Middlesex Water Company (“Middlesex” or the “Company”)
was incorporated as a water company in 1897 and owns and
operates regulated water and wastewater utility systems primarily
in New Jersey and Delaware. Middlesex also operates water and
wastewater systems under contract on behalf of municipal and
private clients in New Jersey and Delaware.
OUR SCOPE OF
SERVICES
O Water Production, Treatment & Distribution
O Design/Build/Own/Operate
System Assets
O Public Private Partnerships
O Water & Sewer Line Maintenance
O Full Service Municipal
Contract Operations
O Water & Wastewater
System Maintenance
O Wastewater Collection & Treatment
FAMILY OF
COMPANIES
O Middlesex Water Company
O Tidewater Utilities, Inc.
O Pinelands Water Company
O Pinelands Wastewater Company
O Utility Service Affiliates
(Perth Amboy), Inc.
O Utility Service Affiliates, Inc.
O Southern Shores Water Company, LLC
O White Marsh Environmental Systems, Inc.
ANNUAL MEETING
The Annual Meeting of Shareholders of Middlesex Water Company will be held on
Tuesday, May 21, 2024 at 11:00 a.m. EDT. You may attend the meeting online, including
submitting questions, at www.VirtualShareholderMeeting.com/MSEX2024. Shareholders
of record as of March 26, 2024 will be eligible to receive notice of, and to vote at,
the 2024 Annual Meeting.
Our Company’s Common Stock trades on the Nasdaq Global Select Market under
the symbol MSEX.
Members of the Middlesex Distribution Team stand ready to maintain
reliability and continuity in delivering essential water service.
DEAR VALUED SHAREHOLDERS,
I write this letter with mixed emotions in that I no longer lead the
Company that has been my life for the last nineteen years. We have
accomplished much for our stakeholders over that time, all through the
dedicated efforts of our employees and the support of our regulators
and various other business partners. Although not actively involved
in the day-to-day operations of the business, the role that you, our
shareholders, have played over those nineteen years, and continue to
play to this day, is instrumental to our success. Your support has never
been taken for granted either by me or by our entire Board of Directors.
Dennis W. Doll
Chairman, Past President and CEO
Elevated storage tanks constructed in the Millville by the Sea and South Rehoboth
districts in southern Delaware stand over 150 feet tall with a capacity of one million
gallons. These tanks will help address seasonal water use fluctuations and improve
pressures throughout Tidewater’s growing distribution system.
Despite our many accomplishments
with respect to operational and financial
performance, I believe my recent retirement
as your President & CEO is a timely occurrence
in our Company’s evolution. I have served as
your President & CEO since 2006 and I believe you deserve a fresh
perspective on our Company’s opportunities and challenges,
intended to generate innovative ideas, new strategies and objective
views of our business processes. I am grateful to share, as we
announced previously, that Nadine Leslie has joined our Company
effective March 1st as your President & CEO, and as a member of
the Board of Directors. Nadine’s wealth of knowledge and
experience, in both local and global settings, brings that fresh and
experienced perspective. I look forward to much future success
for both Nadine and the Company. I am also grateful to our search
committee, comprised of the Compensation Committee of our
Board, and to the entire Board of Directors, for all of their efforts in
finding and selecting a strong and talented leader in Nadine.
In July 2023, Middlesex Water Company completed construction of an upgraded
treatment plant at its Park Avenue wellfield in South Plainfield, New Jersey to treat
Perfluorooctanoic Acid (PFOA). The $52 million dollar new facility is currently treating
groundwater in compliance with all state and federal drinking water standards.
ACCOMPLISHMENTS IN
A YEAR OF TRANSITION
Separate from numerous activities throughout 2023 surrounding succession planning,
not only for my role but also for various roles at various levels in the Company, the past year
has been one of significant transition, and progress, in many respects. A sampling of recent
accomplishments, as well as certain challenges includes the following:
$ We executed our comprehensive 2023 capital program in the face of dramatically
increasing interest rates and other pressures such as inflation and supply chain challenges.
$ We put numerous critical infrastructure projects into service, not the least of which is
our upgraded Park Avenue groundwater treatment plant to remediate certain poly- and
perfluoroalkyl substances, collectively referred to as “PFAS.”
$ We settled long-standing litigation to recover costs associated with the substantial
upgrades to the Park Avenue Treatment Plant.
$ We filed, and settled, a base rate case for the Middlesex system in New Jersey resulting
in additional annual operating revenues of $15.4 million. This filing was made to
compensate for our recent significant infrastructure investments under our Water for
Tomorrow® Program and increases in various operating costs. Many of these capital
investments and increased operating costs have been incurred to comply with new, or
enhanced, regulatory standards at both the federal and state levels.
$ We achieved a successful settlement in a base rate case filing for our Pinelands Water
& Wastewater systems in Burlington County, New Jersey, resulting in additional annual
operating revenues of $1.0 million.
$ We executed a successful Investment Plan discount period as well as numerous debt
financings to raise the necessary capital to fund our investments in Utility Plant.
$ We continued to invest in our Delaware operations to support our history of strong
organic growth as reflected in an approximately 2,300 customer base increase in our
Delaware system.
$ We kept our focus on sustainability objectives to ensure our water supplies were
adequately protected and that our policies and practices support the environment,
our people, and our customers.
$ We weathered a depressed financial market as part of a peer group of water utility stocks,
and utility stocks in general, largely influenced by macroeconomic conditions.
$ We increased the common dividend by 4.0%, representing the 51st consecutive year of
dividend increases.
$ We maintained a well-trained, skilled workforce against the backdrop of several
retirements of long-term employees with significant institutional knowledge and skills.
$ We further enhanced our emergency management, business continuity and cybersecurity
controls and processes.
Middlesex Production, Distribution and Laboratory
employees take confined space training as part of their
40-hour HAZWOPER (Hazardous Waste Operations and
Emergency Response) Safety Training developed by the
Occupational Safety and Health Administration.
As water supply and its related quality continue
to attract increasing attention both nationally
and globally, we see the quantity and pace of
regulation accelerating. Some of those existing
and relatively new regulatory requirements
include:
$ Increased and more stringent state and federal regulations for PFAS.
$ The first update to the Lead & Copper Rule under the federal Safe Drinking
Water Act in more than 30 years.
$ Federal and State regulations to remove lead and galvanized steel service lines,
whether owned by the utility, or the customer.
$ Federal Unregulated Contaminant Monitoring Rule (UCMR5) to sample and
report on certain contaminants which are not yet regulated.
$ America’s Water Infrastructure Act (AWIA).
$ New Jersey’s Water Quality Accountability Act.
$ Delaware’s Cross-Connection Control legislation.
In addition to these requirements, there are other federal and state mandates
contemplated which will continue to challenge water and wastewater purveyors
(both investor-owned and municipal) across the country. Investments required to
meet these challenges not only enhance the health and safety of our customers,
but also provide opportunity for shareholders to earn a fair return on the necessary
capital investments.
The good news is that as an industry, and as a Company, we are in the business
of solving problems for customers and addressing
regulatory challenges. In New Jersey and in
Delaware, we have the skills and financial capacity
to meet those challenges as well as serve as a
technical resource to those seeking water and
wastewater solutions.
During our Annual Practical Training Day,
Middlesex Field Crews received refresher training
on specialized equipment and techniques.
During one of our Transmission Main upgrades
in 2023, Middlesex’s contractor, Structural
Preservation Systems, LLC, conducts a quality
control inspection inside a large diameter main.
THE CONSOLIDATION/
ACQUISITIONS LANDSCAPE
Many who report on the activities and progress in the water and wastewater utility industry
have believed for many years that consolidation in our industry is necessary. With many
thousands of water systems across the country, some of which serve very few customers, it
seems only logical that economies of scale can produce more consistent quality across various
systems at a more effective cost. One of the challenges facing investor-owned systems such as
Middlesex is the efforts of activist groups who believe privatization is detrimental to customers
insofar as they claim the rates we charge our customers are higher than the rates charged by
government-owned systems. That may be true in many cases however, there is an endemic lack
of intellectual honesty by these activist groups whereby educating customers about the actual
cost of delivering quality utility service does not further their cause and therefore, is not part of
their narrative.
We have observed over many years that the rates charged by many, but not all, government-
owned systems are a function of many years of underinvestment in the utility infrastructure,
largely driven by political decisions to keep customers rates artificially low and therefore,
customers are not charged the full cost required to provide reliable quality service. Middlesex
has always employed full-cost pricing, as is required by the rate regulated model, and we
have the operational and financial capability to compete effectively for these consolidation
opportunities. Many systems are further becoming either unable or unwilling to meet their own
needs or to charge their constituents the full cost of providing the service. There is more work to
be done by our Company and our industry, both investor – and government-owned, to further
educate the public at-large about the need for consistent investment in aging infrastructure, the
need to ensure consistent regulatory compliance, the need to charge the full cost of providing
the service and the need to maintain a well-trained workforce.
Middlesex representatives were honored to accept the
award for Best Compliance and Ethics Program for Corporate
Governance at the Governance Intelligence Awards.
HONORS AND
AWARDS
Once again, in 2023, we were honored for a variety of
achievements. Two of the more notable honors included
Middlesex receiving an award from Governance Intelligence,
IR Magazine for “Best Compliance and Ethics Program.” Our
competition in this category included well-known global
companies who are household names. We are also a finalist
in the Underground Infrastructure Magazine 2024 awards for
a major project posing a challenging repair to water supply
system transmission mains in a critical geographic area.
Various employees were honored individually for their
contributions and service to our industry, to the communities
we support and to the State of New Jersey and Delaware.
The National Association of Water
Companies President and CEO, Robert
Powelson, presents Dennis Doll with the
Water Droplet Award in recognition of his
years of dedication to the water industry
at the 2023 NAWC Annual Summit.
Mark Theiler (Assistant Director of Production)
graduated from the Transformative Water
Leadership Academy through the American
Water Works Association (AWWA) and is pictured
here with AWWA leadership.
Middlesex plans to invest approximately $75 million
in 2024 to upgrade and replace utility infrastructure and enhance
the reliability of our facilities to better serve current and future
generations of customers.
AFFORDABILITY OF RATES
The word “affordability”, as related to water service, has become more prominent in recent
years in articles, at conferences and in other venues. Rates for water utility service have grown
significantly over time in various parts of the country, as well as within our Company. We, and
others, have a continued need to upgrade and replace utility infrastructure, and to procure
increasingly higher cost goods and services necessary to provide continuous safe and reliable
service. Recent and anticipated additional federal and state regulations regarding water
quality and overall service delivery, highlighted above, are putting further upward pressure
on customers’ rates, and will likely continue to do so for the near future. Consequently, there
is a greater focus both locally and nationally on the cost of water service within a customer’s
household budget.
Numerous financial models have been developed by consultants, academia, and others in an
attempt to define “affordability”, typically based on the socioeconomic demographics of an
individual utility’s customer base. There is no doubt that certain portions of our customer base
at Middlesex are challenged to meet basic needs, which includes our water utility service. The
relevant question regarding affordability of rates in a water system such as Middlesex is simply,
“Who should pay?” Our revenue requirement, properly authorized by our regulators to provide
safe and reliable service, is determined in a legal rate proceeding. That revenue requirement
is then apportioned to the rates of the various individual classes of customers. Therefore, to
the extent rates may be considered unaffordable for any demographic group, and as a result,
potentially artificially adjusted downward, those customers’ rates are therefore subsidized by
artificially higher rates by other customers.
These circumstances highlight the fact that affordability in the context of a regulated water
utility such as Middlesex is a “social issue,” which is why there are ongoing efforts to secure
a permanent source of funding from government sources to subsidize those who have a
legitimate need of financial assistance. Based on the longstanding regulatory compact in which
we operate, it would be inappropriate and in direct contravention of the regulatory compact
for shareholders, as opposed to customers, to subsidize any portion of the Company’s revenue
requirement based on affordability. I have devoted a fair number of words here to this issue
because I believe the concept of affordability will become a more significant challenge to
manage for our Company and for our industry as we continue to make necessary significant
infrastructure and other investments over time.
SERVING OUR STAKEHOLDERS –
PAST, PRESENT AND FUTURE
CONCLUSION
Your Company has weathered many operational, financial, regulatory, political, and other
challenges over its 127-year history, not to mention a global pandemic. We continue to rely on
the time-tested regulatory model that underpins the majority of our business, and we continue
to rely on the knowledge, skills and resilience of our people to not only meet the challenges
of today and tomorrow but also, to capitalize on opportunities for further customer and
shareholder value.
I thank you for your long-standing support of Middlesex Water Company, for your support
of our Board of Directors and for your support of me, personally. I take immense pride and
pleasure in passing the baton to your new President & CEO, Nadine Leslie, to bring your
Company into the future.
Dennis W. Doll
Chairman, Past President and CEO
INTRODUCING
NADINE LESLIE
What attracted you to accept the CEO role at Middlesex Water Company?
The Company’s mission and values resonate with mine. Middlesex has a
strong purpose. The enterprise works to provide an essential service to
the communities we serve and to positively impact the environment and
stakeholders. Middlesex is also an established and respected regulated
business with a supportive Board and Leadership Team. It has extensive expertise
providing innovative and cost-effective solutions to address the challenges of our industry.
Nadine Leslie
President and CEO
How do you plan on maintaining Middlesex’s strong tradition of operational excellence?
Providing reliable and resilient utility service requires a multifaceted approach: to name
a few: Leadership commitment to a continuous improvement culture, clear vision and
values, prudent investment in infrastructure, employee training and development,
empowerment and accountability, stakeholder and shareholder focus. Maintaining
consistency, persistence, and a proactive approach in everything we do will help us
continue delivering value for our stakeholders.
How critical are employees in delivering on the mission?
Employees are essential to the success of any organization. For us at Middlesex, investing
in our employees is a core aspect of our Company’s values and guiding principles. By
providing opportunities for growth, training and development, we empower our teams to
excel in their roles and contribute to the Company’s success.
As Middlesex’s new CEO, what can shareholders look for under your leadership?
Middlesex has provided quality service for over a century. We plan on building on that solid
foundation by continuing to deliver operational excellence while identifying key areas that
will enhance long term value creation for our shareholders. I thank the Board for placing
their trust in me as we embark on a new chapter in the Company’s history.
FINANCIAL HIGHLIGHTS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
2021 2022 2023
OPERATING REVENUES
(MILLIONS OF DOLLARS)
166.3
162.4
141.6
143.1
134.6
Operating Revenues
$143.1
$ 162.4
$ 166.3
Operations and Maintenance Expenses
73.7
79.1
83 .1
Depreciation
21.1
23.0
25.2
Income and Other Taxes
Interest Charges
9.7
8.1
21.4
19.8
9.4
13.1
Net Income
36.5
42.4
31.5
Earnings Applicable to Common Stock
36.4
42.3
31.4
Diluted Earnings Per Share
2.07
2.39
1.76
Cash Dividends Paid Per Share
1.11
1.18
1.26
Utility Plant
1,065.1
1,135.4
1,233.9
Return on Average Common Equity
10.3%
11.0%
7.7%
STOCK LISTING
The Company’s common shares trade on the Nasdaq GS (Nasdaq)
Global Select Market under the trading symbol MSEX.
The following table sets forth the high and low sales price
of the common stock for the periods indicated,
as reported by Nasdaq, and dividends paid.
2022
2023
High
Low
Dividend
Paid
High
Low
Dividend
Paid
Q4 $95.82
$74.20
$0.31
$73.47
$61.34
$0.325
'19
'20 '21
'22
'23
NET INCOME
(MILLIONS OF DOLLARS)
38.4
36.5
33.9
42.4
31.5
'19
'20 '21
'22
'23
EARNINGS & DIVIDENDS
(DOLLARS PER SHARE)
Earnings per share
Dividends
2.18
2.07
2.01
2.39
1.76
Q3
$96.19
$77.08
$0.29
$84.35 $65.37
$0.31
1.04
1.11
0.98
1.18
1.26
Q2 $108.27
Q1 $121.10
$75.77
$0.29
$84.38
$66.51
$0.31
$94.56
$0.29
$90.56
$72.64
$0.31
'19
'20
'21
'22
'23
2023 Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________________
2022 Form 10-K
Commission File Number 0-422
MIDDLESEX WATER COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
(State of Incorporation)
22-1114430
(IRS employer identification no.)
485C Route 1 South, Suite 400, Iselin New Jersey 08830
(Address of principal executive offices, including zip code)
(732) 634-1500
(Registrant’s telephone number, including area code)
Title of Each Class:
Common Stock, No Par Value
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol:
MSEX
Name of each exchange on which registered:
The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Ex-
change Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on their corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrants were required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”
and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company
Accelerated filer
Non-accelerated filer
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply-
ing with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based com-
pensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2023 was $1,395,620,526 based on the
closing market price of $80.66 per share on the NASDAQ Global Select Market.
The number of shares outstanding for each of the registrant’s classes of common stock, as of February 29, 2024:
Common Stock, No par Value 17,821,670 shares outstanding
Documents Incorporated by Reference
Proxy Statement to be filed in connection with the Registrant’s Annual Meeting of Stockholders to be held on May 21, 2024, which will
be filed with the Securities and Exchange Commission within 120 days of the end of our 2023 fiscal year, is incorporated by reference into
Part III of this Annual Report on Form 10-K to the extent described herein.
MIDDLESEX WATER COMPANY
FORM 10-K
INDEX
Forward-Looking Statements
PAGE
1
PART I
Item 1. Business:
Overview
Financial Information
Water Supplies and Contracts
2
2
2
4
4
Wastewater Facilities
5
Human Capital Management
5
7
Competition
Regulation 7
Seasonality
11
Management
11
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
13
19
19
21
22
24
Properties
PART II 25
Item 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
[Reserved]
Item 6.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
Item 8.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Financial Statements and Supplementary Data
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Exhibit Index
25
26
27
42
43
74
75
77
77
78
78
78
78
78
78
79
79
79
FORWARD-LOOKING STATEMENTS
Certain statements contained in this annual report and in the documents incorporated by reference constitute “forward-
looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. Middlesex Water Company (the Company) intends that these statements be covered by the safe
harbors created under those laws. They include, but are not limited to statements as to:
-
-
-
-
-
-
-
-
-
-
-
-
-
expected financial condition, performance, prospects and earnings of the Company;
strategic plans for growth;
the amount and timing of rate increases and other regulatory matters, including the recovery of certain costs
recorded as regulatory assets;
the Company’s expected liquidity needs during the upcoming fiscal year and beyond and the sources and
availability of funds to meet its liquidity needs;
expected customer rates, consumption volumes, service fees, revenues, margins, expenses and operating results;
financial projections;
the expected amount of cash contributions to fund the Company’s retirement benefit plans, anticipated discount
rates and rates of return on plan assets;
the ability of the Company to pay dividends;
the Company’s compliance with environmental laws and regulations and estimations of the materiality of any
related costs;
the safety and reliability of the Company’s equipment, facilities and operations;
the Company’s plans to renew municipal franchises and consents in the territories it serves;
trends; and
the availability and quality of our water supply.
These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to
differ materially from future results expressed or implied by the forward-looking statements. Important factors that could
cause actual results to differ materially from anticipated results and outcomes include, but are not limited to:
-
-
-
effects of general economic conditions;
increases in competition for growth in non-franchised markets to be potentially served by the Company;
ability of the Company to adequately control selected operating expenses which are necessary to maintain safe
and proper utility services, and which may be beyond the Company’s control;
availability of adequate supplies of water;
actions taken by government regulators, including decisions on rate increase requests;
new or modified water quality standards and compliance with related legal and regulatory requirements;
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-
-
- weather variations and other natural phenomena impacting utility operations;
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-
-
-
-
financial and operating risks associated with acquisitions and, or privatizations;
acts of war or terrorism;
cyber-attacks;
changes in the pace of housing development;
availability and cost of capital resources;
timely availability of materials and supplies for operations and for critical infrastructure projects;
effectiveness of internal control over financial reporting;
impact of the Novel Coronavirus (COVID-19) or other pandemic; and
other factors discussed elsewhere in this annual report.
Many of these factors are beyond the Company’s ability to control or predict. Given these uncertainties, readers are
cautioned not to place undue reliance on any forward-looking statements, which only speak to the Company’s
understanding as of the date of this report. The Company does not undertake any obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to
reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
For an additional discussion of factors that may affect the Company’s business and results of operations, see Item 1A -
Risk Factors.
Item 1. Business.
Overview
PART I
Middlesex Water Company (Middlesex) was incorporated as a water utility company in 1897 and owns and operates
regulated water utility and wastewater systems primarily in New Jersey and Delaware. Middlesex also operates
water and wastewater systems under contract on behalf of municipal and private clients primarily in New Jersey
and Delaware.
The terms “the Company,” “we,” “our,” and “us” refer to Middlesex Water Company and its subsidiaries, including
Tidewater Utilities, Inc. (Tidewater) and Tidewater’s wholly-owned subsidiaries, Southern Shores Water Company,
LLC (Southern Shores) and White Marsh Environmental Systems, Inc. (White Marsh). The Company’s other
subsidiaries are Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands
Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA) and Utility Service Affiliates (Perth
Amboy) Inc., (USA-PA).
The Company’s principal executive offices are located at 485C Route 1 South, Suite 400, Iselin, New Jersey 08830.
Our telephone number is (732) 634-1500. Our website address is http://www.middlesexwater.com. Information
contained on our website is not part of this Annual Report on Form 10-K. We make available, free of charge through
our website, reports and amendments filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, after such material is electronically filed with or furnished to the United States Securities
and Exchange Commission (the SEC).
Middlesex System
Located in New Jersey, the Middlesex System provides water services to approximately 61,000 retail customers,
primarily in eastern Middlesex County and under wholesale contracts to the City of Rahway, Townships of Edison
and Marlboro, the Borough of Highland Park and the Old Bridge Municipal Utilities Authority. The Middlesex
System treats, stores and distributes water for residential, commercial, industrial and fire protection purposes. The
Middlesex System also provides water treatment and pumping services to the Township of East Brunswick under
contract. The amount of water supply allocated to the Township of East Brunswick is granted directly to the
Township by the New Jersey Water Supply Authority. The Middlesex System produced approximately 66% of our
2023 consolidated operating revenues.
The Middlesex System’s retail customers are located in an area of approximately 55 square miles in Woodbridge
Township, the City of South Amboy, the Boroughs of Metuchen and Carteret, portions of the Township of Edison
and the Borough of South Plainfield, all in Middlesex County, and a portion of the Township of Clark in Union
County. Retail customers include a mix of residential customers, large industrial concerns and commercial and light
industrial facilities. These customers are located in generally well-developed areas of central New Jersey.
The contract customers of the Middlesex System comprise an area of approximately 110 square miles with a
population of over 200,000. Contract sales to the Townships of Edison and Marlboro, the City of Rahway and the
Old Bridge Municipal Utilities Authority are supplemental to the water systems owned and operated by these
customers. Middlesex is the sole source of water for the Borough of Highland Park and the Township of East
Brunswick.
Middlesex provides water service to approximately 300 customers in Cumberland County, New Jersey. This system
is referred to as the Fortescue System, and is not physically interconnected with the Middlesex System. The
Fortescue System produced less than 0.1% of our 2023 consolidated operating revenues.
Tidewater System
Tidewater, together with its wholly-owned subsidiary, Southern Shores, provides water services to approximately
59,000 retail customers for residential, commercial and fire protection purposes in over 470 separate communities
2
in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 25% of our
2023 consolidated operating revenues.
USA-PA
USA-PA operates the City of Perth Amboy, New Jersey’s (Perth Amboy) water and wastewater systems under a
10-year agreement, which expires in December 2028. In addition to performing day-to day operations, USA-PA is
also responsible for emergency responses and management of capital projects funded by Perth Amboy. USA-PA
produced approximately 4% of our 2023 consolidated operating revenues.
Pinelands Systems
Pinelands Water provides water services to approximately 2,500 residential customers in Burlington County, New
Jersey. Pinelands Water is not physically interconnected with the Middlesex System. Pinelands Water produced
approximately 1% of our 2023 consolidated operating revenues.
Pinelands Wastewater provides wastewater collection and treatment services to approximately 2,500 residential
customers and one municipal wastewater system in Burlington County, New Jersey. Pinelands Wastewater
produced approximately 1% of our 2023 consolidated operating revenues.
USA
USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system
under a ten-year operations and maintenance contract expiring in 2032. In addition to performing day-to-day
service operations, USA is responsible for emergency responses and management of capital projects funded by
Avalon.
USA operates the Borough of Highland Park, New Jersey’s (Highland Park) water utility and sewer utility under a
ten-year operations and maintenance contract expiring in 2030.
USA also provides water and wastewater services to several other New Jersey municipalities under contracts that
are not regulated by a public utility commission as to rates and service.
Under a marketing agreement with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential
customers in New Jersey and Delaware various water and wastewater related home maintenance programs.
HomeServe is a leading national provider of such home maintenance service programs. USA receives a service fee
for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.
USA produced approximately 2% of our 2023 consolidated operating revenues.
White Marsh
White Marsh operates or maintains water and/or wastewater systems that serve approximately 4,300 service
connections under 31 separate contracts. White Marsh also owns two commercial properties that are leased to
Tidewater for its administrative office campus and its field operations center. White Marsh produced approximately
1% of our 2023 consolidated operating revenues.
3
Financial Information
Consolidated operating revenues, operating income and net income are as follows:
(Thousands of Dollars)
Years Ended December 31,
2022
2023
2021
Operating Revenues
$ 166,274
$ 162,434
$ 143,141
Operating Income
$ 39,223
$ 47,333
$ 33,211
Net Income
$ 31,524
$ 42,429
$ 36,543
Operating revenues were earned from the following sources:
Years Ended December 31,
2023
2021
2022
Residential
Commercial
Industrial
Fire Protection
Contract Sales
Contract Operations
Other
Total
52.1 % 52.3 % 54.3 %
14.4
7.0
7.6
11.5
7.4
0.0
14.0
6.9
7.8
11.6
7.4
0.0
100.0 % 100.0 % 100.0 %
11.7
6.3
8.8
10.2
8.6
0.1
Water Supplies and Contracts
Our New Jersey and Delaware water supply systems are physically separate and are not interconnected. In New
Jersey, the Pinelands System and Fortescue System are not interconnected with the Middlesex System or each other.
We believe we have adequate sources of water supply to meet the current service requirements of our present
customers in New Jersey and Delaware.
Middlesex System
Our Middlesex System produced approximately 13.8 billion gallons in 2023 from:
• The Carl J. Olsen Surface Water Treatment Plant (CJO Plant)-10.7 billion gallons;
• Twenty-seven Company-owned wells (ground water)-2.0 billion gallons; and
• The balance purchased from a non-affiliated water utility regulated by the New Jersey Board of Public
Utilities (NJBPU) under an agreement which expires February 27, 2026. This agreement provides for
minimum purchases of 3.0 million gallons per day (mgd) of treated water with provisions for additional
purchases.
In November 2021, Middlesex temporarily ceased pumping from its Company-owned wells at the Park Avenue
Wellfield Treatment Plant (Park Avenue Plant) in South Plainfield, New Jersey and alternate sources of supply
were obtained in order to comply with new State of New Jersey water quality regulations relative to poly- and
perfluoroalkyl substances, collectively referred to as PFAS, that became effective in 2021.
4
Prior to 2021, the Company began design for construction of an enhanced treatment process at the Park Avenue
Plant to meet the expected PFAS water quality standards anticipated to be enacted by the State of New Jersey,
which at that time were unknown as to their timing and extent. In June 2022, a portion of the enhanced treatment
process was completed, placed into service and effectively treated the ground water in compliance with all state
and federal drinking water standards. In June 2023, the Company completed the permanent construction of the
entire Park Avenue Plant treatment upgrades and placed the upgrades into operation in full compliance with the
new State of New Jersey PFAS water quality regulations.
The Middlesex System’s distribution storage facilities are used to supply water to customers at times of peak
demand, outages and emergencies.
The principal source of surface water for the Middlesex System is the Delaware & Raritan Canal, which is owned
by the State of New Jersey and operated by the New Jersey Water Supply Authority (NJWSA). Middlesex is under
contract with the NJWSA, which expires November 30, 2048, and provides for average purchases of 27.0 mgd,
with a peak up to 47.0 mgd, of untreated water from the Delaware & Raritan Canal, augmented by the Round
Valley/Spruce Run Reservoir System. The untreated surface water is pumped to, and treated at, the CJO Plant.
Water supply to customers of the Fortescue System is derived from two wells, which produced approximately 6.7
million gallons in 2023.
