,632)
-
(288,632)
Dividends of March 1, 2023 declared ($0.287 per share)
-
-
(75,808)
-
(75,808)
Issuance of common stock from stock purchase contracts
(9,029,461 shares)
4,515
(4,515)
-
-
-
Issuance of common stock under dividend reinvestment plan
(368,278 shares)
184
16,435
-
-
16,619
Issuance of common stock from at-the-market sale
agreements (1,321,994 shares)
661
62,379
-
-
63,040
Repurchase of stock (25,037 shares)
-
-
-
(1,192)
(1,192)
Equity compensation plan (81,516 shares)
41
(41)
-
-
-
Exercise of stock options (69,684 shares)
35
2,440
-
-
2,475
Stock-based compensation
-
12,094
(667)
-
11,427
Other
-
(1,344)
-
1,114
(230)
Balance at December 31, 2022
$
133,486
$
3,793,262
$
1,534,331
$
(83,693)
$
5,377,386
Net income
-
-
498,226
-
498,226
Dividends declared and paid ($1.1882 per share)
-
-
(240,999)
-
(240,999)
Dividends of March 1, 2024 declared ($0.3071 per share)
-
-
(83,929)
-
(83,929)
Issuance of common stock under dividend reinvestment plan
(430,487 shares)
215
15,790
-
-
16,005
Issuance of common stock from at-the-market sale
agreements (8,938,839 shares)
4,470
318,513
-
-
322,983
Repurchase of stock (89,785 shares)
-
-
-
(3,981)
(3,981)
Equity compensation plan (244,407 shares)
122
(122)
-
-
-
Exercise of stock options (8,174 shares)
4
283
-
-
287
Stock-based compensation
-
11,330
(954)
-
10,376
Other
-
(1,360)
-
1,189
(171)
Balance at December 31, 2023
$
138,297
$
4,137,696
$
1,706,675
$
(86,485)
$
5,896,183
Net income
-
-
595,314
-
595,314
Dividends declared and paid ($1.2652 per share)
-
-
(262,462)
-
(262,462)
Dividends of March 1, 2025 declared ($0.3255 per share)
-
-
(89,441)
-
(89,441)
Issuance of common stock under dividend reinvestment plan
(433,688 shares)
217
15,259
-
-
15,476
Issuance of common stock from at-the-market sale
agreements (925,497 shares)
463
35,671
-
-
36,134
Repurchase of stock (111,955 shares)
-
-
-
(4,048)
(4,048)
Equity compensation plan (185,927 shares)
93
(93)
-
-
-
Exercise of stock options (69,320 shares)
35
2,436
-
-
2,471
Stock-based compensation
-
9,781
(594)
-
9,187
Other
-
(914)
-
909
(5)
Balance at December 31, 2024
$
139,105
$ 4,199,836
$ 1,949,492
$ (89,624)
$ 6,198,809
See accompanying notes to consolidated financial statements.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars, except per share amounts)
34
Years ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net income
$
595,314 $
498,226 $
465,237
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
369,552
343,695
321,177
Deferred income taxes
(27,756)
(79,845)
(23,045)
Provision for doubtful accounts
21,865
23,209
27,631
Stock-based compensation
9,785
11,323
12,206
Gain on sale of utility system and other assets
(92,224)
(65)
(991)
Net change in receivables, deferred purchased gas costs, inventory and prepayments
(103,335)
189,989
(223,335)
Net change in payables, accrued interest, accrued taxes and other accrued liabilities
26,963
(14,559)
53,761
Pension and other postretirement benefits contributions
(9,394)
(20,343)
(22,027)
Other
(20,427)
(18,043)
(10,308)
Net cash flows from operating activities
770,343
933,587
600,306
Cash flows from investing activities:
Property, plant and equipment additions, including the debt component of allowance for
funds used during construction of $7,372, $5,241 and $6,047
(1,329,747)
(1,199,103)
(1,062,763)
Acquisitions of utility systems and other, net
(665)
(45,303)
(116,891)
Net proceeds from the sale of utility systems and other assets
167,470
41,758
1,081
Other
(339)
(19,080)
271
Net cash flows used in investing activities
(1,163,281)
(1,221,728)
(1,178,302)
Cash flows from financing activities:
Customers' advances and contributions in aid of construction
19,563
23,982
11,714
Repayments of customers' advances
(8,564)
(8,471)
(5,006)
Net proceeds (repayments) of short-term debt
26,418
(68,377)
163,500
Proceeds from long-term debt
1,649,546
1,207,619
1,646,742
Repayments of long-term debt
(1,027,473)
(876,379)
(977,175)
Change in cash overdraft position
34,356
(15,336)
(53,028)
Proceeds from issuance of common stock under dividend reinvestment plan
15,476
16,005
16,619
Proceeds from issuance of common stock from at-the-market sale agreement
36,134
322,983
63,040
Proceeds from exercised stock options
2,471
287
2,475
Repurchase of common stock
(4,048)
(3,981)
(1,192)
Dividends paid on common stock
(346,392)
(316,806)
(288,632)
Other
(5)
(171)
(230)
Net cash flows from financing activities
397,482
281,355
578,827
Net increase (decrease) in cash and cash equivalents
4,544
(6,786)
831
Cash and cash equivalents at beginning of year
4,612
11,398
10,567
Cash and cash equivalents at end of year
$
9,156 $
4,612 $
11,398
Cash paid during the year for:
Interest, net of amounts capitalized
$
275,898 $
272,532 $
225,820
Income taxes
6,698
7,839
11,269
Non-cash investing activities:
Property, plant and equipment additions purchased at the period end, but not yet paid
$
135,331 $
102,770 $
102,129
Non-cash utility property contributions
38,840
56,297
35,698
See accompanying notes to consolidated financial statements.
Refer to Note 15 – Employee Stock and Incentive Plan for a description of non-cash activities.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands of dollars, except per share amounts)
35
Note 1 – Summary of Significant Accounting Policies
Nature of Operations ─ Essential Utilities, Inc. (“Essential Utilities,” the “Company,” “we,” “our”, or “us”) is the
holding company for regulated utilities providing water, wastewater, or natural gas services concentrated in
Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Kentucky under the Aqua and
Peoples brands. One of our largest operating subsidiaries is Aqua Pennsylvania, Inc., which accounted for
approximately 55% of our Regulated Water segment’s operating revenues and approximately 67% of our Regulated
Water segment’s income for 2024. Aqua Pennsylvania’s service territory is located in the suburban areas north and
west of the City of Philadelphia and in 27 other counties in Pennsylvania. The Company’s other regulated water or
wastewater utility subsidiaries provide similar services in seven additional states. Our Peoples subsidiaries provide
natural gas service to approximately 745,000 customers in western Pennsylvania and Kentucky. Approximately 95%
of the total number of natural gas utility customers we serve are in western Pennsylvania. The Company also operates
market-based activities, conducted through its non-regulated subsidiaries, that provide utility service line protection
solutions and repair services to households and gas marketing and production activities.
In October 2023, the Company closed on the sale of its regulated natural gas utility assets in West Virginia. In January
2024, the Company closed on the sale of its interest in three non-utility local microgrid and distributed energy projects.
These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will
allow the Company to prioritize the growth of its utilities in states where it has scale. See Note 3 – Dispositions for
further information.
Regulation ─ 0ost of tKe opeUatinJ Fompanies tKat aUe UeJulated publiF utilities aUe subMeFt to UeJulation b\ tKe utilit\
commissions of the states in which they operate. The respective utility commissions have jurisdiction with respect to
rates, service, accounting procedures, issuance of securities, acquisitions and other matters. Some of the operating
companies that are regulated public utilities are subject to rate regulation by county or city government. Regulated
public utilities follow the Financial Accounting Standards Board’s (“FASB”) accounting guidance for regulated
operations, which provides for the recognition of regulatory assets and liabilities as allowed by regulators for costs or
credits that are reflected in current rates or are considered probable of being included in future rates. Costs, for which
the Company has received or expects to receive prospective rate recovery, are deferred as a regulatory asset and
amortized over the period of rate recovery in accordance with the FASB’s accounting guidance for regulated
operations. Conversely, excess recovery of costs or amounts collected in rates to recover costs expected to be incurred
in the future or to be refunded in the future are recorded as regulatory liabilities. The regulatory assets or liabilities are
then relieved as the cost or credit is reflected in Company’s rates charged for utility service. If, as a result of a change
in circumstances, it is determined that a regulated operating company no longer meets the criteria to apply regulatory
accounting, the operating company would have to discontinue regulatory accounting and write-off the respective
regulatory assets and liabilities. See Note 6 - Regulatory Assets and Liabilities for further information.
The Company makes significant judgments and estimates to record regulatory assets and liabilities. For each
regulatory jurisdiction with regulated operations, the Company evaluates at the end of each reporting period, whether
the regulatory assets and liabilities continue to meet the probable criteria for future recovery or refund. The evaluation
considers factors such as regulatory orders or guidelines, in the same regulatory jurisdiction, of a specific matter or a
similar matter, as provided to the Company in the past or to other regulated utilities. In addition, the evaluation may be
impacted by changes in the regulatory environment and pending or new legislation that could impact the ability to
recover costs through regulated rates. There may be multiple participants to rate or transactional regulatory
proceedings who might offer different views on various aspects of such proceedings, and in these instances, may
challenge the prudence of our business policies and practices, seek cost disallowances or request other relief.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
36
Use of Estimates in Preparation of Consolidated Financial Statements ─ 7Ke pUepaUation of Fonsolidated finanFial
statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The most significant estimates include the application of
regulatory accounting principles and estimation of regulatory assets and liabilities, estimates used in impairment
testing of goodwill and other long-lived assets, allowance for doubtful accounts, unbilled revenues, pension and other
post-retirement benefit obligations, and income taxes. Actual results could differ from those estimates.
Basis of Presentation ² The consolidated financial statements include the accounts of the Company and its subsidiari-
es. All intercompany accounts and transactions have been eliminated.
Property, Plant and Equipment and Depreciation ─ Property, plant and equipment consist primarily of utility plant.
The cost of additions includes contracted cost, direct labor and fringe benefits, materials, overheads, and for additions
meeting certain criteria, allowance for funds used during construction. Utility systems acquired are typically recorded
at estimated original cost of utility plant when first devoted to utility service and the applicable depreciation is
recorded to accumulated depreciation. Further, utility systems acquired under fair value regulations would be
recorded based on the valuation of the utility plant as approved by the respective utility commission. The difference
between the estimated original cost, less applicable accumulated depreciation, and the purchase price may be recorded
as an acquisition adjustment within utility plant as permitted by the applicable regulatory jurisdiction. At
December 31, 2024 and 2023, utility plant includes a net credit acquisition adjustment of $5,627 and $6,444,
respectively, which is generally being amortized from 10 to 53 years. Amortization of the acquisition adjustments
totaled $787 in 2024, $2,103 in 2023, and $2,788 in 2022.
Utility expenditures for maintenance and repairs, including major maintenance projects and minor renewals, are
charged to operating expenses when incurred in accordance with the system of accounts prescribed by the utility
commissions of the states in which the company operates. The cost of new units of property and betterments are
capitalized. Utility expenditures for water main cleaning and relining of pipes are deferred and are presented in net
property, plant and equipment in accordance with the FASB’s accounting guidance for regulated operations. As of
December 31, 2024, $1,635 of these costs have been incurred since the last respective rate proceeding and are
considered probable of being included in future rates.
The cost of software upgrades and enhancements are capitalized if they result in added functionality, which enables
the software to perform tasks it was previously incapable of performing. Information technology costs associated
with major system installations, conversions and improvements, such as software training, data conversion and
business process reengineering costs, are deferred as a regulatory asset if it is probable that such costs are recoverable
in future rates. If these costs are not deferred, then these costs are charged to operating expenses when incurred. As
of December 31, 2024, $18,107 of these costs have been deferred since the last respective rate proceeding as a
regulatory asset, and the deferral is reported as a component of net property, plant and equipment.
When units of utility property are replaced, retired or abandoned, the recorded value thereof is credited to the asset
account and such value, together with the net cost of removal, is charged to accumulated depreciation. To the extent
the Company anticipates recovery of the cost of removal or other retirement costs through rates after the retirement
costs are incurred, a regulatory asset is recorded as those costs are incurred. In some cases, the Company recovers
retirement costs through rates during the life of the associated asset and before the costs are incurred. These amounts,
which are not yet utilized, result in a regulatory liability being reported based on the amounts previously recovered
through customer rates.
The straight-line remaining life method is used to compute depreciation on utility plant. Generally, the straight-line
method is used with respect to transportation and mechanical equipment, office equipment and laboratory equipment.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
37
Impairment of Long-Lived Assets Long-lived assets of the Company, which consist primarily of utility plant in
service, operating lease right-of-use assets and intangible assets, are reviewed for impairment when changes in
circumstances or events occur. These circumstances or events could include a decline in the market value or physical
condition of a long-lived asset, an adverse change in the manner in which long-lived assets are used or planned to be
used, a change in historical trends, operating cash flows associated with the long-lived assets, changes in
macroeconomic conditions, industry and market conditions, or overall financial performance. When these
circumstances or events occur, the Company determines whether it is more likely than not that the fair value of those
assets is less than their carrying amount. If the Company determines that it is more likely than not (that is, the
likelihood of more than 50 percent), the Company would recognize an impairment charge if it is determined that the
carrying amount of an asset exceeds the sum of the undiscounted estimated cash flows. In this circumstance, the
Company would recognize an impairment charge equal to the difference between the carrying amount and the fair
value of the asset. Fair value is estimated to be the present value of future net cash flows associated with the asset,
discounted using a discount rate commensurate with the risk and remaining life of the asset. During the year ended
December 31, 2022, the Company recorded an impairment loss to write down a portion of the operating lease right-
of-use asset for office space not used in operations to fair value. Refer to Note 10 – Leases, for further details.
Regulatory assets are reviewed for the continued application of the FASB accounting guidance for regulated
operations. The Company’s review determines whether there have been changes in circumstances or events, such as
regulatory disallowances, or abandonments, that have occurred that require adjustments to the carrying value of these
assets. Adjustments to the carrying value of these assets would be made in instances where their inclusion in the rate-
making process is unlikely. For utility plant in service, we would recognize an impairment loss for any amount
disallowed by the respective utility commission.
Allowance for Funds Used During Construction ─ 7Ke alloZanFe foU funds used duUinJ FonstUuFtion ³$)8'&´
represents the capitalized cost of funds used to finance the construction of utility plant. In general, AFUDC is applied
to construction projects requiring more than one month to complete. No AFUDC is applied to projects funded by
customer advances for construction, contributions in aid of construction, or applicable state-revolving fund loans.
AFUDC includes the net cost of borrowed funds and a rate of return on other funds when used and is recovered
through rates as the utility plant is depreciated. The amount of AFUDC related to equity funds in 2024 was $13,938,
2023 was $11,726, and 2022 was $17,618. No interest was capitalized by our market-based businesses.
Lease Accounting ─ 7Ke &ompan\ eYaluates tKe FontUaFts it enteUs into to deteUmine ZKetKeU suFK FontUaFts Fontain
leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or
equipment for a period of time in exchange for consideration. We enter into operating lease contracts for the right to
utilize certain land, office facilities, office equipment, and vehicles from third parties. For contracts that extend for a
period greater than 12 months, we recognize a right of use asset and a corresponding lease liability on our consolidated
balance sheet. The present value of each lease is based on the future minimum lease payments in accordance with
$FFountinJ 6tandaUds &odifiFation ³$6&´ and is deteUmined b\ disFountinJ tKese pa\ments usinJ an inFUemental
borrowing rate or the rate implicit in the lease, if available.
Recognition of Revenues ─ 7Ke &ompan\ UeFoJni]es UeYenue as utilit\ seUYiFes aUe pUoYided to ouU FustomeUs
which happens over time as the services are delivered and the performance obligation is satisfied. The Company’s
utility revenues recognized in an accounting period includes amounts billed to customers on a cycle basis and unbilled
amounts based on estimated usage from the last billing to the end of the accounting period. Unbilled amounts are
calculated by deriving estimates based on average customer usage. The Company’s actual results could differ from
these estimates, which would result in operating revenues being adjusted in the period that the revision to our
estimates are determined.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
38
Generally, payment is due within 30 days once a bill is issued to a customer. Sales tax and other taxes we collect on
behalf of government authorities, concurrent with our revenue-producing activities, are primarily excluded from
revenue. The following table presents our revenues disaggregated by major source and customer class for the years
ended December 31:
2024
Water Revenues
Wastewater
Revenues
Natural Gas
Revenues
Other Revenues
Revenues from contracts with customers:
Residential
$
662,909
$
146,849
$
504,426
$
-
Commercial
186,534
36,951
100,662
-
Fire protection
42,409
-
-
-
Industrial
34,831
2,724
2,279
-
Gas transportation & storage
-
-
194,413
-
Other water
80,964
-
-
-
Other wastewater
-
12,898
-
-
Other utility
-
-
30,436
11,226
Revenues from contracts with customers
1,007,647
199,422
832,216
11,226
Alternative revenue program
3,850
(265)
10,775
-
Other and eliminations
-
-
-
21,242
Consolidated
$
1,011,497
$
199,157
$
842,991
$
32,468
2023
Water Revenues
Wastewater
Revenues
Natural Gas
Revenues
Other Revenues
Revenues from contracts with customers:
Residential
$
641,351
$
139,188
$
519,406
$
-
Commercial
180,731
35,530
111,272
-
Fire protection
41,257
-
-
-
Industrial
33,949
2,087
3,232
-
Gas transportation & storage
-
-
184,598
-
Other water
51,527
-
-
-
Other wastewater
-
10,589
-
-
Other utility
-
-
43,163
14,863
Revenues from contracts with customers
948,815
187,394
861,671
14,863
Alternative revenue program
2,236
68
2,088
-
Other and eliminations
-
-
-
36,689
Consolidated
$
951,051
$
187,462
$
863,759
$
51,552
2022
Water Revenues
Wastewater
Revenues
Natural Gas
Revenues
Other
Revenues
Revenues from contracts with customers:
Residential
$
607,473
$
122,612
$
720,490
$
-
Commercial
168,460
30,340
149,653
-
Fire protection
38,970
-
-
-
Industrial
32,581
1,755
5,636
-
Gas transportation & storage
-
-
205,825
-
Other water
55,389
-
-
-
Other wastewater
-
10,676
-
-
Other utility
-
-
61,393
11,478
Revenues from contracts with customers
902,873
165,383
1,142,997
11,478
Alternative revenue program
3,309
(71)
365
-
Other and eliminations
-
-
-
61,698
Consolidated
$
906,182
$
165,312
$
1,143,362
$
73,176
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
39
Revenues from Contracts with Customers – These revenues are composed of four main categories: water,
wastewater, natural gas, and other. Water revenues represent revenues earned for supplying customers with water
service. Wastewater revenues represent revenues earned for treating wastewater and releasing it into the
environment. Natural gas revenues represent revenues earned for the gas commodity and delivery of natural gas to
customers. Other revenues are associated fees that relate to our utility businesses but are not water, wastewater, or
natural gas revenues. Refer to the description below for a discussion of the performance obligation for each of these
revenue streams.