Tidewater System
Our Tidewater System produced approximately 2.9 billion gallons in 2023, primarily from 175 wells. Tidewater
expects to submit applications to Delaware regulatory authorities for the approval of additional wells as growth,
customer demand and water quality warrant. Tidewater augments its water production with annual purchases of up
to 60.0 million gallons of treated water from the City of Dover, Delaware. Tidewater does not have a central water
treatment facility for the over 470 separate communities it serves. As the number has grown, many of Tidewater’s
individual systems have been interconnected, forming several regional systems that are served by multiple water
treatment facilities owned by Tidewater.
Pinelands Water System
Water supply to our Pinelands Water System is derived from four wells which produced approximately 134.7
million gallons in 2023. The aggregate pumping capacity of the four wells is 2.2 mgd.
Wastewater Facilities
Pinelands Wastewater System
The Pinelands Wastewater System discharges into the South Branch of the Rancocas Creek through a wastewater
treatment plant that provides clarification, sedimentation, filtration and disinfection. The total capacity of the plant
is 0.5 mgd, and the system treated approximately 94.8 million gallons in 2023.
Human Capital Management
The Company strives to attract and retain employees by offering competitive compensation and benefits along with
career development and training opportunities in a safe, supportive and inclusive work environment. Our mission,
our business philosophy and the manner in which we deliver value for our customers, our shareholders and our
employees is inherent in what we, as an enterprise, profess to be our core values of Respect, Integrity, Growth,
Honesty and Teamwork. Our employees’ success is a key element of the Company’s success.
Workforce
As of December 31, 2023, the Company had 355 employees. None of our employees are subject to a collective
bargaining agreement. We believe our employee relations are positive.
5
Employee Compensation and Benefits
We offer comprehensive competitive employee compensation and benefit programs consistent with job functions,
skill levels, experience, knowledge and geographic location. These programs are periodically independently
evaluated by a nationally recognized consulting firm to gauge effectiveness and are benchmarked against industry
peers and the overall markets in which we operate our businesses. Compensation increases and incentive
compensation are based on merit, which is communicated to employees and documented in our bi-annual
performance evaluation process. Benefits include a variety of programs to enhance employee overall physical,
mental and financial health and well-being, including healthcare insurance, employer funded retirement savings
plans, life insurance, disability insurance, accident insurance, tuition reimbursement, flu shots, wellness newsletters
and webinars, flexible hybrid office and remote work capabilities, incentive programs for achieving fitness
milestones, financial counseling, elder care assistance, substance abuse support and more.
Safety
The Company has implemented safety programs and management practices designed to promote a culture of safety
to protect its employees. This includes required trainings for employees, as well as specific qualifications and
certifications for certain operational employees. All employees have been empowered to report, and immediately
stop, work which, in their personal judgement, is unsafe or is not consistent with our safety policies and procedures.
They can take this action without fear of reprisal.
In response to the Coronavirus (COVID-19) pandemic, the Company continues to implement changes it determines
are in the best interest of our employees and customers, as well as required to comply with government emergency
orders and regulations. While the nature of our utility services business requires portions of our workforce to operate
in the field and at treatment facilities, we employ and maintain a variety of processes to help ensure the safety of
those employees and the public in light of the pandemic.
Employee Development and Training
The Company employs various training and other educational programs and has developed company-wide and
project-specific training and educational programs, including tuition assistance for full-time employees enrolled in
pre-approved undergraduate or graduate courses or professional licensing courses. All employees receive training
to identify and report operational and financial risks, as well as risks to Company brand and reputation, which
fosters a personal culture of accountability and reinforces our commitment to a safe and sustainable workplace. All
employees receive cybersecurity training and other education regarding their use of sensitive data. Our Executive
Management team and our Board of Directors continually assess succession plans, leadership development progress
and policies and strategies regarding recruitment, retention, career development, diversity, equity and inclusion.
Formalized succession planning strategies have been developed for key leadership positions.
Diversity, Equity & Inclusion (DEI)
The Company is committed to DEI based upon our belief that embracing DEI is consistent with our Company
culture and benefits all stakeholders by maintaining a workforce with a variety of skills and perspectives as a result
of their diverse backgrounds and experiences. The Company remains a signatory to CEO Action for Diversity and
Inclusion, a business led initiative which encourages companies to cultivate environments that support dialogue on
DEI, implement and expand bias education and training and engage boards of directors in the development and
evaluation of inclusion and diversity strategies.
The Company is focused on recruitment and/or development of both external and internal candidates so that all
prospective and current employees are provided an opportunity to advance their careers. We are intentional in our
efforts to attract candidates from historically marginalized groups and seek a diverse pool of candidates for
apprenticeships and internship opportunities. Statements on DEI and our Human Rights Policy can be found on our
website. We continue to monitor the results of our DEI efforts and continually explore opportunities to further
engage our employees and customers.
6
Competition
Our business in our franchised service areas is substantially free from direct competition for growth with other
public utilities, municipalities and other entities. However, our ability to provide contract wholesale water supply
and operations and maintenance services that are not under the jurisdiction of a state public utility commission is
subject to competition from other public utilities, municipalities and other entities. Although Tidewater has been
granted exclusive franchises for its existing community water systems, the ability to expand service areas can be
affected by the Delaware Public Service Commission (DEPSC) awarding franchises to other regulated water
utilities with whom we compete for such franchises and for projects.
Regulation
Our rates charged to customers for utility services, the quality of the services we provide and certain other matters
are regulated by the NJBPU and DEPSC (collectively, the Public Utility Commissions).
Our USA, USA-PA and White Marsh subsidiaries are not regulated public utilities as related to rates and service
quality. However, they are subject to federal and state environmental regulations with respect to water quality and
wastewater effluent quality to the extent such services are provided.
We are subject to environmental and water quality regulation by the following regulatory agencies (collectively,
the Government Environmental Regulatory Agencies):
• United States Environmental Protection Agency (USEPA);
• New Jersey Department of Environmental Protection (NJDEP) with respect to operations in New Jersey;
and
• Delaware Department of Natural Resources and Environmental Control, the Delaware Department of Health
and Social Services-Division of Public Health (DEDPH), and the Delaware River Basin Commission with
respect to operations in Delaware.
In addition, our issuances of equity securities are subject to the prior approval of the NJBPU and require registration
with the United States Securities and Exchange Commission. Our issuances of long-term debt securities are subject
to the prior approval of the respective state Public Utility Commissions.
Regulation of Rates and Services
For regulated rate setting purposes, we account separately for our regulated utility operations to facilitate
independent rate setting by the applicable Public Utility Commissions.
In determining our regulated utility rates, the respective Public Utility Commissions consider the revenue, expenses
and utility infrastructure used and useful in providing service to the public. Rate determinations by the respective
Public Utility Commissions do not guarantee achievement by our regulated utility companies of specific rates of
return for our regulated utility operations. Thus, we may not achieve the rates of return authorized by the Public
Utility Commissions. In addition, there can be no assurance that any future rate increases will be granted or, if
granted, that they will be in the amounts requested.
Middlesex Rate Matters
In February 2024, Middlesex’s petition to the NJBPU, filed in May 2023, seeking permission to increase its base
water rates was concluded, based on a negotiated settlement that is expected to increase annual operating revenues
by $15.4 million effective March 1, 2024. The approved tariff rates were designed to recover increased operating
costs as well as a return on invested capital of $563.1 million, based on an authorized return on common equity of
9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and replacement of its
utility assets to support continued regulatory compliance, resilience and overall quality of service. Net proceeds
from the settlement of Middlesex’s 3M Company (3M) lawsuit were used to recover costs for the construction of
the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. The rate case
7
settlement will result in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of
Construction in the March 31, 2024 balance sheet. The Company will also record in the first quarter of 2024 the
recovery of $0.7 million and $2.4 million of prior year depreciation and carrying costs, respectively, as well as the
recovery of $1.4 million of prior year costs which were associated with the interim solution to comply with the
Notice, all of which were approved in the rate case settlement For further information on the 3M settlement
agreement, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,
Regulatory Notice of Non-Compliance and Regulatory Matters.
In January 2024, the NJBPU approved Middlesex’s petition for the proposed cost recovery of its Lead Service Line
Replacement (LSLR) Plan and cost recovery of project costs associated with replacing Middlesex customer-owned
lead service lines. Replacement of Middlesex and Middlesex customer-owned lead service lines is required by the
New Jersey LSLR Law. Under this legislation, the costs associated with replacing customer-owned lead service
lines are recoverable through future customer surcharges. Cost recovery for replacing Company-owned lead service
lines are recoverable through traditional base rate case filings. The current estimates for replacement of Middlesex
and Middlesex customer-owned lead service lines are approximately $46 million to $77 million over a nine-year
period.
In October 2023, the NJBPU approved Middlesex’s petition for a Distribution System Improvement Charge (DSIC)
Foundation Filing, which is a prerequisite to implementing a DSIC rate that allows water utilities to recover
investments in, and generate a return on, qualifying capital improvements to their water distribution system made
between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total
revenues established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually,
beginning in April 2024, the Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible
investments made during the period. DSIC rates remain in effect until Middlesex’s next base rate case increase
subsequent to the March 1, 2024 increase. Under the terms of the Foundational Filing, the Company is required to
file a base rate petition before November 2026.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water
Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million for the purchase of treated water
from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased purchased
water costs between base rate case filings. The increase, effective October 1, 2022, was on an interim basis and
subject to refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023.
In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero
in October 2023.
In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7
million. The approved tariff rates were designed to recover increased operating costs, as well as a return on invested
capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented
in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective
January 1, 2023. As part of the negotiated settlement, the PWAC was reset to zero.
Tidewater Rate Matters
In December 2023, the DEPSC approved Tidewater’s application to implement a new DSIC. Effective January 1,
2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate revenue of approximately $1.3
million annually. A Delaware DISC is subject to a semi-annual reset with an overall maximum rate of 7.5%.
In October 2023, the DEPSC issued an Order that made a temporary base rate reduction permanent. The initial
DEPSC order required Tidewater to reduce its base rates charged to general metered and private fire customers by
6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered as a result of
Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1
million in 2023.
8
In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return
exceeded the rate of return authorized by the DEPSC. Consequently, Tidewater reset its DSIC rate to zero effective
April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for
DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Pinelands Rate Matters
In April 2023, Pinelands Water and Pinelands Wastewater concluded their base rate case matters when the NJBPU
approved a combined $1.0 million increase in annual base rates, effective April 15, 2023. The requests were
necessitated by capital infrastructure investments the companies have made as well as increased operations and
maintenance costs.
Southern Shores Rate Matters
Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for water service to a 2,200
unit condominium community we serve in Sussex County, Delaware. Under the agreement, current rates were to
remain in effect until December 31, 2024, unless there are unanticipated capital expenditures or regulatory related
changes in operating expenses exceeding certain thresholds during this time period. In 2022, capital expenditures
did exceed the established threshold and rates were increased by 5.39%, effective January 1, 2023. Beginning in
2025 and thereafter, inflation-based rate increases cannot exceed the lesser of the regional Consumer Price Index
or, 3%. Inflation based increases are in addition to the threshold rate increases. This agreement expires on
December 31, 2029.
Future Rate Filings
Management monitors the need for rate relief for our regulated entities on an ongoing basis. When capital
improvements and/or increases in operation, maintenance or other costs indicate a need for rate relief, base rate
increase requests are filed with the respective Public Utility Commissions.
Regulatory Service Matters
Twin Lakes Utilities, LLC (Twin Lakes) provides water services to approximately 115 residential customers in
Shohola, Pennsylvania. Pursuant to the Pennsylvania Public Utility Code, Twin Lakes filed a petition requesting
the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by a capable public
utility. The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a
recommended decision (Recommended Decision) to the PAPUC. As part of this legal proceeding the PAPUC also
issued an Order in January 2021 appointing a large Pennsylvania based investor-owned water utility as the receiver
(the Receiver Utility) of the Twin Lakes system until the petition is fully adjudicated by the PAPUC. In November
2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to
acquire the Twin Lakes water system and for Middlesex, the parent company of Twin Lakes, to submit $1.7 million
into an escrow account within 30 days. Twin Lakes immediately filed a Petition For Review (PFR) with the
Commonwealth Court of Pennsylvania (the Commonwealth Court) seeking reversal and vacation of the escrow
requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States
Constitution. In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the
Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the
Commonwealth Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the
Commonwealth Court issued an opinion upholding PAPUC’s November 2021 Order in its entirety. In September
2022, Twin Lakes filed a Petition For Allowance of Appeal (Appeal Petition) to the Supreme Court of Pennsylvania
seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the grounds that the
Commonwealth Court erred in failing to address Twin Lakes’ claims that because the $1.7 million escrow
requirement placed on Middlesex violated Middlesex’s constitutional rights, Middlesex’s refusal to submit this
escrow payment would jeopardize the relief Twin Lakes was otherwise entitled to in the appointment of the
Receiver Utility. In March 2023, the Supreme Court of Pennsylvania issued a decision denying Twin Lakes’ Appeal
Petition without addressing this claim on the merits. As a result of the Pennsylvania Courts’ failure to address Twin
9
Lakes’ claim, Middlesex subsequently filed a Complaint with the United States District Court for the Middle
District of Pennsylvania to address the issue of whether the PAPUC’s Order violated Middlesex’s rights under the
United States Constitution. On January 18, 2024, the District Court issued an Order dismissing Middlesex’s
Complaint without addressing the issue of whether the PAPUC’s Order violated Middlesex’s rights under the
United States Constitution. On January 31, 2024, Middlesex filed a Notice of Appeal of the District Court’s decision
with the United States Court of Appeals for the Third Circuit.
The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.
Water and Wastewater Quality and Environmental Regulations
Government environmental regulatory agencies regulate our operations in New Jersey and Delaware with respect
to water supply, treatment and distribution systems and the quality of the water. They also regulate our operations
with respect to wastewater collection, treatment and disposal.
Regulations relating to water quality require us to perform tests to ensure our water meets state and federal quality
requirements. In addition, government environmental regulatory agencies continuously review current regulations
governing the limits of certain organic compounds found in the water as byproducts of the treatment process. We
participate in industry-related research to identify technologies that may reduce the level of organic, inorganic and
synthetic compounds found in water. The cost to water utilities to comply with any proposed water quality standards
depends in part on the limits set in the regulations and on the method selected to treat the water to the required
standards. We regularly test our water to determine compliance with government environmental regulatory
agencies’ water quality standards.
In September 2021, the NJDEP issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting
by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Plant in South
Plainfield, New Jersey exceeded a standard promulgated in a NJDEP regulation that became effective in 2021.
Middlesex was required by the regulation to notify its affected customers and complied within the required Notice
period in November 2021.
The Notice further required the Company to take any action necessary to comply with the new standard by
September 7, 2022. Consequently, in November 2021, the Company implemented an interim solution to meet the
Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status and
obtaining alternate sources of supply. In June 2022, the Company accelerated the in-service date for a portion of
the enhanced treatment project based on engineering analysis that allowed a restart of the Park Avenue Wellfield
Treatment Plant to ensure continued compliance with all state and federal drinking water standards.
On September 13, 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP, which
required the Company to take whatever actions necessary to achieve and maintain compliance with applicable
regulations. As prescribed in the ACO, the Company was to issue periodic public notifications until the ACO was
closed.
In June 2023, the Company completed the permanent construction of the entire Park Avenue Plant treatment
upgrades and placed the upgrades into operation in full compliance with the NJDEP PFOA standards. In October
2023, the Company received confirmation from the NJDEP that it has complied with all requirements of the ACO
and consequently, the ACO has been closed.
In addition to the enhanced groundwater treatment process for PFOA, we treat the groundwater supplies in our
Middlesex System with chlorination for primary disinfection purposes and use air stripping for removal of volatile
organic compounds.
Surface water treatment in our Middlesex System is by conventional treatment; coagulation, sedimentation and
filtration. The treatment process includes pH adjustment, ozone and chlorination for disinfection, and corrosion
control for the distribution system.
10
Treatment of groundwater in our Tidewater System is by chlorination for disinfection purposes and, in some cases,
pH adjustment and filtration for nitrate and iron removal and granular activated carbon filtration for organics
removal. Chloramination is used for final disinfection at Southern Shores.
Treatment of groundwater in the Pinelands Water and Fortescue Systems (primary disinfection only) is performed
at individual well sites.
Treatment of wastewater in the Pinelands Wastewater System includes the use of rotating biological contactors.
The NJDEP and DEDPH monitor our activities and review the results of water quality tests that are performed for
adherence to applicable regulations. Other applicable regulations include the Lead, Copper and Lead Service Line
Rules, the Federal Surface Water Treatment Rule and the Federal Total Coliform Rule and regulations for maximum
contaminant levels established for various volatile organic compounds.
The Company must comply with various environmental laws and regulations promulgated by the USEPA, NJDEP
and other governmental agencies, including the Toxic Catastrophe Prevention Act, the Spill Prevention, Control,
and Countermeasure Rule and the Discharge Prevention Program of the New Jersey Spill Compensation and
Control Act.
Seasonality
Customer demand for our water during the warmer months is generally greater than other times of the year due
primarily to additional consumption of water in connection with irrigation systems, swimming pools, cooling
systems and other outside water use. Throughout the year, and particularly during typically warmer months, demand
may vary with temperature and rainfall timing and overall levels. In the event that temperatures during the typically
warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand for our water
may decrease and therefore, adversely affect our revenues.
Management
In May 2023, President and Chief Executive Officer, Dennis W. Doll announced a plan to retire upon turning age
65. On January 23, 2024, the Company named Nadine Leslie as its new President and Chief Executive Officer
effective March 1, 2024. Ms. Leslie will also be appointed to the Board of Directors effective March 1, 2024. Mr.
Doll will remain Chairman of the Company’s Board of Directors through the expiration of his current term as a
Director as of the May 21, 2024 Annual Meeting of Shareholders.
This table lists information concerning our executive management team in 2023:
Name
Dennis W. Doll
Age Principal Position(s)
65
President, Chief Executive Officer and Chairman of the Board of
Directors
65 Senior Vice President, Treasurer and Chief Financial Officer
A. Bruce O’Connor
G. Christian Andreasen, Jr. 64 Vice President-Enterprise Engineering
Robert K. Fullagar
Lorrie B. Ginegaw
Jay L. Kooper
Georgia M. Simpson
Bernadette M. Sohler
Bruce E. Patrick
Robert J. Capko
57 Vice President-Operations
48 Vice President-Human Resources
51 Vice President-General Counsel and Secretary
50 Vice President-Information Technology and Chief Technology Officer
63 Vice President-Corporate Affairs
55 President-Tidewater
50 Corporate Controller and Principal Accounting Officer
Dennis W. Doll – Mr. Doll joined the Company as Executive Vice President in November 2004 and was named
President and Chief Executive Officer, and a Director of Middlesex, effective January 1, 2006. In May 2010, he
was elected Chairman of the Board, also serving as Chairman of the Boards of the Company’s subsidiary
companies. He is a Past President of the National Association of Water Companies and past Chairman of the Board
11
of the New Jersey Utilities Association, representing the state’s electric, gas, water and telecommunications
industries. He is a past Chairman of the Board of The Water Research Foundation where he continues to serve as a
non-Trustee member of the Audit Committee. He has also served as a Director and member of the Executive
Committee of the Board of Directors of the American Water Works Association. He presently serves as Treasurer
and member of the Board of Trustees of Court Appointed Special Advocates of Middlesex County, NJ serving the
needs of children living in foster care.
A. Bruce O’Connor – Mr. O’Connor, a Certified Public Accountant, joined the Company in 1990 and was named
Vice President and Chief Financial Officer in 1996 and Treasurer in 2014. On January 1, 2019, Mr. O’Connor was
appointed Senior Vice President of Middlesex. Mr. O’Connor is also the principal financial officer and a Director
of all Middlesex subsidiaries.
G. Christian Andreasen, Jr. – Mr. Andreasen, a licensed professional engineer, joined the Company in 1982, was
named Assistant Vice President-Enterprise Engineering in January 2019 and promoted to Vice President-Enterprise
Engineering in July 2019. He is President and a Director of Pinelands Water and Pinelands Wastewater. Mr.
Andreasen serves as a Member and Vice Chair of the NJDEP’s Water Supply Advisory Council.
Robert K. Fullagar – Mr. Fullagar, a licensed professional engineer, joined the Company in 1997, was named
Assistant Vice President-Operations in January 2019 and promoted to Vice President-Operations in July 2019. He
is President and a Director of USA-PA, USA and Twin Lakes. Mr. Fullagar serves as Sector Chair of the New
Jersey Infrastructure Advisory Committee and is a Member of the NJDEP’s Licensed Operator Advisory
Committee.
Lorrie B. Ginegaw – Ms. Ginegaw joined Tidewater in 2004 and in 2007 was promoted to Director of Human
Resources for Middlesex. In March 2012, Ms. Ginegaw was named Vice President-Human Resources. Prior to
joining the Company, Ms. Ginegaw worked in various human resources positions in the healthcare and
transportation/logistics industries. Ms. Ginegaw serves as a volunteer director on the Board of the New Jersey
Utilities Association.
Jay L. Kooper – Mr. Kooper joined the Company in 2014 as Vice President and General Counsel and serves as
Secretary for the Company and all subsidiaries. Prior to joining the Company, Mr. Kooper held various positions
in private and public entities as well as in private law practice, representing electric, gas, water, wastewater,
telephone and cable companies as well as municipalities and private clients before 17 state public utility
commissions and legislatures, federal agencies and federal and state appellate courts. Mr. Kooper serves as a
volunteer director on selected non-profit utility industry-related Boards including the National Association of Water
Companies (current Director and Chairman of the New Jersey Chapter) and the New Jersey State Bar Association’s
Public Utility Law Section (current Consultor and Past Chairman) and on other non-profit boards based in New
Jersey, including as President of Temple B’Nai Abraham in Livingston, New Jersey and as a Director of the Crohn’s
and Colitis Foundation’s New Jersey Chapter.
Georgia M. Simpson – Ms. Simpson joined the Company in 2009, was named Assistant Vice President-Information
Technology in January 2019 and promoted to Vice President- Information Technology in July 2019. In April 2022,
Ms. Simpson was named Chief Technology Officer. Prior to joining the Company, Ms. Simpson held various
Information Technology positions and has gained an extensive array of technical and business computer
certifications. Ms. Simpson serves as a member of the Delaware Cyber Security Advisory Council, the Society for
Information Management, New Jersey chapter and the Project Management Institute, New Jersey chapter.
Bernadette M. Sohler – Ms. Sohler joined the Company in 1994 after having served in several marketing and public
relations management positions in the financial services industry. She was named Director of Communications in
2004 and promoted to Vice President-Corporate Affairs in March 2007 and also serves as Vice President of USA.
Ms. Sohler is a volunteer director on area Chambers of Commerce and several other non-profit Boards supporting
public safety and the arts. She is a past director of the National Association of Water Companies and former Chair
of the New Jersey Utilities Association’s Communications Committee.
12
Bruce E. Patrick – Mr. Patrick, a licensed professional engineer, joined Tidewater in February 2002 as Vice
President of Engineering. He was promoted to Vice President and General Manager in April 2012, Executive Vice
President in April 2023, and President in December 2023. Mr. Patrick has extensive experience in regulatory
compliance, permitting, planning and design. Prior to joining Tidewater, he served as Kent County, Delaware
Public Works Director and County Engineer where he had overall responsibility for the County’s regional
wastewater facilities. Mr. Patrick also held prior positions with the Delaware Department of Natural Resources and
Environmental Control as well as the Delaware Division of Public Health.
Robert J. Capko – Mr. Capko, a Certified Public Accountant, joined the Company in 2009 as Corporate Controller.
On March 28, 2023, Mr. Capko was appointed Principal Accounting Officer of Middlesex. Mr. Capko is also a
Director and Treasurer of Tidewater and White Marsh and Controller of USA, USA-PA, Pinelands Water and
Pinelands Wastewater. Prior to joining Middlesex, Mr. Capko was an Audit Senior Manager with Deloitte &
Touche LLP, with a focus on publicly traded regulated utilities including several regulated public utility clients
subject to the jurisdiction of the NJBPU.
ITEM 1A. RISK FACTORS.
Operational Risks
Weather conditions and overuse of underground aquifers may interfere with our sources of water, demand
for water services and our ability to supply water to customers.
Our ability to meet current and future water demands of our customers depends on the availability of an adequate
supply of water. Unexpected conditions may interfere with our water supply sources. Drought and overuse of
underground aquifers may limit the availability of ground and/or surface water. Freezing weather may also
contribute to water transmission interruptions caused by water main breakage. Any interruption in our water supply
could cause a reduction in our revenue and profitability. These factors may adversely affect our ability to supply
water in sufficient quantities to our customers. Governmental drought restrictions may result in decreased customer
demand for water services and can adversely affect our revenue and earnings.
Our water sources or water service provided to customers may become contaminated by naturally-occurring
or man-made compounds and events. This may cause disruption in services and impose operational and
regulatory enforcement costs upon us to restore the water to required levels of quality as well as may damage
our reputation and cause private litigation claims against us.
Our sources of water or water in our distribution systems may become contaminated by naturally-occurring or man-
made compounds or other events. In the event that any portion of our water supply sources or water distribution
systems is contaminated, we may need to interrupt service to our customers until we are able to remediate the
contamination or substitute the flow of water from an uncontaminated water source through existing
interconnections with other water purveyors or through our transmission and distribution systems, where possible.
We may also incur significant costs in treating any contaminated water, or remediating the effects on our treatment
and distribution systems, through the use of our current treatment facilities, or development of new treatment
methods. Our inability to substitute water supply from an uncontaminated water source, or to adequately treat the
contaminated water supply in a cost-effective manner, may reduce our revenues or increase our expenses and make
us less profitable.
We may be unable to recover costs associated with treating water supplies through rates or, recovery of these costs
may not occur in a timely manner. In addition, we could be subject to claims for damages arising from government
enforcement actions or legal actions arising out of interruption of service or perceived human exposure to hazardous
substances in our drinking water and water supplies. Such costs could adversely affect our financial results.
Contamination of the water supply or the water service provided to our customers could result in substantial injury
or damage to our customers, employees or others and we could be exposed to substantial claims and litigation,
which are inherently subject to uncertainties and are potentially subject to unfavorable regulatory and/or legal
13
actions. Negative impacts to our profitability and/or our reputation may occur even if we are not responsible for the
contamination or the consequences arising out of human exposure to contamination or hazardous substances in the
water supplies. Pending or future claims against us could have a material adverse impact on our financial condition,
results of operations and cash flows.
The necessity for ongoing physical and technological security has resulted, and may continue to result, in
increased operating costs.
Because of physical and technological threats to the health and security of the United States of America, we employ
procedures to review and modify security measures. We provide ongoing training and communications to our
employees about threats to our water supply, our assets and related systems and our employees’ personal safety.
We have incurred, and will continue to incur, costs for security measures in efforts to protect against such risks.
Climate variability may cause weather volatility in the future, which may impact water usage and related
revenue or, may require additional expenditures to reduce risk associated with any increasing storm, flood,
drought or other weather occurrences.
Increased climate variability may cause increased precipitation and flooding, increased frequency and severity of
storms and other weather events, potential degradation of water quality, decreases in available water supply,
changes in water usage patterns and disruptions in service. Because of the uncertainty of weather volatility related
to climate variability, we cannot predict its potential impact on our financial condition, results of operations, cash
flows and liquidity. Although some or all potential expenditures and costs with respect to our regulated businesses
could be recovered through rates we charge to our customers, there can be no assurance that the NJBPU or the
DEPSC would authorize recovery of such costs, in whole or in part.
Regulatory Risks
Our revenue and earnings depend on the rates we charge our customers. We cannot raise utility rates in our
regulated businesses without petitioning the appropriate Public Utility Commissions. If these agencies
modify, delay or deny our petition, our revenues will not increase and our earnings will decline unless we are
able to reduce costs without degrading service quality.
The NJBPU regulates our public utility companies in New Jersey with respect to rates and charges for service,
classification of accounts, awards of new service territory, acquisitions, financings and other matters. That means,
for example, that we cannot raise the utility rates we charge to our customers without first petitioning the NJBPU
and navigating a lengthy administrative process. Similarly, the DEPSC regulates our public utility companies in
Delaware. We cannot provide assurance as to when we will request approval for any such matter, nor can we predict
whether these Public Utility Commissions will approve, deny or reduce the amount of such requests.
Certain costs are not completely within our control. The failure to obtain any rate increase would prevent us from
increasing our revenues and, unless we are able to reduce costs without degrading service quality, would result in
reduced earnings.
We are subject to environmental laws and regulations, including water quality and wastewater effluent
quality regulations, as well as other state and local regulations. Compliance with those laws and regulations
requires us to incur costs and we are subject to fines or other sanctions for non-compliance.
Government environmental regulatory agencies regulate our operations in New Jersey and Delaware with respect
to water supply, treatment and distribution systems and the quality of water. Government environmental regulatory
agencies also regulate our operations in New Jersey and Delaware with respect to wastewater collection, treatment
and disposal.
Government environmental regulatory agencies’ regulations relating to water quality require us to perform
expanded types of testing to ensure our water meets state and federal water quality requirements. We are subject to
USEPA regulations under the Federal Safe Drinking Water Act and under the Federal Clean Water Act regarding
14
wastewater services. Regulations under the Safe Drinking Water Act include the Lead and Copper Rule, the
maximum contaminant levels established for various volatile organic compounds, the Federal Surface Water
Treatment Rule and the Total Coliform Rule. There are also similar NJDEP regulations for our New Jersey water
systems. The NJDEP and DEDPH monitor our activities and review the results of water quality tests we perform
for adherence to applicable regulations. In addition, Government Environmental Regulatory Agencies are
continually reviewing regulations governing the limits of certain organic compounds found in the water as
byproducts of treatment.
We are also subject to regulations related to fire protection services in New Jersey and Delaware. In New Jersey
there is no state-wide fire protection regulatory agency. However, New Jersey regulations exist as to the size of
piping required regarding the provision of fire protection services. In Delaware, fire protection is regulated
statewide by the Office of State Fire Marshal.
The cost of compliance with the water and wastewater effluent quality standards depends in part on the limits set
in the regulations and on the methods selected to comply with these standards. If new or more restrictive standards
are imposed, the cost of compliance could increase and therefore, have an adverse impact on our revenues and
results of operations if we cannot recover those costs through the rates we charge our customers. The cost of
compliance with fire protection requirements could also increase and make us less profitable if we cannot recover
those costs through our rates charged to our customers.
The Company must comply with various environmental laws and regulations promulgated by the USEPA, NJDEP
and other governmental agencies, including the Toxic Catastrophe Prevention Act, the Spill Prevention, Control,
and Countermeasure Rule and the Discharge Prevention Program of the New Jersey Spill Compensation and
Control Act. If we fail to comply with environmental or other laws and regulations to which our business is subject,
we could be fined or subject to other sanctions, which could adversely impact our business or results of operations.
Financial Risks
We depend upon our ability to raise money in the capital markets to finance some of the costs of complying
with laws and regulations, including environmental laws and regulations or to pay for some of the costs of
improvements to or the expansion of our utility system assets. Our regulated utility companies cannot issue
debt or equity securities without prior regulatory approval.
We require financing from external sources to fund the ongoing capital program for the improvement in our utility
system assets and for planned expansion of those systems. We expect to spend approximately $226 million for
capital projects through 2026. We must obtain prior approval from our economic regulators to sell debt or equity
securities to raise capital for these projects. If sufficient capital is not available, or the cost of capital is too high, or
if the regulatory authorities deny our petition to sell debt or equity securities, we may not be able to meet the costs
of complying with environmental laws and regulations or the costs of improving and expanding our utility system
assets to the level we believe operationally prudent. This may result in the imposition of fines from environmental
regulators or restrictions on our operations which could curtail our ability to upgrade or replace utility system assets.
We face competition from other utilities and service providers which might hinder our growth opportunities
and mitigate our future profitability.
We face risks of competition from other utilities or other entities authorized by federal, state or local agencies to
expand rate-regulated or contracted utility services. Once a state utility regulator grants a franchise to a public utility
to serve a specific territory, that utility effectively has an exclusive right to service that territory. Although a new
franchise offers some protection against competitors, the pursuit of franchises is often competitive, particularly in
Delaware, where new franchises may be awarded to utilities based upon competitive negotiation. Competing
entities have challenged, and may challenge in the future, our applications for new franchises. Also, third parties
entering into agreements to operate municipal utility systems may adversely affect the management of our long-
term agreements to supply water or wastewater services on a contract basis to those municipalities, which could
adversely affect our financial results.
15
We have short-term and long-term contractual obligations for water, wastewater and storm water system
operation and maintenance under which we may incur costs in excess of payments received.
USA-PA and USA operate and maintain water and wastewater systems for three New Jersey municipalities under
10-year contracts expiring in 2028, 2030 and 2032, respectively. These contracts do not protect us against incurring
costs in excess of revenues we earn pursuant to the contracts. There can be no absolute assurance we will not
experience losses resulting from these contracts. Losses under these contracts, or our failure or inability to perform
or renew such agreements, may have a material adverse effect on our financial condition and results of operations.
Capital market conditions and key assumptions may adversely impact the value of our postretirement benefit
plan assets and liabilities.
Market factors can adversely affect the rate of return on assets held in trusts to satisfy our future postretirement
benefit obligations, as well as negatively affect interest rates, which impacts the discount rates used in the
determination of our postretirement benefit actuarial valuations. In addition, changes in demographics, such as
increases in life expectancy assumptions, can increase future postretirement benefit obligations. Any negative
impact to these factors, either individually or a combination thereof, may have a material adverse effect on our
financial condition and results of operations.
An element of our growth strategy is the acquisition of water and wastewater assets, operations, contracts or
companies. Any pending or future acquisitions we decide to undertake will involve risks.
The acquisition and/or operation of water and wastewater systems is an element of our growth strategy. This
strategy depends on identifying suitable opportunities that meet our risk/reward profile and reaching mutually
agreeable terms with acquisition candidates or contract parties. Further, acquisitions may result in dilution in the
value of our equity securities, incurrence of debt and contingent liabilities and fluctuations in financial results. In
addition, the assets, operations, contracts or companies we acquire may not achieve the revenues and profitability
projected.
Our ability to achieve organic customer growth in our market area is dependent on the residential building
market. New housing starts and home sale closings are one element that impacts our rate of growth and
therefore, may not meet our expectations.
We expect our revenues to increase from customer growth for our regulated water operations as a result of
anticipated construction, sale and close of new housing units. If housing starts decline, or do not increase as we
have projected, or home sales closing cycle times increase as a result of economic conditions or otherwise, the
timing and extent of our organic revenue growth may not meet our expectations, our deferred project costs may not
produce revenue-generating projects in the timeframes anticipated and our financial results could be negatively
impacted.
There can be no assurance we will continue to pay dividends in the future or, if dividends are paid, that
they will be in amounts similar to past dividends.
We have paid dividends on our common stock each year since 1912 and have increased the amount of dividends
paid each year since 1973. Our earnings, financial condition, capital requirements, applicable regulations and other
factors, including the timeliness and adequacy of rate increases, will determine both our ability to pay dividends
and the amount of those dividends. There can be no assurance we will continue to pay dividends in the future or, if
dividends are paid, that they will be in amounts similar to past dividends.
If we are unable to pay the principal and interest on our indebtedness as it comes due or we default under
certain other provisions of our loan documents, our indebtedness could be accelerated and our results of
operations and financial condition could be adversely affected.
Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and
future performance. Our performance is affected by many factors, some of which are beyond our control.
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We believe cash generated from operations and, if necessary, borrowings under existing credit facilities, will be
sufficient to enable us to make our debt payments as they become due. If, however, we do not generate sufficient
cash, we may be required to refinance our obligations or sell additional equity, which may be on terms that are less
favorable than we desire.
No assurance can be given that any refinancing or sale of equity will be possible when needed, or that we will be
able to negotiate acceptable terms. In addition, our failure to comply with certain provisions contained in our trust
indentures and loan agreements relating to our outstanding indebtedness could lead to a default under these
documents, which could result in an acceleration of our indebtedness.
Our business is subject to seasonal fluctuations, which could affect demand for our water service and our
revenues.
Demand for our water during the warmer months is generally greater than during colder months due primarily to
additional consumption of water in connection with irrigation systems, swimming pools, cooling systems and other
outdoor water use. Throughout the year, and particularly during typically warmer months, demand may vary with
temperature and rainfall levels. In the event that temperatures during the typically warmer months are cooler than
normal, or if there is more rainfall than normal, the demand for our water may decrease and adversely affect our
revenues.
General economic conditions may materially and adversely affect our financial condition and results of
operations.
Adverse economic conditions could negatively impact our customers’ water usage demands, particularly the level
of water usage demand by our commercial and industrial customers in our Middlesex System. If water demand by
our commercial and industrial customers in our Middlesex System decreases, our financial condition and results of
operations could be negatively impacted until completion of a subsequent base rate filing.
The current concentration of our business in central New Jersey and in Delaware makes us susceptible to
adverse developments in local regulatory, economic, demographic, competitive and weather conditions.
Our Middlesex System provides water services to customers located primarily in eastern Middlesex County, New
Jersey. Water service is provided under wholesale contracts to the Townships of Edison, East Brunswick and
Marlboro, the Borough of Highland Park, the Old Bridge Municipal Utilities Authority and the City of Rahway.
We also provide water services to customers in the State of Delaware. Our revenues and operating results are
therefore subject to local regulatory, economic, demographic, competitive and weather conditions in a relatively
concentrated geographic area. A change in any of these conditions could make it more costly for us to conduct our
business.
We are subject to anti-takeover measures that may be used to discourage, delay or prevent changes of control
that might benefit non-management shareholders.
Subsection 10A of the New Jersey Business Corporation Act, known as the New Jersey Shareholders Protection
Act, applies to us. The Shareholders Protection Act deters merger proposals, tender offers or other attempts to effect
changes in control that are not approved by our Board of Directors. In addition, we have a classified Board of
Directors, which means only a portion of the Director population is elected each year. A classified Board can make
it more difficult for an acquirer to gain control of the Company by voting its candidates onto the Board of Directors
and may also deter merger proposals and tender offers. Our Board of Directors also has the ability, subject to
obtaining NJBPU approval, to issue one or more series of preferred stock having such number of shares,
designation, preferences, voting rights, limitations and other rights as the Board of Directors may fix. This could
be used by the Board of Directors to discourage, delay or prevent an acquisition the Board of Directors determines
is not in the best interest of the common shareholders.
17
We identified material weaknesses in our internal controls which, if not remediated appropriately or timely,
could result in loss of investor confidence and adversely impact our stock price.
Internal controls related to the operation of technology systems are critical to maintaining adequate internal control
over financial reporting. During the fourth quarter of 2023, management identified a material weakness in internal
control related to ineffective information technology general controls (ITGCs) in the areas of user access and change
management over certain information technology (IT) systems that support the Company’s financial reporting
processes. Certain of those controls were found to be deficient because of a lack of sufficient IT control processes
designed to prevent or detect unauthorized changes in applications and data in selected IT environments. In
December 2023, management implemented various auditing and monitoring solutions that provide greater
transparency into changes made within our IT systems. These control solutions are supported by a timely review
process that focuses on the proper authorization and approval of IT system changes. Due to the timing of
implementing the solutions, the controls implemented did not operate over a sufficient time period to adequately
test and validate the remediation and reassess other ITGCs, which may require further remediation actions. In
addition, there were ineffective controls related to income tax accounting for a non-routine transaction, which
management has identified as a material weakness in internal controls over financial reporting.
Therefore, management concluded that our internal control over financial reporting was not effective as of
December 31, 2023. Until remediation measures are completed, fully tested and determined effective, we will not
be able to conclude that the material weaknesses have been remediated. If we are unable to determine that our
remediation measures are effective or otherwise remediate the material weaknesses, or are otherwise unable to
maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to
record, process and report financial information accurately, and to prepare financial statements within required time
periods, could be adversely affected, which could subject us to litigation or investigations requiring management
resources and payment of legal and other expenses, negatively affecting investor confidence in our financial
statements and adversely impacting our stock price.
General Risks
We rely on our information technology systems to help manage our operations.
Our information technology systems require periodic modifications, upgrades and/or replacement which subject us
to costs and risks including potential disruption of our internal control structure, substantial unanticipated capital
expenditures, additional operating expenses, retention of sufficiently skilled personnel and other risks in
transitioning to new systems or integrating new systems. A failure to modify, upgrade or replace our information
technology systems could have an adverse impact on our business. In addition, challenges implementing new
technology systems may cause disruptions in our business operations and have an adverse effect on our business
operations.
Our information technology systems may be subject to physical and cyber attacks.
We rely on our computer, information and communications technology systems in connection with the operation
of our business, especially with respect to customer service and billing, accounting and, in some cases, the
monitoring and operation of our operating facilities. Our computer and communications systems and operations
could be damaged or interrupted by natural disasters, cyber-attacks, power loss and internet, telecommunications
or data network failures or acts of war or terrorism or similar events or disruptions. Any of these or other events
could cause service interruption, delays and loss of critical data or, impede aspects of operations and therefore,
adversely affect our financial results.
Cyber-attacks could result in the loss, or compromise, of customer, financial or operational data, disruption of
billing, collections or normal field service activities, disruption of electronic monitoring and control of operational
systems and delays in financial reporting and other management functions. Possible impacts associated with a
cyber-incident may include remediation costs related to lost, stolen, or compromised data, repairs to data processing
18
systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and
environmental laws and regulations, including standards for drinking water, litigation and reputational damage.
We depend significantly on the technical and management services of our team, and the departure of any of
certain persons could cause our operating results to temporarily be short of our expectations.
Our success depends significantly on the continued individual and collective contributions of our team. If we lose
the services of certain members of our team, or are unable to attract and retain qualified personnel in key roles, our
operating results could be negatively impacted.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY
Cybersecurity Program
The Company’s cybersecurity program is an integral element of the Company's overarching strategic plan. The
robustness of the cybersecurity initiatives directly impact the realization of the Company's mission, vision, and
goals. Aligned with the National Institute of Standards and Technology Cyber Security Framework, the Company
employs a comprehensive "defense-in-depth" strategy, deploying multiple security measures to safeguard its
operational environment and data integrity systems.
The Company continually evaluates and refines its cybersecurity program in response to key factors such as
evolving threat landscapes, program maturation, gap analysis, and guidance from external security consultants. The
Company’s cybersecurity program relies on three key pillars: People, Process and Technology (PPT) to deliver a
robust cybersecurity program. The cybersecurity program includes various aspects of PPT, including, but not
limited to:
• Technology: Encryption, threat management, backups, monitoring, investigative support utilizing artificial
intelligence embedded tools;
• Identity and Access Control Management Tools: Multi-factor authentication, monitoring and alerting of
privilege account access;
• Cybersecurity Processes: Vulnerability scanning, penetration testing, and periodic assessments conducted
by external security consultants;
• Incident Response Training: Regularly assessed incident response preparedness through various incident
response and disaster recovery exercises; and
• Cyber Risk Awareness and Training: Frequent simulation exercises to heighten awareness of
cybersecurity threats and educate our user community on preventative measures and reporting protocols.
All employees participate in required periodic training with respect to cybersecurity risk and risk mitigation.
Our Chief Technology Officer (CTO), with over 25 years of experience in various disciplines of information
technology, oversees the cybersecurity program. Reporting to the Chief Executive Officer, the CTO provides
regular briefs to the Board of Directors (the Board) and executive management, informing them about prevention,
detection, mitigation, and remediation of cybersecurity incidents, as well as ongoing risks and threats.
In our industry, the continuous functioning of information systems is of the utmost importance. Leveraging
information technology systems, we collect, process and safeguard sensitive data and utilize automated tools to
operate our plants.
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Identified as a critical risk factor, cybersecurity threats encompass potential hazards such as malicious code,
employee misconduct, advanced persistent threats, fraud, and phishing attacks. These risks have the potential to
lead to information technology system failures, threat to water supply, or compromise of sensitive information.
Our cybersecurity program aims to protect the uninterrupted availability of critical information technology
resources. Regular assessments, conducted both internally and by third parties, evaluate our program against
industry standards, including the National Institute of Standards and Technology Cybersecurity Standard and the
Risk Management Framework.
Although we have not experienced cybersecurity breaches or incidents that have significantly impacted our
financial condition, results of operations, or business strategy, the effectiveness of our measures to prevent, detect,
mitigate, or recover is based on currently known threats and recovery methods. There is no guarantee that
cybersecurity breaches or incidents will not impact our business operations, strategy, financial condition, or
operations.
The ever-evolving landscape of cybersecurity threats introduces ongoing challenges. The Company recognizes the
increasing frequency and sophistication of these threats. Despite implementing measures to secure operational and
technology systems and fostering a culture of continuous improvement, the dynamic nature of cyber-attacks and
vulnerabilities implies that these defenses may not be foolproof.
Cybersecurity Risk Management Program and Strategy
Cybersecurity risk management strategy is an integral component of our operations and our overall risk
management process. Recognizing the dynamic nature of cybersecurity threats, we have implemented a
comprehensive risk management program that aims to identify, assess, and mitigate potential risks. Our strategy
involves a proactive approach, incorporating preventative measures, continuous monitoring, and adaptive response
mechanisms. We prioritize the safeguarding of our operational network environment, sensitive data, including
confidential business information and personal details of our customers and employees. Regular assessments
conducted both internally and by third parties ensure our cybersecurity program aligns with industry standards. In
addition to a dedicated cybersecurity team, we employ a defense-in-depth strategy, utilizing multiple security
measures to protect our information technology system. Collaboration with third-party experts, industry peers and
ongoing training initiatives ensures our cybersecurity strategy remains robust and responsive to evolving threats.
We understand the importance of maintaining a vigilant and adaptive stance in the ever-evolving landscape of
cybersecurity to safeguard our business operations, financial stability, and as a direct result, our overall success.
Key elements of our cybersecurity risk mitigation approach are comprised of:
• A dedicated cybersecurity team;
• Collaboration with a third-party managed detection and response company for 24/7 monitoring and
response;
• Cybersecurity insurance to cover a portion of losses and damages resulting from cyber-attacks or security
breaches;
• An incident response team that is comprised of various departments required for an effective response;
• Conducting periodic drills and exercises, including industry collaborations and participation from the
executive team;
• Continuous information security awareness training and phishing simulation exercises;
• Regular security assessments to address evolving risks and threats;
• Deployment of automation solutions to strengthen detection and response capabilities; and
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• Utilizing services offered by the United States Department of Homeland Security to assist with resiliency
planning.
Third-Party Relationships
The Company utilizes partners and third-party service providers to help deliver safe and reliable water and
wastewater services across its regulated operations. In connection with these relationships, we perform due
diligence, cyber risk scoring, cybersecurity related contractual obligations, and periodic reviews of third-party
control environments to ensure alignment with the Company's risk exposure, business requirements, and risk
tolerances.
We extend our cybersecurity focus to third-party service providers by evaluating and monitoring their cybersecurity
risks. High-risk vendors undergo continuous monitoring, and we maintain contractual agreements that mandate our
third-party providers’ commitment to managing cybersecurity risks, providing incident notifications, and being
subject to cybersecurity audits.
Cybersecurity Governance
The Corporate Governance and Nominating Committee of the Board is tasked with overseeing cybersecurity risk.
Management, including the CTO, provides regular reports to the Board covering aspects such as risks, threats, the
evolving threat landscape, enhancements to the cybersecurity program, and the preparedness of internal responses.
ITEM 2.
PROPERTIES.
Utility Plant
The water utility plant in our systems consists of source of supply, pumping, water treatment, transmission and
distribution, general facilities and all appurtenances, including all connecting pipes.
The wastewater utility plant in our systems consist of pumping, treatment, collection mains, general facilities and
all appurtenances, including all connecting pipes.
We believe our water and wastewater utility plant facilities are sufficient for the operations of the Company.
Middlesex System
The Middlesex System’s principal source of surface supply is the Delaware & Raritan Canal owned by the State of
New Jersey and operated as a water resource by the NJWSA.
Water is withdrawn from the Delaware & Raritan Canal at New Brunswick, New Jersey through our intake and
pumping station, located on state-owned land bordering the canal. Water is transported through two raw water
pipelines for treatment and distribution at our CJO Plant in Edison, New Jersey.
The CJO Plant includes chemical storage and chemical feed equipment, two dual rapid mixing basins, four upflow
clarifiers which are also called superpulsators, three ozone contactors, twelve rapid filters containing gravel, sand
and anthracite for water treatment and a steel washwater tank. The CJO Plant also includes a computerized
Supervisory Control and Data Acquisitions system to monitor and control the CJO Plant and the water supply and
distribution system in the Middlesex System. There is a State of New Jersey certified on-site laboratory capable of
performing bacteriological, chemical, process control and advanced instrumental chemical sampling and analysis.
The firm design capacity of the CJO Plant is 55 mgd (60 mgd maximum capacity). The five electric motor-driven,
vertical turbine pumps presently installed have an aggregate capacity of 85 mgd.
In addition, there is a 15 mgd auxiliary pumping station on-site at the CJO Plant location. It has a dedicated
substation and emergency power supply provided by a diesel-driven generator. It pumps from the 10 million gallon
distribution storage reservoir directly into the distribution system.
The transmission and distribution system is comprised of 746 miles of mains and includes 24,300 feet of 48-inch
concrete transmission main and 23,400 feet of 42-inch ductile iron transmission main connecting the CJO Plant to
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our distribution pipe network and related storage facilities. Also included are a 58,600 foot transmission main and
a 38,800 foot transmission main, augmented with a long-term, non-exclusive agreement with East Brunswick to
transport water through the East Brunswick system to several of our other contract customers.
The Middlesex System’s storage facilities consist of a 10 million gallon reservoir at the CJO Plant, 5 million gallon
and 2 million gallon reservoirs in Edison and a 2 million gallon reservoir at the Park Avenue Plant.
In New Jersey, we own the properties on which the Middlesex System’s 27 wells are located, the properties on
which our storage tanks are located as well as the property where the CJO Plant is located. We own our operations
center located at 1500 Ronson Road, Iselin, New Jersey, consisting of a 27,000 square foot office building, 16,500
square foot maintenance facility and a 1.96 acre equipment and materials storage and staging yard. We lease 29,036
square feet of commercial office space adjacent to the Ronson Road complex. The leased space, which is under
contract through 2028, houses our corporate administrative functions including executive, accounting, customer
service and billing, engineering, human resources, information technology and legal.
Tidewater System
The Tidewater System is comprised of 85 production plants that vary in pumping capacity from 46,000 gallons per
day to 4.4 mgd. Water is transported to our customers through 917 miles of transmission and distribution mains.
Storage facilities include 48 tanks, with an aggregate capacity of 9.9 million gallons. The Delaware office property,
located on an eleven-acre parcel owned by White Marsh, consists of two office buildings totaling approximately
17,000 square feet. In addition, Tidewater maintains a field operations center servicing its largest service territory
in Sussex County, Delaware. The operations center is located on a 2.9 acre parcel owned by White Marsh, and
consists of three buildings totaling approximately 12,000 square feet.
Pinelands Water System
Pinelands Water owns well site and storage properties in Southampton Township, New Jersey. The Pinelands Water
storage facility is a 1.3 million gallon standpipe. Water is transported to our customers through 18 miles of
transmission and distribution mains.
Pinelands Wastewater System
Pinelands Wastewater owns a 12 acre site on which its 0.5 mgd capacity wastewater treatment plant and connecting
pipes are located. Its wastewater collection system is comprised of approximately 24 miles of sewer lines.
Fortescue System
The Fortescue System includes two well sites, which are located in Downe Township, Cumberland County, New
Jersey. Water is transported to its customers through our 4.2 mile distribution system.
USA-PA, USA and White Marsh
Our non-regulated subsidiaries, namely USA-PA, USA and White Marsh, do not own utility plant property.
ITEM 3.
LEGAL PROCEEDINGS.
In September 2021, the NJDEP issued a Notice to Middlesex based on self-reporting by Middlesex that the level
of PFOA in water treated at its Park Avenue Plant in New Jersey exceeded a recently promulgated NJDEP standard
effective in 2021. Neither the NJDEP nor Middlesex characterized this exceedance as an acute health emergency.
However, Middlesex was required to notify its affected customers and the Company complied in due course. Water
currently being delivered to customers is in compliance with all USEPA and NJDEP drinking water standards, including
the newly established water quality standard for PFOA.
In 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical,
water filter replacement and other claimed related costs. These lawsuits are in the early stages of the legal process
22
and their ultimate resolution cannot be predicted at this time. The following summarizes the legal complaints
brought against Middlesex related to this matter:
Vera et al. v. Middlesex Water Company - On October 29, 2021, a complaint was filed in the Superior Court of
New Jersey, Middlesex County seeking restitution, equitable and injunctive relief for the costs of (1) seeking
medical advice; (2) installing home water filters; (3) purchasing bottled water; and (4) court-supervised medical
monitoring/testing going forward. On November 19, 2021, a first amended complaint was filed together with
motions for Class Certification and Injunctive Relief. On December 17, 2021, the parties entered into a
Stipulation where it was agreed that Plaintiff’s motion for injunctive relief would be withdrawn. On February 16,
2022, Middlesex filed a Motion To Dismiss Plaintiffs’ complaint for: (1) failure to include an indispensable party,
3M, whom Middlesex claims is the source of the PFOA in the Company’s wells; and (2) failure to state legally
cognizable claims in support of all of the counts set forth in the complaint. Plaintiff’s motion for Class
Certification and further discovery was postponed pending the outcome of Middlesex’s Motion To Dismiss. On
April 21, 2022, the Judge granted Vera’s Motion for Class Certification and granted in part and denied in part
Middlesex’s Motion to Dismiss. On May 4, 2022, the Company impleaded 3M as a third-party defendant in this
lawsuit. On July 6, 2022, the Company filed a Motion to Remove this case from New Jersey Superior Court to
the United States District Court for the District of New Jersey. Vera challenged Middlesex’s Motion To Remove
at the United States District Court for the District of New Jersey in an attempt to remand the case back to the
Superior Court of New Jersey. On March 21, 2023, the United States District Court for the District of New Jersey
issued an order remanding the case back to the Superior Court of New Jersey. Discovery is underway in this
matter. On August 29, 2023, the Company executed a settlement agreement with 3M to resolve a lawsuit related
to perfluoroalkyl substances in which Middlesex and 3M agreed to enter into joint mediation to resolve this and
another PFOA-related class action lawsuit against Middlesex and 3M seeking restitution for medical, water
replacement and other claimed related costs. A mediation session among the parties was held on November 17,
2023. The Superior Court of New Jersey has set a deadline of February 29, 2024 for the parties to submit a final
settlement agreement with the Court should the parties be able to reach a settlement.
Lonsk et al. v. Middlesex Water Company and 3M Company - On November 9, 2021, a complaint was filed in the
United States District Court, District of New Jersey seeking Class Certification and restitution, equitable and
injunctive relief for the costs of (1) seeking medical advice; (2) installing home water filters; (3) purchasing bottled
water; and (4) all other claimed related costs. On December 23, 2021, the parties agreed to postpone the filing date
of Middlesex’s and 3M’s answers to the complaint to January 14, 2022 at the earliest. This filing date was
subsequently further postponed to March 1, 2022. On March 4, 2022, Middlesex filed a Motion to Dismiss
Plaintiffs’ complaint. On April 15, 2022, Plaintiffs filed an Amended Complaint. On July 7, 2022, this case was
reassigned to a new trial judge at the United States District Court for the District of New Jersey. On October 31,
2022, the trial judge in this matter dismissed Middlesex’s and 3M’s motions to dismiss the Plaintiffs’ complaint
and Middlesex and 3M filed answers to Plaintiffs’ amended complaint on November 21, 2022. On August 29, 2023
the Company executed a settlement agreement with 3M to resolve a lawsuit related to perfluoroalkyl substances in
which Middlesex and 3M agreed to enter into a joint mediation, scheduled for November 2023, to resolve this and
another PFOA-related class action lawsuit against Middlesex and 3M seeking restitution for medical, water
replacement and other claimed related costs. Discovery in this case is currently underway and continues. A
mediation session among the parties was held on November 17, 2023. The Superior Court of New jersey has set a
deadline of March 4, 2024 for the parties to submit a final settlement agreement with the Court should the parties
be able to reach a settlement.
For further discussion of the 3M settlement and the case above, see Item 7 - Management’s Discussion and Analysis
of Financial Condition and Results of Operations, Regulatory Notice of Non-Compliance.
The Company is a defendant in other lawsuits in the normal course of business. We believe the resolution of these
pending claims and legal proceedings will not have a material adverse effect on the Company’s consolidated
financial statements.