Tariff Revenues – These revenues are categorized by customer class: residential, commercial, fire protection,
industrial, gas transportation, other water, and other wastewater. The rates that generate these revenues are
approved by the respective state utility commission, and revenues are billed cyclically and accrued for when
unbilled. The regulated natural gas rates are set and adjusted for increases or decreases in our purchased gas
costs through purchased gas adjustment mechanisms. Purchased gas adjustment mechanisms provide us with
a means to recover purchased gas costs on an ongoing basis without filing a rate case. Other water and other
wastewater revenues consists primarily of fines, penalties, surcharges, and availability lot fees. Our
performance obligation for tariff revenues is to provide potable water, wastewater treatment service, or
delivery and sale of natural gas to customers. This performance obligation is satisfied over time as the
services are rendered. The amounts that the Company has a right to invoice for tariff revenues reflect the
right to consideration from the customers in an amount that corresponds directly with the value transferred to
the customer for the performance completed to date.
Other Utility Revenues – Other utility revenues represent revenues earned primarily from: antenna revenues,
which represents fees received from telecommunication operators that have put cellular antennas on our water
towers; operation and maintenance and billing contracts, which represent fees earned from municipalities for
our operation of their water or wastewater treatment services or performing billing services; and fees earned
from developers for accessing our water mains, miscellaneous service revenue from gas distribution
operations, gas processing and handling revenue, sales of natural gas at market-based rates and contracted
fixed prices, sales of gas purchased from third parties, and other gas marketing activities. The performance
obligations vary for these revenues, but all are primarily recognized over time as the service is delivered.
Alternative Revenue Program:
o Water / Wastewater Revenues – These revenues represent the difference between the actual billed
utility volumetric water and wastewater revenues for Aqua Illinois and the revenues set in the last
Aqua Illinois rate case. In accordance with the Illinois Commerce Commission, we recognize
revenues based on the target amount established in the last rate case, and then record either a
regulatory asset or liability based on the cumulative annual difference between the target and actual
amounts billed, which results in either a payment from customers or a refund due to customers. The
cumulative annual difference is either refunded to customers or collected from customers over a nine-
month period.
o Natural Gas Revenues – These revenues represent the weather-normalization adjustment (“WNA”)
mechanism in place for our natural gas customers served in Kentucky and, beginning in October
2024, for our natural gas customers in Pennsylvania. The WNA serves to minimize the effects of
weather on the Company’s results for its residential and small commercial natural gas customers.
This regulatory mechanism adjusts revenues earned for the variance between actual and normal
weather and can have either positive (warmer than normal) or negative (colder than normal) effects
on revenues. Customer bills are adjusted in the heating season billing months, with rates adjusted for
the difference between actual revenues and revenues calculated under this mechanism billed to the
customers.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
40
These revenue programs represent a contract between the utility and its regulators, not customers, and
therefore are not within the scope of the FASB’s accounting guidance for recognizing revenue from contracts
with customers.
Other and Eliminations – Other and eliminations consist of market-based revenues, which are earned through
our non-regulated natural gas operations and Aqua Resources, and intercompany activities for revenue billed
between our subsidiaries. Our non-regulated natural gas operations consist of utility service line protection
solutions and repair services for households and the operation of gas marketing and production entities.
Revenue is recognized and the performance obligation is satisfied over time as the service is delivered. Aqua
Resources earned revenues and continues to earn revenue through third-party water and sewer service line
protection and repair services. For the service line protection business, the performance obligations are
allowing the use of our logo to a third-party water and sewer service line repair provider. Revenues are
primarily recognized over time as service is delivered.
Cash and Cash Equivalents ─ 7Ke &ompan\ FonsideUs all KiJKl\ liquid inYestments ZitK an oUiJinal matuUit\ of
three months or less, which are not restricted for construction activity, to be cash equivalents.
Under our cash management system, checks issued but not yet presented to banks would result in a negative bank
balance or a book overdraft. The Company funds its book overdraft from its line of credit and operating cash flows.
The balance of the book overdraft is reported as book overdraft, and the change in the book overdraft balance is
reported as cash flows from financing activities, due to our ability to fund the overdraft with the Company’s credit
facility.
Accounts Receivable ─ $FFounts UeFeiYable aUe UeFoUded at tKe inYoiFed amounts ZKiFK Fonsists of billed and
unbilled revenues. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable
credit losses in our existing accounts receivable and is determined based on lifetime expected credit losses, the aging
of account balances, and consideration of current and expected future conditions. The Company reviews the
allowance for doubtful accounts quarterly. Account balances are written off against the allowance when it is probable
the receivable will not be recovered. When utility customers request extended payment terms, credit is extended
based on regulatory guidelines, and collateral is not required.
Inventories – Materials and Supplies – Inventories are stated at the lower of cost or net realizable value. Cost is
determined using the first-in, first-out method.
Inventory – Gas Stored – The Company accounts for gas in storage inventory using the weighted average cost of gas
method.
Goodwill ─ *oodZill UepUesents tKe e[Fess Fost oYeU tKe faiU Yalue of net tanJible and identifiable intanJible assets
aFquiUed tKUouJK aFquisitions *oodZill is not amoUti]ed but is tested foU impaiUment annuall\ oU moUe often if
circumstances indicate a possible impairment may exist. When testing goodwill for impairment, we may assess
qualitative factors, including macroeconomic conditions, industry and market considerations, changes to regulatory
environment, recent regulatory and legislative proceedings, cost factors, overall financial performance, and entity
specific events, for some or all of our reporting units to determine whether it’s more likely than not that the fair value
of a reporting unit is less than its carrying amount. Alternatively, based on our assessment of the qualitative factors
previously noted or at our discretion, we may perform a quantitative goodwill impairment test by determining the fair
value of a reporting unit. If we perform a quantitative test and determine that the fair value of a reporting unit is less
than its carrying amount, we would record an impairment loss for the amount by which a reporting unit’s carrying
amount exceeds its fair value, not to exceed the reporting unit’s carrying amount of goodwill.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
41
Impairment testing for goodwill is done at the reporting unit level. A reporting unit is an operating segment or one
level below an operating segment (also known as a component). A component of an operating segment is a reporting
unit if the component constitutes a business for which discrete financial information is available, and segment
management regularly reviews the operating results of that component. We assigned assets and liabilities to each
reporting unit based on either specific identification or by using judgment for the remaining assets and liabilities that
are not specific to a reporting unit. Goodwill was assigned to the reporting units based on a combination of specific
identification and relative fair values.
Determining the fair value of our reporting units involves the use of significant estimates and assumptions and
considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at
the time, but such assumptions are subject to inherent uncertainty. We estimated the fair value of reporting units by
weighting results from the market approach and the income approach. These valuation approaches consider a number
of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount
rates, and comparable multiples from publicly traded companies in our industry. Changes in market conditions,
changes in the regulatory environment, pending or new legislation that could impact the ability to recover costs
through regulated rates or other factors outside of our control, could cause us to change key assumptions and our
judgment about a reporting unit’s prospects. Similarly, in a specific period, a reporting unit could significantly
underperform relative to its historical or projected future operating results. Either situation could result in a
meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.
During the fourth quarter of 2024, as part of the annual goodwill assessment as of October 1, 2024, we elected to
perform qualitative goodwill impairment assessments on the goodwill attributable to our Regulated Natural Gas, our
Regulated Water, and Other reporting units. Based on our analysis, we determined that none of the goodwill of our
reporting units were impaired.
The following table summarizes the changes in the Company’s goodwill:
Regulated
Water
Regulated
Natural Gas
Other
Consolidated
Balance at December 31, 2022
$
58,504 $ 2,277,447 $
4,841 $
2,340,792
Goodwill acquired
-
-
-
-
Reclassifications to utility plant acquisition adjustment
(54)
-
-
(54)
Balance at December 31, 2023
58,450
2,277,447
4,841
2,340,738
Goodwill acquired
-
-
-
-
Reclassifications to utility plant acquisition adjustment
(25)
-
-
(25)
Balance at December 31, 2024
$
58,425 $ 2,277,447 $
4,841 $
2,340,713
The reclassification of goodwill to utility plant acquisition adjustment results from either a regulatory order or a
mechanism approved by the applicable utility commission. A regulatory order may provide for the one-time transfer
of certain acquired goodwill. The mechanism provides for the transfer over time, and the recovery through customer
rates, of goodwill associated with some acquisitions upon achieving specific objectives.
Intangible assets – The Company’s intangible assets consist of customer relationships for our non-regulated natural
gas operations and non-compete agreements with certain former employees of Peoples. These intangible assets are
amortized on a straight-line basis over their estimated useful lives of fifteen years for the customer relationships and
five years for the non-compete agreements.
Derivative Instruments – The Company’s natural gas commodity price risk, driven mainly by price fluctuations of
natural gas, is mitigated by its purchased-gas cost adjustment mechanisms. The Company also uses derivative
instruments to economically hedge the cost of anticipated natural gas purchases during the winter heating months that
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
42
seeks to offset the risk to the Company’s utility customers from upward market price volatility. These strategies
include requirements contracts, spot purchase contracts and underground storage to meet regulated customers’ natural
gas requirements that may have fixed or variable pricing. The variable price contracts qualify as derivative
instruments; however, because the contract price is the prevailing price at the future transaction date the contract has
no determinable fair value. The fixed price contracts and firm commitments to purchase a fixed quantity of gas in the
future qualify for the normal purchases and normal sales exception that is allowed for contracts that are probable of
delivery in the normal course of business and, as such, are accounted for under the accrual basis and are not recorded
at fair value in the Company’s consolidated financial statements.
Deferred Charges and Other Assets ─ 'efeUUed FKaUJes and otKeU assets Fonsist pUimaUil\ of assets Keld to
compensate employees in the future who participate in the Company’s deferred compensation plan, and prepaid
pension and other post-retirement benefit plans assets, which amounted to $31,324 and $45,983 as of December 31,
2024; and $26,442 and $43,025 as of December 31, 2023, respectively. The assets of the deferred compensation plan
are invested in mutual funds which are carried on the consolidated balance sheet at fair market value, and changes in
fair value are included in other expense (income), refer to Note 12 – Fair Value of Financial Instruments for further
details. Refer to Note 16 – Pension Plans and Other Post-Retirement Benefit Plans for further information on the
prepaid pension and other post-retirement benefit plan assets.
Income Taxes ─ 7Ke &ompan\ aFFounts foU some inFome and e[pense items in diffeUent time peUiods foU finanFial
and tax reporting purposes. Deferred income taxes are provided on specific temporary differences between the tax
basis of the assets and liabilities, and the amounts at which they are carried in the consolidated financial statements.
The income tax effect of temporary differences not currently included in rates is recorded as deferred taxes with an
offsetting regulatory asset or liability. These deferred income taxes are based on the enacted tax rates expected to be
in effect when such temporary differences are projected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be realized. Investment tax credits are
deferred and amortized over the estimated useful lives of the related properties. Judgment is required in evaluating
the Company’s Federal and state tax positions. Despite management’s belief that the Company’s tax return positions
are fully supportable, the Company establishes reserves when it believes that its tax positions are likely to be
challenged and it may not fully prevail in these challenges. The Company’s provision for income taxes includes
interest, penalties and reserves for uncertain tax positions.
Customers’ Advances for Construction and Contributions in Aid of Construction ─ 8tilit\ mains otKeU utilit\
property or, in some instances, cash advances to reimburse the Company for its costs to construct utility mains or
other utility property, are contributed to the Company by customers, real estate developers and builders in order to
extend utility service to their properties. The value of these contributions is recorded as customers’ advances for
construction. Over time, the amount of non-cash contributed property will vary based on the timing of the
contribution of the non-cash property and the volume of non-cash contributed property received in connection with
development in our service territories. The Company makes refunds on these advances over a specific period of time
based on operating revenues related to the property, or as new customers are connected to and take service from the
applicable water main. After all refunds are made, any remaining balance is transferred to contributions in aid of
construction for our regulated water business. Contributions in aid of construction include direct non-refundable
contributions and the portion of customers' advances for construction that become non-refundable. For our regulated
gas business, non-refundable contributions are netted against the cost of the related utility mains or other utility
property.
Based on regulatory conventions in states where the Company operates, generally our subsidiaries depreciate
contributed property and amortize contributions in aid of construction at the composite rate of the related property.
Contributions in aid of construction and customers’ advances for construction are deducted from the Company’s rate
base for rate-making purposes, and therefore, no return is earned on contributed property.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
43
Stock-Based Compensation ─ 7Ke &ompan\ UeFoUds Fompensation e[pense in tKe finanFial statements foU stoFN-
based aZaUds based on tKe JUant date faiU Yalue of tKose aZaUds 6toFN-based Fompensation e[pense inFludes an
estimate foU pUe-YestinJ foUfeituUes and is UeFoJni]ed oYeU tKe Uequisite seUYiFe peUiods of tKe aZaUds on eitKeU a
stUaiJKt-line basis oU tKe JUaded YestinJ metKod ZKiFK is JeneUall\ FommensuUate ZitK tKe YestinJ teUm
Fair Value Measurements ± 7Ke &ompan\ folloZs tKe )$6%¶s aFFountinJ JuidanFe foU faiU Yalue measuUements and
disFlosuUes ZKiFK defines faiU Yalue and establisKes a fUameZoUN foU usinJ faiU Yalue to measuUe assets and liabilities
7Kat fUameZoUN pUoYides a faiU Yalue KieUaUFK\ tKat pUioUiti]es tKe inputs to Yaluation teFKniques used to measuUe faiU
Yalue 7Ke KieUaUFK\ JiYes KiJKest pUioUit\ to unadMusted quoted pUiFes in aFtiYe maUNets foU identiFal assets oU
liabilities /eYel measuUements and tKe loZest pUioUit\ to unobseUYable inputs /eYel measuUements 7Ke tKUee
leYels of tKe faiU Yalue KieUaUFK\ aUe as folloZs
/eYel unadMusted quoted pUiFes in aFtiYe maUNets foU identiFal assets oU liabilities tKat tKe &ompan\ Kas tKe
abilit\ to aFFess
/eYel inputs otKeU tKan /eYel tKat aUe obseUYable eitKeU diUeFtl\ oU indiUeFtl\ suFK as quoted maUNet
pUiFes in aFtiYe maUNets foU similaU assets oU liabilities quoted pUiFes foU identiFal oU similaU assets oU
liabilities in non-aFtiYe maUNets oU otKeU inputs tKat aUe obseUYable oU Fan be FoUUoboUated b\ obseUYable
maUNet data foU substantiall\ tKe full teUm of tKe assets oU liabilities oU
/eYel inputs tKat aUe unobseUYable and siJnifiFant to tKe faiU Yalue measuUement
7Ke asset¶s oU liabilit\¶s faiU Yalue measuUement leYel ZitKin tKe faiU Yalue KieUaUFK\ is based on tKe loZest leYel of
an\ input tKat is siJnifiFant to tKe faiU Yalue measuUement 9aluation teFKniques used need to ma[imi]e tKe use of
obseUYable inputs and minimi]e tKe use of unobseUYable inputs $dditionall\ assets tKat aUe measuUed at faiU Yalue
usinJ tKe net asset Yalue ³1$9´ peU sKaUe pUaFtiFal e[pedient aUe not Flassified in tKe faiU Yalue KieUaUFK\ 7KeUe
KaYe been no FKanJes in tKe Yaluation teFKniques used to measuUe faiU Yalue oU asset oU liabilit\ tUansfeUs betZeen tKe
leYels of tKe faiU Yalue KieUaUFK\ foU tKe \eaUs ended 'eFembeU and
5HFHQW$FFRXQWLQJ3URQRXQFHPHQWV─
3UonounFements to be adopted upon tKe effeFtiYe date
,n 1oYembeU tKe )$6% issued $68 - ³Income Statement Reporting–Comprehensive Income–Expense
Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses´ 7Ke standaUd update
impUoYes tKe disFlosuUes about a publiF business entit\¶s e[penses b\ UequiUinJ moUe detailed infoUmation about tKe
t\pes of e[penses inFludinJ puUFKases of inYentoU\ emplo\ee Fompensation depUeFiation and amoUti]ation
included within income statement expense captions. The guidance will be effective for annual reporting periods
beJinninJ afteU 'eFembeU and inteUim UepoUtinJ peUiods beJinninJ afteU 'eFembeU (aUl\
adoption is peUmitted 7Ke standaUd updates aUe to be applied pUospeFtiYel\ ZitK tKe option foU UetUospeFtiYe
appliFation 7Ke &ompan\ is FuUUentl\ eYaluatinJ tKe impaFt of adoption of tKe standaUd update on its finanFial
statement disclosures.