23
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
24
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s common stock is traded on the NASDAQ Stock Market, LLC, under the symbol MSEX. As of
December 31, 2023, there were 1,717 holders of record.
The Company has paid dividends on its common stock each year since 1912. The payment of future dividends is
contingent upon the future earnings of the Company, its financial condition and other factors deemed relevant by
the Board of Directors at its discretion.
If four or more quarterly dividends are in arrears, the preferred shareholders, as a class, are entitled to elect two
members to the Board of Directors in addition to Directors elected by holders of the common stock. In the event
dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common stock of the
Company.
The Company issues shares of its common stock in connection with its Middlesex Water Company Investment Plan
(the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common stock.
Since the inception of the Investment Plan and its predecessor plan, the Company has periodically replenished the
level of authorized shares in the plans. Currently, 0.7 million shares remain registered with the SEC and available
for issuance to participants under the Investment Plan. The Company raised approximately $12.1 million through
the issuance of shares under the Investment Plan during 2023.
On March 1, 2023, the Company began offering shares of its common stock for purchase at a 3% discount to
participants in the Investment Plan. The discount offering ended December 1, 2023. The discount applied to all
common stock purchases made under the Investment Plan during that time period, whether by optional cash
payment or by dividend reinvestment.
The Company maintains a long-term incentive compensation plan for certain management employees where awards
are made in the form of restricted common stock. Shares issued in connection with this plan are subject to forfeiture
by the employee in the event of termination of employment for any reason within five years of the award, other
than as a result of retirement at normal retirement age, death, disability or change in control. The maximum number
of shares authorized for award under this plan is 0.3 million shares, of which approximately 75% remain available
for future issuance.
The Company maintains a stock plan for its independent members of the Board of Directors as a component of their
compensation. In 2023, shares of the Company’s common stock valued at $0.4 million were granted and issued to
the Independent Directors. The maximum number of shares authorized for grant under this plan is 0.1 million.
Approximately 42% of the authorized shares remain available for future issuance.
Set forth below is a graph comparing the yearly change in the cumulative total return (which includes reinvestment
of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-owned water
utilities, and the S&P 500 Stock Index for the period of five years commencing December 31, 2018. The S&P 500
Stock Index measures the stock performance of 500 large companies listed on stock exchanges in the United States.
25
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Middlesex Water Company, the S&P 500 Stock Index and a Peer Group*
$250
$225
$200
$175
$150
$125
$100
2018
2019
2020
2021
2022
2023
Middlesex Water Company
S&P 500
Peer Group
* Peer group includes American States Water Company, Artesian Resources Corp., California Water
Service Group, Global Water Resources Inc, SJW Corp., York Water Company and Middlesex.
Middlesex Water Company
S&P 500 Stock Index
Peer Group
ITEM 6.
[RESERVED]
2020
2019
2021
2018
100.00 121.14 140.27 235.68 156.10 132.41
100.00 131.49 155.68 200.37 164.08 207.21
100.00 123.86 126.00 164.71 148.74 127.88
2022
2023
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Company’s consolidated financial statements and
related notes.
Operations
Middlesex Water Company (Middlesex or the Company) has operated as a water utility in New Jersey since 1897
and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc. (Tidewater), since 1992. We are
in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and
fire protection purposes. We operate water and wastewater systems under contract for governmental entities and
private entities primarily in New Jersey and Delaware and also provide regulated wastewater services in New
Jersey. We are regulated by state public utility commissions as to rates charged to customers for water and
wastewater services, as to the quality of water and wastewater services we provide and as to certain other matters
in the states in which our regulated subsidiaries operate. Only our Utility Service Affiliates, Inc. (USA), Utility
Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White Marsh)
subsidiaries are not regulated public utilities as related to rates and services quality. All municipal or commercial
entities whose utility operations are managed by these entities however, are subject to environmental regulation at
the federal and state levels.
Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately
61,000 retail customers, primarily in central New Jersey. The Middlesex System also provides water sales under
contract to municipalities in central New Jersey with a total population of over 0.2 million. Our Fortescue System
provides water services in Downe Township, New Jersey. Our other New Jersey subsidiaries, Pinelands Water
Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands),
provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.
Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC (Southern Shores), provide water
services to approximately 59,000 retail customers in New Castle, Kent and Sussex Counties, Delaware. Tidewater’s
subsidiary, White Marsh, services approximately 4,300 customers in Kent and Sussex Counties through various
operations and maintenance contracts.
USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under
a 10-year operations and maintenance contract expiring in 2028. In addition to performing day-to day operations,
USA-PA is also responsible for emergency response and management of capital projects funded by Perth Amboy.
USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system
under a 10-year operations and maintenance contract expiring in 2032. USA also operates the Borough of Highland
Park, New Jersey’s (Highland Park) water and wastewater systems under a 10-year operations and maintenance
contract expiring in 2030. In addition to performing day-to-day service operations, USA is responsible for
emergency response and management of capital projects funded by Avalon and Highland Park. Under a marketing
agreement with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New
Jersey and Delaware water and wastewater related services and home maintenance programs. HomeServe is a
leading national provider of such home maintenance service programs. USA receives a service fee for the billing,
cash collection and other administrative matters associated with HomeServe’s service contracts. USA also provides
unregulated water and wastewater services under contract with several New Jersey municipalities.
Middlesex President and Chief Executive Officer Retirement Announcement and Replacement
In May 2023, President and Chief Executive Officer, Dennis W. Doll announced a plan to retire upon turning age
65. On January 23, 2024, the Company named Nadine Leslie as its new President and Chief Executive Officer
effective March 1, 2024. Ms. Leslie will also be appointed to the Board of Directors effective March 1, 2024. Mr.
27
Doll will remain Chairman of the Company’s Board of Directors through the expiration of his current term as a
Director as of the May 21, 2024 Annual Meeting of Shareholders.
Regulatory Notice of Non-Compliance
In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-
Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid
(PFOA) in water treated at its Park Avenue Wellfield Treatment Plant (Park Avenue Plant) in South Plainfield,
New Jersey exceeded a standard promulgated in a NJDEP regulation that became effective in 2021. Middlesex was
required by the regulation to notify its affected customers and complied within the required Notice period in
November 2021.
The Notice further required the Company to take any action necessary to comply with the new standard by
September 7, 2022. Consequently, in November 2021, the Company implemented an interim solution to meet the
Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status and
obtaining alternate sources of supply. In June 2022, the Company accelerated the in-service date for a portion of
the enhanced treatment project based on engineering analysis that allowed a restart of the Park Avenue Wellfield
Treatment Plant to ensure continued compliance with all state and federal drinking water standards.
In September 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP, which
required the Company to take whatever actions necessary to achieve and maintain compliance with applicable
regulations. As prescribed in the ACO, the Company was to issue periodic public notifications until the ACO was
closed.
In June 2023, the Company completed the permanent construction of the entire Park Avenue Plant treatment
upgrades and placed the upgrades into operation in full compliance with the NJDEP PFOA standards. In October
2023, the Company received confirmation from the NJDEP that it has complied with all requirements of the ACO
and consequently, the ACO has been closed.
The Company had previously initiated a lawsuit against 3M Company (3M), in connection with the Company’s
claim that 3M introduced perfluoroalkyl substances (commonly known as “PFAS”), which include PFOA, into the
Company’s water supply at its Park Avenue Plant.
On August 29, 2023, Middlesex and 3M executed a settlement agreement (the Settlement Agreement) to resolve
the lawsuit. The Settlement Agreement provides that:
• 3M will pay $93.2 million in two installments, one payment of $23.3 million received in December 2023
and one payment of $69.9 million in July 2024. Middlesex is obligated to pay 30% of the proceeds received
plus reimbursable out-of-pocket legal expenses to its lawyers as legal fees, or $29.5 million in total;
• Proceeds received from the Settlement Agreement are being used to mitigate the impact of the increase in
Middlesex’s customer rates approved by the NJBPU and to be implemented March 1, 2024 (for further
discussion of Middlesex’s base rate increase, see Rates, Middlesex below);
• Middlesex, by nature of its status as a U.S. water purveyor impacted by PFAS, was automatically included
in a Multi-District Litigation Settlement before the United States District Court for the District of South
Carolina in which 3M and other companies (Non-3M Companies) are participants. Middlesex agreed as part
of the Settlement Agreement to remain a member of the plaintiff class in order to be eligible to obtain future
additional compensation from 3M and the Non-3M Companies for any future remediation which may be
required of its water treatment facilities; and
• Middlesex and 3M agreed to enter into a joint mediation, which occurred in November 2023, to resolve two
PFOA-related class action lawsuits against Middlesex seeking restitution for medical, water replacement
and other claimed related costs. Both Middlesex and 3M are defendants in these lawsuits. These lawsuits
remain in the legal process and their ultimate resolution is not known at this time.
28
Capital Construction Program
The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and
replace utility infrastructure as well as enhance the integrity and reliability of assets to better serve the current and
future generations of water and wastewater customers. The Company plans to invest approximately $75 million in
2024 in connection with this plan for projects that include, but are not limited to:
• Replacement of approximately 17,200 linear feet of cast iron 6" water main in the Port Reading and Carteret
sections of Woodbridge, New Jersey;
• Replacement of control room and electrical distribution equipment at our The Carl J. Olsen Surface Water
Treatment Plant (CJO Plant);
• Supply and storage improvements and installation of emergency generators at several of our Tidewater
facilities;
• Construction of residual removal equipment and chemical feed improvements, pumps and a surge mitigation
tank as well as other improvements and upgrades at our Park Avenue Plant;
• Upgrades and improvements to our Enterprise Resource Planning System; and
• Various water main replacements and improvements.
Strategy for Growth
Our strategy for profitable growth is focused on the following key areas:
•
Invest in projects, products and services that complement our core water and wastewater competencies;
• Timely and adequate recovery of infrastructure investments and other costs to maintain service quality;
• Prudent acquisitions of investor and municipally-owned water and wastewater utilities; and
• Operation of municipal and industrial water and wastewater systems on a contract basis which meet our
risk profile.
Rates
Middlesex - In February 2024, Middlesex’s petition to the NJBPU, filed in May 2023, seeking permission to
increase its base water rates was concluded, based on a negotiated settlement that is expected to increase annual
operating revenues by $15.4 million effective March 1, 2024. The approved tariff rates were designed to recover
increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on
common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and
replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of
service. Net proceeds from the 3M Settlement Agreement were used to recover costs for the construction of the
Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. The rate case settlement
will result in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of
Construction in the March 31, 2024 balance sheet. The Company will also record in the first quarter of 2024 the
recovery of $0.7 million and $2.4 million of prior year depreciation and carrying costs, respectively, as well as the
recovery of $1.4 million of prior year costs which were associated with the interim solution to comply with the
Notice, all of which were approved in the rate case settlement. For further information on the 3M Settlement
Agreement, see Regulatory Notice of Non-Compliance above.
In January 2024, the NJBPU approved Middlesex’s petition for the proposed cost recovery of its Lead Service Line
Replacement (LSLR) Plan and cost recovery of project costs associated with replacing Middlesex customer-owned
lead service lines. Replacement of Middlesex and Middlesex customer-owned lead service lines is required by the
New Jersey LSLR Law. Under this legislation, the costs associated with replacing customer-owned lead service
lines are recoverable through future customer surcharges. Cost recovery for replacing Company-owned lead service
lines are recoverable through traditional base rate case filings. The current estimates for replacement of Middlesex
and Middlesex customer-owned lead service lines are approximately $46 million to $77 million over a nine-year
period.
29
In October 2023, the NJBPU approved Middlesex’s petition for a Distribution System Improvement Charge (DSIC)
Foundation Filing, which is a prerequisite to implementing a DSIC rate that allows water utilities to recover
investments in, and generate a return on, qualifying capital improvements to their water distribution system made
between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total
revenues established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually,
beginning in April 2024, the Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible
investments made during the period. DSIC rates remain in effect until Middlesex’s next base rate case increase
subsequent to the March 1, 2024 increase. Under the terms of the Foundational filing, the Company is required to
file a base rate petition before November 2026.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water
Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million for the purchase of treated water
from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased purchased
water costs between base rate case filings. The increase, effective October 1, 2022, was on an interim basis and
subject to refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023.
In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero
in October 2023.
In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7
million. The approved tariff rates were designed to recover increased operating costs, as well as a return on invested
capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented
in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective
January 1, 2023. As part of the negotiated settlement, the PWAC was reset to zero.
Tidewater - In December 2023, the DEPSC approved Tidewater’s application to implement a new DSIC. Effective
January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate revenue of
approximately $1.3 million annually. A Delaware DISC is subject to a semi-annual reset with an overall maximum
rate of 7.5%.
In October 2023, the DEPSC issued an Order that made a temporary base rate reduction permanent. The initial
DEPSC order required Tidewater to reduce its base rates charged to general metered and private fire customers by
6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered as a result of
Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1
million in 2023.
In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return
exceeded the rate of return authorized by the DEPSC. Consequently, Tidewater reset its DSIC rate to zero effective
April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for
DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Pinelands - In April 2023, Pinelands Water and Pinelands Wastewater concluded their base rate case matters when
the NJBPU approved a combined $1.0 million increase in annual base rates, effective April 15, 2023. The requests
were necessitated by capital infrastructure investments the companies have made as well as increased operations
and maintenance costs.
Southern Shores - Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for
water service to a 2,200 unit condominium community we serve in Sussex County, Delaware. Under the agreement,
current rates were to remain in effect until December 31, 2024, unless there are unanticipated capital expenditures
or regulatory related changes in operating expenses exceeding certain thresholds during this time period. In 2022,
capital expenditures did exceed the established threshold and rates were increased by 5.39% effective January 1,
2023. Beginning in 2025 and thereafter, inflation-based rate increases cannot exceed the lesser of the regional
30
Consumer Price Index or 3%. Inflation based increases are in addition to the threshold rate increases. The
agreement expires on December 31, 2029.
Outlook
Our ability to increase operating income and net income is based significantly on four factors: weather, adequate
and timely rate relief, effective cost management and customer growth (which are evident in comparison
discussions in the Results of Operations section below). Weather patterns which can result in lower customer
demand for water may occur in 2024. As operating costs are anticipated to increase in 2024 in a variety of
categories, we continue to implement plans to further streamline operations and further reduce, and mitigate
increases in, operating costs. Changes in customer water usage habits, as well as increases in capital expenditures
and operating costs, are significant factors in determining the timing and extent of rate increase requests.
Our investments in system infrastructure continue to grow significantly and our operating costs are anticipated to
increase in 2024 and 2025 in a variety of categories. These factors, among others, may require base rate increase
requests filings by Tidewater, Pinelands Water and Pinelands Wastewater later in 2024.
Overall, organic residential customer growth continues in our Tidewater system (approximately 4% in 2023).
However, current and evolving economic market conditions may challenge that growth.
Builders and developers in Tidewater’s service areas are experiencing lower home starts and longer home sales
closing cycles due to supply chain issues, which may be further affected by inflationary trends on housing
construction materials and mortgage interest rates.
The Company has projected to spend approximately $226 million for the 2024-2026 capital investment program,
including approximately $15 million for replacement of a thirty inch main in our Middlesex System, $9 million for
LSLR compliance in the Middlesex System, $34 million on the RENEW Program, which is our ongoing initiative
to replace water mains in the Middlesex System, $6 million for evaluation of PFAS treatment at our CJO Plant and
$7 million for control room and electrical distribution equipment at our CJO Plant.
Operating Results by Segment
The Company has two operating segments, Regulated and Non-Regulated. Our Regulated segment contributed
approximately 93%, 93% and 91% of total revenues for the years ended December 31, 2023, 2022 and 2021,
respectively, and approximately 92%, 93% and 93% of net income for the years ended December 31, 2023, 2022
and 2021, respectively . The discussion of the Company’s results of operations is on a consolidated basis and
includes significant factors by subsidiary. The segments in the tables included below are comprised of the following
companies: Regulated- Middlesex, Tidewater, Pinelands and Southern Shores; Non-Regulated- USA, USA-PA,
and White Marsh.
31
Results of Operations for 2023 as Compared to 2022
(In Millions)
Years Ended December 31,
2023
Non-
Regulated
2022
Non-
Regulated
Total
Regulated
Regulated
$150.6
$154.0
$162.4
$166.3
79.1
70.8
83.2
74.8
23.0
22.8
25.2
24.9
18.2
18.5
18.7 18.0
- - - 5.2
5.2
35.8 3.4 39.2 44.2 3.1 47.3
$11.8
8.3
0.2
0.2
$12.3
8.4
0.3
0.2
-
Total
6.3
13.1
(0.1)
$29.1
0.2
-
1.1
$2.5
6.5
13.1
7.4
9.4
1.0 2.0
$40.2
$31.6
0.3
-
1.2
$2.2
7.7
9.4
3.2
$42.4
Revenues
Operations and maintenance expenses
Depreciation expense
Other taxes
Gain on Sale of Subsidiary
Operating income
Other income (expense), net
Interest expense
Income taxes
Net income
Operating Revenues
Operating revenues for the year ended December 31, 2023 increased $3.8 million from the same period in 2022 due
to the following factors:
• Middlesex System revenues increased by $4.2 million due to the implementation of the final phase of the
2021 base rate case increase on January 1, 2023 and the PWAC rate increase offset by lower weather-driven
demand across all customer classes (for further discussion of Middlesex’s 2021 base and PWAC rate
increases, see Rates, Middlesex above);
• Tidewater System revenues decreased by $0.9 million due to a DEPSC ordered rate reduction in September
2022, lower customer connection fees and lower weather-driven customer demand partially offset by an
increase in customers (for further information on the Tidewater rate reduction, see Rates, Tidewater above);
• Pinelands System revenues increased $0.2 million due to the implementation of a base rate increase effective
April 15, 2023 (for further discussion of Pinelands 2023 base rate increase, see Rates, Pinelands above) ;
and
• Non-regulated revenues increased $0.3 million, primarily due to higher supplemental contract services.
Operation and Maintenance Expense
Operation and maintenance expenses for the year ended December 31, 2023 increased $4.0 million from the same
period in 2022 due to the following factors:
• Variable production costs increased $2.9 million primarily due to weather-driven changes in water quality
and higher chemical prices;
• Outside service costs rose by $0.9 million primarily due to production instrumentation calibration
activities;
• Labor cost increased $0.7 million due to wage increases;
• Bad debt expense increased $0.4 million due to higher anticipated customer receivable write-offs;
• Non-regulated expenses increased $0.2 million due to additional billable supplemental service expenses;
• Lower weather-related main break activity in our Middlesex System during the winter months resulted
in $0.8 million of decreased non-labor costs; and
• All other operation and maintenance expense categories decreased $0.3 million.
32
Depreciation
Depreciation expense for the year ended December 31, 2023 increased $2.2 million from the same period in 2022
due to a higher level of utility plant in service.
Other Taxes
Other taxes for the year ended December 31, 2023 increased $0.5 million from the same period in 2022 primarily
due to higher revenue related taxes on increased revenues in our Middlesex system.
Gain on Sale of Subsidiary
Middlesex recognized a $5.2 million gain on the sale of its regulated Delaware wastewater subsidiary in January
2022.
Other Income, net
Other Income, net for the year ended December 31, 2023 decreased $1.2 million from the same period in 2022
primarily due to lower actuarially-determined retirement benefit plans non-service benefit.
Interest Charges
Interest charges for the year ended December 31, 2023 increased $3.8 million from the same period in 2022 due to
higher average debt outstanding and higher average interest rates in 2023 as compared to 2022.
Income Taxes
Income taxes for the year ended December 31, 2023 decreased by $2.2 million from the same period in 2022,
primarily due to greater income tax benefits associated with increased repair expenditures on tangible property in the
Middlesex System and lower pretax income due to gain on the sale of a subsidiary in 2022.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2023 decreased $10.9 million as compared with the same period in
2022. Basic earnings per share were $1.77 and $2.40 for the years ended December 31, 2023 and 2022, respectively.
Diluted earnings per share were $1.76 and $2.39 for the years ended December 31, 2023 and 2022, respectively.
Results of Operations for 2022 as Compared to 2021
Years Ended December 31,
2022
Non-
Regulated
2021
Non-
Regulated
Revenues
Operations and maintenance expenses
Depreciation expense
Other taxes
Gain on Sale of Subsidiary
Operating income
Total
Regulated
$150.6
70.8
22.8
18.0
5.2
44.2 3.1 47.3 29.6 3.6 33.2
Regulated
$130.8
$162.4
65.4
79.1
23.0
20.9
18.2 14.9
$143.1
73.7
21.1
15.1
$11.8
8.3
0.2
0.2
$12.3
8.3
0.2
0.2
- - -
-
Total
5.2
Other income (expense), net
Interest expense
Income taxes
Net income
7.4
0.3
9.4 -
1.2
2.0
$2.2
$40.2
33
7.7
9.4
3.2 (6.7)
$33.8
$42.4
5.6
0.3
8.1 -
5.9
8.1
1.2 (5.5)
$36.5
$2.7
Operating Revenues
Operating revenues for the year ended December 31, 2022 increased $19.3 million from the same period in 2021
due to the following factors:
• Middlesex System revenues increased by $21.6 million due to the approved 2022 base rate and PWAC rate
increases and higher weather driven demand across all customer classes (for further discussion of
Middlesex’s 2021 base rate and PWAC rate increases see Rates, Middlesex above);
• Tidewater System revenues increased $0.9 million due to additional customers and a one-time customer
credit issued in 2021 partially offset by a DEPSC ordered 2022 rate reduction (for further information on
the one-time credit and rate reduction, see Rates, Tidewater above);
• The sale of our regulated Delaware wastewater subsidiary in January 2022 reduced revenues by $2.7
million;
• Non-regulated revenues decreased $0.4 million, primarily due to lower supplemental contract services; and
• All other revenue categories decreased $0.1 million.
Operation and Maintenance Expense
Operation and maintenance expenses for the year ended December 31, 2022 increased $5.4 million from the same
period in 2021 due to the following factors:
• Labor cost increased $1.5 million due to wage increases;
• Variable production costs increased $1.2 million primarily due to increased production, weather-driven
changes in water quality and higher chemical prices;
• Costs for employee benefits increased $1.0 million due to market fluctuations in the cash surrender value of
life insurance policies and higher health insurance premiums;
• Higher weather-related main break activity in our Middlesex system during the winter months resulted in $0.6
million of additional non-labor costs;
• Equipment repairs and maintenance costs increased by $0.5 million;
• Transportation expenses increased $0.3 million due to higher fuel prices;
• Costs associated with the NJDEP PFOA customer notification process resulted in $0.2 million of
additional expense (for further information on this matter, see Regulatory Notice of Non-Compliance
above); and
• All other operation and maintenance expense categories increased $0.1 million.
Depreciation
Depreciation expense for the year ended December 31, 2022 increased $1.9 million from the same period in 2021
due to a higher level of utility plant in service.
Other Taxes
Other taxes for the year ended December 31, 2022 increased $3.0 million from the same period in 2021 primarily
due to higher revenue related taxes on increased revenues in our Middlesex system.
Gain on Sale of Subsidiary
Middlesex recognized a $5.2 million gain on the sale of its regulated Delaware wastewater subsidiary in January
2022.
Other Income, net
Other Income, net for the year ended December 31, 2022 increased $1.8 million from the same period in 2021
primarily due to higher actuarially-determined retirement benefit plans non-service benefit partially offset by lower
AFUDC resulting from a reduced level of capital projects under construction.
34
Interest Charges
Interest charges for the year ended December 31, 2022 increased $1.3 million from the same period in 2021 due to
higher average debt outstanding and higher average interest rates in 2022 as compared to 2021 .
Income Taxes
Income taxes for the year ended December 31, 2022 increased by $8.7 million from the same period in 2021,
primarily due to income taxes on the gain on the sale of a subsidiary and the expiration of income tax benefits
associated with the adoption of Internal Revenue Service tangible property regulations as Middlesex was required
by the NJBPU to account for the benefit of adopting these regulations over 48 months beginning in 2018. Partially
offsetting these increases were greater income tax benefits associated with increased repair expenditures on tangible
property in the Middlesex system.
Net Income and Earnings Per Share
Net income for the year ended December 31, 2022 increased $5.9 million as compared with the same period in
2021. Basic earnings per share were $2.40 and $2.08 for the years ended December 31, 2022 and 2021, respectively.
Diluted earnings per share were $2.39 and $2.07 for the years ended December 31, 2022 and 2021, respectively
(for further discussion of Middlesex’s 2022 rate increase, see Rates, Middlesex above).
Liquidity and Capital Resources
Cash Flows from Operating Activities
Cash flows from operating activities are largely influenced by four factors: weather, adequate and timely rate
increases, effective cost management and customer growth. The effect of those factors on net income is discussed
in the Results of Operations section above.
For the year ended December 31, 2023, cash flows from operating activities decreased $8.6 million to $52.8 million.
The decrease in cash flows from operating activities primarily resulted from lower net income and higher interest
payments.
Increases in certain operating costs impact our liquidity and capital resources. We continually monitor the need for
timely rate filing to minimize the lag between the time we experience increased operating costs and capital
expenditures and the time we receive appropriate rate relief. There can be no assurances however that our regulated
subsidiaries’ respective utility commissions will approve base water and/or wastewater rate increase requests in
whole or in part or when the decisions will be rendered.
Cash Flows from Investing Activities
For the year ended December 31, 2023, cash flows used in investing activities increased $2.0 million to $90.2
million, which was attributable to cash received from the sale of Middlesex’s regulated wastewater subsidiary in
January 2022 partially offset by lower utility plant expenditures.
For further discussion on the Company’s future capital expenditures and expected funding sources, see “Capital
Expenditures and Commitments” below.
Cash Flows from Financing Activities
For the year ended December 31, 2023, cash flows provided by financing activities increased $8.8 million to $36.0
million. The increase in cash flows provided by financing activities is due to an increase in net borrowings and
higher proceeds from the issuance of common stock under the Investment Plan partially offset by increased common
stock dividend payments.
For further discussion on the Company’s short-term and long-term debt, see “Sources of Liquidity” below.
35
Capital Expenditures and Commitments
To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds
from sales of common stock under the Investment Plan and, when market conditions are favorable, proceeds from
sales to the public of our common stock.
The table below summarizes our estimated capital expenditures for the years 2024-2026.
(Millions)
Distribution/Network System
Production System
Information Technology (IT) Systems
Other
Total Estimated Capital Expenditures
2024
$
2025
$
2026
$
2024-2026
$
43
23
3
6
75
55
18
2
6
81
50
11
3
6
70
148
52
8
18
226
$
$
$
$
Our estimated capital expenditures for the items listed above are primarily comprised of the following:
• Distribution/Network System - Includes projects associated with replacement, installation and relocation of
water mains and service lines and wastewater collection systems, construction of water storage tanks,
installation and replacement of hydrants, meters and meter pits and the RENEW Program. RENEW is our
ongoing initiative to replace water mains in the Middlesex System. In connection with RENEW, we expect
to spend approximately $11 million in each of 2024 and 2025, and $12 million in 2026.
• Production System - Includes projects associated with our treatment plants, including approximately $2.0
million of expenditures for PFAS treatment upgrades and $6.8 million for replacement of existing motor
control center and electrical distribution equipment in our Middlesex system, and $3.6 million of various
treatment projects in our Tidewater system in 2024.
Information Technology (IT) Systems - Includes further upgrade of our enterprise resource planning system
and hardware and software purchases for other IT systems.
•
• Other - Includes purchase of transportation equipment, tools, furniture, laboratory equipment, security
systems and other general infrastructure needs including improvements to field and inventory management
facilities in Iselin, New Jersey.
The actual amount and timing of capital expenditures is dependent on the need for replacement of existing
infrastructure, customer growth, residential new home construction and sales, project scheduling and continued
refinement of project scope and costs.
To pay for our capital program in 2024, we estimate we will utilize some or all of the following:
Internally generated funds;
•
• Short-term borrowings, as needed, through $140 million of available lines of credit with several financial
institutions. As of December 31, 2023, $42.8 million was outstanding under these lines of credit (see
discussion under “Sources of Liquidity-Short-term Debt” below);
• Proceeds from the Delaware State Revolving Fund (SRF) Program. SRF programs provide low cost
financing for projects meeting certain water quality and system improvement benchmarks (see discussion
under “Sources of Liquidity-Long-term Debt” below);
• Proceeds from other long-term borrowings (see discussion under “Sources of Liquidity-Long-term Debt”
below); and
• Proceeds from common stock sales through the Middlesex Water Company Investment Plan (the Investment
Plan) (see discussion under “Sources of Liquidity-Common Stock” below).
36
Sources of Liquidity
Short-term Debt - In January 2022, the Company increased available lines of credit from $110 million to $140
million. The outstanding borrowings under the credit lines at December 31, 2023 were $42.8 million, at a weighted
average interest rate of 6.50%.
The weighted average daily amounts of borrowings outstanding under the credit lines and the weighted average interest
rates on those amounts were $35.7 million and $28.9 million at 6.13% and 3.34 % for the years ended December 31,
2023 and 2022, respectively.
Long-term Debt - Subject to regulatory approval, the Company periodically issues long-term debt to fund
investments in utility plant. To the extent possible and fiscally prudent, the Company finances qualifying capital
projects under SRF loan programs in New Jersey and Delaware. These government programs provide financing at
interest rates typically below rates available in the broader financial markets. A portion of the borrowings under the
New Jersey SRF is interest-free.
Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey
Infrastructure Bank (NJIB) and submit requisitions for cost reimbursements over the life of the construction period.
When construction on the qualifying project is substantially complete, NJIB will coordinate the conversion of the
construction loan into a long-term securitized loan with a portion of the principal balance having a stated interest
rate of zero percent (0%) and a portion of the principal balance at a market interest rate at the time of closing using
the credit rating of the State of New Jersey. As a result of revised project funding priority ranking for the NJIB
SRF Program, the Company has no current projects in the NJIB SRF program. However, it is seeking to have
Middlesex’s LSLR Project added to the qualified list in order to borrow under the NJIB SRF program.
Under the Delaware SRF program, borrowers typically 1) enter into a long-term note agreement for a term not to
exceed twenty years, 2) submit requisitions for cost reimbursements during the construction period for up to two
years after the agreement is executed and 3) as the proceeds are received from the requisitions, Tidewater records
a corresponding debt obligation amount.
In April 2023, Middlesex received approval from the NJBPU to borrow up to $300.0 million from the New Jersey
SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions
as needed through December 31, 2025. The Company may issue debt securities in a series of one or more transaction
offerings to help fund Middlesex’s multi-year capital construction program.
In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs)
with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce the Company’s outstanding
balances under its bank lines of credit.
In May 2022, Middlesex repaid its two outstanding NJIB construction loans by issuing FMBs to the NJIB under
two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2
million) and Series 2022B ($36.0 million). The interest rate on the Series 2022A bond is zero and the interest rate
on the Series 2022B bond ranges between 2.7% and 3.0%. The final maturity date for both FMBs is August 1,
2056, with scheduled debt service payments over the life of these loans.
In November 2021, Middlesex closed on a $19.5 million, 2.79% private placement of FMBs with a 2041 maturity
date designated as Series 2021A. Proceeds were used to reduce the Company’s outstanding balances under its lines
of credit.
In June 2021, Middlesex received approval from the NJBPU to redeem up to $45.5 million of outstanding FMBs,
specifically Series RR ($22.5 million) and Series SS ($23.0 million), and issue replacement FMBs at an overall
lower cost of debt. In November 2021, Middlesex closed on a $45.5 million, 2.90% private placement of FMBs,
designated as Series 2021B with a 2051 maturity date to effectuate the redemptions.
37
In May 2023, Tidewater closed on a $20.0 million loan from CoBank, ACB (CoBank) with an interest rate of 5.71%
and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the loan were used to pay off
Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.
In April 2023, Tidewater closed on three DEPSC-approved Delaware SRF loans totaling $10.2 million, all at
interest rates of 2.0% with maturity dates in 2043 and 2044. These loans are for the construction, relocation,
improvement, and/or interconnection of transmission mains. Tidewater has drawn a total of $6.1 million through
December 31, 2023 and expects that the requisitions will continue through mid-2025.
In December 2021, Tidewater closed on a DEPSC-approved $5.0 million Delaware SRF loan at an interest rate of
2.0%. The loan was for construction of a one million gallon elevated storage tank. Through December 31, 2023,
Tidewater has drawn a total of $4.8 million and expects that the requisitions will continue through the first quarter
of 2024. The final maturity date on the loan is 2044.
In September 2021, Tidewater completed its $20 million secured borrowing with CoBank, at an interest rate of
3.94% and a 2046 maturity date. Proceeds from the loan were used to pay off its outstanding balances under its
bank lines of credit.
In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank
amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for
each loan. Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital
projects.
Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service
and capital ratio covenants. The Company is in compliance with all of its mortgage covenants
Common Stock - The Company issues shares of its common stock in connection with the Investment Plan, a direct
share purchase and dividend reinvestment plan for the Company’s common stock. The Company raised
approximately $12.1 million through the issuance of shares under the Investment Plan during 2023. In May 2023,
Middlesex received approval from the NJBPU to increase the number of authorized shares under the Investment
Plan by 0.7 million shares. Currently, 0.7 million shares remain registered with the United States Securities and
Exchange Commission and available for issuance to participants under the Investment Plan. On March 1, 2023,
the Company began offering shares of its common stock for purchase at a 3% discount to participants in the
Investment Plan. The discount offering ended December 1, 2023. The discount applied to all common stock
purchases made under the Investment Plan during that time period, whether by optional cash payment or by
dividend reinvestment.
In order to fully fund the ongoing capital investment program and maintain a balanced capital structure required for
a regulated water utility, Middlesex may offer for sale additional shares of its common stock. The amount, the
timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the
level of additional debt financing and financial market conditions. Common stock offerings will occur as needed
to maintain a balanced capital structure as we continue on a parallel path with future debt offerings.
In April 2023, Middlesex received approval from the NJBPU to issue and sell up to 1.0 million shares of its common
stock, without par value, through December 31, 2025. Sales of additional shares of common stock are part of the
Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program. As
described above in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing plan.
Contractual Obligations
In the course of normal business activities, the Company enters into a variety of contractual obligations and
commercial commitments. Some result in direct obligations on the Company’s balance sheet while others are
commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated
financial statements.
38
The table below presents our known contractual obligations for the periods specified as of December 31, 2023.
Payment Due by Period
(Millions of Dollars)
Less than 1
Year
8
$
43
12
7
1
71
$
2-3 Years
$
15
-
4-5 Years
$
14
-
24
11
2
52
$
23
7
2
46
$
More than
5 Years
328
$
-
201
72
1
602
$
365
43
260
97
6
771
Total
$
$
Long-term Debt
Note Payable
Interest on Long-Term Debt
Purchased Water Contracts
Commercial Office Leases
TOTAL
The table above does not reflect any anticipated cash payments for retirement benefit plan obligations. The effect
on the timing and amount of these payments resulting from potential changes in actuarial assumptions and returns
on plan assets cannot be estimated. In 2023, the Company contributed $1.3 million to its retirement benefit plans
and expects to contribute approximately $1.8 million in 2024.
We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements, or for other contractually narrow or
limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.
Critical Accounting Policies and Estimates
The application of accounting policies and standards often requires the use of estimates, assumptions and
judgments. The Company regularly evaluates these estimates, assumptions and judgments, including those related
to the calculation of pension and other retirement benefits, unbilled revenues, and the recoverability of certain
assets, including regulatory assets. The Company bases its estimates, assumptions and judgments on historical
experience and current operating environment. Changes in any of the variables that are used for the Company’s
estimates, assumptions and judgments may lead to significantly different financial statement results.
Our critical accounting policies and estimates are set forth below.
Regulatory Accounting
We maintain our books and records in accordance with accounting principles generally accepted in the United
States of America. Middlesex and certain of its subsidiaries are subject to regulation in the states in which they
operate. Those companies are required to maintain their accounts in accordance with regulatory authorities’ rules
and guidelines, which may differ from other authoritative accounting pronouncements. In those instances, the
Company follows the guidance in the Financial Accounting Standards Board Accounting Standards Codification
Topic 980 Regulated Operations (Regulatory Accounting).
In accordance with Regulatory Accounting, costs and obligations are deferred if it is probable that these items will
be recognized for rate-making purposes in future rates. Accordingly, we have recorded costs and obligations, which
will be amortized over various future periods. Any change in the assessment of the probability of rate-making
treatment would require us to change the accounting treatment of the deferred item. We have no reason to believe
any of the deferred items that are recorded will be treated differently by the regulators in the future.
39
Revenues
Revenues from our regulated customers, which include amounts billed quarterly to residential customers and
monthly to industrial, commercial, fire-protection and wholesale customers, also include unbilled amounts based
upon estimated usage from the date of the last meter reading to the end of the accounting period. While actual usage
for customers may differ from the estimate, we believe the overall total estimate of consumption and revenue for
the fiscal period will not differ materially from actual consumption.
Retirement Benefit Plans
We maintain a noncontributory defined benefit pension plan (Pension Plan) which covers all currently active
employees hired prior to April 1, 2007. In addition, the Company maintains an unfunded supplemental plan for
certain executive officers.
The Company has a retirement benefit plan other than pensions (Other Benefits Plan) for substantially all of its
retired employees. Employees hired after March 31, 2007 are not eligible to participate in the Other Benefits Plan.
Coverage includes healthcare and life insurance.
The costs for providing retirement benefits are dependent upon numerous factors, including actual plan experience
and assumptions of future experience. Future retirement benefit plan obligations and expense will depend on future
investment performance, changes in future discount rates and various other demographic factors related to the
population participating in the Company’s retirement benefit plans, all of which can change significantly in future
years.
The primary assumptions used for determining future retirement benefit plans’ obligations and costs, which are
reviewed and revised as needed each year, are as follows:
• Discount Rate - calculated based on market rates for long-term, high-quality corporate bonds specific to the
expected duration of our Pension Plan and Other Benefits Plan’s liabilities;
• Compensation Increase - based on management projected future employee compensation increases;
• Long-Term Rate of Return - determined based on expected returns from our asset allocation for our Pension
Plan and Other Benefits Plan assets;
• Mortality - The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality
Improvement Scale MP-2021); and
• Healthcare Cost Trend Rate - based on management projected future healthcare costs.
The discount rate, compensation increase rate and long-term rate of return used to determine future obligations of
our retirement benefit plans as of December 31, 2023 are as follows:
Discount Rate
Compensation Increase
Long-term Rate of Return
Pension Plan
4.79%
3.00%
7.00%
Other Benefits Plan
4.79%
3.00%
7.00%
For the 2023 valuation, costs and obligations for our Other Benefits Plan assumed an 7.5% annual rate of increase
in the per capita cost of covered healthcare benefits in 2024 with the annual rate of increase declining 0.5% per year
for 2025-2030, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5%
by year 2030.
40
The following is a sensitivity analysis for certain actuarial assumptions used in determining projected benefit
obligations (PBO) and expenses for our retirement benefit plans:
Pension Plan
Actuarial Assumptions
Discount Rate 1% Increase
Discount Rate 1% Decrease
Other Benefits Plan
Actuarial Assumptions
Discount Rate 1% Increase
Discount Rate 1% Decrease
Healthcare Cost Trend Rate 1% Increase
Healthcare Cost Trend Rate 1% Decrease
Recent Accounting Standards
Estimated
Increase/
(Decrease)
on PBO
(000s)
Estimated
Increase/
(Decrease)
on Expense
(000s)
$ (9,903) $ (604)
12,086 992
Estimated
Increase/
(Decrease)
on PBO
(000s)
Estimated
Increase/
(Decrease)
on Expense
(000s)
$ (3,440) $ (552)
4,286 180
3,264 499
(2,676) (696)
See Note 1(r) of the Notes to Consolidated Financial Statements for a discussion of recent accounting
pronouncements.
41
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk associated with changes in interest rates and commodity prices. The Company is
subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest
rates through the use of fixed rate long-term debt and, to a lesser extent, variable rate short-term debt. The
Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the
majority of our First Mortgage Bonds, which have final maturity dates ranging from 2024 to 2059. Over the next
twelve months, approximately $7.8 million of the current portion of existing long-term debt instruments will
mature. The Company manages its interest rate risk related to existing variable-rate short-term debt by limiting our
variable rate exposure. Applying a hypothetical change in the rate of interest charged by 10% on those fixed- and
variable-rate borrowings would not have a material effect on our earnings.
Our risks associated with commodity price increases for chemicals, electricity and other commodities are reduced
through contractual arrangements and the ability to recover price increases through rates. Non-performance by these
commodity suppliers could have a material adverse impact on our results of operations, financial position and cash
flows.
We are exposed to credit risk for both our Regulated and Non-Regulated business segments. Our Regulated
operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations
engage in business activities with developers, government entities and other customers. Our primary credit risk is
exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-
payment of customer accounts receivable balances. Our credit risk is managed through established credit and
collection policies which are in compliance with applicable regulatory requirements and involve monitoring of
customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment
arrangements. Our credit portfolio is diversified with no significant customer or industry concentrations. In
addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible
customer accounts receivable expenses and collection costs through rates.
The Company's retirement benefit plan assets are exposed to the market price variations of debt and equity
securities. Changes to the Company's retirement benefit plan assets’ value can impact the Company's retirement
benefit plan expense, funded status and future minimum funding requirements. Risk is mitigated through our ability
to recover retirement benefit plan costs through customer rates.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Middlesex Water Company:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets and consolidated statements of capital stock and
long-term debt of Middlesex Water Company (the "Company") as of December 31, 2023 and 2022, the related
consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial
statements"). We also have audited the Company’s internal control over financial reporting as of December 31,
2023, 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 present fairly, in all material respects, the financial position of
the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, because of the effect of the material weaknesses
described below on the achievement of the objectives of the control criteria, the Company has not maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by COSO.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weaknesses have been
identified and included in the accompanying Management’s Report on Internal Control Over Financial Reporting
appearing under Item 9A:
There were ineffective information technology general controls (ITGCs) in the areas of user access and change
management over certain information technology (IT) systems that support the Company’s financial reporting
processes. As a result, automated and manual process controls dependent on those ITGCs were also not
effective.
There were ineffective controls related to income tax accounting for a non-routine transaction.
We considered the material weaknesses in determining the nature, timing, and extent of audit tests applied in our
audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s
internal control over financial reporting does not affect our opinion on those consolidated financial statements.
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 the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company's consolidated financial statements and an opinion 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.
43
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 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 (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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Income Tax Accounting for Non-Routine Transaction
Critical Audit Matter Description
As described in Notes 1 and 2 to the consolidated financial statements, the Company executed a non-routine
litigation settlement agreement in 2023. Management estimated and recorded the income tax effects of this non-
routine transaction.
We identified management’s assessment, accounting and financial statement presentation and disclosure of income
taxes for this non-routine transaction as a critical audit matter. Auditing management’s assessment, accounting,
presentation and disclosure required a high degree of judgment and subjectivity and the use of individuals with
specialized knowledge.
44
How We Addressed the Matter in Our Audit
The primary procedures we performed to address this critical audit matter included:
Testing the effectiveness of controls relating to income taxes, including controls over the determination of
the accounting and presentation for the non-routine transaction.
Testing management’s process for determining the accounting for income taxes. Due to the non-routine
nature of the transaction, we evaluated the appropriateness of the facts and circumstances relating to the
transaction and the applicable tax regulations and financial reporting requirements.
Utilizing internal tax specialists to assist in evaluating the appropriateness of the income tax accounting
impact from the significant non-routine transaction and in assessing the presentation and disclosure in the
consolidated financial statements.
Evaluating whether the amounts and assumptions used in the calculation were reasonable.
/s/ Baker Tilly US, LLP
We have served as the Company's auditor since 2006.
Philadelphia, Pennsylvania
February 29, 2024
45
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Operating Revenues
Operating Expenses:
Operations and Maintenance
Depreciation
Other Taxes
Years Ended December 31,
2022
2021
2023
$
166,274
$
162,434
$
143,141
83,113
25,194
18,744
79,096
23,029
18,208
73,671
21,109
15,150
Total Operating Expenses
127,051
120,333
109,930
Gain on Sale of Subsidiary
-
5,232
-
Operating Income
39,223
47,333
33,211
Other Income (Expense):
Allowance for Funds Used During Construction
Other Income (Expense), net
Total Other Income, net
Interest Charges
Income before Income Taxes
Income Taxes
Net Income
Preferred Stock Dividend Requirements
2,433
4,052
6,485
13,143
32,565
1,041
31,524
120
2,314
5,389
7,703
9,367
2,653
3,305
5,958
8,114
45,669
31,055
3,240
(5,488)
42,429
36,543
120
120
Earnings Applicable to Common Stock
$
31,404
$
42,309
$
36,423
Earnings per share of Common Stock:
Basic
Diluted
Average Number of
Common Shares Outstanding :
Basic
Diluted
See Notes to Consolidated Financial Statements.
$
$
1.77
1.76
$
$
2.40
2.39
$
$
2.08
2.07
17,732
17,847
17,597
17,712
17,492
17,607
46
ASSETS
UTILITY PLANT:
CURRENT ASSETS:
OTHER ASSETS:
MIDDLESEX WATER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Water Production
Transmission and Distribution
General
Construction Work in Progress
TOTAL
Less Accumulated Depreciation
UTILITY PLANT - NET
Cash and Cash Equivalents
Accounts Receivable, net of allowance for uncollectible accounts of $2,137 and $2,326, respectively
Litigation Settlement Receivable
Unbilled Revenues
Materials and Supplies (at average cost)
Prepayments
TOTAL CURRENT ASSETS
Operating Lease Right of Use Asset
Preliminary Survey and Investigation Charges
Regulatory Assets
Non-utility Assets - Net
Employee Benefit Plans
Other
TOTAL OTHER ASSETS
TOTAL ASSETS
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock, No Par Value
Retained Earnings
TOTAL COMMON EQUITY
Preferred Stock
Long-term Debt
TOTAL CAPITALIZATION
CURRENT
LIABILITIES:
Current Portion of Long-term Debt
Notes Payable
Accounts Payable
Litigation Settlement Payable
Accrued Taxes
Accrued Interest
Unearned Revenues and Advanced Service Fees
Other
TOTAL CURRENT LIABILITIES
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
OTHER LIABILITIES:
Customer Advances for Construction
Lease Obligations
Accumulated Deferred Income Taxes
Regulatory Liabilities
Other
TOTAL OTHER LIABILITIES
December 31,
2023
$
303,791
809,862
100,593
19,636
1,233,882
235,540
998,342
December 31,
2022
$
249,153
735,138
97,581
53,570
1,135,442
214,891
920,551
2,390
18,172
69,872
9,297
6,972
1,833
108,536
3,828
16,018
-
8,659
6,177
2,624
37,306
3,185
1,932
90,694
11,522
21,779
62
129,174
1,236,052
$
3,826
2,806
90,046
11,207
8,689
19
116,593
1,074,450
$
$
246,764
176,227
422,991
2,084
358,153
783,228
$
233,054
167,274
400,328
2,084
290,280
692,692
7,740
42,750
27,618
6,237
10,535
3,138
1,390
4,421
103,829
21,313
3,063
88,736
113,021
592
226,725
17,462
55,500
24,847
-
12,162
2,535
1,365
3,988
117,859
21,382
3,706
77,783
46,734
919
150,524
CONTRIBUTIONS IN AID OF CONSTRUCTION
TOTAL CAPITALIZATION AND LIABILITIES
$
122,270
1,236,052
$
113,375
1,074,450
See Notes to Consolidated Financial Statements.
47
47
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization
Provision for Deferred Income Taxes
Equity Portion of Allowance for Funds Used During Construction (AFUDC)
Cash Surrender Value of Life Insurance
Stock Compensation Expense
Gain on Sale of Subsidiary
Changes in Assets and Liabilities:
Accounts Receivable
Unbilled Revenues
Materials & Supplies
Prepayments
Accounts Payable
Accrued Taxes
Accrued Interest
Employee Benefit Plans
Unearned Revenue & Advanced Service Fees
Other Assets and Liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility Plant Expenditures, Including AFUDC of $975 in 2023, $927 in 2022 and $1,148 in 2021
Proceeds from Sale of Subsidiary
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of Long-term Debt
Proceeds from Issuance of Long-term Debt
Net Short-term Bank Borrowings
Deferred Debt Issuance Expense
Common Stock Issuance Expense
Payment of Grantee Withholding Taxes in Exchange for Restricted Stock
Proceeds from Issuance of Common Stock
Payment of Common Dividends
Payment of Preferred Dividends
Construction Advances and Contributions-Net
2023
Years Ended December 31,
2022
2021
$
31,524
$
42,429
$
36,543
29,442
(5,599)
(1,458)
(300)
2,214
-
(2,154)
(638)
(795)
791
2,771
(1,627)
603
(1,340)
25
(677)
52,782
(90,179)
-
(90,179)
(17,463)
75,812
(12,750)
(131)
(10)
(619)
12,115
(22,441)
(120)
1,566
27,475
(5,334)
(1,387)
401
1,630
(5,232)
(707)
(1,386)
(819)
256
3,722
3,541
549
(4,266)
35
454
26,799
(10,989)
(1,505)
(136)
1,338
-
(742)
(208)
(246)
6
(9,318)
(1,517)
(151)
(2,645)
75
(4,276)
61,361
33,028
(91,335)
3,122
(79,378)
-
(88,213)
(79,378)
(7,423)
2,662
42,500
(624)
(32)
-
10,335
(20,810)
(120)
659
(52,691)
86,595
11,000
(994)
-
-
3,837
(19,373)
(120)
11,225
NET CASH PROVIDED BY FINANCING ACTIVITIES
NET CHANGES IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
35,959
(1,438)
3,828
2,390
$
27,147
295
3,533
3,828
$
39,479
(6,871)
10,404
3,533
$
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Utility Plant received as Construction Advances and Contributions
Long-term Debt Deobligation
Non-Cash Consideration for Sale of Subsidiary
Litigation Settlement Receivable
Litigation Settlement Payable
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest
Interest Capitalized
Income Taxes
See Notes to Consolidated Financial Statements.
$
7,259
-
$
$
-
$
69,872
$
6,237
$
6,252
$
-
$
2,100
-
$
$
-
$
4,750
$
64
$
-
$
-
$
-
$
$
$
12,762
975
2,962
$
$
$
9,251
927
3,230
$
$
$
8,546
1,148
3,335
48
48
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND LONG-TERM DEBT
(In thousands)
December 31,
2023
December 31,
2022
$
246,764
$
233,054
$
176,227
422,991
$
167,274
400,328
$
1,005
$
1,005
79
1,000
2,084
$
79
1,000
2,084
$
$
$
278,374
69,724
16,638
364,736
6,529
(5,372)
(7,740)
358,153
252,269
44,918
9,200
306,387
6,873
(5,518)
(17,462)
290,280
$
$
Common Stock, No Par Value
Shares Authorized - 40,000
Shares Outstanding - 2023 - 17,821; 2022 - 17,642
Retained Earnings
TOTAL COMMON EQUITY
Cumulative Preferred Stock, No Par Value:
Shares Authorized - 120
Shares Outstanding - 20
Convertible:
Shares Outstanding, $7.00 Series - 10
Nonredeemable:
Shares Outstanding, $7.00 Series - 1
Shares Outstanding, $4.75 Series - 10
TOTAL PREFERRED STOCK
Long-term Debt:
First Mortgage Bonds, 0.00%-5.50%, due 2024-2059
Amortizing Secured Notes, 3.94%-7.05%, due 2028-2046
State Revolving Trust Notes, 2.00%-4.03%, due 2025-2044
SUBTOTAL LONG-TERM DEBT
Add: Premium on Issuance of Long-term Debt
Less: Unamortized Debt Expense
Less: Current Portion of Long-term Debt
TOTAL LONG-TERM DEBT
See Notes to Consolidated Financial Statements.
49
MIDDLESEX WATER COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(In thousands)
Balance at January 1, 2021
17,473
$
217,451
$
128,757
$
346,208
Common
Stock
Shares
Common
Stock
Amount
Retained
Earnings
Total
$
$
$
$
$
$
$
$
$
$
36,543
-
-
-
(19,373)
(120)
145,807
42,429
-
-
-
(20,810)
(120)
(32)
167,274
31,524
-
-
-
(22,441)
(120)
(10)
176,227
36,543
3,837
350
281
(19,373)
(120)
367,726
42,429
10,335
520
280
(20,810)
(120)
(32)
400,328
31,524
12,115
1,235
360
(22,441)
(120)
(10)
422,991
$
$
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award - Net - Employees
Stock Award - Board Of Directors
Cash Dividends on Common Stock ($1.108 per share)
Cash Dividends on Preferred Stock
Balance at December 31, 2021
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award - Net - Employees
Stock Award - Board Of Directors
Cash Dividends on Common Stock ($1.1825 per share)
Cash Dividends on Preferred Stock
Common Stock Issuance Expenses
Balance at December 31, 2022
Net Income
Dividend Reinvestment & Common Stock Purchase Plan
Restricted Stock Award - Net - Employees
Stock Award - Board Of Directors
Cash Dividends on Common Stock ($1.2625 per share)
Cash Dividends on Preferred Stock
Common Stock Issuance Expenses
Balance at December 31, 2023
See Notes to Consolidated Financial Statements.
-
40
6
3
-
-
17,522
-
114
3
3
-
-
-
17,642
-
167
7
5
-
-
-
17,821
-
$
3,837
350
281
-
-
221,919
$
$
-
10,335
520
280
-
-
-
233,054
$
$
-
12,115
1,235
360
-
-
-
246,764
$
5050
MIDDLESEX WATER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization, Summary of Significant Accounting Policies and Recent Developments
(a) Organization - Middlesex Water Company (Middlesex or the Company) is the parent company and sole
shareholder of Tidewater Utilities, Inc. (Tidewater), Pinelands Water Company (Pinelands Water) and Pinelands
Wastewater Company (Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA),
Utility Service Affiliates (Perth Amboy) Inc. (USA-PA) and Twin Lakes Utilities, Inc. (Twin Lakes). Southern
Shores Water Company, LLC (Southern Shores) and White Marsh Environmental Systems, Inc. (White Marsh) are
wholly-owned subsidiaries of Tidewater.
Middlesex has operated as a water utility in New Jersey since 1897 and in Delaware, through our wholly-owned
subsidiary, Tidewater, since 1992. We are in the business of collecting, treating, distributing and selling water for
domestic, commercial, municipal, industrial and fire protection purposes. We also operate New Jersey municipal
water, wastewater and storm water systems under contract and provide unregulated water and wastewater services
in New Jersey and Delaware through our subsidiaries. Our rates charged to customers for water and wastewater
services, the quality of services we provide and certain other matters are regulated in New Jersey and Delaware by
the New Jersey Board of Public Utilities (NJBPU) and the Delaware Public Service Commission (DEPSC),
respectively. Our USA, USA-PA and White Marsh subsidiaries are not regulated utilities.
(b) Principles of Consolidation – The financial statements for Middlesex and its wholly-owned subsidiaries (the
Company) are reported on a consolidated basis. All significant intercompany accounts and transactions have been
eliminated. Other financial investments in which the Company holds a 50% or less voting interest and cannot
exercise control over the operation and policies of the investments are accounted for under the equity method of
accounting. Under the equity method of accounting, the Company records its investment interests in Non-Utility
Assets and its percentage share of the earnings or losses of the investees in Other Income (Expense).
(c) System of Accounts – The Company’s regulated utilities maintain their accounts in accordance with the
Uniform System of Accounts prescribed by the NJBPU and DEPSC.
(d) Regulatory Accounting - We maintain our books and records in accordance with accounting principles
generally accepted in the United States of America. Middlesex and certain of its subsidiaries, which account for
93% of Operating Revenues and 99% of Total Assets, are subject to regulation in the state in which they operate.
Those companies are required to maintain their accounts in accordance with regulatory authorities’ rules and
guidelines, which may differ from other authoritative accounting pronouncements. In those instances, the Company
follows the guidance provided in Accounting Standards Codification (ASC) 980, Regulated Operations.
In accordance with ASC 980, Regulated Operations, costs and obligations are deferred if it is probable that these
items will be recognized for rate-making purposes in future rates. Accordingly, we have recorded costs and
obligations, which will be amortized over various future periods. Any change in the assessment of the probability
of rate-making treatment will require us to change the accounting treatment of the deferred item. We have no reason
to believe any of the deferred items that are recorded will be treated differently by the regulators in the future. For
additional information, see Note 2 – Rate and Regulatory Matters.
(e) Retirement Benefit Plans - We maintain a noncontributory defined benefit pension plan (Pension Plan), which
covers all active employees who were hired prior to April 1, 2007, as well as a defined contribution plan in which
all employees are eligible to participate. In addition, the Company maintains an unfunded supplemental plan for
certain of its executive officers. The Company has a retirement benefit plan other than pensions (Other Benefits
Plan) for substantially all of its retired employees. Employees hired after March 31, 2007 are not eligible to
participate in this plan. Coverage includes healthcare and life insurance.