,n 'eFembeU tKe )$6% issued $68 - "Income Taxes (7opiF ): Improvements to Income Tax
Disclosures". 7Ke $68 enKanFes tKe tUanspaUenF\ and deFision usefulness of inFome ta[ disFlosuUes and is effeFtiYe
foU annual peUiods beJinninJ afteU 'eFembeU on a pUospeFtiYe basis (aUl\ adoption is peUmitted 7Ke
&ompan\ plans to adopt tKe standaUd in its annual UepoUt on )oUm -. 7Ke &ompan\ does not e[peFt tKis
ASU to have a significant impact to its current disclosures.
,n 0aUFK tKe 86 6eFuUities and ([FKanJe &ommission 6(& issued its final Flimate disFlosuUe Uule ZKiFK
UequiUes tKe disFlosuUe of 6Fope and 6Fope JUeenKouse Jas emissions and otKeU Flimate-Uelated topiFs in annual
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
44
reports and registration statements, when material. A number of petitions have been filed in federal courts seeking to
challenge the SEC’s climate disclosure rule. As a result, in April 2024, the SEC placed a pause on its implementation
of the new rule. We are evaluating the impact of the new rule and, depending on the outcome of the proceedings,
will include the required disclosures once it becomes effective.
Pronouncements adopted during the fiscal year:
In November 2023, the FASB issued ASU 2023-07 Segment Reporting - Improving Reportable Segment Disclosures
(Topic 280). The update is intended to improve reportable segment disclosure requirements, primarily through
enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment
expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment
items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when
deciding how to allocate resources. The ASU also requires certain annual disclosures currently required by Topic 280
to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and
interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and requires
retrospective application to all prior periods presented in the financial statements. The Company adopted the updated
provisions in this 2024 annual report on Form 10-K.
Recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not
relevant to the Company
Note 2 – Acquisitions
Water and Wastewater Utility Acquisitions – Completed
In January 2025, the Company acquired Greenville Sanitary Authority’s wastewater utility assets, which serves
approximately 2,300 customers in Greenville, Pennsylvania for $18,000.
In October 2024, the Company acquired wastewater utility assets in Morgan County, Indiana, which serve
approximately 100 customers for $500.
In May 2024, the Company acquired the wastewater utility assets of Westfield HOA, which serves approximately 200
customers within Westfield Homeowners Subdivision in Glenview, Illinois for a cash purchase price of $67.
In July 2023, the Company completed the following water utility asset acquisitions: Shenandoah Borough,
Pennsylvania, which serves approximately 2,900 customers for $12,291; La Rue, an Ohio municipality, which serves
approximately 300 customers for $2,253; and, Southern Oaks Water System, which serves approximately 800
customers in Texas for $3,321. Additionally, in July 2023, the Company completed their acquisition of a portion of
the water and wastewater utility assets of the Village of Frankfort, an Illinois municipality, which serves
approximately 1,500 customers for $1,424.
In June 2023, the Company acquired the wastewater utility assets of Union Rome, Ohio, which serves approximately
4,300 customers for a cash purchase price of $25,547.
In March 2023, the Company acquired the North Heidelberg Sewer Company in Berks County, Pennsylvania, which
serves approximately 300 customer connections for a cash purchase price of $136.
In November 2022, the Company acquired certain water utility assets of Oak Brook, Illinois, which serve 2,037
customers for a cash purchase price of $12,500.
In March 2022, the Company acquired the wastewater system of Lower Makefield Township, which serves 11,323
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
45
customer connections in Lower Makefield, Falls, and Middletown townships, and Yardley Borough, Bucks County,
Pennsylvania, for a cash purchase price of $53,000.
The operating revenues included in the consolidated financial statements of the Company during the period owned by
the Company for these utility systems acquired in 2024 are $32.
The operating revenues included in the consolidated financial statements of the Company during the period owned by
the Company for these utility systems acquired in 2023 were $7,715 in 2024 and $3,290 in 2023.
The operating revenues included in the consolidated financial statements of the Company during the period owned by
the Company for the utility systems acquired in 2022 were $19,013 in 2024, $18,039 in 2023 and $11,393 in 2022.
The purchase price allocation for these acquisitions consisted primarily of property, plant and equipment. The pro
forma effect of the utility systems acquired is not material either individually or collectively to the Company’s results
of operations.
Water and Wastewater Utility Acquisitions – Pending Completion
In October 2024, the Company entered into a purchase agreement to acquire Integra Water Texas, LLC’s wastewater
system assets in Bastrop County, Texas, which serves approximately 1,100 customers for $4,400.
In August 2024, the Company entered into a purchase agreement to acquire the Village of Midvale’s water system in
Ohio, which serves approximately 900 customers for $2,950.
In June 2024, the Company entered into a purchase agreement to acquire private water and wastewater utility assets in
Harris County, Texas, which serves approximately 400 equivalent retail customers for $1,125.
In December 2023, the Company entered into a purchase agreement to acquire North Versailles wastewater assets in
North Versailles Township, Pennsylvania which serves approximately 4,400 customers for between $25,000 and
$30,000. In August 2024, the purchase agreement was terminated mutually by the Company and the Authority.
In September 2023, the Company entered into a purchase agreement to acquire Greenville Municipal Water
Authority’s water system in Greenville, Pennsylvania which serves approximately 3,000 customers for $18,000.
In October 2021, the Company entered into a purchase agreement to acquire the wastewater utility assets of the City
of Beaver Falls, Pennsylvania which consists of approximately 7,600 customers for $41,250.
The purchase price for each of these pending acquisitions is subject to certain adjustments at closing, and is subject to
regulatory approval, including the final determination of the fair value of the rate base acquired. We plan to finance
the purchase price of these acquisitions by utilizing our revolving credit facility until permanent debt and common
equity are secured. These pending acquisitions are expected to close in 2025. Closing for our utility acquisitions are
subject to the timing of the respective regulatory approval processes.
East Whiteland Purchase Agreement
On July 29, 2022, the Pennsylvania Public Utility Commission issued an order (the “PUC Order”) approving the
Company’s acquisition of the municipal wastewater assets of East Whiteland Township, Chester County,
Pennsylvania, which serves 4,018 customers (the “East Whiteland Wastewater Assets”). On August 12, 2022, the
Company acquired the East Whiteland Wastewater Assets for a cash purchase price of $54,374. Subsequently on
August 25, 2022, the Office of Consumer Advocate (“OCA”) filed an appeal of the PUC Order to the Pennsylvania
Commonwealth Court. On July 31, 2023, a decision was issued by the Pennsylvania Commonwealth Court, in which
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
46
the Pennsylvania Commonwealth Court agreed with the OCA and reversed the PUC order which approved the
acquisition. On September 26, 2023, the Pennsylvania Commonwealth Court denied our motion for reargument. On
October 26, 2023, the Company, the Pennsylvania Public Utility Commission, and East Whiteland Township filed an
appeal to the Pennsylvania Supreme Court. East Whiteland Township filed to Supplement its Petition for Allowance
of Appeal on January 2, 2024. On January 16, 2024, the Company, the OCA and the PUC filed Answers to East
Whiteland Township’s Petition. On June 14, 2024, the Pennsylvania Supreme Court granted the Petitions for
Allowance of Appeal of the Pennsylvania Public Utility Commission, the Company, and East Whiteland Township.
The Company, the Pennsylvania Public Utility Commission, East Whiteland Township, and several Amicus Curiae
filed Initial Briefs on September 26, 2024. The OCA submitted its Brief on December 10, 2024. The Company, the
Pennsylvania Public Utility Commission, and East Whiteland Township submitted Reply Briefs on January 10, 2025.
Management believes the final resolution of this matter is not expected to have a material adverse effect on the
Company’s financial position, results of operations, or cash flows.
DELCORA Purchase Agreement
In 2019, the Company entered into a purchase agreement to acquire the wastewater utility system assets of the
Delaware County Regional Water Quality Control Authority (“DELCORA”), which consists of approximately 16,000
customers, or the equivalent of 198,000 retail customers, in 42 municipalities in Southeast Pennsylvania for $276,500.
There are several legal proceedings involving the Company as a result of the purchase agreement that are on-going.
On January 25, 2023, DELCORA filed in the Delaware Court of Common Pleas a complaint for Declaratory
Judgment seeking resolution of whether the County Ordinance dissolving DELCORA is a final action prohibiting
DELCORA from carrying out the material transaction of the Asset Purchase Agreement and, in the event that
DELCORA retains the ability to close the transaction, whether DELCORA is permitted to exist as a trust. On
February 14, 2023, the Company filed preliminary objections to DELCORA’s complaint. DELCORA filed an answer
and new matter to the Company’s preliminary objections on February 21, 2023. On December 3, 2024, the Delaware
County Court of Common Pleas issued an order that sustained Aqua’s preliminary objections and dismissed
DELCORA’s complaint. The purchase price for this pending acquisition is subject to certain adjustments at closing,
and is subject to regulatory approval, including the final determination of the fair value of the rate base acquired. We
plan to finance the purchase price of this acquisition with a mix of equity and debt financing, utilizing our revolving
credit facility until permanent debt is secured. Closing of our acquisition of DELCORA is subject to regulatory
approval and on-going litigation.
Note 3 – Dispositions
In October 2023, the Company closed on the sale of its regulated natural gas utility assets in West Virginia, which
served approximately 13,000 customers or about two percent of the Company’s regulated natural gas customers
(“Peoples Gas West Virginia”). Initially the sale closed for an estimated purchase price of $39,965, subject to
working capital and other adjustments. In March 2024, the Company received an additional $1,213 from the buyer.
The additional proceeds were based on finalizing closing working capital and other adjustments, resulting in a final
purchase price of $41,178 and a loss of an inconsequential amount. The sale concluded the Company’s regulated
utility operations in West Virginia. The sale of the Peoples Gas West Virginia utility assets had no major effect on
the Company’s operations and did not meet the requirements to be classified as discontinued operations.
In October 2023, the Company entered into an agreement to sell its interest in three non-utility local microgrid and
distributed energy projects for $165,000. As of December 31, 2023, balances associated with these projects of
$63,182 were included in prepayments and other current assets in the condensed consolidated balance sheets. The
sale was completed in January 2024, and the Company recognized a gain of $91,236 during the first quarter of 2024,
which is included in other expense (income) in the accompanying consolidated statement of operations.
The Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater
acquisitions, in place of external funding from equity and debt issuances.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
47
Note 4 – Property, Plant and Equipment
December 31,
2024
2023
Approximate
Range of
Useful Lives
Weighted
Average
Useful
Life
Regulated Water segment:
Utility plant and equipment:
Mains and accessories
$
4,781,229 $ 4,523,718
26-90 years
73 years
Services, hydrants, treatment plants and reservoirs
3,315,076
3,140,497
5-89 years
56 years
Operations structures and water tanks
448,040
413,147
15-80 years
48 years
Miscellaneous pumping and purification equipment
1,328,806
1,237,967
7-76 years
42 years
Meters, transportation and other operating equipment
1,152,416
1,104,643
5-84 years
28 years
Land and other non-depreciable assets
141,835
143,752
-
-
Utility plant and equipment - regulated water segment
11,167,402
10,563,724
Utility construction work in progress
405,751
315,973
-
-
Net utility plant acquisition adjustment
(5,627)
(6,444)
10-53 years
22 years
Non-utility plant and equipment
20,073
20,019
17-64 years
58 years
Property, Plant and Equipment - Regulated Water
segment
11,587,599
10,893,272
Regulated Natural Gas segment:
Natural gas transmission
444,560
429,465
29-97 years
61 years
Natural gas storage
62,706
62,157
30-89 years
44 years
Natural gas gathering and processing
155,470
147,700
22-96 years
47 years
Natural gas distribution
3,279,497
2,733,054
21-81 years
53 years
Meters, transportation and other operating equipment
637,712
613,653
5-61 years
24 years
Land and other non-depreciable assets
4,839
4,139
-
-
Utility plant and equipment - Regulated Natural Gas
segment
4,584,784
3,990,168
Utility construction work-in-progress
102,994
93,581
-
-
Property, plant and equipment - Regulated Natural Gas
segment
4,687,778
4,083,749
Total property, plant and equipment
$ 16,275,377 $ 14,977,021
Note 5 – Accounts Receivable
December 31,
2024
2023
Billed utility revenue
$
211,168
$
199,986
Other
14,295
4,887
225,463
204,873
Less allowance for doubtful accounts
58,941
60,573
Net accounts receivable
$
166,522 $
144,300
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
48
As of December 31, 2024, the Company’s utility customers are located principally in the following states: 66% in
Pennsylvania, 9% in Ohio, 6% in North Carolina, 5% in Texas, and 5% in Illinois. No single customer accounted for
more than one percent of the Company's utility operating revenues during the years ended December 31, 2024, 2023,
and 2022. The following table summarizes the changes in the Company’s allowance for doubtful accounts:
2024
2023
2022
Balance at January 1,
$
60,573 $
63,981 $
58,073
Amounts charged to expense
21,865
23,209
27,631
Accounts written off
(24,190)
(27,759)
(22,507)
Recoveries of accounts written off and other
693
1,142
784
Balance at December 31,
$
58,941 $
60,573 $
63,981
Note 6 – Regulatory Assets and Liabilities
Regulatory assets represent costs that are probable to be fully recovered from customers in future rates while
regulatory liabilities represent amounts that are expected to be refunded to customers in future rates or amounts
recovered from customers in advance of incurring the costs. Except for income taxes and utility plant retirement
costs, regulatory assets and regulatory liabilities are excluded from the Company’s rate base and do not earn a return.
The components of regulatory assets and regulatory liabilities are as follows:
December 31, 2024
December 31, 2023
Regulatory
Regulatory
Regulatory
Regulatory
Assets
Liabilities
Assets
Liabilities
Income taxes
$
1,712,714
528,656
$
1,553,111
599,088
Purchased gas costs
21,366
413
21,019
29,807
Utility plant retirement costs
29,146
75,270
38,148
68,815
Post-retirement benefits
80,875
160,851
80,000
153,816
Accrued vacation
418
-
1,877
-
Water tank painting
11,242
-
17,044
-
Fair value adjustment of long-term debt assumed in acquisition
30,603
-
38,482
-
Debt refinancing
11,587
-
12,674
-
Rate case filing expenses and other
42,689
1,325
33,617
654
$
1,940,640
$
766,515
$
1,795,972
$
852,180
Items giving rise to deferred state income taxes, as well as a portion of deferred Federal income taxes related to
specific differences between tax and book depreciation expense, are recognized in the rate setting process on a cash
basis or as a reduction in current income tax expense and will be recovered as they reverse. Amounts include
differences that arise between specific utility asset improvement costs capitalized for book and deducted as an
expense for tax purposes. Additionally, the recording of AFUDC for equity funds results in the recognition of a
regulatory asset for income taxes, which represents amounts due related to the revenue requirement. The Company
records regulatory assets when a valuation allowance is recorded on deferred tax assets, associated with state NOLs
that the Company does not believe are more likely than not to be realized, and are expected to be fully recovered from
customers in future rates. Regulatory liabilities are refundable in future rate filings based on the difference between
the amount of the income tax benefits that were incorporated into the Company’s cost of service in its latest rate case
as compared to the actual income tax benefits recognized.
A portion of the income taxes regulatory liability is related to Peoples Natural Gas’ income tax accounting change for
the tax benefits realized for the periods prior to adoption of a tax accounting method change for certain qualifying
infrastructure investments. In May 2021, the Company received a regulatory order directing the Company to refund
the catch-up adjustment to its utility customers over a five-year period, which was initiated by the Company in
August 2021, and, in December 2024, extended this refund period to ten years or up to August 2031. In 2022, the
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
49
Company made a similar change for its Peoples Gas and Aqua New Jersey subsidiaries, resulting in the recognition of
a regulatory liability for each of these subsidiaries for the tax benefits prior to the year of adoption.
The regulatory asset or liability for purchased gas costs reflects the differences between actual purchased gas costs
and the levels of recovery for these costs in current rates. The unrecovered costs are recovered and the over-
recovered costs are refunded in future periods, typically within a year, through quarterly and annual filings with the
applicable state regulatory agency.
The regulatory asset for utility plant retirement costs, including cost of removal, represents costs already incurred that
will be recovered in future rates over a five year recovery period. The regulatory liability for utility plant retirement
costs represents amounts recovered through rates during the life of the associated asset and before the costs are
incurred.
The regulatory asset for accrued vacation represents costs that would otherwise be charged to operations and
maintenance expense for vacation that is earned by employees, which is recovered as a cost of service.
The regulatory asset for post-retirement benefits, which includes pension and other post-retirement benefits, primarily
reflects a regulatory asset that has been recorded for the costs that would otherwise be charged to stockholders’ equity
for the underfunded status of the Company’s pension and other post-retirement benefit plans. The Company also has
a regulatory asset related to post-retirement benefits costs that represent costs already incurred which are now being
or anticipated to be recovered in rates over a period ranging from approximately 10 to 37 years. The regulatory
liability for post-retirement benefits represents costs recovered in rates in excess of post-retirement benefits expense.
Expenses associated with water tank painting are deferred and amortized over a period of time as approved in the
regulatory process. Water tank painting costs are generally being amortized over a period ranging from 10 to 20
years. The regulatory liability for water tank painting costs represents amounts recovered through rates and before the
costs are incurred.
The Company recorded a fair value adjustment for fixed rate, long-term debt assumed in acquisitions that matures in
various years ranging from 2024 to 2033. The regulatory asset or liability results from the rate setting process
continuing to recognize the historical interest cost of the assumed debt.
The regulatory asset for debt refinancing represents a portion of a make whole payment of $25,237 incurred in 2019
for the Company’s redemption of $313,500 of the Company’s outstanding notes that had maturities ranging from
2019 to 2037 and interest rates ranging from 3.57 to 5.83%. The Company deferred a portion of the make whole
payment as it represents an amount by which we expect to receive prospective rate recovery.
The regulatory asset related to rate case filing expenses and other represents the costs associated with filing for rate
increases that are deferred and amortized over periods that generally range from one year to five years, and costs
incurred by the Company for which it has received or expects to receive rate recovery. Other regulatory assets also
include the financial impacts of customer-owned lead service line replacement costs and regulatory balancing
accounts. Regulatory balancing accounts represent the difference between revenues recognized and authorized
revenue requirements until they are recovered from customers, and low-income customer assistance programs.
The regulatory asset related to the costs incurred for information technology software projects and water main
cleaning and relining projects are described in Note 1 – Summary of Significant Accounting Policies – Property, Plant
and Equipment and Depreciation.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
50
Note 7 – Income Taxes
Income tax benefit for the years ended December 31, is comprised of the following:
Years Ended December 31,
2024
2023
2022
Current:
Federal
$
-
$
1,913
$
-
State
5,920
11,487
8,716
5,920
13,400
8,716
Deferred:
Federal
(4,583)
(103,617)
(8,258)
State
(23,173)
23,772
(14,787)
(27,756)
(79,845)
(23,045)
Total income tax benefit
$
(21,836)
$
(66,445)
$
(14,329)
The statutory Federal tax rate is 21% for 2024, 2023, and 2022. For states with a corporate net income tax, the state
corporate net income tax rates range from 2.5% to 9.99% for the years presented. The Company’s effective income
tax rate for 2024, 2023, and 2022 was (3.8)%, (15.4)%, and (3.2)%, respectively. The Company remains subject to
examination by federal and state tax authorities for the tax years of 2021 through 2024.
The differences between income taxes expected at the federal statutory rate and the reported income tax benefit are
described below:
Years Ended December 31,
2024
2023
2022
Computed Federal tax expense at statutory rate
$
120,430
$
90,674
$
94,691
Decrease in Federal tax expense related to the flow through
benefit of repair deductions
(107,853)
(117,370)
(72,302)
Amortization of deferred benefit from repair method changes
(18,454)
(18,454)
(21,012)
State income taxes, net of Federal tax benefit
(13,745)
(15,115)
(3,972)
Amortization of excess deferred income taxes
(5,971)
(8,324)
(8,425)
Net change in unrecognized tax benefit
288
(4,796)
718
Valuation allowance for deferred tax assets
4,747
8,148
-
Other, net
(1,278)
(1,208)
(4,027)
Actual income tax benefit
$
(21,836) $
(66,445) $
(14,329)
As of December 31, 2024, and 2023, a change in valuation allowance for state deferred tax assets in the amounts of
$(4,206) and $10,969, respectively, are included in state income taxes, net of federal tax benefit above.
The Company uses the flow-through method to account for the repairs tax deduction for qualifying utility
infrastructure at its regulated Pennsylvania and New Jersey subsidiaries. The flow-through method of recording
income tax benefits results in a reduction to current income tax expense and is included in utility customers’
rates. The Company’s regulated Pennsylvania subsidiaries are subject to a collar mechanism. Amounts recognized
above or below the collar are required to be recorded as either a regulatory asset or liability, subject to disposition in
the next base rate case.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
51
In April 2023, the Internal Revenue Service issued Revenue Procedure 2023-15 which provides a safe harbor method
of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural
gas transmission and distribution property must be capitalized for tax purposes. The Company adopted the
methodology on its 2023 tax return. In the second quarter of 2023, based on the tax legislative guidance that was
issued, the Company reevaluated the uncertain tax positions related to the Regulated Water Segment and ultimately
released a portion of its historical income tax reserves. Concurrently, the Company deferred this tax benefit from the
reserve release as a regulatory liability. Based on the rate order received by Aqua Pennsylvania in February 2025, the
tax benefit of $4,874 from the reserve release will be refunded to customers through base rates over a two-year
period.
In September 2024, the Pennsylvania Public Utility Commission issued a rate order to Peoples Natural Gas approving
several tax related settlements. Accordingly, in December 2024, the Company filed an updated Tax Repairs surcredit
calculation with the Public Utility Commission to reflect the updated catch-up adjustment that should be returned to
customers effective January 1, 2025, with extension of the original 481(a) amortization period from 5 to 10 years.
Beginning January 1, 2025, no state tax benefit is being returned to customers in the approved base rates, as the state
NOLs cannot be utilized presently.
The following table provides the changes in the Company’s unrecognized tax benefits:
2024
2023
2022
Balance at January 1,
$
7,898 $
18,217 $
20,201
Impact of current year activity
309
7,219
(900)
Effect of Pennsylvania tax rate change
-
-
(1,084)
Decrease for prior year tax positions
-
(17,538)
-
Balance at December 31,
$
8,207 $
7,898 $
18,217
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that
has a greater than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may
be assessed interest and penalties by taxing authorities, which would be recorded as income tax expense. During the
years ended December 31, 2024, 2023, and 2022, there were expenses of $216, $23, and $118 for interest and
penalties related to uncertain tax positions. As of December 31, 2024, 2023 and 2022, the Company recognized
liabilities of $360, $144, and $620, respectively, for interest and penalties related to its uncertain tax positions.
The unrecognized tax benefits from uncertain tax positions are attributable to temporary differences. The Company
does not anticipate material changes to its unrecognized tax benefits within the next year. As a result of the
regulatory treatment afforded by the income tax accounting change in Pennsylvania and despite this position being a
temporary difference, as of December 31, 2024, 2023, and 2022, $7,216, $6,918, and $35,267, respectively, of these
tax benefits would have an impact on the Company’s effective income tax rate in the event the Company does sustain
all, or a portion, of its tax position.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
52
The following table provides the components of net deferred tax liability:
December 31,
2024
2023
Deferred tax assets:
Customers' advances for construction
$
26,394 $
20,332
Costs expensed for book not deducted for tax, principally accrued expenses
19,642
35,577
Post-retirement benefits
1,638
1,368
Tax effect of regulatory liabilities for post-retirement benefits
44,567
49,199
Tax attributes and credit carryforwards
494,318
458,001
Operating lease liabilities
9,532
11,529
Other
2,937
-
599,028
576,006
Less valuation allowance
(166,249)
(149,486)
432,779
426,520
Deferred tax liabilities:
Utility plant, principally due to depreciation and differences in the basis of fixed
assets due to variation in tax and book accounting
1,820,785
1,662,741
Deferred taxes associated with the gross-up of revenues necessary to recover, in
rates, the effect of temporary differences
408,624
348,646
Tax effect of regulatory assets for post-retirement benefits
22,151
28,092
Deferred investment tax credit
4,601
4,771
Operating lease right-of-use assets
8,486
10,301
Other
-
293
2,264,647
2,054,844
Net deferred tax liability
$
1,831,868 $
1,628,324
Certain prior year amounts have been reclassified for consistency with the current year presentation.
The following table summarizes the changes in the Company’s valuation allowance for deferred tax assets:
2024
2023
2022
Balance at January 1,
$
149,486
$
38,940
$
36,662
Amounts charged to expense
542
16,311
2,278
Amounts charged to regulatory assets
16,221
94,235
-
Balance at December 31,
$
166,249
$
149,486
$
38,940
At December 31, 2024, the Company has a cumulative Federal NOL of $1,425,886. The Company believes the
Federal NOLs are more likely than not to be recovered and require no valuation allowance. The Company’s Federal
NOLs will begin to expire in 2032.
At December 31, 2024, the Company has a cumulative state NOL of $2,811,033, a portion of which is offset by a
valuation allowance. The Company believes a portion of its Regulated Natural Gas segment state NOLs is not likely
to be realized due to its continuous investments in qualifying infrastructure resulting in the recording of a valuation
allowance in 2023. The Company recorded a regulatory asset for the portion of the valuation allowance that is
expected to be fully recovered from customers in future rates. At December 31, 2024, the Company has a cumulative
state valuation allowance of $2,282,663. The state NOL began expiring in 2023.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
53
At December 31, 2024, the Company’s Federal and state NOL carryforwards are reduced by an unrecognized tax
position of $19,549 and $13,818, respectively, which results from the Company’s presentation of an unrecognized tax
benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amounts of
the Company’s Federal and state NOL carryforwards net of the unrecognized tax positions are $1,406,337 and
$2,797,215, respectively. The Company records its unrecognized tax benefit as a component of its net deferred
income tax liability.
At December 31, 2024, the Company has a cumulative Federal charitable contribution of $61,404, on which a
valuation allowance of $61,404 has been recorded as the Company determined it is more likely than not they will
expire before they are utilized within the carryforward period.
At December 31, 2024, the Company has a cumulative state charitable contribution of $56,894 on which a valuation
allowance of $56,894 has been recorded as the Company does not believe these state charitable contributions are
more likely than not to be realized.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law, which, among other things,
implements a 15% minimum tax on book income of certain large corporations, and a 1% excise tax on net stock
repurchases after December 31, 2022. The alternative minimum tax would not be applicable in our next fiscal year
because it is based on a three-year average annual adjusted financial statement income in excess of $1,000,000. We
are continuing to assess the future impact of the provisions of the IRA on our consolidated financial statements. As a
regulated utility, taxes have been traditionally recognized by state public utility commissions as appropriate for
inclusion in establishing rates.
On July 8, 2022, Pennsylvania enacted House Bill 1342 into law, which, among other things, reduces Pennsylvania’s
corporate income tax rate from 9.99% to 8.99% beginning January 1, 2023, and an additional 0.5% annually through
2031, when it reaches to 4.99%. The Company evaluated the impacts of the tax rate change and recorded a reduction
to our deferred tax liabilities with a corresponding reduction primarily to our regulatory assets.
Note 8 – Taxes Other than Income Taxes
The following table provides the components of taxes other than income taxes:
Years Ended December 31,
2024
2023
2022
Property
$
34,569
$
32,790
$
33,703
Gross receipts, excise and franchise
17,801
17,985
16,828
Payroll
22,930
21,628
21,343
Regulatory assessments
7,836
7,451
6,771
Pumping fees
8,049
6,405
7,881
Other
3,449
3,949
3,498
Total taxes other than income taxes
$
94,634
$
90,208
$
90,024
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
54
Note 9 – Commitments and Contingencies
Commitments –
The Company maintains agreements with other water purveyors for the purchase of water to supplement its water
supply, particularly during periods of peak demand. The agreements stipulate purchases of minimum quantities of
water to the year 2032. The estimated annual commitments related to such purchases through 2029 are expected to
average $2,204, and the aggregate of the years remaining approximates $3,027.
The Company has entered into purchase obligations, in the ordinary course of business, that include agreements for
water treatment processes at some of its wells in a small number of its divisions. The 20 year term agreement
provides for the use of treatment equipment and media used in the treatment process and are subject to adjustment
based on changes in the Consumer Price Index. The future contractual cash obligations related to these agreements
are as follows:
2025
2026
2027
2028
2029
Thereafter
$
1,157
$
1,183
$
1,209
$
657
$
668
$
989
The Company’s natural gas supply is provided by sources on the interstate pipeline system and from local western
Pennsylvania gas well production. The Company has various interstate pipeline service agreements that provide for
firm transportation capacity, firm storage capacity, and other services and include capacity reservation charges based
upon the maximum daily and annual contract quantities set forth in the agreements. Some of these agreements have
minimum volume obligations and are transacted at applicable tariff and negotiated rates to the year 2034. The
estimated annual commitments related to such purchases through 2029 are expected to average $239,663, and the
aggregate of the years remaining beyond 2029 approximates $950,055.
The purchased water, water treatment, and purchased gas expenses under these agreements were as follows:
Years Ended December 31,
2024
2023
2022
Purchased water under long-term agreements
$
7,633 $
6,752 $
5,559
Water treatment expense under contractual agreement
1,125
1,103
1,061
Purchased natural gas under long-term agreements
277,009
352,306
601,995
Contingencies – The Company is routinely involved in various disputes, claims, lawsuits and other regulatory and
legal matters, including both asserted and unasserted legal claims, in the ordinary course of business. The status of
each such matter, referred to herein as a loss contingency, is reviewed and assessed in accordance with applicable
accounting rules regarding the nature of the matter, the likelihood that a loss will be incurred, and the amounts
involved. As of December 31, 2024, the aggregate amount of $23,815 is accrued for loss contingencies and is
reported in the Company’s consolidated balance sheet as other accrued liabilities and other liabilities. These accruals
represent management’s best estimate of probable loss (as defined in the accounting guidance) for loss contingencies
or the low end of a range of losses if no single probable loss can be estimated. For some loss contingencies, the
Company is unable to estimate the amount of the probable loss or range of probable losses. Further, Essential
Utilities has insurance coverage for certain of these loss contingencies, and as of December 31, 2024, estimates that
approximately $688 of the amount accrued for these matters are probable of recovery through insurance, which
amount is also reported in the Company’s consolidated balance sheet as deferred charges and other assets, net.
During a portion of 2019, the Company initiated a do not consume advisory for some of its customers in one division
served by the Company’s Illinois subsidiary. The do not consume advisory was lifted in 2019, and, in 2022, the water
system was determined to be in compliance with the federal Lead and Copper Rule. The Company has accrued for the
penalty and other fees that will be paid as a result of a settlement that was reached with the state and local regulators
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
55
and approved by the Illinois court with jurisdiction over this matter in July 2024. In addition, on September 3, 2019,
two individuals, on behalf of themselves and those similarly situated, commenced an action against the Company’s
Illinois subsidiary in the State court in Will County, Illinois related to this do not consume advisory. The complaint
seeks class action certification, attorney's fees, and "damages, including, but not limited to, out of pocket damages,
and discomfort, aggravation, and annoyance” based upon the water provided by the Company’s subsidiary to a
discrete service area in University Park, Illinois. The complaint contains allegations of damages as a result of
supplied water. In December, 2024, the State court in Will County, Illinois dismissed the case against the Company,
and plaintiffs have filed an appeal of that decision. The Company has an accrual for the amount of loss asserted in the
complaint that we determined to be probable and estimable of being incurred. While the final outcome of this claim
cannot be predicted with certainty, and unfavorable outcomes could negatively impact the Company, at this time in
the opinion of management, the final resolution of this matter is not expected to have a material adverse effect on the
Company’s financial position, results of operations or cash flows. Further, the Company submitted a claim for the
expenses incurred to its insurance carrier for potential recovery of a portion of these costs, is currently in litigation
with one of its carriers seeking to enforce its claims, and recently prevailed in the Third Circuit Court of Appeals
which held that the insurance carrier possessed a duty to defend. The Company continues to assess the potential loss
contingency on this matter.
A number of the Company’s subsidiaries are parties to several lawsuits against manufacturers of certain per- and
polyfluoroalkyl substances or compounds (“PFAS”) for damages, contribution and reimbursement of costs incurred
and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and
operated by these utility subsidiaries throughout its service area. One such suit to which the Company is a party is a
multi-district litigation (the “MDL”) lawsuit which commenced on December 7, 2018, in the United States District
Court for the District of South Carolina. Several defendants in such lawsuit have agreed to settle. In February and
April 2024, the MDL court issued its final approval of the DuPont and 3M class action settlements, respectively. In
April 2024 and May 2024, Tyco Fire Products LP and BASF Corp, respectively, filed similar class action settlements
in the MDL court to resolve claims, and, on November 11, 2024, received final approval from the MDL court. The
Company submitted the phase one public water system claims requirements pursuant to the Dupont and 3M
settlement agreements and will submit other requirements within the time period provided by the MDL court. The
amount of recovery, if any, by the Company is uncertain.
Although the results of legal proceedings cannot be predicted with certainty, other than disclosed above, there are no
pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of its properties
is the subject that are material or are expected to have a material effect on the Company’s financial position, results of
operations or cash flows.
In addition to the aforementioned loss contingencies, the Company self-insures a portion of its employee medical
benefit program, and maintains stop-loss coverage to limit the exposure arising from these claims. The Company’s
reserve for these claims totaled $2,295 and $1,846 at December 31, 2024 and 2023, respectively, and represents a
reserve for unpaid claim costs, including an estimate for the cost of incurred but not reported claims.
Note 10 – Leases
The Company leases land, office facilities, office equipment, and vehicles for use in its operations, which are
accounted for as operating leases. Leases with a term of 12 months or less are not recorded on the balance sheet;
rather, lease expense is recognized over the lease term. Our leases have remaining lives of 1 to 70 years.
Some of the Company’s leases can be extended on a month-to-month basis, which allow us to terminate the lease at
any given month without penalty while others include options to extend the leases for up to 50 years. The renewal of
a month-to-month lease is at our sole discretion.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
56
The Company accounts for lease and non-lease components of lease arrangements separately. For calculating lease
liabilities, we may deem lease terms to include options to extend or terminate the lease when it’s reasonably certain
that we will exercise that option. The Company’s lease agreements do not contain significant residual value
guarantees, restrictions or covenants.
Lease liabilities and corresponding right-of-use assets are recorded based on the present value of the lease payments
over the expected lease term, including leases with variable payments that are based on a market rate or an index and
net of any impairment. All other variable payments are expensed as incurred. Since the Company’s lease agreements
do not provide an implicit interest rate, we utilize our incremental borrowing rate to determine the discount rate used
to present value the lease payments.
On January 6, 2022, the Company entered into an amendment to an office lease that provided for the partial
termination of the Company’s obligations with respect to a portion of the leased premises of approximately 37,000
rentable square feet. The Company paid a termination fee of $2,812, reduced its remaining lease payments by $1,753
and recognized a loss on the partial termination of the lease of $1,801 that is included within operations and
maintenance expense in the consolidated statements of operations and comprehensive income.