The Company’s costs for providing retirement benefits are dependent upon numerous factors, including actual plan
experience and assumptions of future experience. Retirement benefit plan obligations and expense are determined
51
based on investment performance, discount rates and various other demographic factors related to the population
participating in the Company’s retirement benefit plans, all of which can change significantly in future years. For
more information on the Company’s Retirement Benefit Plans, see Note 7 – Employee Benefit Plans.
(f) Utility Plant – Utility Plant is stated at original cost as defined for regulatory purposes. Property accounts are
charged with the cost of betterments and major replacements of property. Cost includes direct material, labor and
indirect charges for pension benefits and payroll taxes. The cost of labor, materials, supervision and other expenses
incurred in making repairs and minor replacements and in maintaining the properties is charged to the appropriate
expense accounts. At December 31, 2023, there was no event or change in circumstance that would indicate that
the carrying amount of any long-lived asset was not recoverable.
(g) Depreciation – Depreciation is computed by each regulated member of the Company utilizing a rate approved
by the applicable regulatory authority. The accumulated provision for depreciation is charged with the cost of
property retired, less salvage. The following table sets forth the range of depreciation rates for the major utility
plant categories used to calculate depreciation for the years ended December 31, 2023, 2022, and 2021. These rates
have been approved by the NJBPU or DEPSC:
Source of Supply
Pumping
Water Treatment
General Plant
Wastewater Collection
1.15% - 3.44%
2.00% - 5.39%
1.65% - 7.09%
2.08% - 17.84%
1.42% - 1.81%
Transmission and Distribution (T&D):
T&D – Mains
1.10% - 3.13%
T&D – Services 2.12% - 3.16%
1.61% - 4.63%
T&D – Other
Non-regulated fixed assets consist primarily of office buildings, furniture and fixtures, and transportation
equipment. These assets are recorded at original cost and depreciation is calculated based on the estimated useful
lives, ranging from 3 to 42 years.
(h) Preliminary Survey and Investigation (PS&I) Costs – In the design of water and wastewater systems that the
Company ultimately intends to construct, own and operate, certain expenditures are incurred to advance those
project activities. These PS&I costs are recorded as deferred charges on the balance sheet as these costs are expected
to be recovered through future rates charged to customers as the underlying project assets are placed into service as
utility plant. If it is subsequently determined that costs for a project recorded as PS&I are not recoverable through
rates charged to our customers, the applicable PS&I costs are recorded as Other Expense on the Statement of Income
at that time.
(i) Customers’ Advances for Construction (CAC) – Utility plant and/or cash advances are provided to the
Company by customers, real estate developers and builders in order to extend utility service to their properties.
These transactions are recorded as CAC. Contractual Refunds of CACs in the form of cash are made by the
Company and are based on either additional operating revenues generated from new customers or, as new customers
are connected to the respective system. After all refunds are made and/or contract terms have expired, any
remaining balance is transferred to Contributions in Aid of Construction.
Contributions in Aid of Construction (CIAC) – CIAC include direct non-refundable contributions of utility
plant and/or cash and the portion of CAC that becomes non-refundable.
In accordance with regulatory requirements, CAC and CIAC are not depreciated. In addition, these amounts reduce
the investment base for purposes of setting rates.
(j) Allowance for Funds Used During Construction (AFUDC) - Middlesex and its regulated subsidiaries
capitalize AFUDC, which represents the cost of financing projects during construction. AFUDC is added to the
construction costs of individual projects exceeding specific cost and construction period thresholds established for
each company and then depreciated with the utility plant direct costs over the underlying assets’ estimated useful
life. AFUDC is calculated using each company’s weighted cost of debt and equity as approved in their most recent
52
respective regulatory rate order. The AFUDC rates for the years ended December 31, 2022, 2021 and 2020 for
Middlesex and Tidewater are as follows:
Middlesex
Tidewater
2023
2022
6.35% 6.35% 6.50%
7.92% 7.92% 7.92%
2021
(k) Accounts Receivable – We record bad debt expense based on a variety of factors such as our customers’
payment history, current economic conditions and trending reasonable and supportable forecasts on expected
collectability of accounts receivable. The allowance for doubtful accounts was $2.1 million and $2.3 million as of
December 31, 2023 and 2022, respectively. For the years ended December 31, 2023, 2022 and 2021, bad debt
expense was $1.0 million, $0.5 million and $0.9 million, respectively. For the years ended December 31, 2023,
2022 and 2021, write-offs were $1.2 million, $0.7 million and $0.4 million, respectively.
(l) Revenues - The Company’s revenues are primarily generated from regulated tariff-based sales of water and
wastewater services and non-regulated operation and maintenance contracts for services on water and wastewater
systems owned by others. Revenue from contracts with customers is recognized when control of a promised good
or service is transferred to customers at an amount that reflects the consideration to which the Company expects to
be entitled in exchange for those goods and services.
The Company’s regulated revenue results from tariff-based sales from the provision of water and wastewater
services to residential, industrial, commercial, fire-protection and wholesale customers. Residential customers are
billed quarterly while most industrial, commercial, fire-protection and wholesale customers are billed monthly.
Payments by customers are due between 15 to 30 days after the invoice date. Revenue is recognized as the water
and wastewater services are delivered to customers as well as from accrual of unbilled revenues estimated from the
last meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional
weather indicators and general economic conditions in the relevant service territories. Unearned Revenues and
Advance Service Fees include fixed service charge billings in advance to Tidewater customers recognized as service
is provided to the customer.
Non-regulated service contract revenues consist of base service fees as well as fees for additional billable services
provided to customers. Fees are billed monthly and are due within 30 days after the invoice date. The Company
considers the amounts billed to represent the value of these services provided to customers. These contracts expire
at various times through 2032 and contain remaining performance obligations for which the Company expects to
recognize revenue in the future. These contracts also contain customary termination provisions.
Substantially all of the amounts included in operating revenues and accounts receivable are from contracts with
customers. The Company records its allowance for doubtful accounts based on historical write-offs combined with
an evaluation of current economic conditions within its service territories.
The Company’s contracts do not contain any significant financing components.
53
The Company’s operating revenues are comprised of the following:
(In Thousands)
Years Ended December 31,
2022
2021
2023
Regulated Tariff Sales
Residential
Commercial
Industrial
Fire Protection
Wholesale
Non-Regulated Contract Operations
Total Revenue from Contracts with Customers
Other Regulated Revenues
Other Non-Regulated Revenues
Inter-segment Elimination
Total Revenue
$
$
$
86,581
23,945
11,586
12,582
19,117
12,320
166,131
806
453
(1,116)
166,274
84,950
22,689
11,152
12,726
18,769
12,006
162,292
831
440
(1,129)
162,434
77,699
16,715
8,990
12,608
14,590
12,391
142,993
929
427
(1,208)
143,141
$
$
$
$
$
$
(m) Unamortized Debt Expense and Premiums on Long-Term Debt - Unamortized Debt Expense and
Premiums on Long-Term Debt, included on the consolidated balance sheet in long-term debt, are amortized over
the lives of the related debt issues.
(n) Income Taxes - Middlesex files a consolidated federal income tax return for the Company and income taxes
are allocated based on the separate return method. Certain income and expense items are accounted for in different
time periods for financial reporting than for income tax reporting purposes. Deferred income taxes are provided on
differences between the tax basis of assets and liabilities and the amounts at which they are carried in the
consolidated financial statements. Investment tax credits have been deferred and are amortized over the estimated
useful life of the related property. In the event that there are interest and penalties associated with income tax
adjustments from income tax authority examinations, these amounts will be reported under interest expense and
other expense, respectively. For more information on income taxes, see Note 3 – Income Taxes.
(o) Cash and Cash Equivalents - For purposes of reporting cash flows, the Company considers all highly liquid
investments with original maturity dates of three months or less to be cash equivalents. Cash and cash equivalents
represent bank balances and money market funds with investments maturing in less than 90 days.
(p) Restricted Cash – Restricted cash includes cash proceeds from loan transactions entered into through
government financing programs and are held in trusts for specific capital expenditures or debt service.
(q) Use of Estimates - Conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts in the financial
statements. Actual results could differ from those estimates.
(r) Recent Accounting Pronouncements - There are no new adopted or proposed accounting guidance that the
Company is aware of that could have a material impact on the Company’s consolidated financial statements.
(s) Regulatory Notice of Non-Compliance – In September 2021, the New Jersey Department of Environmental
Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by
Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment
Plant (Park Avenue Plant) in South Plainfield, New Jersey exceeded a NJDEP standard that became effective in
2021.
54
Prior to 2021, the Company began design for construction of an enhanced treatment process at the Park Avenue
Plant to comply with the new standard prior to the regulation being enacted. Since completion was not expected
until mid-2023, the Company implemented an interim solution to meet the Notice requirements.
In June 2022, a portion of the enhanced treatment process was completed, placed into service and is effectively
treating the ground water in compliance with all state and federal drinking water standards.
In September 2022, the Company entered into an Administrative Consent Order (ACO) with the NJDEP with
respect to the Notice, which voided any further notice regarding the fact that the permanent treatment solution was
not in service by September 7, 2022 as required by the Notice. As prescribed in the ACO, the Company was to
issue periodic public notifications until the ACO was closed.
In June 2023, the Company completed the permanent construction of the entire Park Avenue Plant treatment
upgrades and placed the upgrades into operation in full compliance with the NJDEP PFOA standards. In October
2023, the Company received confirmation from the NJDEP that it has complied with all requirements of the ACO
and consequently, the ACO has been closed.
The Company had previously initiated a lawsuit against 3M Company (3M), in connection with the Company’s
claim that 3M introduced perfluoroalkyl substances (commonly known as “PFAS”), which include PFOA, into the
Company’s water supply at its Park Avenue Plant.
On August 29, 2023, Middlesex and 3M executed a settlement agreement (the Settlement Agreement) to resolve
the lawsuit. The Settlement Agreement provides that:
• 3M will pay $93.2 million in two installments, one payment of $23.3 million received in December 2023
and one payment of $69.9 million in July 2024. Middlesex is obligated to pay 30% of the proceeds received
plus reimbursable out-of-pocket legal expenses to its lawyers as legal fees, or $29.5 million in total;
• Proceeds received from the Settlement Agreement are being used to mitigate the impact of the increase in
Middlesex’s customer rates approved by the NJBPU, which is to be implemented March 1, 2024 (for further
discussion of Middlesex’s base rate increase, see Note 2, Rate Matters, Middlesex below);
• Middlesex, by nature of its status as a U.S. water purveyor impacted by PFAS, was automatically included
in a Multi-District Litigation Settlement before the United States District Court for the District of South
Carolina in which 3M and other companies (Non-3M Companies) are participants. Middlesex agreed as part
of the Settlement Agreement to remain a member of the plaintiff class in order to be eligible to obtain future
additional compensation from 3M and the Non-3M Companies for any future remediation which may be
required of its water treatment facilities; and
• Middlesex and 3M agreed to enter into a joint mediation which occurred November 2023, to resolve two
PFOA-related class action lawsuits against Middlesex seeking restitution for medical, water replacement
and other claimed related costs. Both Middlesex and 3M are defendants in these lawsuits. These lawsuits
remain in the legal process and their ultimate resolution is not known at this time.
Note 2 - Rate and Regulatory Matters
Rate Matters
Middlesex – In February 2024, Middlesex’s petition to the NJBPU, filed in May 2023, seeking permission to
increase its base water rates was concluded, based on a negotiated settlement that is expected to increase annual
operating revenues by $15.4 million effective March 1, 2024. The approved tariff rates were designed to recover
increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized return on
common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and
replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of
service. Net proceeds from the 3M Settlement Agreement were used to recover costs for the construction of the
Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. The rate case settlement
55
will result in the reclassification of $48.3 million from Regulatory Liabilities to CIAC in the March 31, 2024 balance
sheet. The Company will also record in the first quarter of 2024 the recovery of $0.7 million and $2.4 million of
prior year depreciation and carrying costs, respectively, as well as the recovery of $1.4 million of prior year costs
which were associated with the interim solution to comply with the Notice, all of which were approved in the rate
case settlement. For further information on the 3M Settlement Agreement, see Note 1(s) - Regulatory Notice of
Non-Compliance above.
In January 2024, the NJBPU approved Middlesex’s petition for the proposed cost recovery of its Lead Service Line
Replacement (LSLR) Plan and cost recovery of project costs associated with replacing Middlesex customer-owned
lead service lines. Replacement of Middlesex and Middlesex customer-owned lead service lines is required by the
New Jersey LSLR Law. Under this legislation, the costs associated with replacing customer-owned lead service
lines are recoverable through future customer surcharges. Cost recovery for replacing Company-owned lead service
lines are recoverable through traditional base rate case filings. The current estimates for replacement of Middlesex
and Middlesex customer-owned lead service lines are approximately $46 million to $77 million over a nine-year
period.
In October 2023, the NJBPU approved Middlesex’s petition for a Distribution System Improvement Charge (DSIC)
Foundation Filing, which is a prerequisite to implementing a DSIC rate that allows water utilities to recover
investments in, and generate a return on, qualifying capital improvements to their water distribution system made
between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total
revenues established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually,
beginning in April 2024, the Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible
investments made during the period. DSIC rates remain in effect until Middlesex’s next base rate case increase
subsequent to the March 1, 2024 increase. Under the terms of the Foundational Filing, the Company is required to
file a base rate petition before October 2026.
In September 2022, the NJBPU approved Middlesex's Emergency Relief Motion to reset its Purchased Water
Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million for the purchase of treated water
from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased purchased
water costs between base rate case filings. The increase, effective October 1, 2022, was on an interim basis and
subject to refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023.
In connection with the full recovery of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero
in October 2023.
In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was
concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7
million. The approved tariff rates were designed to recover increased operating costs, as well as a return on invested
capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented
in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective
January 1, 2023. As part of the negotiated settlement, the PWAC was reset to zero.
Tidewater – In December 2023, the DEPSC approved Tidewater’s application to implement a new DSIC. Effective
January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate revenue of
approximately $1.3 million annually. A Delaware DISC is subject to a semi-annual reset with an overall maximum
rate of 7.5%.
In October 2023, the DEPSC issued an Order that made a temporary base rate reduction permanent. The initial
DEPSC order required Tidewater to reduce its base rates charged to general metered and private fire customers by
6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered as a result of
Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1
million in 2023.
56
In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return
exceeded the rate of return authorized by the DEPSC. Consequently, Tidewater reset its DSIC rate to zero effective
April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account credit for
DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Pinelands – In April 2023, Pinelands Water and Pinelands Wastewater concluded their base rate case matters when
the NJBPU approved a combined $1.0 million increase in annual base rates, effective April 15, 2023. The requests
were necessitated by capital infrastructure investments the companies have made as well as increased operations
and maintenance costs.
Southern Shores - Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for
water service to a 2,200 unit condominium community we serve in Sussex County, Delaware. Under the agreement,
current rates were to remain in effect until December 31, 2024, unless there are unanticipated capital expenditures
or regulatory related changes in operating expenses exceeding certain thresholds during this time period. In 2022,
capital expenditures did exceed the established threshold and rates were increased by 5.39%, effective January 1,
2023. Beginning in 2025 and thereafter, inflation-based rate increases cannot exceed the lesser of the regional
Consumer Price Index or, 3%. Inflation based increases are in addition to the threshold rate increases. This
agreement expires on December 31, 2029.
Twin Lakes Utilities, Inc. (Twin Lakes) - Twin Lakes provides water services to approximately 115 residential
customers in Shohola, Pennsylvania. Pursuant to the Pennsylvania Public Utility Code, Twin Lakes filed a petition
requesting the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by a
capable public utility. The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit
a recommended decision (Recommended Decision) to the PAPUC. As part of this legal proceeding the PAPUC
also issued an Order in January 2021 appointing a large Pennsylvania based investor-owned water utility as the
receiver (the Receiver Utility) of the Twin Lakes system until the petition is fully adjudicated by the PAPUC. In
November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver
Utility to acquire the Twin Lakes water system and for Middlesex, the parent company of Twin Lakes, to submit
$1.7 million into an escrow account within 30 days. Twin Lakes immediately filed a Petition For Review (PFR)
with the Commonwealth Court of Pennsylvania (the Commonwealth Court) seeking reversal and vacation of the
escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States
Constitution. In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the
Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the
Commonwealth Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the
Commonwealth Court issued an opinion upholding PAPUC’s November 2021 Order in its entirety. In September
2022, Twin Lakes filed a Petition For Allowance of Appeal (Appeal Petition) to the Supreme Court of Pennsylvania
seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the grounds that the
Commonwealth Court erred in failing to address Twin Lakes’ claims that because the $1.7 million escrow
requirement placed on Middlesex violated Middlesex’s constitutional rights, Middlesex’s refusal to submit this
escrow payment would jeopardize the relief Twin Lakes was otherwise entitled to in the appointment of the
Receiver Utility. In March 2023, the Supreme Court of Pennsylvania issued a decision denying Twin Lakes’ Appeal
Petition without addressing this claim on the merits. As a result of the Pennsylvania Courts’ failure to address Twin
Lakes’ claim, Middlesex subsequently filed a Complaint with the United States District Court for the Middle
District of Pennsylvania to address the issue of whether the PAPUC’s Order violated Middlesex’s rights under the
United States Constitution. On January 18, 2024, the District Court issued an Order dismissing Middlesex’s
Complaint without addressing the issue of whether the PAPUC’s Order violated Middlesex’s rights under the
United States Constitution. On January 31, 2024, Middlesex filed a Notice of Appeal of the District Court’s decision
with the United States Court of Appeals for the Third Circuit. We are currently awaiting the Court’s decision.
The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.
57
Regulatory Matters
We have recorded certain costs as regulatory assets because we expect full recovery of, or are currently recovering,
these costs in the rates we charge customers. These deferred costs have been excluded from rate base and, therefore,
we are not earning a return on the unamortized balances. These items are detailed as follows:
Regulatory Assets
Retirement Benefits
Income Taxes
Rate Cases, Tank Painting, and Other
Total
(Thousands of Dollars)
December 31,
2023
2022
$ -
84,419
$9,214
74,422
6,275 6,410
$90,046
$90,694
\
Remaining
Recovery Periods
Various
Various
2-10 years
Retirement benefits include pension and other retirement benefits that have been recorded on the Consolidated
Balance Sheet in accordance with the guidance provided in ASC 715, Compensation – Retirement Benefits. These
amounts represent obligations in excess of current funding (regulatory asset) or less than current funding (regulatory
liability, which was $1.5 million as of December 31, 2023), which the Company believes will be fully recovered or
refunded in rates set by the regulatory authorities.
The recovery period for income taxes is dependent upon when the temporary differences between the tax and book
treatment of various items reverse.
The net proceeds available to Middlesex from the 3M Settlement Agreement, after excluding legal fees and
estimated income taxes payable, $63.6 million, were recorded as a regulatory liability, as of December 31, 2023.
For further information on the 3M Settlement Agreement, see Rates, Note 1(s) - Regulatory Notice of Non-
Compliance and Rate Matters, Middlesex above.
The 2017 Tax Act reduced the statutory corporate federal income tax rate from 35% to 21%. The tariff rates
charged to customers effective prior to 2018 in the Company’s regulated companies include recovery of income
taxes at the statutory rate in effect at the time those rates were approved by the respective state public utility
commissions. As of December 31, 2023 and 2022, the Company has recorded regulatory liabilities of $28.2 million
and $29.0 million, respectively for excess income taxes collected through rates due to the lower income tax rate
under the 2017 Tax Act. These regulatory liabilities are overwhelmingly related to utility plant depreciation
deduction timing differences, which are subject to Internal Revenue Service (IRS) normalization rules. The IRS
rules limit how quickly the excess taxes attributable to accelerated taxes can be returned to customers. The current
base rates for Middlesex and Pinelands customers became effective after 2017 and reflect the impact of the 2017
Tax Act on their revenue requirements.
The Company uses composite depreciation rates for its regulated utility assets, which is currently an acceptable
method under generally accepted accounting principles and is widely used in the utility industry. Historically, under
the composite depreciation method, the anticipated costs of removing assets upon retirement are provided for over
the life of those assets as a component of depreciation expense. The Company recovers certain asset retirement
costs through rates charged to customers as an approved component of depreciation expense. As of December 31,
2023 and 2022, the Company has approximately $19.7 million and $17.7 million, respectively, of expected costs
of removal recovered currently in rates in excess of actual costs incurred as regulatory liabilities.
58
Note 3 – Income Taxes
Income tax expense (benefit) differs from the amount computed by applying the statutory rate on book income
subject to tax for the following reasons:
Income Tax at Statutory Rate
Tax Effect of:
Utility Plant Related
Tangible Property Repairs
State Income Taxes – Net
Other
Total Income Tax Expense (Benefit)
(Thousands of Dollars)
Years Ended December 31,
2023
2021
2022
$ 6,839 $ 9,590 $ 6,521
(1,495) (1,106) (1,290)
(5,475) (6,767) (12,281)
1,117 1,296 1,499
55 227 63
$ 1,041 $ 3,240 $ (5,488)
Income tax expense (benefit) is comprised of the following:
(Thousands of Dollars)
Years Ended December 31,
2022
2021
2023
Current:
Federal
State
Deferred:
Federal
State
Investment Tax Credits
Total Income Tax Expense (Benefit)
$ 2,952 $ 425 $ (8,247)
1,066 1,381 1,467
(3,261)
1,242 933
348 260 431
(64) (68) (72)
$ 1,041 $ 3,240 $ (5,488)
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for
regulatory accounting treatment of income tax benefits associated with the adoption of tangible property regulations
issued by the IRS (fully amortized as of March 31, 2022) as well as prospective recognition of the income tax
benefits for the immediate deduction of repair costs on tangible property. This results in significant reductions in
the Company’s effective income tax rate, current income tax expense (benefit) and deferred income tax expense
(benefit).
59
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets
and liabilities for financial purposes and the amounts used for income tax purposes. The components of the net
deferred tax liability are as follows:
Utility Plant Related
Customer Advances
Employee Benefits
Investment Tax Credits
Other
Total Accumulated Deferred Income Taxes
(Thousands of Dollars)
December 31,
2023
2022
$ 84,330 $ 72,996
(3,546) (3,568)
7,100 7,380
240 304
612 671
$ 88,736 $ 77,783
Note 4 - Commitments and Contingent Liabilities
Water Supply – Middlesex’s agreement with the New Jersey Water Supply Authority (NJWSA) for the purchase of
untreated water expires November 30, 2048. NJSWA provides for an average purchase of 27.0 million gallons a
day (mgd), with a peak up to 47.0 mgd. Pricing is set annually by the NJWSA through a public rate making process.
The agreement has provisions for additional pricing in the event Middlesex overdrafts or exceeds certain monthly
and annual thresholds.
Middlesex also has an agreement with a non-affiliated NJBPU-regulated water utility for the purchase of treated
water. This agreement, which expires February 27, 2026, provides for the minimum purchase of 3.0 mgd of treated
water with provisions for additional purchases if needed.
Tidewater contracts with the City of Dover, Delaware to purchase treated water of up to 60.0 million gallons
annually.
Purchased water costs are shown below:
(Millions of Dollars)
Years Ended December 31,
2022
2021
2023
Untreated
Treated
Total Costs
$ 3.2 $ 3.2 $ 3.3
5.3 3.9 3.6
$ 8.5 $ 7.1 $ 6.9
Leases - The Company determines if an arrangement is a lease at the inception of the lease. Generally, a lease
agreement exists if the Company determines that the arrangement gives the Company control over the use of an
identified asset and obtains substantially all of the benefits from the identified asset.
The Company has entered into an operating lease of office space for administrative purposes, expiring in 2030. The
Company has not entered into any finance leases. The exercise of a lease renewal option for the Company’s
administrative offices is solely at the discretion of the Company.
The right-of-use (ROU) asset recorded represents the Company’s right to use an underlying asset for the lease term
and lease liability represents the Company’s obligation to make lease payments arising from the lease. Lease ROU
assets and liabilities are recognized at commencement date based on the present value of lease payments over the
lease term. The Company’s operating lease does not provide an implicit discount rate and as such the Company
used an estimated incremental borrowing rate (4.03%) based on the information available at commencement date
in determining the present value of lease payments.
60
Given the impacts of accounting for regulated operations, and the resulting recognition of expense at the amounts
recovered in customer rates, expenditures for operating leases are consistent with lease expense and was $0.8
million for each of the years ended December 31, 2023, 2022 and 2021.
Information related to operating lease ROU assets is as follows:
(In Millions)
December 31,
2023
2022
ROU Asset at Lease Inception
Accumulated Amortization
Current ROU Asset
$
$
7.3
(4.1)
3.2
7.3
(3.5)
3.8
$
$
The Company’s future minimum operating lease commitments as of December 31, 2023 are as follows:
2024
2025
2026
2027
2028
Thereafter
Total Lease Payments
Imputed Interest
Present Value of Lease Payments
Less Current Portion*
Non-Current Lease Liability
(In Millions)
December 31, 2023
0.8
0.8
0.9
0.9
0.9
0.9
5.2
(1.5)
3.7
(0.6)
3.1
$
$
*Included in Other Current Liabilities
Construction –The Company has projected to spend approximately $75 million in 2024, $81 million in 2025 and
$70 million in 2026 on its construction program. As of December 31, 2023, the Company has entered into several
contractual construction agreements that in total obligate it to expend an estimated $6.7 million in the future. The
actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure,
customer growth, residential new home construction and sales, project scheduling, supply chain issues and
continued refinement of project scope and costs. There is no assurance that projected customer growth and
residential new home construction and sales will occur.
Contingencies – Based on our operations in the heavily-regulated water and wastewater industries, the Company is
routinely involved in disputes, claims, lawsuits and other regulatory and legal matters, including responsibility for
fines and penalties relative to regulatory compliance. At this time, Management does not believe the final resolution
of any such matters, whether asserted or unasserted, will have a material adverse effect on the Company’s financial
position, results of operations or cash flows. In addition, the Company maintains business insurance coverage that
may mitigate the effect of any current or future loss contingencies.
PFOA Matter - In November 2021, the Company was served with two PFOA-related class action lawsuits seeking
restitution for medical, water replacement and other related costs and economic damages. Middlesex and 3M
agreed to enter into a joint mediation on these lawsuits (for further discussion of this matter, see Note 1(s)
Regulatory Notice of Non-Compliance).
61
Change in Control Agreements – The Company has Change in Control Agreements with its executive officers that
provide compensation and benefits in the event of termination of employment in connection with a change in control
of the Company.
Note 5 – Short-term Borrowings
Information regarding the Company’s short-term borrowings for the years ended December 31, 2023 and 2022 is
summarized below:
(In Millions)
Average Amount Outstanding
Weighted Average Interest Rate
Notes Payable at Year-End
Weighted Average Interest Rate at Year-End
2023
$
2022
$
35.7
6.13%
42.8
6.50%
28.9
3.34%
55.5
5.17%
$
$
The Company maintains bank lines of credit aggregating $140.0 million.
(In Millions)
As of December 31, 2023
Bank of America
PNC Bank
CoBank, ACB (CoBank)
$
Outstanding Available Maximum Credit Type
Uncommitted
-
$
Committed
39.8
Committed
3.0
42.8
60.0
68.0
12.0
140.0
60.0
28.2
9.0
97.2
$
$
$
$
Line of Credit
Renewal Date
January 24, 2025
January 31, 2026
May 20, 2026
The maturity dates for the Notes Payable as of December 31, 2023 are extendable at the discretion of the Company.
The interest rates are set for borrowings under the Bank of America and PNC Bank lines of credit using the Secured
Overnight Financing Rate (SOFR) and then adding a specific financial institution credit spread. The interest rate
for borrowings under the CoBank line of credit are set weekly using CoBank’s internal cost of funds index that is
similar to the SOFR and adding a credit spread. There is no requirement for a compensating balance under any of
the established lines of credit.
Note 6 - Capitalization
All the transactions discussed below related to the issuance of securities were approved by either the NJBPU or
DEPSC, except where otherwise noted.
Common Stock
The Company issues shares of its common stock in connection with its Middlesex Water Company Investment Plan
(the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common stock.
The Company raised approximately $12.1 million under the Investment Plan during 2023. On March 1, 2023, the
Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment
Plan. The discount offering ended December 1, 2023. The discount applied to all common stock purchases made
under the Investment Plan during that time period, whether by optional cash payment or by dividend reinvestment.