Years Ended December 31,
2024
2023
2022
Components of lease expense were as follows:
Operating lease cost
$
9,821 $
9,307 $
9,359
Years Ended December 31,
2024
2023
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
8,148
$
9,149
December 31,
2024
2023
Supplemental balance sheet information related to leases was as follows:
Operating leases:
Operating lease right-of-use assets
$
31,263
$
37,416
Other accrued liabilities
$
7,591
7,360
Operating lease liabilities
27,447
34,425
Total operating lease liabilities
$
35,038
$
41,785
December 31,
2024
2023
Weighted average remaining lease term:
Operating leases
10.2 years
10.1 years
Weighted average discount rate:
Operating leases
5.15%
4.87%
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
57
Maturities of operating lease liabilities and a reconciliation of the operating lease liabilities reported on our
consolidated balance sheets as of December 31, 2024 are as follows:
Operating Leases
2025
$
9,144
2026
7,515
2027
7,262
2028
6,870
2029
1,075
Thereafter
12,827
Total operating lease payments
$
44,693
Total operating lease payments
$
44,693
Less operating lease liabilities
35,038
Present value adjustment
$
9,655
Note 11 – Long-term Debt and Loans Payable
Long-term Debt – The consolidated statements of capitalization provide a summary of long-term debt as of
December 31, 2024 and 2023. The supplemental indentures with respect to specific issues of the first mortgage bonds
restrict the ability of Aqua Pennsylvania and other operating subsidiaries of the Company to declare dividends, in
cash or property, or repurchase or otherwise acquire the stock of these companies. Loan agreements for Aqua
Pennsylvania and other operating subsidiaries of the Company have restrictions on minimum net assets. As of
December 31, 2024, restrictions on the net assets of the Company were $4,886,450 of the total $6,198,809 in net
assets. Included in this amount were restrictions on Aqua Pennsylvania’s net assets of $1,817,084 of their total net
assets of $2,540,787. As of December 31, 2024, $2,626,620 of Aqua Pennsylvania’s retained earnings of $2,646,620
and $372,979 of the retained earnings of $578,490 of other subsidiaries were free of these restrictions. Some
supplemental indentures also prohibit Aqua Pennsylvania and some other subsidiaries of the Company from making
loans to, or purchasing the stock of, the Company.
Sinking fund payments are required by the terms of specific issues of long-term debt. Excluding amounts due under
the Company’s revolving credit agreement, the future sinking fund payments and debt maturities of the Company’s
long-term debt are as follows:
Interest Rate Range
2025
2026
2027
2028
2029
Thereafter
0.00% to 0.99%
$
250
$
232
$
199
$
199
$
199
$
1,558
1.00% to 1.99%
758
1,089
1,917
1,941
1,965
4,062
2.00% to 2.99%
1,427
1,304
1,111
906
774
1,100,775
3.00% to 3.99%
1,343
807
206,657
362
400,336
1,773,498
4.00% to 4.99%
115,621
3,818
501,626
1,628
1,558
1,614,781
5.00% to 5.99%
-
-
-
3,000
-
1,329,260
6.00% to 6.99%
-
5,000
20,000
-
-
6,000
7.00% to 7.99%
23,000
-
4,888
-
-
-
8.00% to 8.99%
408
39
-
-
-
-
9.00% to 9.99%
-
11,800
-
-
-
-
Total
$
142,807
$
24,089
$
736,398
$
8,036
$
404,832
$
5,829,934
On August 15, 2024, the Company issued $500,000 of senior notes, less expenses of $3,015, due in 2027, with an
interest rate of 4.80%. On January 8, 2024, the Company issued $500,000 of senior notes, less expenses of $4,610,
due in 2034 with an interest rate of 5.375%. The Company used the net proceeds from the issuance of these senior
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
58
notes (1) to repay a portion of the borrowings under the Company’s existing five year unsecured revolving credit
facility, and (2) for general corporate purposes.
In August 2023, the Company’s subsidiary, Aqua Pennsylvania, issued $225,000 in aggregate principal amount of
first mortgage bonds. The bonds consisted of $175,000 of 5.48% first mortgage bonds due in 2053; and $50,000 of
5.56% first mortgage bonds due in 2061. In January 2023, Aqua Pennsylvania issued $75,000 of first mortgage bonds,
due in 2043, and with an interest rate of 5.60%. The proceeds from these bonds were used to repay existing
indebtedness and for general corporate purposes.
The weighted average cost of long-term debt at December 31, 2024 and 2023 was 4.14% and 4.14%,
respectively. The weighted average cost of fixed rate long-term debt at December 31, 2024 and 2023 was 4.03% and
3.86%, respectively.
On December 14, 2022, the Company entered into a five year $1,000,000 unsecured revolving credit facility, which
replaced the Company’s prior five year $1,000,000 unsecured revolving credit facility. The facility includes a
$100,000 sublimit for daily demand loan. Funds borrowed under this facility are classified as long-term debt and are
used to provide working capital as well as support for letters of credit for insurance policies and other financing
arrangements. As of December 31, 2024, the Company has the following sublimits and available capacity under the
credit facility: $100,000 letter of credit sublimit, $83,226 of letters of credit available capacity, $0 borrowed under
the swing-line commitment, $570,226 was available for borrowing and $413,000 of funds borrowed under the
agreement. Interest under the facility is equal to either (i) Term simple secured overnight financing rate (SOFR), plus
applicable margin; or (ii) an Alternate Base Rate (which is based at the highest of the (a) New York Federal Reserve
Bank rate, plus 0.5%, (b) the prime rate, and, (c) the daily SOFR, plus 1.0%,) plus applicable margin. The applicable
margin for an Alternate Base Rate loan will be up to 0.5% and for a SOFR loan will be up to 1.5%, in each case
depending on the debt ratings in effect as of such date. The Company may elect either the Term SOFR or the
Alternate Base Rate at the time of the drawdown, and loans may be converted from one rate to another at any time,
subject or certain conditions. A facility fee is charged on the total commitment amount of the agreement. Under these
facilities the average cost of borrowings was 6.17% and 6.30%, and the average borrowing was $292,017 and
$537,983, during 2024 and 2023, respectively.
The Company is obligated to comply with covenants under some of its loan and debt agreements. These covenants
contain a number of restrictive financial covenants, which among other things limit, subject to specific exceptions, the
Company’s ratio of consolidated total indebtedness to consolidated total capitalization, and require a minimum level
of earnings coverage over interest expense. During 2024, the Company was in compliance with its debt covenants
under its loan and debt agreements. Failure to comply with the Company’s debt covenants could result in an event of
default, which could result in the Company being required to repay or finance its borrowings before their due date,
possibly limiting the Company’s future borrowings, and increasing its borrowing costs.
Loans Payable – On June 12, 2024, Aqua Pennsylvania and Peoples Natural Gas Companies amended the terms of
their respective $100,000 and $300,000, 364-day revolving credit agreements, as follows: (1) extended the maturity
dates to June 10, 2025; and (2) revised the interest rate index from the Bloomberg Short-Term Bank Yield Index
(BSBY) to SOFR. The funds borrowed under these agreements are classified as loans payable and are used to provide
working capital.
As of December 31, 2024 and 2023, funds borrowed under the Aqua Pennsylvania revolving credit agreement were
$31,158 and $23,123, respectively. Interest under this facility is based, at the borrower’s option, on the prime rate, an
adjusted overnight bank funding rate, or, effective June 12, 2024, an adjusted SOFR (prior benchmark rate was an
adjusted BSBY floating rate). A commitment fee of 0.05% is charged on the total commitment amount of Aqua
Pennsylvania’s revolving credit agreement. The average cost of borrowing under the facility was 5.9% and 5.36%,
and the average borrowing was $29,074 and $19,275, during 2024 and 2023, respectively. The maximum amount
outstanding at the end of any one month was $42,691 and $54,472 in 2024 and 2023, respectively.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
59
As of December 31, 2024 and 2023, funds borrowed under the Peoples Natural Gas Companies revolving credit
agreement were $155,384 and $137,000, respectively. Interest under this facility is based, at the borrower’ option, at
the prime rate, an adjusted overnight bank funding rate, or, effective June 12, 2024, an adjusted SOFR (prior
benchmark rate was an adjusted BSBY floating rate). A commitment fee of 0.08% is charged on the total
commitment amount of Peoples’ revolving credit agreement. The average cost of borrowing under the facility was
6.18% and 5.97%, and the average borrowing was $96,609 and $78,952, during 2024 and 2023, respectively. The
maximum amount outstanding at the end of any one month was $158,249 and $161,500 in 2024 and 2023,
respectively.
At December 31, 2023, the Company had other combined short-term lines of credit of $35,500. During the third
quarter of 2024, the Company terminated these lines as they were no longer needed. There were no funds borrowed
under these short-term lines of credit in 2024 and 2023, and, if borrowings were outstanding, they would have been
classified as loans payable and used to provide working capital.
Interest Income and Expense– Interest income of $3,318, $3,401, and $3,675 was recognized for the years ended
December 31, 2024, 2023, and 2022, respectively. Interest expense was $302,467, $283,362, and $238,116 in 2024,
2023, and 2022, including amounts capitalized for borrowed funds of $7,372, $5,241, and $6,047, respectively.
Note 12 – Fair Value of Financial Instruments
Financial instruments are recorded at carrying value in the financial statements and approximate fair value, with the
exception of long-term debt, as of the dates presented. The fair value of these instruments is disclosed below in
accordance with current accounting guidance related to financial instruments.
The fair value of loans payable is determined based on its carrying amount and utilizing Level 1 methods and
assumptions. As of December 31, 2024 and 2023, the carrying amount of the Company’s loans payable was
$186,542 and $160,123, respectively, which equates to their estimated fair value. The fair value of cash and cash
equivalents is determined based on Level 1 methods and assumptions. As of December 31, 2024 and 2023, the
carrying amounts of the Company's cash and cash equivalents were $9,156 and $4,612, respectively, which equates to
their fair value. The Company’s assets underlying the deferred compensation and non-qualified pension plans are
determined by the fair value of mutual funds, which are based on quoted market prices from active markets utilizing
Level 1 methods and assumptions. As of December 31, 2024 and 2023, the carrying amount of these securities was
$31,324 and $26,442, respectively, which equates to their fair value, and is reported in the consolidated balance sheet
in deferred charges and other assets.
Unrealized gains and losses on equity securities held in conjunction with our non-qualified pension plan is as follows:
Years ended December 31,
2024
2023
2022
Net gain (loss) recognized during the period on equity securities
$
1,158 $
582 $
(895)
Less: net gain (loss) recognized during the period on equity securities sold
during the period
-
-
-
Unrealized gain (loss) recognized during the reporting period on equity
securities still held at the reporting date
$
1,158 $
582 $
(895)
The net gain (loss) recognized on equity securities is presented on the consolidated statements of operations and
comprehensive income on the line item “Other.”
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
60
The carrying amounts and estimated fair values of the Company’s long-term debt is as follows:
December 31,
2024
2023
Carrying amount
$
7,559,096 $
6,938,008
Estimated fair value
$
6,431,777 $
5,980,722
The fair value of long-term debt has been determined by discounting the future cash flows using current market
interest rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions.
Note 13 – Stockholders’ Equity
At December 31, 2024, the Company had 600,000,000 shares of common stock authorized; par value $0.50. Shares
outstanding and treasury shares held were as follows:
December 31,
2024
2023
2022
Shares outstanding
274,823,591
273,296,037
263,737,084
Treasury shares
3,386,069
3,299,191
3,236,237
At December 31, 2024, the Company had 1,770,819 shares of authorized but unissued Series Preferred Stock, $1.00
par value.
In March 2024, the Company filed a new universal shelf registration with the SEC to allow for the potential future
offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of our
common stock, preferred stock, debt securities, and other securities specified therein at indeterminate prices. This
registration statement is effective for three years and replaces a similar filing that expired in the second quarter of
2024.
The Company has an acquisition shelf registration statement on file with the SEC which permits the offering, from
time to time, of an aggregate of $500,000 in shares of common stock and shares of preferred stock in connection with
acquisitions. The balance remaining available for use under the acquisition shelf registration statement as of
December 31, 2024 is $487,155.
The form and terms of any securities issued under the universal shelf registration statement and the acquisition shelf
registration statement will be determined at the time of issuance.
The Company has a Dividend Reinvestment and Direct Stock Purchase Plan (“Plan”) that allows reinvested dividends
to be used to purchase shares of common stock at a five percent discount from the current market value. Under the
direct stock purchase program, shares are issued throughout the year. The shares issued under the Plan are either
shares purchased by the Company’s transfer agent in the open-market or original issue shares. In 2024, 2023, and
2022, the Company sold 433,688, 430,487, and 368,278 original issue shares of common stock through the dividend
reinvestment portion of the Plan, for net proceeds of $15,476, $16,005, and $16,619, respectively.
The Company recorded a regulatory asset for the underfunded status of its pension and other post-retirement benefit
plans that would otherwise be charged to other comprehensive income, as it anticipates recovery of its costs through
customer rates.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
61
At-the-Market Offering
On August 13, 2024, the Company filed a prospectus supplement under the 2024 universal shelf registration statement
relating to a new at-the-market equity sales program (“ATM”), under which it may issue and sell shares of its
common stock up to an aggregate offering price of $1,000,000 (“2024 ATM”). This 2024 ATM replaced the
Company’s previous ATM filed on October 14, 2022 (“2022 ATM”).
During year ended December 31, 2024, the Company issued 925,497 shares of common stock for net proceeds of
$36,134 under the 2024 ATM. As of December 31, 2024, the 2024 ATM had approximately $964,000 of equity
available for issuance. During the year ended December 31, 2023, the Company issued 8,938,839 shares of common
stock for net proceeds of $322,983 under the 2022 ATM. During the year ended December 31, 2022, the Company
issued 1,321,994 shares of common stock for net proceeds of $63,040 under the 2022 ATM. There were no common
stock sales under the 2022 ATM in 2024. The Company used the net proceeds from the sales of shares through the
2022 and 2024 ATMs for working capital, capital expenditures, water and wastewater utility acquisitions, and
repaying a portion of outstanding indebtedness.
Tangible Equity Unit Issuances
On April 23, 2019, the Company issued $690,000, less expenses of $16,358, of its tangible equity units (the “Units”),
with a stated amount of $50 per unit, as part of the financing of the Peoples Gas Acquisition. Each Unit consisted of a
prepaid stock purchase contract and an amortizing note, each issued by the Company. The amortizing notes had an
initial principal amount of $8.62909, or $119,081 in aggregate, and yielded interest at a rate of 3.00% per year, and
paid equal quarterly cash installments of $0.75000 per amortizing note (except for the July 30, 2019 installment
payment, which was $0.80833 per amortizing note), that constituted a payment of interest and a partial repayment of
principal. This cash payment in the aggregate was equivalent to 6.00% per year with respect to each $50 stated
amount of the Units. The amortizing notes represented unsecured senior obligations of the Company. During 2022,
981,919 stock purchase contracts were early settled by the holders of the contracts prior to the mandatory settlement
date, resulting in the issuance of 1,166,107 shares of the Company’s common stock. On May 2, 2022, the remaining
6,621,315 stock purchase contracts were each mandatorily settled for 1.18758 shares of the Company’s common
stock, and in the aggregate the Company issued 7,863,354 shares of its common stock. Additionally, the final
quarterly installment payment was made, which resulted in the complete pay-off of the amortizing notes.
Note 14 – Net Income per Common Share and Equity per Common Share
Basic net income per share is based on the weighted average number of common shares outstanding and the weighted
average minimum number of shares issued upon settlement of the stock purchase contracts issued under the tangible
equity units. Diluted net income per share is based on the weighted average number of common shares outstanding
and potentially dilutive shares. The dilutive effect of employee stock-based compensation and shares issuable under
the forward equity sale agreement (from the date the Company entered into the forward equity sale agreement to the
settlement date) are included in the computation of diluted net income per common share. The dilutive effect of
stock-based compensation and shares issuable under the forward equity sale agreement are calculated by using the
treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation and
settlement of the forward equity sale agreement. The treasury stock method assumes that the proceeds from stock-
based compensation and settlement of the forward equity sale agreement are used to purchase the Company’s
common stock at the average market price during the period. The following table summarizes the shares, in
thousands, used in computing basic and diluted net income per share:
Years ended December 31,
2024
2023
2022
Average common shares outstanding during the period for basic computation
273,914
267,171
262,246
Effect of dilutive securities:
Employee stock-based compensation
507
488
622
Average common shares outstanding during the period for diluted computation
274,421
267,659
262,868
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
62
The number of outstanding employee stock options that were not included in the diluted earnings per share
calculation because the effect would have been anti-dilutive was 243,780, 148,725 and 77,506 for the years ended
December 31, 2024, 2023 and 2022, respectively. Additionally, the dilutive effect of performance share units and
restricted share units granted are included in the Company’s calculation of diluted net income per share.
On May 2, 2022, all of the remaining stock purchase contracts under the tangible equity units were mandatorily
settled. For the year ended December 31, 2022, the weighted average impact of 2,932,010 shares was included in the
basic computation of the average common shares outstanding based on the number of shares that were issued upon
settlement of the stock purchase contracts under the tangible equity units.
Note 15 – Employee Stock and Incentive Plan
Under the Company’s Amended and Restated Equity Compensation Plan, (the “Plan”) approved by the Company’s
shareholders on May 2, 2019, to replace the 2004 Equity Compensation Plan, stock options, stock units, stock awards,
stock appreciation rights, dividend equivalents, and other stock-based awards may be granted to employees, non-
employee directors, and consultants and advisors. The Plan authorizes 6,250,000 shares for issuance under the plan.
A maximum of 3,125,000 shares under the Plan may be issued pursuant to stock award, stock units and other stock-
based awards, subject to adjustment as provided in the Plan. During any calendar year, no individual may be granted
(i) stock options and stock appreciation rights under the Plan for more than 500,000 shares of common stock in the
aggregate or (ii) stock awards, stock units or other stock-based awards under the Plan for more than 500,000 shares of
Company stock in the aggregate, subject to adjustment as provided in the Plan. Awards to employees and consultants
under the Plan are made by a committee of the Board of Directors, except that with respect to awards to the Chief
Executive Officer, the committee recommends those awards for approval by the non-employee directors of the Board
of Directors. In the case of awards to non-employee directors, the Board of Directors makes such awards. At
December 31, 2024, 1,197,122 shares were still available for issuance under the Plan. No further grants may be made
under the Company’s 2004 Equity Compensation Plan.
Performance Share Units – During 2024, 2023, and 2022, the Company granted performance share units. A
performance share unit (“PSU”) represents the right to receive a share of the Company’s common stock if specified
performance goals are met over the three-year performance period specified in the grant, subject to exceptions
through the respective vesting periods, which is generally three years. Each grantee is granted a target award of PSUs
and may earn between 0% and 200% of the target amount depending on the Company’s performance against the
performance goals.
The performance goals of the 2024, 2023, and 2022 PSU grants consisted of the following metrics:
Metric 1 – Company’s total shareholder return (“TSR”) compared to the TSR for a specific
peer group of investor-owned utilities (a market-based condition)
38.46%
Metric 2 – Achievement of a targeted cumulative level of rate base growth as a result of
acquisitions (a performance-based condition)
30.77%
Metric 3 – Achievement of targets for maintaining consolidated operations and
maintenance expenses over the three-year measurement period (a performance-based
condition)
30.77%
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
63
The following table provides the compensation expense and income tax benefit for PSUs:
Years ended December 31,
2024
2023
2022
Stock-based compensation within operations and maintenance expense
$
5,787 $
6,942 $
7,950
Income tax benefit
$
1,450 $
1,741 $
1,997
The following table summarizes nonvested PSU transactions for the year ended December 31, 2024:
Number of
Share Units
Weighted
Average Fair
Value
Nonvested share units at beginning of period
531,437 $
40.03
Granted
227,284
38.10
Performance criteria adjustment
(50,562)
39.47
Forfeited
(48,078)
41.37
Share units issued
(96,425)
43.40
Nonvested share units at end of period
563,656 $
38.61
A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-
based conditions associated with the PSUs using the Monte Carlo valuation method, which assesses the probabilities
of various outcomes of market conditions. The other portion of the fair value of the PSUs associated with
performance-based conditions was based on the fair market value of the Company’s stock at the grant date, regardless
of whether the market-based condition is satisfied. The fair value of each PSU grant is amortized into compensation
expense on a straight-line basis over their respective vesting periods, generally 36 months. The accrual of
compensation costs is based on an estimate of the final expected value of the award and is adjusted as required for the
portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and
recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the
PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of
the PSUs. The recording of compensation expense for PSUs has no impact on net cash flows. The following table
provides the assumptions used in the pricing model for the grant, the resulting grant date fair value of PSUs, and the
intrinsic value and fair value of PSUs that vested during the year:
Years ended December 31,
2024
2023
2022
Expected term (years)
3.0
3.0
3.0
Risk-free interest rate
4.19%
4.43%
1.75%
Expected volatility
22.4%
33.8%
31.9%
Weighted average fair value of PSUs granted
$
38.10 $
45.06 $
42.33
Intrinsic value of vested PSUs
$
3,421 $
7,483 $
-
Fair value of vested PSUs
$
4,168 $
9,692 $
-
As of December 31, 2024, $9,729 of unrecognized compensation costs related to PSUs is expected to be recognized
over a weighted average period of approximately 1.8 years. The aggregate intrinsic value of PSUs as of
December 31, 2024 was $20,472. The aggregate intrinsic value of PSUs is based on the number of nonvested share
units and the market value of the Company’s common stock as of the period end date.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
64
Restricted Stock Units – A restricted stock unit (“RSU”) represents the right to receive a share of the Company’s
common stock and is valued based on the fair market value of the Company’s stock on the date of grant. RSUs are
eligible to be earned at the end of a specified restricted period, generally three years, beginning on the date of grant.
In some cases, the right to receive the shares is subject to specific performance goals established at the time the grant
is made. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which
results in a reduction in compensation expense. As the payout of the RSUs includes dividend equivalents, no separate
dividend yield assumption is required in calculating the fair value of the RSUs. The following table provides the
compensation expense and income tax benefit for RSUs:
Years ended December 31,
2024
2023
2022
Stock-based compensation within operations and maintenance expense
$
2,802 $
2,877 $
2,927
Income tax benefit
$
702 $
722 $
736
The following table summarizes nonvested RSU transactions for the year ended December 31, 2024:
Number of
Stock Units
Weighted
Average Fair
Value
Nonvested stock units at beginning of period
192,217 $
45.06
Granted
104,661
36.61
Stock units vested
(66,040)
44.40
Forfeited
(20,589)
41.37
Nonvested stock units at end of period
210,249 $
41.40
The following table summarizes the value of RSUs:
Years ended December 31,
2024
2023
2022
Weighted average fair value of RSUs granted
$
36.61 $
45.53 $
44.74
Intrinsic value of vested RSUs
$
2,348 $
2,427 $
3,090
Fair value of vested RSUs
$
2,930 $
2,665 $
2,483
As of December 31, 2024, $3,596 of unrecognized compensation costs related to RSUs is expected to be recognized
over a weighted average period of approximately 1.5 years. The aggregate intrinsic value of RSUs as of
December 31, 2024 was $7,636. The aggregate intrinsic value of RSUs is based on the number of nonvested stock
units and the market value of the Company’s common stock as of the period end date.
Stock Options – A stock option represents the option to purchase a number of shares of common stock of the
Company as specified in the stock option grant agreement at the exercise price per share as determined by the closing
market price of our common stock on the grant date. Stock options are exercisable in installments of 33% annually,
starting one year from the grant date and expire ten years from the grant date. The vesting of stock options granted in
2024, 2023 and 2022 are subject to the achievement of the following performance goal: the Company achieves at
least an adjusted return on equity equal to 150 basis points below the return on equity granted by the Pennsylvania
Public Utility Commission during the Company’s Pennsylvania subsidiary’s last rate proceeding. The adjusted return
on equity equals net income, excluding net income or loss from acquisitions which have not yet been incorporated
into a rate application as of the last year end, divided by equity which excludes equity applicable to acquisitions
which are not yet incorporated in a rate application during the award period.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
65
The fair value of each stock option is amortized into compensation expense using the graded vesting method, which
results in the recognition of compensation costs over the requisite service period for each separately vesting tranche of
the stock options as though the stock options were, in substance, multiple stock option grants. The following table
provides compensation expense and income tax benefit for stock options:
Years ended December 31,
2024
2023
2022
Stock-based compensation within operations and maintenance expenses
$
304 $
650 $
451
Income tax benefit
$
76 $
162 $
140
Options under the plans were issued at the closing market price of the stock on the day of the grant. The fair value of
options was estimated at the grant date using the Black-Scholes option-pricing model, which relies on assumptions
that require management’s judgment. The following table provides the assumptions used in the pricing model for
grants and the resulting grant date fair value of stock options granted in the period reported:
2024
2023
2022
Expected term (years)
5.5
5.5
5.5
Risk-free interest rate
4.00%
4.03%
1.92%
Expected volatility
28.30%
27.80%
26.50%
Dividend yield
3.43%
2.53%
2.37%
Grant date fair value per option
$
8.12 $
11.37 $
9.34
Historical information was the principal basis for the selection of the expected term and dividend yield. The expected
volatility is based on a weighted-average combination of historical and implied volatilities over a period that
approximates the expected term of the option. The risk-free interest rate was selected based upon the U.S. Treasury
yield curve in effect at the time of grant for the expected term of the option. The Company assumes that forfeitures
will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense.
The following table summarizes stock option transactions for the year ended December 31, 2024:
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life (years)
Aggregate
Intrinsic
Value
Outstanding, beginning of year
882,442 $
37.03
Granted
119,548
35.78
Forfeited
(17,917)
39.27
Expired / Cancelled
(7,851)
43.74
Exercised
(69,320)
35.65
Outstanding at end of year
906,902 $
36.87
5.1 $
713
Exercisable at end of year
732,590 $
36.27
4.2 $
655
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
66
The intrinsic value of stock options is the amount by which the market price of the stock on a given date, such as at
the end of the period or on the day of exercise, exceeded the closing market price of stock on the date of grant. The
following table summarizes the intrinsic value of stock options exercised and the fair value of stock options which
vested:
Years ended December 31,
2024
2023
2022
Intrinsic value of options exercised
$
172 $
64 $
960
Fair value of options vested
$
502 $
236 $
1,203
The following table summarizes information about the options outstanding and options exercisable as of
December 31, 2024:
Options Outstanding
Options Exercisable
Shares
Weighted
Average
Remaining
Life (years)
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Range of prices:
$30.00 - 33.99
50,975
2.1 $
30.47
50,975 $
30.47
$34.00 - 34.99
86,714
3.2
34.51
86,714
34.51
$35.00 - 35.99
633,620
5.0
35.94
525,433
35.94
$36.00 and above
135,593
7.6
45.24
69,468
45.18
906,902
5.1 $
36.87
732,590 $
36.27
As of December 31, 2024, there was $122 of total unrecognized compensation costs related to nonvested stock
options granted under the plans. The cost is expected to be recognized over a weighted average period of
approximately 0.7 years.
Restricted Stock – Restricted stock awards provide the grantee with the rights of a shareholder, including the right to
receive dividends and to vote such shares, but not the right to sell or otherwise transfer the shares during the
restriction period. Restricted stock awards result in compensation expense that is equal to the fair market value of the
stock on the date of the grant and is amortized ratably over the restriction period. The Company expects forfeitures of
restricted stock to be de minimis.
The following table provides the compensation cost and income tax benefit for stock-based compensation related to
restricted stock:
Years ended December 31,
2024
2023
2022
Stock-based compensation within operations and maintenance expense
$
53 $
43 $
50
Income tax benefit
$
15 $
12 $
15
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
67
The following table summarizes restricted stock transactions for the year ended December 31, 2024:
Number of Shares
Weighted Average
Fair Value
Nonvested shares at beginning of period
1,412
$
35.42
Granted
1,268
39.43
Vested
(1,412)
35.42
Nonvested shares at end of period
1,268
$
39.43
Stock Awards – Stock awards represent the issuance of the Company’s common stock, without restriction. Stock
awards are granted to the Company’s non-employee directors. The issuance of stock awards results in compensation
expense which is equal to the fair market value of the stock on the grant date, and is expensed immediately upon
grant. The following table provides compensation cost and income tax benefit for stock-based compensation related
to stock awards:
Years ended December 31,
2024
2023
2022
Stock-based compensation within operations and maintenance expense
$
840 $
810 $
715
Income tax benefit
$
233 $
228 $
207
The following table summarizes the value of stock awards:
Years ended December 31,
2024
2023
2022
Intrinsic and fair value of stock awards vested
$
840 $
810 $
715
Weighted average fair value of stock awards granted
$
36.82 $
41.58 $
46.44
The following table summarizes stock award transactions for year ended December 31, 2024:
Number of
Stock
Awards
Weighted
Average Fair
Value
Nonvested stock awards at beginning of period
- $
-
Granted
22,813
36.82
Vested
(22,813)
36.82
Nonvested stock awards at end of period
- $
-
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
68
Note 16 – Pension Plans and Other Post-retirement Benefits
The Company maintains a qualified, defined benefit pension plan that covers its full-time employees who were hired
prior to the date their respective pension plan was closed to new participants. Retirement benefits under the plan are
generally based on the employee’s total years of service and compensation during the last five years of employment.
The Company’s policy is to fund the plan annually at a level which is deductible for income tax purposes and which
provides assets sufficient to meet its pension obligations over time. To offset some limitations imposed by the
Internal Revenue Code with respect to payments under qualified plans, the Company has a non-qualified
Supplemental Pension Benefit Plan for Salaried Employees in order to prevent some employees from being penalized
by these limitations, and to provide certain retirement benefits based on employee’s years of service and
compensation. The net pension costs and obligations of the qualified and non-qualified plans are included in the
tables which follow. Employees hired after their respective pension plan was closed, may participate in a defined
contribution plan that provides a Company matching contribution on amounts contributed by participants and an
annual profit-sharing contribution based upon a percentage of the eligible participants’ compensation.
The Company’s qualified defined benefit pension plan has a permanent lump sum option on the form of benefit
payments offered to participants upon retirement or termination. The plan paid $4,003 and $30,347 to participants
who elected this option during 2024 and 2023, respectively. During 2023, we made lump-sum pension benefit
distributions exceeding the cumulative amount of service and interest cost components of the net periodic pension
cost for the year, which is the settlement accounting threshold. A settlement loss of $5,173 was recorded as a
regulatory asset, as it is probable of recovery in future rates, and will be amortized into pension benefit costs. A
settlement loss is the recognition of unrecognized pension benefit costs that would have been incurred in subsequent
periods.
In addition to providing pension benefits, the Company offers post-retirement benefits other than pensions to
employees retiring with a minimum level of service and hired before their respective plan closed to new participants.
These benefits include continuation of medical and prescription drug benefits, or a cash contribution toward such
benefits, for eligible retirees and life insurance benefits for eligible retirees. The Company funds these benefits
through various trust accounts. The benefits of retired officers and other eligible retirees are paid by the Company
and not from plan assets due to limitations imposed by the Internal Revenue Code.
In December 2024, the Company transferred a portion of its existing liability for a group of participants with retiree
life insurance benefits under the pension and post-retirement benefit plan to an insurance carrier. Total consideration
paid to the insurance carrier amounted to $7,292. This transaction triggered settlement accounting in our other post-
retirement benefit plan and a settlement gain of $3,214 was recorded as a regulatory liability which will be amortized
into post-retirement benefit costs.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the
years indicated:
Pension Benefits
Other Post-retirement Benefits
Years:
2025
$
26,780
$
5,357
2026
26,492
5,503
2027
28,235
5,870
2028
26,920
6,147
2029
26,560
6,488
2030-2034
117,508
32,521
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
69
The changes in the benefit obligation and fair value of plan assets, the funded status of the plans and the assumptions
used in the measurement of the company’s benefit obligation are as follows:
Pension Benefits
Other Post-retirement Benefits
2024
2023
2024
2023
Change in benefit obligation:
Benefit obligation at January 1,
$
313,698 $
324,690
$
91,502
$
83,501
Service cost
1,429
1,507
1,453
1,347
Interest cost
15,632
16,007
4,450
4,476
Actuarial loss/(gain)
(12,579)
20,418
(1,071)
5,008
Plan participants' contributions
-
-
121
106
Benefits paid
(23,144)
(18,577)
(7,439)
(2,936)
Settlements
-
(30,347)
(6,052)
-
Benefit obligation at December 31,
295,036
313,698
82,964
91,502
Change in plan assets:
Fair value of plan assets at January 1,
312,303
333,176
95,005
85,994
Actual return on plan assets
(4,959)
7,648
11,781
12,060
Employer contributions
9,393
20,343
-
-
Participants' contributions
-
-
121
106
Benefits paid
(23,085)
(18,517)
(6,605)
(3,155)
Settlements
-
(30,347)
(6,052)
-
Fair value of plan assets at December 31,
293,652
312,303
94,250
95,005
Funded status of plan:
Net asset / (liability) recognized at December 31,
$
(1,384) $
(1,395)
$
11,286
$
3,503
The following table provides the net liability recognized on the consolidated balance sheets at December 31:
Pension Benefits
Other Post-retirement Benefits
2024
2023
2024
2023
Non-current asset
$
16,475 $
16,325
$
29,508 $
26,700
Current liability
(1,844)
(1,334)
(557)
(733)
Noncurrent liability
(16,015)
(16,386)
(17,665)
(22,464)
Net asset / (liability) recognized
$
(1,384) $
(1,395)
$
11,286 $
3,503
The following table provides selected information about plans with accumulated benefit obligation and projected
benefit obligation in excess of plan assets:
December 31,
December 31,
2024
2023
Pension
Benefits
Other
Post-
retirement
Benefits
Pension
Benefits
Other
Post-
retirement
Benefits
Selected information for plans with projected benefit
obligation in excess of plan assets:
Projected benefit obligation
$
17,858
$
N/A
$
17,720
$
N/A
Fair value of plan assets
$
-
$
N/A
$
-
$
N/A
Selected information for plans with accumulated
benefit obligation in excess of plan assets:
Accumulated benefit obligation
$
15,352
$
30,072
$
14,843
$
35,154
Fair value of plan assets
$
-
$
13,507
$
-
$
11,957
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
70
The following table provides the components of net periodic benefit costs for the years ended December 31:
Pension Benefits
Other Post-retirement Benefits
2024
2023
2022
2024
2023
2022
Service cost
$
1,429 $
1,507 $
2,587 $
1,453 $
1,347 $
1,911
Interest cost
15,632
16,007
13,806
4,450
4,476
3,369
Expected return on plan assets
(18,782)
(22,223)
(22,004)
(4,420)
(4,372)
(4,502)
Amortization of prior service cost (credit)
325
684
536
-
-
-
Amortization of actuarial loss (gain)
3,003
2,962
2,043
(1,068)
(1,317)
(1,336)
Net periodic benefit cost/(credit)
$
1,607 $
(1,063) $
(3,032) $
415 $
134 $
(558)
The Company records the underfunded/overfunded status of its pension and other post-retirement benefit plans on its
consolidated balance sheets and records a regulatory asset/liability for these costs that would otherwise be charged to
stockholders’ equity, as the Company anticipates recoverability of the costs through customer rates to be probable.