Since the inception of the Investment Plan and its predecessor plan, the Company has periodically replenished the
level of authorized shares in the plans. In May 2023, Middlesex received approval from the NJBPU to increase the
number of authorized shares under the Investment Plan by 0.7 million shares. Currently, 0.7 million shares remain
registered with the United States Securities and Exchange Commission and available for issuance to participants
under the Investment Plan.
62
In April 2023, Middlesex received approval from the NJBPU to issue and sell up to 1.0 million shares of its common
stock, without par value, through December 31, 2025. Sales of additional shares of common stock are part of the
Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program. As
described below in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing plan.
The Company issues common shares under a restricted stock plan for certain management employees, which is
described in Note 7 – Employee Benefit Plans.
The Company maintains a stock plan for its independent Directors as a component of outside members of the Board
of Directors compensation. For the years ended December 31, 2023, 2022 and 2021, 4,608, 2,664 and 3,444 shares,
respectively, of Middlesex common stock were granted and issued to the Company’s independent Directors under
the plan. The maximum number of shares authorized for grant under the plan is 100,000, of which 41,853 shares
remain available for future awards.
In the event dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common
stock of the Company.
Preferred Stock
At December 31, 2023 and 2022, there were 120,000 shares of preferred stock authorized and less than 21,000
shares of preferred stock outstanding. There were no preferred stock dividends in arrears.
The Company may not pay any dividends on its common stock unless full cumulative dividends to the preceding
dividend date for all outstanding shares of preferred stock have been paid or set aside for payment. If four or more
quarterly dividends are in arrears, the preferred shareholders, as a class, are entitled to elect two members to the
Board of Directors in addition to Directors elected by holders of the common stock. In addition, if Middlesex were
to liquidate, holders of preferred stock would be paid back the stated value of their preferred shares before any
distributions could be made to common stockholders.
The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security
holders to exchange one convertible preferred share for twelve shares of the Company's common stock. In addition,
the Company may redeem up to 10% of the outstanding convertible stock in any calendar year at a price equal to
the fair value of twelve shares of the Company's common stock for each share of convertible stock redeemed.
Long-term Debt
Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility
plant. To the extent possible and fiscally prudent, the Company finances qualifying capital projects under State
Revolving Fund (SRF) loan programs in New Jersey and Delaware. These government programs provide financing
at interest rates typically below rates available in the broader financial markets. A portion of the borrowings under
the New Jersey SRF is interest-free.
Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey
Infrastructure Bank (NJIB) at a below market interest rate. When construction on the qualifying project is
substantially complete, NJIB will coordinate the conversion of the construction loan into a long-term securitized
loan with a portion of the principal balance having a stated interest rate of zero percent (0%) and a portion of the
principal balance at a market interest rate at the time of closing using the credit rating of the State of New Jersey.
As a result of revised project funding priority ranking for the NJIB SRF Program, the Company has no current
projects in the NJIB SRF program. However, it is seeking to have Middlesex’s LSLR Project added to the qualified
list in order to borrow under the NJIB SRF program.
Under the Delaware SRF program, borrowers 1) enter into a long-term note agreement for a term not to exceed
twenty years, 2) submit requisitions for cost reimbursements during the construction period for up to two years after
63
the agreement is executed and 3) as the proceeds are received from the requisitions, borrowers record a
corresponding debt obligation amount.
In April 2023, Middlesex received approval from the NJBPU to borrow up to $300.0 million from the New Jersey
SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions
as needed through December 31, 2025. The Company may issue debt securities in a series of one or more transaction
offerings to help fund Middlesex’s multi-year capital construction program.
In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs)
with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce the Company’s outstanding
balances under its bank lines of credit.
In May 2022, Middlesex repaid its two outstanding NJIB construction loans by issuing FMBs to the NJIB under
two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2
million) and Series 2022B ($36.0 million). The interest rate on the Series 2022A bond is zero and the interest rate
on the Series 2022B bond ranges between 2.7% and 3.0%. The final maturity date for both FMBs is August 1,
2056, with scheduled debt service payments over the life of these loans.
In November 2021, Middlesex closed on a $19.5 million, 2.79% private placement of FMBs with a 2041 maturity
date designated as Series 2021A. Proceeds were used to reduce the Company’s outstanding balances under its lines
of credit.
In June 2021, Middlesex received approval from the NJBPU to redeem up to $45.5 million of outstanding FMBs,
specifically Series RR ($22.5 million) and Series SS ($23.0 million), and issue replacement FMBs at an overall
lower cost of debt. In November 2021, Middlesex closed on a $45.5 million, 2.90% private placement of FMBs,
designated as Series 2021B with a 2051 maturity date to effectuate the redemptions.
In May 2023, Tidewater closed on a $20.0 million loan from CoBank, ACB (CoBank) with an interest rate of 5.71%
and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the loan were used to pay off
Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.
In April 2023, Tidewater closed on three DEPSC-approved Delaware SRF loans totaling $10.2 million, all at
interest rates of 2.0% with maturity dates in 2043 and 2044. These loans are for the construction, relocation,
improvement, and/or interconnection of transmission mains. Tidewater has drawn a total of $6.1 million through
December 31, 2023 and expects that the requisitions will continue through mid-2025.
In December 2021, Tidewater closed on a DEPSC-approved $5.0 million Delaware SRF loan at an interest rate of
2.0%. The loan was for construction of a one million gallon elevated storage tank. Through December 31, 2023,
Tidewater has drawn a total of $4.8 million and expects that the requisitions will continue through the first quarter
of 2024. The final maturity date on the loan is 2044.
In September 2021, Tidewater completed its $20 million secured borrowing with CoBank, at an interest rate of
3.94% and a 2046 maturity date. Proceeds from the loan were used to pay off its outstanding balances under its
lines of credit.
In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank
amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for
each loan. Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital
projects.
64
The aggregate annual principal repayment obligations as of December 31, 2023 for all long-term debt over the next
five years and thereafter are shown below:
Year
(Millions of Dollars)
Annual Maturities
2024
2025
2026
2027
2028
Thereafter
$ 7.7
$ 7.6
$ 7.4
$ 7.2
$ 6.9
$327.9
The weighted average interest rate on all long-term debt at December 31, 2023 and 2022 was 3.65% and 2.98%,
respectively.
Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service
and capital ratio covenants. The Company is in compliance with all of its mortgage covenants and restrictions.
Earnings Per Share
The following table presents the calculation of basic and diluted earnings per share (EPS) for the years ended December
31, 2023, 2022 and 2021. Basic EPS is computed on the basis of the weighted average number of shares outstanding.
Diluted EPS assumes the conversion of the Convertible Preferred Stock $7.00 Series.
Basic:
Net Income
Preferred Dividend
Earnings Applicable to Common Stock
Basic EPS
Diluted:
Earnings Applicable to Common Stock
Convertible Preferred $7.00 Series Dividend
Adjusted Earnings Applicable to Common
Stock
Diluted EPS
Fair Value of Financial Instruments
2023
Income Shares
$31,524
(120)
$31,404 17,732
(In Thousands, Except Per Share Amounts)
2022
Income Shares
$42,429
(120)
$42,309 17,597
17,732
17,597
2021
Income Shares
$36,543
(120)
$36,423
$2.08
$1.77
$2.40
17,492
17,492
$31,404 17,732
115
67
$42,309 17,597
115
67
$36,423
67
17,492
115
$31,471
$1.76
17,847
$42,376
$2.39
17,712
$36,490
$2.07
17,607
The following methods and assumptions were used by the Company in estimating its fair value disclosure for
financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the
consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and notes payable
approximate their respective fair values due to the short-term maturities of these instruments. The fair value of
FMBs and SRF Bonds (collectively, the Bonds) issued by Middlesex is based on quoted market prices for similar
issues. Under the fair value hierarchy, the fair value of cash and cash equivalents is classified as a Level 1
65
measurement and the fair value of notes payable and the Bonds in the table below are classified as Level 2
measurements. The carrying amount and fair value of the Bonds were as follows:
(Thousands of Dollars)
At December 31,
2023
Carrying
Amount
$133,374
FMBs
Fair
Value
$131,745
2022
Carrying
Amount
$147,269
Fair
Value
$138,756
It was not practicable to estimate the fair value on our outstanding long-term debt for which there is no quoted
market price and there is not an active trading market. For details, including carrying value, interest rate and due
date on these series of long-term debt, please refer to those series of long-term debt titled “Amortizing Secured
Notes” and “State Revolving Trust Notes” on the Consolidated Statements of Capital Stock and Long-Term Debt.
The carrying amount of these instruments was $231.3 million and $159.1 million at December 31, 2023 and 2022,
respectively. Customer advances for construction have carrying amounts of $21.3 million and $21.4 million at
December 31, 2023 and 2022, respectively. Their relative fair values cannot be accurately estimated since future
refund payments depend on several variables, including new customer connections, customer consumption levels
and future rate increases.
Note 7 - Employee Benefit Plans
Pension Benefits
The Company’s Pension Plan covers all active employees hired prior to April 1, 2007. Employees hired after March
31, 2007 are not eligible to participate in this plan, but can participate in a defined contribution profit sharing plan
that provides an annual contribution at the discretion of the Company, based upon a percentage of the participants’
annual paid compensation. In order to be eligible for contribution, the eligible employee must be employed by the
Company on December 31st of the year to which the contribution relates. The Company maintains an unfunded
supplemental plan for a limited number of its executive officers. The Accumulated Benefit Obligation for the
Company’s Pension Plan at December 31, 2023 and 2022 was $83.7 million and $79.4 million, respectively.
Other Benefits
The Company’s Other Benefits Plan covers substantially all of its current retired employees. Employees hired after
March 31, 2007 are not eligible to participate in this plan. Coverage includes healthcare and life insurance.
Regulatory Treatment of Over/Underfunded Retirement Obligations
Because the Company is subject to rate regulation in the states in which it operates, it is required to maintain its
accounts in accordance with the regulatory authority’s rules and guidelines, which may differ from other
authoritative accounting pronouncements. In those instances, the Company follows the guidance of ASC 980,
Regulated Operations. Based on prior regulatory practice, and in accordance with the guidance in ASC 980,
Regulated Operations, the Company records underfunded Pension Plan and Other Benefits Plan obligation costs,
which otherwise would be recognized in Other Comprehensive Income under ASC 715, Compensation –
Retirement Benefits, as a Regulatory Asset, and expects to recover those costs in rates charged to customers.
66
The Company uses a December 31 measurement date for all of its employee benefit plans. The tables below set
forth information relating to the Company’s Pension Plan and Other Benefits Plan for 2023 and 2022.
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
Years Ended December 31,
2023
2022
2023
2022
Change in Projected Benefit Obligation:
Beginning Balance
Service Cost
Interest Cost
Actuarial (Gain) Loss
Benefits Paid
Ending Balance
$ 87,788 $ 113,710 $ 32,909 $ 49,396
1,551 2,362 391 799
4,270 3,042 1,608 1,325
1,966 (27,850) (5,968) (17,761)
(3,722) (3,476) (940) (850)
$ 91,853 $ 87,788 $ 28,000 $ 32,909
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
Years Ended December 31,
2023
2022
2023
2022
Change in Fair Value of Plan Assets:
Beginning Balance
Actual Return on Plan Assets
Employer Contributions
Benefits Paid
Ending Balance
$ 84,828 $ 100,750 $ 44,029 $ 50,668
10,840 (14,346) 4,323 (6,639)
400 1,900 940 850
(3,722) (3,476) (940) (850)
$ 92,346 $ 84,828 $ 48,352 $ 44,029
Funded Status
$ 494 $ (2,960) $ 20,352 $ 11,120
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
2023
As of December 31,
2022
2023
2022
Amounts Recognized in the Consolidated
Balance Sheets consist of:
Current Liability
Noncurrent Liability (Asset)
Net Liability (Asset) Recognized
$ 933 $ 529 $ - $ -
(1,427) 2,431 (20,352) (11,120)
$ (494) $ 2,960 $ (20,352) $ (11,120)
67
(Thousands of Dollars)
Pension Plan
Other Benefits Plan
Years Ended December 31,
2023
2022
2021
2023
2022
2021
Components of Net Periodic Benefit Cost
Service Cost
Interest Cost
Expected Return on Plan Assets
Amortization of Net Actuarial Loss (Gain)
Net Periodic Benefit Cost*
$ 1,551 $ 2,362 $ 2,696 $ 391 $ 799 $ 917
4,270 3,042 2,706 1,608 1,325 1,236
(5,865) (7,041) (6,225) (3,082) (3,547) (3,142)
658 1,674 2,868 (191) - 527
$ 614 $ 37 $ 2,045 $ (1,274) $ (1,423) $ (462)
*Service cost is included in Operations and Maintenance expense on the consolidated statements of income; all
other amounts are included in Other Income (Expense), net.
Amounts that are expected to be amortized from Regulatory Assets into Net Periodic Benefit Cost in 2024 are as
follows:
(Thousands of Dollars)
Actuarial Loss (Gain)
Plan
$153
Pension
Other
Benefits
Plan
$(1,098)
The discount rate and compensation increase rate for determining our postretirement benefit plans’ benefit
obligations and costs as of and for the years ended December 31, 2023, 2022 and 2021, respectively, are as
follows:
Pension Plan
2022
2021
2023
Other Benefits Plan
2022
2023
2021
Weighted Average Assumptions:
Expected Return on Plan Assets
Discount Rate for:
Benefit Obligation
Benefit Cost
Compensation Increase for:
Benefit Obligation
Benefit Cost
7.00%
7.00%
7.00%
7.00%
7.00%
7.00%
4.79%
4.98%
4.98%
2.72%
2.72%
2.37%
4.79%
4.98%
4.98%
2.72%
2.72%
2.37%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
The compensation increase assumption for the Other Benefits Plan is attributable to life insurance provided to
qualifying employees upon their retirement. The insurance coverage will be determined based on the employee’s
base compensation as of their retirement date.
The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality Improvement Scale MP2021).
For the 2023 valuation, costs and obligations for our Other Benefits Plan assumed a 7.5% annual rate of increase
in the per capita cost of covered healthcare benefits in 2023 with the annual rate of increase declining 0.5% per year
for 2024-2029, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 4.5%
by year 2030.
68
A one-percentage point change in assumed healthcare cost trend rates would have the following effects on the
Other Benefits Plan:
Effect on Current Year Service and Interest Costs
Effect on Projected Benefit Obligation
(Thousands of Dollars)
1 Percentage Point
Increase
$ 308
$ 3,264
Decrease
$ (246)
$ (2,676)
The following benefit payments, which reflect expected future service, are expected to be paid:
(Thousands of Dollars)
Year
Pension Plan
Other Benefits Plan
2024 $ 5,078 $ 1,181
2025 5,457 1,310
2026 5,444 1,377
2027 5,522 1,417
2028 5,638 1,445
2029-2033 29,349 8,104
$ 56,488 $ 14,834
Totals
Benefit Plans Assets
The allocation of plan assets at December 31, 2023 and 2022 by asset category is as follows:
Pension Plan
2022 Target
Other Benefits Plan
2022
Target
2023
Asset Category
Equity Securities
Debt Securities
Cash
Real Estate/Commodities
Total
2023
58.1% 53.6%
39.6% 40.9%
3.9%
1.6%
100.0% 100.0%
0.7%
1.6%
55%
38%
2%
5%
60.9%
36.1%
3.0%
0.0%
55.2%
24.7%
20.1%
0.0%
100.0% 100.0%
43%
50%
2%
5%
Two outside investment firms each manage a portion of the Pension Plan asset portfolio. One of those investment
firms also manages the Other Benefits Plan asset portfolio. Quarterly meetings are held between the Company’s
Pension Committee of the Board of Directors and the investment managers to review their performance and asset
allocation. If the actual asset allocation is outside the targeted range, the Pension Committee reviews current market
conditions and advice provided by the investment managers to determine the appropriateness of rebalancing the
portfolio.
The objective of the Company is to maximize the long-term return on retirement plan assets, relative to a reasonable
level of risk, maintain a diversified investment portfolio and maintain compliance with the Employee Retirement
Income Security Act of 1974. The expected long-term rate of return is based on the various asset categories in
which plan assets are invested and the current expectations and historical performance for these categories.
69
Fair Value Measurements
Accounting guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are described as follows:
• Level 1 – Inputs to the valuation methodology are unadjusted quoted market prices for identical assets or
liabilities in accessible active markets.
• Level 2 – Inputs to the valuation methodology that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities. If the asset or liability has a specified contractual term, the Level 2 input must be observable
for substantially the full term of the asset or liability.
• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
Certain investments in cash and cash equivalents, equity securities, and commodities are valued based on quoted
market prices in active markets and are classified as Level 1 investments. Certain investments in cash and cash
equivalents, equity securities and fixed income securities are valued using prices received from pricing vendors that
utilize observable inputs and are therefore classified as Level 2 investments.
The following tables present Middlesex’s Pension Plan assets measured and recorded at fair value within the fair
value hierarchy:
Mutual Funds
Money Market Funds
Common Equity Securities
Corporate Bonds
Agency/US Debt
Sovereign/Non-US Debt
Total Investments
Mutual Funds
Money Market Funds
Common Equity Securities
Total Investments
(Thousands of Dollars)
As of December 31, 2023
Level 2
-
$
-
-
-
-
-
$
-
Level 3
-
$
-
-
-
-
-
$
-
(Thousands of Dollars)
As of December 31, 2022
Level 2
$
-
-
-
$
-
Level 3
$
-
-
-
$
-
Total
$
71,236
663
12,544
5,091
1,854
958
92,346
$
Total
$
71,559
3,271
9,998
84,828
$
Level 1
$
71,236
663
12,544
5,091
1,854
958
92,346
$
Level 1
$
71,559
3,271
9,998
84,828
$
70
The following tables present Middlesex’s Other Benefits Plan assets measured and recorded at fair value within
the fair value hierarchy:
(Thousands of Dollars)
As of December 31, 2023
Level 2
-
$
-
17,486
17,486
$
Level 3
-
$
-
-
$
-
(Thousands of Dollars)
As of December 31, 2022
Level 2
$
-
-
10,592
-
10,592
$
Level 3
$
-
-
-
-
$
-
Total
$
29,437
1,429
17,486
48,352
$
Total
$
23,660
8,623
10,592
1,154
44,029
$
Level 1
$
29,437
1,429
-
30,866
$
Level 1
$
23,660
8,623
-
1,154
33,437
$
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Total Investments
Mutual Funds
Money Market Funds
Agency/US/State/Municipal Debt
Other
Total Investments
Benefit Plans Contributions
For the Pension Plan, Middlesex made total cash contributions of $0.4 million in 2023 and expects to make
approximately $0.9 million of cash contributions in 2024.
For the Other Benefits Plan, Middlesex made total cash contributions of $0.9 million in 2023 and expects to make
approximately $0.9 million of cash contributions in 2024.
401(k) Plan
The Company maintains a 401(k) defined contribution plan, which covers substantially all employees with more
than 1,000 hours of service. Under the terms of the Plan, the Company matches 100% of a participant’s
contributions, which do not exceed 1% of a participant’s compensation, plus 50% of a participant’s contributions
exceeding 1%, but not more than 6%. The Company’s matching contribution was $0.8 million, $0.7 million and
$0.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Employees hired after March 31, 2007 are not eligible to participate in the Pension Plan and are generally eligible
to participate in a discretionary profit sharing plan administered through the 401(k) plan. In December each year,
the Board of Directors may approve that a stated percentage of eligible compensation be contributed to the account
of the employee participant in the first quarter of the following year. For those employees still actively employed
on December 31, 2023 or retired during the current year, the Company will fund a discretionary contribution of
$0.9 million before April 1, 2024, which represents 5.0% of eligible 2023 compensation. For the years ended
December 31, 2022 and 2021, the Company made qualifying discretionary contributions totaling $0.9 million and
$0.8 million, respectively.
Stock-Based Compensation
The Company maintains a long-term incentive compensation plan for certain management employees where awards
are made in the form of restricted common stock. Shares of restricted stock issued under the plan are subject to
forfeiture by the employee in the event of termination of employment for any reason within five years of the award
71
other than as a result of retirement at normal retirement age, death, disability or change in control. The maximum
number of shares authorized for award under the plan is 300,000 shares, of which approximately 75% remain
available for issuance.
The Company recognizes compensation expense at fair value for the plan awards in accordance with ASC 718,
Compensation – Stock Compensation. Compensation expense is determined by the market value of the stock on
the date of the award and is being amortized over the expected vesting period.
The following table presents awarded but not yet vested share information for the plan:
Balance, January 1, 2021
Granted
Vested
Amortization of Compensation expense
Balance, December 31, 2021
Granted
Vested
Amortization of Compensation expense
Balance, December 31, 2022
Granted
Vested
Amortization of Compensation expense
Balance, December 31, 2023
Note 8 – Business Segment Data
Shares(thousands)
86
15
(18)
-
83
11
(17)
-
77
15
(18)
-
74
Unearned
Compensation
(thousands)
Weighted
Average Granted
Price
$
1,837
1,151
-
(1,057)
1,931
1,151
(1,350)
1,732
1,165
-
(1,854)
1,043
$
$
79.02
$
105.17
$
77.63
The Company has identified two reportable segments. One is the regulated business of collecting, treating and
distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection customers
in parts of New Jersey and Delaware. This segment also includes regulated wastewater systems in New Jersey and
Delaware. The Company is subject to regulations as to its rates, services and other matters by the states of New
Jersey and Delaware with respect to utility service within these states. The other segment is primarily comprised of
non-regulated contract services for the operation and maintenance of municipal and private water and wastewater
systems in New Jersey and Delaware.
Inter-segment transactions relating to operational costs are treated as pass-through expenses. Finance charges on
inter-segment loan activities are based on interest rates that are below what would normally be charged by a third
party lender.
72
Operation by Segments
Revenues:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Revenues
Operating Income:
Regulated
Non – Regulated
Consolidated Operating Income
Depreciation:
Regulated
Non – Regulated
Consolidated Depreciation
Other Income, Net:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Other Income, Net
Interest Expense:
Regulated
Non – Regulated
Inter-segment Elimination
Consolidated Interest Expense
Income Taxes:
Regulated
Non – Regulated
Consolidated Income Taxes
Net Income:
Regulated
Non – Regulated
Consolidated Net Income
Capital Expenditures:
Regulated
Non – Regulated
Total Capital Expenditures
(Thousands of Dollars)
Years Ended December 31,
2022
2021
2023
$
$
$
154,617
12,773
(1,116)
166,274
151,117
12,446
(1,129)
162,434
131,531
12,818
(1,208)
143,141
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
44,257
3,076
47,333
22,783
246
23,029
7,898
279
(474)
7,703
9,833
7
(473)
9,367
2,084
1,156
3,240
40,229
2,200
42,429
91,054
281
91,335
35,820
3,403
39,223
24,931
263
25,194
6,637
214
(366)
6,485
13,508
-
(365)
13,143
(146)
1,187
1,041
29,094
2,430
31,524
90,047
132
90,179
29,577
3,634
33,211
20,897
212
21,109
6,112
279
(433)
5,958
8,529
17
(432)
8,114
(6,723)
1,235
(5,488)
33,849
2,694
36,543
79,195
183
79,378
73
(Thousands of Dollars)
As of
As of
December 31, 2023 December 31, 2022
Assets:
Regulated
Non – Regulated
Inter-segment
Consolidated Assets
1,235,549
8,068
(7,565)
1,236,052
$
$
$
1,079,180
6,999
(11,729)
1,074,450
Note 9 - Quarterly Data - Unaudited
Financial information for each quarter of 2023 and 2022 is as follows:
2023
1st
(Thousands of Dollars, Except per Share Data)
3rd
2nd
4th
Total
Operating Revenues
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per Share
Common Dividend Per Share
High/Low Common Stock Price
$ 38,156 $ 42,801 $ 46,715 $ 38,602 $ 166,274
7,490 10,669 12,822 8,242 39,223
5,868 9,901 9,990 5,765 31,524
$ 0.33 $ 0.56 $ 0.56 $ 0.32 $ 1.77
$ 0.33 $ 0.55 $ 0.56 $ 0.32 $ 1.76
$ 0.3125 $ 0.3125 $ 0.3125 $ 0.3250 $ 1.2625
$65.37/$84.35
$72.64/$90.56
$66.51/$84.38
$61.34/$73.47
2022
1st
2nd
3rd
4th
Total
Operating Revenues
Gain on Sale of Subsidiary
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per Share
Common Dividend Per Share
High/Low Common Stock Price
$ 36,196 $ 39,683 $ 47,732 $ 38,823 $ 162,434
5,232
- - - 5,232
12,523 10,088 16,575 8,147 47,333
12,100 8,868 14,291 7,170 42,429
$ 0.69 $ 0.50 $ 0.81 $ 0.40 $ 2.40
$ 0.68 $ 0.50 $ 0.81 $ 0.40 $ 2.39
$ 0.2900 $ 0.2900 $ 0.2900 $ 0.3125 $ 1.1825
$94.56/$121.10 $75.77/$108.27 $77.08/$96.19
$74.20/$95.82
The information above, in the opinion of the Company, includes all adjustments consisting only of normal recurring
accruals necessary for a fair presentation of such amounts. The business of the Company is subject to seasonal
fluctuation with the peak period usually occurring during the summer months. The quarterly earnings per share
amounts above may differ slightly from previous filings due to the effects of rounding.
ITEM 9.
FINANCIAL DISCLOSURE.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
None.
74
ITEM 9A. CONTROLS AND PROCEDURES
(1)
Disclosure controls and procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in Company reports filed under the
Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer
and Chief Financial Officer as appropriate, to allow timely decisions regarding disclosure.
As required by Rule 13a-15 under the Exchange Act, an evaluation of the effectiveness of the design and operation
of the Company’s disclosure controls and procedures was conducted by the Company’s Chief Executive Officer
along with the Company’s Chief Financial Officer for the year ended December 31, 2023. Based upon that
evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that:
a) The following changes in internal control over financial reporting occurred during the year ended December
31, 2023 that has materially affected, or are reasonably likely to materially affect, internal control over
financial reporting:
In December 2023, management implemented various auditing and monitoring solutions that provide
greater transparency into changes made within our information technology (IT) systems. These control
solutions are supported by a timely review process that focuses on the proper authorization and approval of
IT system changes.
b) Our disclosure controls and procedures were not effective as of December 31, 2023 due to the material
weaknesses described below. A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company's annual or interim financial statements will not be prevented or detected on
a timely basis.
As the IT material weakness was recently determined to exist, the remediation actions described in
paragraph (1) a) above were completed in December 2023. However, the implemented controls did not
operate over a sufficient time period to adequately test and validate the remediation and reassess other
information technology general controls (ITGCs), which may require further remediation actions.
In addition, there were ineffective internal controls related to income tax accounting for a non-routine
transaction.
Management has determined that such material weaknesses still exist as of December 31, 2023.
(2) Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Exchange Act Rule 13A-15(f) and 15d-15(f). Middlesex’s internal control system
was designed to provide reasonable assurance to the Company’s management and Board of Directors of adequate
preparation and fair presentation of the published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to the adequacy of financial statement
preparation and presentation. Middlesex’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
Integrated Framework (2013 framework).
75
Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31,
2022 which were included in Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2022, originally filed with the United States Securities and Exchange Commission on February 24, 2023, the
Company’s independent registered public accounting firm, Baker Tilly US, LLP (Baker Tilly), conducted a routine
internal quality review of its integrated audit of the Company’s 2022 consolidated financial statements and internal
control over financial reporting as of December 31, 2022. As a result of this review, Baker Tilly re-examined the
Company’s ITGCs in the areas of user access and change management over certain IT systems that support the
Company’s financial reporting processes. Certain of those controls were found to be deficient because of a lack of
sufficient IT control processes designed to prevent or detect unauthorized changes in applications and data in
selected IT environments. It has therefore been concluded that automated and manual process controls dependent
on ITGCs were not effective. These ineffective controls create a possibility that material misstatements in financial
reporting processes and financial statement accounts in our consolidated financial statements will not be prevented
or detected on a timely basis. As the material weakness was recently determined to exist, certain remediation actions
were completed in December 2023. Various auditing and monitoring solutions have been implemented that provide
greater transparency into changes made within our IT systems. These control solutions are supported by a timely
review process that focuses on the proper authorization and approval of IT system changes. Due to the timing of
the implementation of the solutions, the controls implemented did not operate over a sufficient time period to
adequately test and validate the remediation and reassess other ITGCs, which may require further remediation
actions.