Changes in the plans’ funded status will affect the assets and liabilities recorded on the balance sheet. Due to the
Company’s regulatory treatment, the recognition of the funded status is recorded as a regulatory asset pursuant to the
FASB’s accounting guidance for regulated operations.
The following table provides the amounts recognized in regulatory assets and regulatory liabilities that have not been
recognized as components of net periodic benefit cost as of December 31:
Pension Benefits
Other Post-retirement Benefits
2024
2023
2024
2023
Net actuarial loss (gain)
$
92,190 $
84,030
$
(24,504)
$
(21,257)
Prior service cost (credit)
1,540
1,866
-
-
Total recognized in regulatory assets
$
93,730 $
85,896
$
(24,504)
$
(21,257)
Accounting for pensions and other post-retirement benefits requires an extensive use of assumptions about the
discount rate, expected return on plan assets, the rate of future compensation increases received by the Company’s
employees, mortality, turnover and medical costs. Each assumption is reviewed annually with assistance from the
Company’s actuarial consultant who provides guidance in establishing the assumptions. The assumptions are selected
to represent the average expected experience over time and may differ in any one year from actual experience due to
changes in capital markets and the overall economy. These differences will impact the amount of pension and other
post-retirement benefit expense that the Company recognizes.
The significant assumptions related to the Company’s benefit obligations are as follows:
Pension Benefits
Other Post-
retirement
Benefits
2024
2023
2024
2023
Weighted Average Assumptions Used to Determine Benefit Obligations as of
December 31,
Discount rate
5.64%
5.17%
5.65%
5.09%
Rate of compensation increase
3.0-4.0% 3.0-4.0%
n/a
n/a
Assumed Health Care Cost Trend Rates Used to Determine Benefit
Obligations as of December 31,
Health care cost trend rate
n/a
n/a
6.50%
6.25%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)
n/a
n/a
5.0%
5.0%
Year that the rate reaches the ultimate trend rate
n/a
n/a
2032
2029
n/a – Assumption is not applicable.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
71
The significant assumptions related to the Company’s net periodic benefit costs are as follows:
Pension Benefits
Other Post-retirement Benefits
2024
2023
2022
2024
2023
2022
Weighted Average Assumptions Used to
Determine Net Periodic Benefit Costs for Years
Ended December 31,
Discount rate *
5.17%
5.51%
2.91%
5.09%
5.45%
2.96%
Expected return on plan assets
6.20%
6.80%
5.40%
3.91%-
6.2%
4.28%-
6.8%3.4%-5.4%
Rate of compensation increase
3.0-4.0%
3.0-4.0% 3.0-4.0%
n/a
n/a
n/a
Assumed Health Care Cost Trend Rates Used to
Determine Net Periodic Benefit Costs for Years
Ended December 31,
Health care cost trend rate
n/a
n/a
n/a
6.25%
6.50%
6.3%
Rate to which the cost trend is assumed to
decline (the ultimate trend rate)
n/a
n/a
n/a
5.0%
5.0%
5.0%
Year that the rate reaches the ultimate trend rate
n/a
n/a
n/a
2029
2029
2027
n/a – Assumption is not applicable.
* In 2023 and 2022, the Company remeasured its qualified pension plan assets and liabilities in accordance with settlement accounting rules.
The discount rate used for the remeasurement and for the calculation of the net periodic benefit cost for the remainder of the year in 2023 and
2022 was 5.20% and 5.58%, respectively.
The Company’s discount rate assumption, which is utilized to calculate the present value of the projected benefit
payments of our post-retirement benefits, was determined by selecting a hypothetical portfolio of high-quality
corporate bonds appropriate to match the projected benefit payments of the plans. The selected bond portfolio was
derived from a universe of Aa-graded corporate bonds. The discount rate was then developed as the rate that equates
the market value of the bonds purchased to the discounted value of the plan’s benefit payments. The Company’s
pension expense and liability (benefit obligations) increases as the discount rate is reduced.
The Company’s expected return on plan assets is determined by evaluating the asset class return expectations with its
advisors as well as actual, long-term, historical results of our asset returns. The Company’s market related value of
plan assets is equal to the fair value of the plan’s assets as of the last day of its fiscal year, and is a determinant for the
expected return on plan assets which is a component of post-retirement benefits expense. The Company’s pension
expense increases as the expected return on plan assets decreases. The Company believes its actual long-term asset
allocation on average will approximate the targeted allocation. The Company’s investment strategy is to earn a
reasonable rate of return while maintaining risk at acceptable levels. Risk is managed through fixed income
investments to manage interest rate exposures that impact the valuation of liabilities and through the diversification of
investments across and within various asset categories. Over time, as the plan’s funded status increases, the target
allocation of return-seeking assets (e.g., equities and other instruments with a similar risk profile) may decline and the
target allocation of liability-hedging assets (e.g., fixed income and other instruments with a similar risk profile) may
increase. Investment returns are compared to a total plan benchmark constructed by applying the plan’s asset
allocation target weightings to passive index returns representative of the respective asset classes in which the plan
invests. The Retirement and Employee Benefits Committee meets quarterly to review plan investments and
management monitors investment performance quarterly through a performance report prepared by an external
consulting firm.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
72
The target allocation by asset class as of December 31, 2024, along with the actual allocation of the Company’s
pension plan assets, are as follows:
Percentage of Plan Assets at December 31,
Target Allocation
2024
2023
Return seeking assets
20-40%
39%
38%
Liability hedging assets
60-80%
61%
62%
Total
100%
100%
100%
The fair value of the Company’s pension plans’ assets at December 31, 2024 by asset class are as follows:
Level 1
Level 2
Level 3
Assets measured at
NAV (a)
Total
Common stock
$
13,726
$
- $
-
$
- $
13,726
Return seeking assets:
Global equities
-
-
-
8,677
8,677
Hedge / diversifying strategies
-
-
-
54,807
54,807
Credit
-
-
-
37,813
37,813
Liability hedging assets
-
-
-
172,654
172,654
Cash and cash equivalents
5,975
-
-
-
5,975
Total pension assets
$
19,701
$
- $
-
$
273,951 $
293,652
(a) Assets that are measured at fair value using the NAV per share practical expedient have not been classified in
the fair value hierarchy.
The fair value of the Company’s pension plans’ assets at December 31, 2023 by asset class are as follows:
Level 1
Level 2
Level 3
Assets measured at
NAV (a)
Total
Common stock
$
14,115
$
- $
- $
- $
14,115
Return seeking assets:
Global equities
-
-
-
9,226
9,226
Hedge / diversifying strategies
-
-
-
57,608
57,608
Credit
-
-
-
37,798
37,798
Liability hedging assets
-
-
-
186,317
186,317
Cash and cash equivalents
7,239
-
-
-
7,239
Total pension assets
$
21,354
$
- $
- $
290,949 $
312,303
Equity securities include our common stock in the amounts of $13,726 or 4.7% and $14,115 or 4.5% of total pension
plans’ assets as of December 31, 2024 and 2023, respectively.
The target allocation by asset class as of December 31, 2024, and actual asset allocation of the Company’s other post-
retirement benefit plans, are as follows:
Percentage of Plan Assets at December 31,
Target Allocation
2024
2023
Return seeking assets
50-70%
65%
68%
Liability hedging assets
30-50%
35%
32%
Total
100%
100%
100%
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
73
The fair value of the Company’s other post-retirement benefit plans’ assets at December 31, 2024 by asset class are as
follows:
Level 1
Level 2
Level 3
Assets measured at
NAV (a)
Total
Return seeking assets:
Global equities
$
30,978 $
-
$
-
$
20,020 $
50,998
Real estate securities
6,750
-
-
3,713
10,463
Liability hedging assets
15,325
-
-
11,237
26,562
Cash and cash equivalents
6,227
-
-
-
6,227
Total other post-retirement assets
$
59,280
$
-
$
-
$
34,970 $
94,250
(a) Assets that are measured at fair value using the NAV per share practical expedient have not been classified in
the fair value hierarchy.
The fair value of the Company’s other post-retirement benefit plans’ assets at December 31, 2023 by asset class are as
follows:
Level 1
Level 2
Level 3
Assets measured at
NAV (a)
Total
Return seeking assets:
Global equities
$
34,209
$
-
$
-
$
19,890 $
54,099
Real estate securities
7,041
-
-
3,653
10,694
Liability hedging assets
16,949
-
-
9,473
26,422
Cash and cash equivalents
3,790
-
-
-
3,790
Total other post-retirement assets
$
61,989
$
-
$
-
$
33,016 $
95,005
Valuation Techniques Used to Determine Fair Value
Common Stocks - Investments in common stocks are valued using unadjusted quoted prices obtained from
active markets.
Return Seeking Assets – Investments in return seeking assets consists of the following:
o Global equities, which consist of common and preferred shares of stock, traded on U.S. or foreign
exchanges that are valued using unadjusted quoted prices obtained from active markets, or
commingled fund vehicles, consisting of such securities valued using NAV, which are not classified
within the fair value hierarchy.
o Real estate securities, which consist of securities, traded on U.S. or foreign exchanges that are valued
using unadjusted quoted prices obtained from active markets, or for real estate commingle fund
vehicles that are not publicly quoted, the fund administrators value the funds using the NAV per fund
share, derived from the quoted prices in active markets of the underlying securities and are not
classified within the fair value hierarchy.
o Hedge / diversifying strategies, which consist of a multi-manager fund vehicle having underlying
exposures that collectively seek to provide low correlation of return to equity and fixed income
markets, thereby offering diversification. As a multi-manager fund investment, NAV is derived from
underlying manager NAVs, which are derived from the quoted prices in active markets of the
underlying securities and are not classified within the fair value hierarchy.
o Credit, which consist of certain opportunistic, return-oriented credits which primarily include below
investment grade bonds (i.e. high yield bonds), bank loans, and securitized debt. Credits are valued
using the NAV per fund share, derived from either quoted prices in active markets of the underlying
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
74
securities, or less active markets, or quotes of similar assets, and are not classified within the fair
value hierarchy.
Liability Hedging Assets – Investments in liability hedging assets consist of funds investing in high-quality
fixed income securities (i.e. U.S. Treasury securities and government bonds), and for funds for which market
quotations are readily available, are valued at the last reported closing price on the primary market or
exchange on which they are traded. Funds for which market quotations are not readily available, are valued
using the NAV per fund share, derived from the quoted prices in active markets of the underlying securities
and are not classified within the fair value hierarchy.
Cash and Cash Equivalents – Investments in cash and cash equivalents are comprised of both uninvested cash
and money market funds. The uninvested cash is valued based on its carrying value, and the money market
funds are valued utilizing the net asset value per unit obtained from published market prices.
Funding requirements for qualified defined benefit pension plans are determined by government regulations and not
by accounting pronouncements. In accordance with funding rules and the Company’s funding policy, during 2025
our pension contribution is expected to be $3,945.
The Company has a 401(k) savings plan, which is a defined contribution plan and covers substantially all employees.
The Company makes matching contributions that are based on a percentage of an employee’s contribution, subject to
specific limitations, as well as, non-discretionary contributions based on eligible hourly wages for certain union
employees, discretionary year-end contributions based on an employee’s eligible compensation, and employer profit
sharing contributions. Participants may diversify their Company matching account balances into other investments
offered under the 401(k) savings plan. The Company’s contributions, which are recorded as compensation expense,
were $24,921, $23,519, and $21,758, for the years ended December 31, 2024, 2023, and 2022, respectively.
Note 17 – Rate Activity
On February 7, 2025, the Pennsylvania Public Utility Commission (“PAPUC”) issued an order approving, with
certain minor modifications, the joint petition for non-unanimous partial settlement filed by Aqua Pennsylvania,
Office of Consumer Advocate and other groups, that allowed a base rate increase designed to increase total annual
operating revenues by $73,000. New rates went into effect on February 22, 2025. At the time the rate order was
received, the rates in effect also included $37,940 in Distribution System Improvement Charges (“DSIC”), which was
6.73% above prior base rates. Consequently, the aggregate annual base rates increased by $110,940 since the last
base rate increase and DSIC was reset to zero.
On November 25, 2024, the Company’s natural gas operating division in Kentucky filed an application with the
Kentucky Public Service Commission a rate case designed to increase rates by $10,910 or 19.0% on an annual basis.
The Company anticipates a final order to be issued by June 2025.
On November 21, 2024, Aqua Illinois received an order from the Illinois Commerce Commission designed to provide
an increase in revenues of $11,632 or 11.4% on an annual basis. New rates went into effect on December 5, 2024.
On October 9, 2024, Aqua New Jersey received an order from the New Jersey Board of Public Utilities that was
designed to provide an increase in water rates of $2,250 on an annual basis. The order also approved the recovery of
customer-side lead service line replacement costs of $11,535, that have been deferred from April 2021 through June
2024, through the use of a customer surcharge over a three-year period. New rates went into effect on October 15,
2024.
On September 12, 2024, the PAPUC issued an order approving the settlement agreement to the general rate case filed
by the Company’s regulated natural gas operating subsidiary, Peoples Natural Gas, that allowed base rate increases
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
75
designed to increase total annual operating revenues by $93,000 or 11.1%. At the time the rate order was received,
the rates in effect included various surcharges and credits, such as the Distribution System Improvement Charges
(“DSIC”) and Tax Cuts and Jobs Act (“TCJA”) amortization credits totaling approximately $21,000 on an annual
basis. The order also provided an annualized change in gathering and other operating revenues of approximately
$3,000. Consequently, the aggregate annual base rates increased approximately $111,000, as the DSIC was reset to
zero, and the TCJA amortization credit, other surcharges and other operating revenues were adjusted. New rates went
into effect on September 27, 2024. The order also approved the implementation of a weather normalization
adjustment mechanism (WNA), which is applied to customer bills during the heating season of October through May
each year. The weather normalization adjustment mechanism is designed to stabilize our residential and commercial
customers’ distribution charges by adjusting billings based on temperature variances from average weather, which
effectively decreases rates when the weather is colder than average, and increases rates when the weather is warmer
than average. The Company expects the weather normalization adjustment mechanism to result in reduced earnings
volatility during the heating season. On October 11, 2024, the Pennsylvania Office of the Consumer Advocate (OCA)
appealed this rate case to the Commonwealth Court. On February 12, 2025, the Office of Consumer Advocate
discontinued its appeal on all but one non-revenue matter which can potentially be resolved through settlement.
On September 12, 2024, the Company’s regulated water and wastewater operating subsidiary in Virginia, Aqua
Virginia, received an order from the State Corporation Commission approving an increase in revenues by $5,490 or
23.8% on an annual basis. The Company implemented interim rates in February 2024 and has refunded to customers
the difference between interim and final approved rates in December 2024.
On December 13, 2023, the Company’s regulated water and wastewater utility operating divisions in Ohio received
an order from the Public Utilities Commission of Ohio designed to increase operating revenues by $4,850 annually.
New rates for water and sewer service went into effect on December 13, 2023.
On September 28, 2023, the Company’s regulated water and wastewater operating subsidiary in Texas, Aqua Texas,
received a final order from the Public Utility Commission of Texas approving infrastructure rehabilitation surcharges
designed to increase revenues by $8,388 annually. The rates authorized on March 28, 2023 and implemented on an
interim basis effective April 1, 2023 did not change with the final order.
On June 5, 2023, the Company’s regulated water and wastewater operating subsidiary in North Carolina, Aqua North
Carolina, received an order from the North Carolina Utilities Commission designed to increase rates by $14,001 in the
first year of new rates being implemented, then by an additional $3,743 and $4,130 in the second and third years,
respectively. In February 2023, the Company had implemented interim rates, based on an estimate of the final
outcome of the order, and no refunds or additional billings were required for the difference between interim and final
approved rates.
On January 3, 2022, the Company’s natural gas operating division in Kentucky received an order from the Kentucky
Public Service Commission resulting in an increase of $5,238 in annual revenues, and new rates went into effect on
January 4, 2022. On June 7, 2022, an additional $260 was approved and made effective by the Commission, resulting
from a rehearing requested by the operating division.
In addition to the Illinois, New Jersey, Virginia, North Carolina, Ohio, Pennsylvania, and Kentucky base rate awards
noted above, the Company’s operating subsidiaries were allowed annualized rate increases of $2,127 in 2024, $1,703
in 2023, and $1,378 in 2022, represented by four, three, and two rate decisions, respectively. Revenues recognized in
aggregate from all of the base rate increases realized in the year of grant were approximately $34,832, $10,109, and
$51,163, in 2024, 2023, and 2022, respectively.
Eight states in which the Company operates permit water and wastewater utilities to add a surcharge to their water or
wastewater bills to offset the additional depreciation and capital costs related to infrastructure system replacement and
rehabilitation projects completed and placed into service between base rate filings. Additionally, Pennsylvania and
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
76
Kentucky allow for the use of an infrastructure rehabilitation surcharge for natural gas utility systems. The surcharge
for infrastructure system replacements and rehabilitations is typically adjusted periodically based on additional
qualified capital expenditures completed or anticipated in a future period, is capped as a percentage of base rates,
generally at 5% to 12.75%, and is reset to zero when new base rates that reflect the costs of those additions become
effective or when a utility’s earnings exceed a regulatory benchmark. During 2024, the Company received approval to
bill infrastructure rehabilitation surcharges designed to increase total operating revenues on an annual basis by
$28,660 in its water and wastewater utility operating divisions in Pennsylvania and Illinois, and $1,170 in its gas
utility operating division in Kentucky. The surcharge for infrastructure system replacements and rehabilitations
provided revenues in 2024, 2023, and 2022 of $45,750, $20,261, and $26,902, respectively.
Note 18 – Segment Information
The Company identifies a business as an operating segment if: i) it engages in business activities from which it may
earn revenues and incur expenses; ii) its operating results are regularly reviewed by the chief operating decision
maker (“CODM”), who is the Company’s Chief Executive Officer, to make decisions about resources to be allocated
to the segment and assess its performance; and iii) it has available discrete financial information. The CODM reviews
financial information, such as budget-to-actual variances and comparisons against prior period, at the operating
segment level, and uses that information when making decisions about the allocation of operating and capital
resources to each segment. The CODM evaluates the performance of the Company’s reportable segments based on a
number of factors, the primary measure being the net income (loss) of each segment.
The Company has eleven operating segments and has two reportable segments, the Regulated Water segment and the
Regulated Natural Gas segment. The Regulated Water segment is comprised of eight operating segments
representing its water and wastewater regulated utility companies, which are organized by the states where the
Company provides water and wastewater services. The eight water and wastewater utility operating segments are
aggregated into one reportable segment, because each of these operating segments has the following similarities:
economic characteristics, nature of services, production processes, customers, water distribution or wastewater
collection methods, and the nature of the regulatory environment. The Regulated Natural Gas segment is comprised
of one operating segment representing natural gas utility companies for which the Company provides natural gas
distribution services. Each reportable segment has a segment manager, the Aqua President for the Regulated Water
segment and the Peoples President for the Regulated Natural Gas segment, that reports directly to the CODM.
In addition to the Company’s two reportable segments, it includes two operating segments within the Other category
below. These segments are not quantitatively significant and are comprised of its non-regulated natural gas
operations and Aqua Resources. Non-regulated natural gas operations consist of utility service line protection
solutions and repair services to households and the operation of gas marketing and production entities. Aqua
Resources offers, through a third party, water and sewer service line protection solutions and repair services to
households. In addition to these segments, Other is comprised of business activities not included in the reportable
segments, corporate costs that have not been allocated to the Regulated Water and Regulated Natural Gas segments,
and intersegment eliminations. Corporate costs include general and administrative expenses, and interest expense.
The Company reports these corporate costs within Other as they relate to corporate-focused responsibilities and
decisions and are not included in internal measures of segment operating performance used by the Company to
measure the underlying performance of the operating segments.
The accounting policies of the segments are the same as those applied in in the Company’s consolidated financial
statements and described in Note 1 – Summary of Significant Policies. Intersegment revenues represent natural gas
sales by the Regulated Natural Gas segment to the non-regulated natural gas operations, at cost, which has a
corresponding offsetting amount in purchased gas. The reportable segments’ financial results includes intercompany
costs that are allocated by corporate and intercompany interest on push-down debt from corporate. All revenues of
the Company are generated in the U.S., and all assets of the Company are located in the U.S.
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
77
The following table presents information about the Company’s reportable segments and reconciliations to
consolidated amounts. Asset information by segment is not utilized for purposes of assessing performance or
allocating resources and, as a result, such information is not presented:
2024
Regulated
Water
Regulated
Natural Gas
Total
Reportable
Segments
Other and
Eliminations
Consolidated
Revenues from external customers
$
1,221,880
$
840,453
$ 2,062,333
$
23,780
$
2,086,113
Intersegment revenues
-
2,538
2,538
(2,538)
-
Total operating revenues
$
1,221,880
$
842,991
$ 2,064,871
$
21,242
$
2,086,113
Operations and maintenance expense
$
381,088
$
207,176
$
588,264
$
(1,014) $
587,250
Purchased gas
$
-
$
267,226
$
267,226
$
9,783
$
277,009
Depreciation and amortization
$
232,338
$
135,814
$
368,152
$
1,400
$
369,552
Taxes other than income taxes
$
68,006
$
22,985
$
90,991
$
3,643
$
94,634
Interest expense, net
$
140,086
$
92,988
$
233,074
$
66,075
$
299,149
Allowance for funds used during construction
$
(16,713) $
(4,597) $
(21,310) $
-
$
(21,310)
Loss (gain) on sale of assets (a)
$
(636) $
(91,581) $
(92,217) $
(7) $
(92,224)
Other segment items (b)
$
(1,445) $
(644) $
(2,089) $
664
$
(1,425)
Provision for income taxes (benefit)
$
68,851
$
(79,993) $
(11,142) $
(10,694) $
(21,836)
Net income (loss)
$
350,305
$
293,617
$
643,922
$
(48,608) $
595,314
Capital expenditures
$
726,698 $
603,049 $ 1,329,747
$
- $
1,329,747
2023
Regulated
Water
Regulated
Natural Gas
Total
Reportable
Segments
Other and
Eliminations
Consolidated
Revenues from external customers
$
1,153,376
$
860,586
$ 2,013,962
$
39,862
$
2,053,824
Intersegment revenues
-
3,173
3,173
(3,173)
-
Total operating revenues
$
1,153,376
$
863,759
$ 2,017,135
$
36,689
$
2,053,824
Operations and maintenance expense
$
368,843
$
209,073
$
577,916
$
(2,398) $
575,518
Purchased gas
$
-
$
327,548
$
327,548
$
24,758
$
352,306
Depreciation and amortization
$
217,593
$
125,263
$
342,856
$
839
$
343,695
Taxes other than income taxes
$
62,759
$
23,846
$
86,605
$
3,603
$
90,208
Interest expense, net
$
124,680
$
92,320
$
217,000
$
62,961
$
279,961
Allowance for funds used during construction
$
(14,786) $
(2,181) $
(16,967) $
-
$
(16,967)
Loss (gain) on sale of assets
$
(624) $
559
$
(65) $
-
$
(65)
Other segment items (b)
$
(3,596) $
121
$
(3,475) $
862
$
(2,613)
Provision for income taxes (benefit)
$
57,546
$
(113,353) $
(55,807) $
(10,638) $
(66,445)
Net income (loss)
$
340,961
$
200,563
$
541,524
$
(43,298) $
498,226
Capital expenditures
$
668,720
$
527,538
$ 1,196,258
$
2,845
$
1,199,103
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(In thousands of dollars, except per share amounts)
78
2022
Regulated
Water
Regulated
Natural Gas
Total
Reportable
Segments
Other and
Eliminations
Consolidated
Revenues from external customers
$
1,082,972
$ 1,139,570
$ 2,222,542
$
65,490
$
2,288,032
Intersegment revenues
-
3,792
3,792
(3,792)
-
Total operating revenues
$
1,082,972
$ 1,143,362
$ 2,226,334
$
61,698
$
2,288,032
Operations and maintenance expense
$
370,850
$
239,506
$
610,356
$
3,293
$
613,649
Purchased gas
$
-
$
551,009
$
551,009
$
50,986
$
601,995
Depreciation and amortization
$
201,392
$
118,955
$
320,347
$
830
$
321,177
Taxes other than income taxes
$
64,472
$
22,642
$
87,114
$
2,910
$
90,024
Interest expense, net
$
111,938
$
87,186
$
199,124
$
35,317
$
234,441
Allowance for funds used during construction
$
(20,950) $
(2,715) $
(23,665) $
-
$
(23,665)
Loss (gain) on sale of assets
$
(991) $
-
$
(991) $
-
$
(991)
Other segment items (b)
$
(5,601) $
3,445
$
(2,156) $
2,650
$
494
Provision for income taxes (benefit)
$
47,510
$
(61,942) $
(14,432) $
103
$
(14,329)
Net income (loss)
$
314,352
$
185,276
$
499,628
$
(34,391) $
465,237
Capital expenditures
$
576,314
$
479,335
$ 1,055,649
$
7,114
$
1,062,763
D Refer to Note 3 – Dispositions for additional information.
(b) Other segment items mainly consists of the non-service cost component of pension and other postretirement benefits for our regulated
segments.
The graph below matches the cumulative 5-Year total return of holders of Essential Utilities, Inc.'s common stock with the
cumulative total returns of the S&P 500 index, the S&P 400 Utilities index and a customized peer group of six companies that
includes: Middlesex Water Co, American Water Works Company Inc, American States Water Co, Essential Utilities Inc, California
Water Service Group and SJW Group. The graph assumes that the value of the investment in our common stock, in each index,
and in the peer group (including reinvestment of dividends) was $100 on 12/31/2019 and tracks it through 12/31/2024.
Years as of December 31
2019
2020
2021
2022
2023
2024
Essential Utilities, Inc.
100.00
102.93
119.44
108.77
87.70
88.15
S&P 500 Index
100.00
118.40
152.39
124.79
157.59
197.02
S&P 400 Utilities Index
100.00
86.13
103.14
102.99
89.38
117.50
Peer Group
100.00
115.51
143.41
122.69
105.48
101.07
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
$0
$50
$100
$150
$200
$250
12/19
12/20
12/21
12/22
12/23
12/24
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Essential Utilities, Inc., the S&P 500 Index, the S&P 400 Utilities Index,
and a Peer Group
Essential Utilities, Inc.
S&P 500
S&P 400 Utilities
Peer Group
*$100 invested on 12/31/19 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2025 Standard & Poor's, a division of S&P Global. All rights reserved.
79
94
inancial Reports and nvestor Relations
Copies of the company’s public financial reports,
including annual reports and Forms 10– and 10–#, are
available online and can be downloaded from the
investor relations section of our website at Essential.co.
*ou may also obtain these reports by writing to us at:
Investor Relations Department
Essential Utilities Inc.
62 (. ancaster Avenue
Bryn Mawr, PA 19010-3489
Corporate
overnance
(e are committed to maintaining high standards of
corporate governance and are in compliance with the
corporate governance rules of the Securities and
Exchange Commission (SEC) and the New *ork Stock
Exchange. Copies of our key corporate governance
documents, including our Corporate overnance
uidelines, Code of Ethical Business Conduct, and the
charters of each committee of our Board of Directors
can be obtained from the corporate governance portion
of the investor relations section of our website,
Essential.co. Amendments to the Code of Ethical
Business, and in the event of any grant of waiver from
a provision of the Code of Conduct requiring disclosure
under applicable SEC rules will be disclosed on our
website.
nn&al eeting
The 2025 Annual Meeting of Shareholders of Essential
Utilities, Inc. will be held virtually via live webcast on
(ednesday, May , 2025, at 8 a.m. Eastern Time, at
www.virtualshareholdermeeting.com(TR2025.
Transfer Agent and Registrar
Computershare
P.O. Box 43006
Providence, RI 02940-3006
800.205.8314 or
www.computershare.cominvestor
ndependent Registered P&lic cco&nting irm
PricewaterhouseCoopers P
Two Commerce Square
Suite 1800
2001 Market Street
Philadelphia, PA 19103-042
Stock Exchange
The Common Stock of the company is listed on the New
*ork Stock Exchange (N*SE) and under the ticker
symbol R
Dividend Reinvestment and Direct Stock
P&rchase Plan
The company’s Dividend Reinvestment and Direct Stock
Purchase Plan (EPlanF) enables shareholders to
reinvest all, or a designated portion of, dividends paid
on up to 100,000 shares of Common Stock in
additional shares of Common Stock at a discretionary
discount from a price based on the market value of the
stock. The discount between 0 and 5.0 percent on the
shares purchased or issued to meet the dividend
reinvestment requirement will be designated by us in
our sole discretion prior to the purchase or issuance of
such shares. (e reserve the right to change, reduce or
discontinue any discount at any time without notice. In
addition, shareholders may purchase additional shares
of Essential Utilities Common Stock at any time with a
minimum investment of 50, up to a maximum of
250,000 annually. Individuals may become
shareholders by making an initial investment of at
least 500. A Plan prospectus may be obtained by
calling Computershare at 800.205.8314 or by visiting
www.computershare.cominvestor. Please read the
prospectus carefully before you invest.
80
95
o( to otain a separate set of voting materials If
you are a registered shareholder who shares an address
with another registered shareholder and have received
only one Notice of Internet Availability of Proxy
Materials or set of proxy material and wish to receive a
separate copy for each shareholder in your household
for the 2025 Annual Meeting, you may write or call us
to request a separate copy of this material at no cost to
you at 610.645.1021 or write us at:
Attn: Investor Relations
Essential Utilities Inc.
762 W. Lancaster Avenue
Bryn Mawr, PA, 19010
Email: investorrelations@essential.co
For future annual meetings, you may request separate
voting material by calling Broadridge at 866.540.9095,
or by writing to Broadridge Financial Solutions, Inc.,
Householding Department, 51 Mercedes Way,
Edgewood, New York 11717.
cco&nt ccess
Essential Utilities shareholders may access their
account by visiting www.computershare.cominvestor.
Shareholders may view their account, purchase
additional shares, and make changes to their account.
To learn more, visit www.computershare.cominvestor or
call 800.205.8314.
Direct Deposit
With direct deposit, Essential Utilities cash dividends
are deposited automatically on the dividend payment
date of each quarter. Shareholders will receive
confirmation of their deposit in the mail.
Shareholders interested in direct deposit should call
the company’s transfer agent at 800.205.8314.
Delivery of voting materials to shareholders
sharing an address
The SEC’s rules permit the Company to deliver a
Notice of Internet Availability of Proxy Materials or a
single set of proxy materials to one address shared
by two or more of the Company’s shareholders. This
is intended to reduce the printing and postage
expense of delivering duplicate voting materials to
our shareholders who have more than one Essential
Utilities stock account. A separate Notice of Internet
Availability or proxy card is included for each of these
shareholders. If you received a Notice of Internet
Availability you will not receive a printed copy of the
proxy materials unless you request it by following the
instructions in the notice for requesting printed proxy
material.
81
96
Dividends
Essential Utilities has paid dividends for 80 consecutive years. The normal Common Stock dividend dates for 2025
and the first six months of 2026 are:
Declaration Date
December 11, 2024
February 19, 2025
July 30, 2025
October 29, 2025
January 12, 2026
February 18, 2026
Ex-Dividend Date
February 10, 2025
May 13, 2025
August 12, 2025
November 12, 2025
February 9, 2026
May 12, 2026
Record Date
February 10, 2025
May 13, 2025
August 12, 2025
November 12, 2025
February 9, 2026
May 12, 2026
Payment Date
March 3, 2025
June 2, 2025
September 2, 2025
December 1, 2025
March 2, 2026
June 1, 2026
To be an owner of record, and therefore eligible to
receive the quarterly dividend, shares must have been
purchased before the ex-dividend date. Owners of any
share(s) on or after the ex-dividend date will not
receive the dividend for that quarter. The previous
owner – the owner of record – will receive the
dividend.
Only the Board of Directors may declare dividends
and set record dates. Therefore, the payment of
dividends and these dates may change at the
discretion of the Board.
Dividends paid on the company’s Common Stock are
subject to Federal and State income tax.
Lost Dividend Checks, Stock Certificates
and Escheatment
Dividend checks lost by shareholders, or those that
might be lost in the mail, will be replaced upon
notification of the lost or missing check. All inquiries
concerning lost or missing dividend checks should be
made to the company’s transfer agent at
800.205.8314. Shareholders should call or write the
company’s transfer agent to report a lost certificate.
Appropriate documentation will be prepared and
sent to the shareholder with instructions.
Escheatment is the act of reporting and transferring
property to a state when the rightful owner has an
invalid address or has not made contact or initiated a
transaction during the state’s designated dormancy
period. Escheated assets are transferred to the state for
safekeeping (and often liquidated) until the rightful
owner makes a claim on the asset. To keep your shares
of stock and uncashed dividends from being escheated,
you must maintain contact (recommended at least once
a year) with the company’s transfer agent, especially if
you recently changed your address, changed your
marital status or are managing an estate following a
death. Unclaimed property laws vary widely from state
to state.
Safekeeping of Stock Certificates
Under the Direct Stock Purchase Plan, shareholders may
have their stock certificates deposited with the transfer
agent for safekeeping free of charge. Stock certificates
and written instructions should be forwarded to:
Computershare, N.A.
P.O. BOX 43006
Providence, RI 02940-3006
82
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which generally include words
such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. The Company can give no assurance that any actual or future results
or events discussed in these statements will be achieved. Any forward-looking statements represent its views only as of today and should not be relied upon as
representing its views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties
that could cause the company’s actual results to differ materially from the statements contained in this release. There are important factors that could cause actual
results to differ materially from those expressed or implied by such forward-looking statements including the factors discussed in our Annual Report on Form 10-K
and our Quarterly Reports on Form 10-Q, which are filed with the Securities and Exchange Commission. For more information regarding risks and uncertainties
associated with the Company’s business, please refer to the Company’s annual, quarterly and other SEC filings. The Company is not under any obligation — and
expressly disclaims any such obligation — to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
OFFICERS
Christopher H. Franklin
Chairman, Chief Executive
Officer and President
Colleen M. Arnold
President
Aqua
Michael A. Huwar
President
Peoples
Christopher P. Luning
Executive Vice President
General Counsel
Robert A. Rubin
Senior Vice President
Chief Accounting Officer
Daniel J. Schuller
Executive Vice President
Chief Financial Officer
OUR MISSION:
To sustain life and improve economic prosperity by
safely and reliably delivering Earth’s most essential
resources to our customers and communities.
OUR VALUES: INTEGRITY RESPECT EXCELLENCE
BOARD OF DIRECTORS
As of February 28, 2025
Christopher H. Franklin
Chairman, Chief Executive
Officer and President
Essential Utilities, Inc.
Director since 2015
Christopher L. Bruner
Former Assurance Partner
Ernst & Young
Director since 2024
W. Bryan Lewis
Vice President and
Chief Investment Officer
United States Steel Corporation
Director since 2022
Elizabeth B. Amato
Former Executive Vice President and
Chief Human Resources Officer
United Technologies Corporation
Director since 2018
David A. Ciesinski
President, Chief Executive
Officer and Director
Lancaster Colony Corporation
President, T. Marzetti Company
Director since 2021
Tamara Linde
Executive Vice President,
Chief Legal Officer
PSEG
Director since 2024
Daniel J. Hilferty
Chairman and Chief
Executive Officer
Comcast Spectacor
Director since 2017
Essential Utilities, Inc. | 762 W. Lancaster Avenue | Bryn Mawr, PA 19010
NYSE: WTRG | 877.987.2782 | www.Essential.co
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