In addition, there were ineffective internal controls related to income tax accounting for a non-routine transaction.
Management has determined that such material weaknesses exist as of December 31, 2023.
Notwithstanding the identified material weakness referred to above, management, including our principal executive
officer and principal financial officer, believe that the financial statements contained in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2023 fairly present, in all material respects, the
financial condition, results of operations and cash flows of the Company for all periods presented in accordance
with accounting principles generally accepted in the United States of America.
While the Audit Committee of our Board of Directors and Company management will closely monitor the
remediation efforts, until the remediation efforts discussed in this section are complete, tested and determined
effective, we will not be able to conclude that the material weakness has been remediated.
Middlesex’s independent registered public accounting firm (PCAOB ID 23) has audited the effectiveness of our
internal control over financial reporting as of December 31, 2023 as stated in their report dated as of February 29,
2024, which is included herein.
/s/ Dennis W. Doll
Dennis W. Doll
President and
Chief Executive Officer
/s/ A. Bruce O’Connor
A. Bruce O’Connor
Senior Vice President, Treasurer and
Chief Financial Officer
Iselin, New Jersey
February 29, 2024
76
ITEM 9B. OTHER INFORMATION.
(a) None.
(b) Insider Trading Arrangements and Policies - During the three months ended December 31, 2023, no director
or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1
trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K."
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
77
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information with respect to Directors of Middlesex Water Company is included in Middlesex Water Company’s
Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
Information regarding the Executive Officers of Middlesex Water Company is included under Item 1. in Part I of
this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
This Information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This information for Middlesex Water Company is included in Middlesex Water Company’s Proxy Statement for
the 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
78
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
1.
The following Financial Statements and Supplementary Data are included in Part II- Item 8. of this
Annual Report:
PART IV
Consolidated Balance Sheets at December 31, 2023 and 2022.
Consolidated Statements of Income for each of the three years in the period ended
December 31, 2023.
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2023.
Consolidated Statements of Capital Stock and Long-term Debt as of December 31, 2023 and 2022.
Consolidated Statements of Common Stockholders’ Equity for each of the three years in the period
ended December 31, 2023.
Notes to Consolidated Financial Statements.
2.
Financial Statement Schedules
All Schedules are omitted because of the absence of the conditions under which they are required or
because the required information is shown in the financial statements or notes thereto.
3. Exhibits
See Exhibit listing immediately following the signature page.
ITEM 16. FORM 10-K SUMMARY.
None.
79
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MIDDLESEX WATER COMPANY
By:
/s/ Dennis W. Doll
Dennis W. Doll
President and Chief Executive Officer
Date:
February 29, 2024
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on February 29, 2024.
By:
By:
By:
/s/ A. Bruce O’Connor
A. Bruce O’Connor
Senior Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
/s/ Robert J. Capko
Robert J. Capko
Corporate Controller
(Principal Accounting Officer)
/s/ Dennis W. Doll
Dennis W. Doll
Chairman of the Board, President, Chief Executive Officer and Director
(Principal Executive Officer)
By:
/s/ Joshua Bershad, M.D.
Joshua Bershad, M.D.
Director
By:
/s/ James F. Cosgrove Jr.
James F. Cosgrove Jr.
Director
By:
/s/ Kim C. Hanemann
Kim C. Hanemann
Director
/s/ Steven M. Klein
By:
Steven M. Klein
Director
By:
Amy B. Mansue
/s/ Amy B. Mansue
Director
By:
Vaughn L. McKoy
/s/ Vaughn L. McKoy
Director
By:
Ann L. Noble
/s/ Ann L. Noble
Director
By:
/s/ Walter G. Reinhard
Walter G. Reinhard
Director
80
EXHIBIT INDEX
Exhibits designated with an asterisk (*) are filed herewith. The exhibits not so designated have heretofore been
filed with the Commission and are incorporated herein by reference to the documents indicated in the previous
filing columns following the description of such exhibits. Exhibits designated with a dagger (t) are management
contracts or compensatory plans.
Previous
Registration
No.
Filing’s
Exhibit
No.
Exhibit No.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
Document Description
The Restated Certificate of Incorporation, filed as Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the Year ended
December 31, 1998.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on June 20, 1997, filed as Exhibit 3.1
to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1997.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on May 27, 1998, filed as Exhibit 3.1
to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1998.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on June 10, 1998, filed as Exhibit 3.1
to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1998.
Certificate of Correction of Middlesex Water Company filed with the
State of New Jersey on April 30, 1999, filed as Exhibit 3.3 to the
Company’s Annual Report on Form 10-K/A-2 for the year ended
December 31, 2003.
Certificate of Amendment to the Restated Certificate of Incorporation
of Middlesex Water Company, filed with the State of New Jersey on
February 17, 2000, filed as Exhibit 3.4 to the Company’s Annual
Report on Form 10-K/A-2 for the year ended December 31, 2003.
Certificate of Amendment to the Restated Certificate of Incorporation
of Middlesex Water Company, filed with the State of New Jersey on
June 5, 2002, filed as Exhibit 3.5 to the Company’s Annual Report on
Form 10-K/A-2 for the year ended December 31, 2003.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on June 19, 2007, filed as Exhibit
3.1 to the Company’s Current Report on Form 8-K filed April 30,
2010.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on September 4, 2019, filed as
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed
September 6, 2019.
Certificate of Amendment to the Restated Certificate of Incorporation,
filed with the State of New Jersey on September 19, 2019, filed as
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed
September 23, 2019.
81
EXHIBIT INDEX
Exhibit No.
3.11
3.12
4.1
10.1
10.2
10.3
10.4
10.5
Document Description
By-laws of the Company, as amended, filed as Exhibit 4.10 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2010.
Amendments to the by-laws of the Company, included as Exhibit
3(ii) to the Company’s Current Report on Form 8-K dated November
22, 2017.
Form of Common Stock Certificate.
Water Service Agreement, dated February 28, 2006, between the
Company and Elizabethtown Water Company, filed as Exhibit 10 of
the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006.
Mortgage, dated April 1, 1927, between the Company and Union
County Trust Company, as Trustee, as supplemented by
Supplemental Indentures, dated as of October 1, 1939 and April 1,
1949.
Supplemental Indenture, dated as of July 1, 1964 and June 15, 1991,
between the Company and Union County Trust Company, as
Trustee.
Agreement for a Supply of Water, dated as of July 27, 2011, between
the Company and the Old Bridge Municipal Utilities Authority, filed
as Exhibit No. 10.4 of the Company’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2011.
Water Supply Agreement, dated as of July 14, 1987, between the
the Marlboro Township Municipal Utilities
Company and
Authority, as amended.
10.7
10.8
*10.6 (1) Water Purchase Contract, dated as of October 24, 2023, between the
Company and the New Jersey Water Supply Authority.
Treatment and Pumping Agreement, dated October 1, 2014,
between the Company and the Township of East Brunswick, filed
as Exhibit No. 10.7 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2016.
Water Supply Agreement, dated June 4, 1990, between the
Company and Edison Township.
Agreement for a Supply of Water, dated January 1, 2006, between
the Company and the Borough of Highland Park, filed as Exhibit
No. 10.1 of the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006.
Amendment to Agreement for a Supply of Water, dated as of
December 1, 2015, between the Company and the Borough of
Highland Park, filed as Exhibit No. 10.9(a) of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2015.
10.9(a)
10.9
Previous
Registration
No.
Filing’s
Exhibit
No.
2-55058
2(a)
2-15795
4(a)-4(f)
33-54922
10.4-10.9
33-31476
10.13
33-54922
10.24
82
Previous
Registration
No.
Filing’s
Exhibit
No.
333-156269
EXHIBIT INDEX
Exhibit No.
(t)10.10
Document Description
Middlesex Water Company Supplemental Executive Retirement
Plan, filed as Exhibit 10.13 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999.
(t)10.12
(t)10.11(b)
(t)10.11(a) Middlesex Water Company 2018 Restricted Stock Plan, filed as
Appendix A to the Company’s Definitive Proxy Statement, dated
and filed April 12, 2018.
Registration Statement, Form S-8, under the Securities Act of
1933, filed December 18, 2008, relating to the Middlesex Water
Company Outside Director Stock Compensation Stock Plan.
Employment Agreement, dated as of March 1, 2024, between the
Company and Nadine Duchemin-Leslie, filed as Exhibit 99.2 of
the Company’s Current Report on Form 8-K dated January 23,
2024.
Change in Control Termination Agreement, dated as of March 1,
2024, between the Company and Nadine Duchemin-Leslie, filed
as Exhibit 99.3 of the Company’s Current Report on Form 8-K
dated January 23, 2024.
Change in Control Termination Agreement, dated as of January
1, 2009, between the Company and A. Bruce O’Connor, filed as
Exhibit 10.13(b) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2008.
(t)10.12(a)
(t)10.12(b)
(t)10.12(d)
(t)10.12(e)
(t)10.12(c) Change in Control Termination Agreement, dated as of March 1,
2012, between the Company and Lorrie B. Ginegaw, filed as
Exhibit 10.13(e) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2011.
Change in Control Termination Agreement, dated as of January
1, 2009, between the Company and Bernadette M. Sohler, filed
as Exhibit 10.13(h) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2008.
Change in Control Termination Agreement, dated as of March
17, 2014, between the Company and Jay L. Kooper, filed as
Exhibit 10.12(g) of the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2014.
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and G. Christian Andreasen, filed
as Exhibit 10.12(f) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2019.
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and Robert K. Fullagar, filed as
Exhibit 10.12(g) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2019.
(t)10.12(g)
(t)10.12(f)
83
Previous
Registration
No.
Filing’s
Exhibit
No.
33-54922
10.23
Exhibit No.
(t)10.12(h)
(t)10.12(i)
10.13
10.13(a)
10.14
10.15
10.16
10.17(a)
EXHIBIT INDEX
Document Description
Change in Control Termination Agreement, dated as of July 1,
2019, between the Company and Georgia M. Simpson, filed as
Exhibit 10.12(h) of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2019.
Change in Control Termination Agreement, dated as of April 28,
2023 between the Company and Robert J. Capko, filed as Exhibit
10.12(i) of the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2023.
Transmission Agreement, dated October 16, 1992, between the
Company and the Township of East Brunswick.
Amendment, dated November 28, 2016, to Transmission
Agreement between the Company and the Township of East
Brunswick, filed as Exhibit No. 10.13(a) of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2016.
Contract, dated August 20, 2018, between the City of Perth
Amboy and Utility Service Affiliates (Perth Amboy), Inc., filed
as Exhibit 10.16 of the Company’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2018.
Thirtieth Supplemental Indenture, dated October 15, 2004,
between
the Company and Wachovia Bank, National
Association; Loan Agreement, dated November 1, 2004, between
the State of New Jersey and the Company (Series EE), filed as
Exhibit No. 10.26 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2004.
Thirty-First Supplemental Indenture, dated October 15, 2004,
between
the Company and Wachovia Bank, National
Association; Loan Agreement, dated November 1, 2004, between
the New Jersey Environmental Infrastructure Trust and the
Company (Series FF), filed as Exhibit No. 10.27 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2004.
Promissory Note and Supplement, dated October 15, 2014,
between Tidewater Utilities,
Inc. and CoBank, ACB;
Amendment to Combination Water Utility Real Estate Mortgage
and Security Agreement, effective October 15, 2014, between
Tidewater Utilities, Inc. and CoBank, ACB, filed as Exhibit
10.23 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2014.
84
Previous
Registration
No.
Filing’s
Exhibit
No.
Exhibit No.
10.17(b)
10.17(c)
10.17(d)
10.18
10.19
10.20
10.21
10.22
10.23
EXHIBIT INDEX
Document Description
Promissory Note and Supplement, dated March 29, 2021,
Inc. and CoBank, ACB;
between Tidewater Utilities,
Amendment to Combination Water Utility Real Estate Mortgage
and Security Agreement, effective March 29, 2021, between
Tidewater Utilities, Inc. and CoBank, ACB, filed as Exhibit
10.19(b) of the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2021.
Promissory Note and Supplement, dated May 11, 2023, between
Tidewater Utilities, Inc. and CoBank, ACB; Amendments to
Combination Water Utility Real Estate Mortgage and Security
Agreement, effective May 11, 2023, between Tidewater Utilities,
Inc. and CoBank, ACB, filed as Exhibit 10.17(c) of the
Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2023.
Sixth Amendment to Promissory Note and Supplement, dated as
of May 11, 2023, between Tidewater Utilities, Inc. and CoBank,
ACB, filed as Exhibit 10.17(d) of the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2023.
Agreement for a Supply of Water, dated April 1, 2006, between
the Company and the City of Rahway, filed as Exhibit No. 10.2
of the Company’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006.
Loan Agreement, dated November 1, 2006, between the State of
New Jersey and the Company (Series GG), filed as Exhibit No.
10.30 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006.
Loan Agreement, dated November 1, 2006, between the New
Jersey Environmental Infrastructure Trust and the Company
(Series HH), filed as Exhibit No. 10.31 of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2006.
Loan Agreement, dated November 1, 2007, between New
Jersey Environmental Infrastructure Trust and the Company
(Series II), filed as Exhibit No. 10.32 of the Company’s
Annual Report on Form 10-K for the year ended December
31, 2007.
Loan Agreement, dated November 1, 2007, between the State
of New Jersey and the Company (Series JJ), filed as Exhibit
10.33 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Loan Agreement, dated November 1, 2008, between New
Jersey Environmental Infrastructure Trust and the Company
dated as of (Series KK), filed as Exhibit 10.34 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.
85
Previous
Registration
No.
Filing’s
Exhibit
No.
333-266482
333-266482
Exhibit No.
10.24
10.25
10.25(a)
10.26(a)
10.26(b)
10.26(c)
10.26(d)
EXHIBIT INDEX
Document Description
Loan Agreement, dated November 1, 2008, between the State
of New Jersey and the Company (Series LL), filed as Exhibit
10.35 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008.
Prospectus Supplement, filed August 3, 2022, relating to the
Middlesex Water Company Investment Plan.
Prospectus Supplement, filed July 25, 2023, relating to the
Middlesex Water Company Investment Plan.
Amended and Restated $68,000,000 Revolving Line of Credit
Note, dated February 9, 2022, between the Company,
Pinelands Wastewater Company, Pinelands Water Company,
Tidewater Utilities, Inc., Utility Service Affiliates (Perth
Amboy) Inc., Utility Service Affiliates Inc. and While Marsh
Environmental Systems, Inc., and PNC Bank, N.A., filed as
Exhibit 10.26(a) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2021.
Waiver and Amendment to Loan Documents, dated February
9, 2022, between the Company, Pinelands Wastewater
Company, Pinelands Water Company, Tidewater Utilities,
Inc., Utility Service Affiliates (Perth Amboy) Inc., Utility
Service Affiliates Inc. and While Marsh Environmental
Systems, Inc., and PNC Bank, N.A., filed as Exhibit 10.26(b)
of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2021.
Amendment to Loan Documents, dated March 17, 2023,
between the Company, Pinelands Wastewater Company,
Pinelands Water Company, Tidewater Utilities, Inc., Utility
Service Affiliates (Perth Amboy) Inc., Utility Service
Affiliates Inc. and While Marsh Environmental Systems, Inc.,
and PNC Bank, N.A. filed as Exhibit 10.26(c) of the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2023.
Amendment to Loan Documents, dated April 5, 2023,
between the Company, Pinelands Wastewater Company,
Pinelands Water Company, Tidewater Utilities, Inc., Utility
Service Affiliates (Perth Amboy) Inc., Utility Service
Affiliates Inc. and While Marsh Environmental Systems, Inc.,
and PNC Bank, N.A, filed as Exhibit 10.26(d) of the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2023.
86
EXHIBIT INDEX
Exhibit No.
10.26(e)
Document Description
Amendment to Loan Documents, dated June 15, 2023, between
the Company, Pinelands Wastewater Company, Pinelands
Water Company, Tidewater Utilities, Inc., Utility Service
Affiliates (Perth Amboy) Inc., Utility Service Affiliates Inc.
and While Marsh Environmental Systems, Inc., and PNC
Bank, N.A, filed as Exhibit 10.26(e) of the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2023.
Previous
Registration
No.
Filing’s
Exhibit
No.
10.27(a)
10.27(b)
*10.26(f) (1) Amendment to Loan Documents, dated January 29, 2024,
between the Company, Pinelands Wastewater Company,
Pinelands Water Company, Tidewater Utilities, Inc., Utility
Service Affiliates (Perth Amboy) Inc., Utility Service
Affiliates Inc. and While Marsh Environmental Systems, Inc.,
and PNC Bank, N.A.
Uncommitted ($30,000,000) Loan Agreement, dated January
28, 2021, between the Company, Tidewater Utilities, Inc.,
White Marsh Environmental Systems, Inc., Pinelands Water
Company, Pinelands Wastewater Company, Utility Service
Affiliates, Inc., Utility Service Affiliates (Perth Amboy) Inc.,
Tidewater Environmental Services, Inc., and Bank of America,
N.A. filed as Exhibit 10.30 of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2020.
Amendment No. 1 ($60,000,000) to Uncommitted Loan
Agreement, dated January 27, 2022, between the Company,
Tidewater Utilities,
Inc., White Marsh Environmental
Systems,
Inc., Pinelands Water Company, Pinelands
Wastewater Company, Utility Service Affiliates, Inc., Utility
Service Affiliates (Perth Amboy) Inc., and Bank of America,
N.A., filed as Exhibit 10.27(b) of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2021.
Amendment No. 2 ($60,000,000) to Uncommitted Loan
Agreement, dated January 26, 2023, between the Company,
Tidewater Utilities, Inc., White Marsh Environmental Systems,
Inc., Pinelands Water Company, Pinelands Wastewater
Company, Utility Service Affiliates, Inc., Utility Service
Affiliates (Perth Amboy) Inc., and Bank of America, N.A. filed
as Exhibit 10.27(c) of the Company’s Annual Report on Form
10-K for the year ended December 31, 2022.
10.27(c)
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10.30
10.31
10.28
10.29
*10.27(d) (1) Amendment No. 3 ($60,000,000) to Uncommitted Loan
Agreement, dated January 25, 2024, between the Company,
Tidewater Utilities,
Inc., White Marsh Environmental
Systems,
Inc., Pinelands Water Company, Pinelands
Wastewater Company, Utility Service Affiliates, Inc., Utility
Service Affiliates (Perth Amboy) Inc., and Bank of America,
N.A.
Fourth Amendment to Promissory Note and Supplement, dated
as of August 19, 2020, between Tidewater Utilities, Inc. and
CoBank, ACB, filed as Exhibit 10.34 of the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2020.
Loan Agreement, dated December 1, 2010, between the State
of New Jersey and the Company (Series MM), filed as Exhibit
10.41 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2010.
Loan Agreement, dated December 1, 2010, between New
Jersey Environmental Infrastructure Trust and the Company
(Series NN), filed as Exhibit 10.42 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2010.
Loan Agreement, dated May 1, 2012, between the State of New
Jersey and the Company, (Series OO), filed as Exhibit 10.43
of the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2012.
Loan Agreement, dated May 1, 2012, between New Jersey
Environmental Infrastructure Trust and the Company (Series
PP), filed as Exhibit 10.44 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2012.
Loan Agreement, dated November 1, 2012, between the New
Jersey Economic Development Authority and the Company
(Series QQ]), filed as Exhibit 10.41 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2012.
Loan Agreement, dated May 1, 2013, between the State of New
Jersey and the Company (Series TT), filed as Exhibit 10.42 of
the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2013.
Loan Agreement, dated May 1, 2013, between New Jersey
Environmental Infrastructure Trust and the Company (Series
UU), filed as Exhibit 10.43 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2013.
Loan Agreement, dated May 1, 2014, between New Jersey
Environmental Infrastructure Trust and the Company (Series
VV), filed as Exhibit 10.43 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2014.
10.35
10.36
10.34
10.33
10.32
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10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
EXHIBIT INDEX
Document Description
Loan Agreement, dated May 1, 2014, between New Jersey
Environmental Infrastructure Trust and the Company (Series
WW), filed as Exhibit 10.44 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2014.
Loan Agreement, dated November 1, 2017, between New
Jersey Environmental Infrastructure Trust and the Company
(Series XX), filed as Exhibit 10.44 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017.
Loan Agreement, dated November 1, 2017, between New
Jersey Environmental Infrastructure Trust and the Company
(Series YY), filed as Exhibit 10.45 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017.
Loan Agreement, dated May 1, 2018, between New Jersey
Environmental Infrastructure Trust and the Company (Series
2018A), filed as Exhibit 10.46 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018.
Loan Agreement, dated May 1, 2018, between New Jersey
Environmental Infrastructure Trust and the Company (Series
2018B), filed as Exhibit 10.47 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018.
Loan Agreement, dated August 1, 2019, between New Jersey
Economic Development Authority and the Company (Series
2019A and Series 2019B), filed as Exhibit 10.50 to the
Company’s Current Report on Form 8-K filed September 6,
2019.
Bond Purchase Agreement, dated November 16, 2020,
between New York Life Insurance Company and Affiliates and
the Company (Series 2020A), filed as Exhibit 10.48 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2020.
Bond Purchase Agreement, dated November 5, 2021, between
New York Life Insurance Company and Affiliates and the
Company (Series 2021A and Series 2021B), filed as Exhibit
10.46 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2021.
Financing Agreement, dated December 16, 2021, between the
Delaware Drinking Water State Revolving Fund, acting by and
through the Delaware Department of Health & Social Services,
and Tidewater Utilities, Inc, filed as Exhibit 10.46 of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2021.
Loan Agreement, dated May 1, 2022, between New Jersey
Infrastructure Bank and the Company (Series 2022A), filed as
Exhibit 10.40 of the Company’s Quarterly Report on Form 10-
Q for the quarterly period ended June 30, 2022.
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10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
EXHIBIT INDEX
Document Description
Loan Agreement, dated May 1, 2022, between the State of New
Jersey, acting by and through the New Jersey Department of
Environmental Protection, and the Company (Series 2022B)
filed as Exhibit 10.41 of the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2022.
Bond Purchase Agreement, dated March 2, 2023, between New
York Life Insurance Company and Affiliates and the Company
(Series 2023A) filed as Exhibit 10.48 of the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2023.
Financing Agreement, dated April 5, 2023, between the
Delaware Drinking Water State Revolving Fund, acting by and
through the Delaware Department of Health and Social
Services, Division of Public Health and Tidewater Utilities, Inc.,
filed as Exhibit 10.49 of the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2023.
Financing Agreement, dated April 5, 2023, between the
Delaware Drinking Water State Revolving Fund, acting by and
through the Delaware Department of Health and Social
Services, Division of Public Health and Tidewater Utilities, Inc,
filed as Exhibit 10.50 of the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2023.
Financing Agreement, dated April 5, 2023, between the
Delaware Drinking Water State Revolving Fund, acting by and
through the Delaware Department of Health and Social
Services, Division of Public Health and Tidewater Utilities, Inc,
filed as Exhibit 10.51 of the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2023.
Multiple Advance Term Promissory Note, dated May 22, 2023,
between Pinelands Water Company and CoBank, ACB, filed as
Exhibit 10.53 of the Company’s Quarterly Report on Form 10-
Q for the quarterly period ended September 30, 2023.
Multiple Advance Term Promissory Note, dated May 22, 2023,
between Pinelands Wastewater Company and CoBank, ACB,
filed as Exhibit 10.54 of the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2023.
Settlement Agreement, dated as of August 28, 2023, between
Middlesex Water Company and 3M Company, filed as Exhibit
10.55 of the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2023.
Consulting Agreement, dated March 1, 2024, between the
Company and Dennis W. Doll, filed as Exhibit 99.4 of the
Company’s Current Report on Form 8-K dated January 23,
2024.
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Exhibit No.
*19 (1)
*21 (1)
*23.1 (1)
*31 (1)
*31.1 (1)
*32 (1)
*32.1 (1)
*97 (1)
101.INS
101.SCH
101.CAL
Document Description
Middlesex Water Company Insider Trading Policy.
Middlesex Water Company Subsidiaries.
Consent of Independent Registered Public Accounting Firm,
Baker Tilly US, LLP.
Section 302 Certification by Dennis W. Doll pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934.
Section 302 Certification by A. Bruce O’Connor pursuant to
Rules 13a-14 and 15d-14 of the Securities Exchange Act of
1934.
Section 906 Certification by Dennis W. Doll pursuant to 18
U.S.C.§1350.
Section 906 Certification by A. Bruce O’Connor pursuant to
18 U.S.C.§1350.
Middlesex Water Company
Clawback Policy.
XBRL Instance Document– the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
Incentive-Based Award
(1) These documents were included in the 2023 Form 10-K, as filed with the United States Securities
and Exchange Commission and will be provided upon request.
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BOARD OF DIRECTORS
Joshua Bershad, M.D. (1,2)
Executive Vice President
Physician Services of RWJBarnabas Health
Chief Medical Officer
Rutgers Athletics
Dennis W. Doll
Chairman of the Board,
Past President & Chief Executive Officer
Middlesex Water Company
James F. Cosgrove, Jr. (2, 4, 5)
President
One Water Consulting, LLC
Kim C. Hanemann (2, 3)
President & Chief Operating Officer
Public Service Electric & Gas Company (PSE&G)
Nadine Leslie
President and Chief Executive Officer
Middlesex Water Company
Steven M. Klein (1, 4)
President & Chief Executive Officer
Northfield Bancorp, Inc., Northfield Bank
Amy B. Mansue (1, 2)
President & Chief Executive Officer
Inspira Health
Vaughn L. McKoy (1,3)
Partner
Connell Foley, LLP
Ann L. Noble (3, 4, 5)
Financial Consultant
Walter G. Reinhard (3, 4, 5)
(Retired) Former Partner
Norris McLaughlin, P.A.
Committees
1. Audit
2. Compensation
3. Corporate Governance & Nominating
4. Pension
5. Ad-Hoc Pricing
EXECUTIVE MANAGEMENT TEAM
G. Christian Andreasen, Jr.
Vice President – Enterprise Engineering
Robert J. Capko
Principal Accounting Officer
Robert K. Fullagar
Vice President – Operations
Lorrie B. Ginegaw
Vice President – Human Resources
Jay L. Kooper
Vice President, General Counsel
& Secretary
Nadine Leslie
President and Chief Executive Officer
A. Bruce O’Connor
Sr. Vice President, Treasurer &
Chief Financial Officer
Bruce E. Patrick
President, Tidewater Utilities, Inc.
Georgia M. Simpson
Vice President – Information Technology &
Chief Technology Officer
Bernadette M. Sohler
Vice President – Corporate Affairs
COMPANY HEADQUARTERS
Middlesex Water Company
485C Route 1 South, Suite 400
Iselin, NJ 08830
Telephone: 732-634-1500
MiddlesexWater.com
TRANSFER AGENT AND REGISTRAR
Broadridge Corporate Issuer Solutions, Inc. (Broadridge)
P.O. Box 1342
Brentwood, New York 11717
Telephone: 1-888-211-0641
E-mail: shareholder@broadridge.com
Website: http://shareholder.broadridge.com/middlesexwater
SHAREHOLDER ACCOUNT INQUIRIES
To review the status of your shareholder account or dividend payments, transfer shares, report a
change of address or other related matters, please contact Broadridge directly
by calling 1-888-211-0641.
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Baker Tilly US, LLP
1650 Market Street, Suite 4500
Philadelphia, PA 19103
Telephone: 215-972-0701
INVESTOR RELATIONS
Shareholders, analysts and others seeking information about
Middlesex Water Company are invited to contact our Investor Relations Department at:
Telephone: 732-638-7549 • Fax: 732-638-7515
E-mail: bsohler@middlesexwater.com
Copies of our earnings and other releases, financial publications including our Annual Report on
SEC Form 10-K as well as 10-Q filings and dividend announcements are available without charge
upon request. These documents are also typically available within minutes of being filed on the
Investors section of our website at MiddlesexWater.com. Shareholders may also subscribe to
receive Email Alerts in this area for daily stock quotes, Company news or SEC filings.
THE MIDDLESEX WATER COMPANY
INVESTMENT PLAN
The Middlesex Water Company Investment Plan provides new and existing shareholders of its
common stock with a convenient way to build ownership in the Company through the purchase
of common shares directly from the Company and the reinvestment of their cash dividends. The
Prospectus and enrollment form are available from Broadridge at
http://shareholder.broadridge.com/middlesexwater and may also be accessed in the Investors
section at MiddlesexWater.com.
2024 DIVIDEND SCHEDULE*
Record Dates Payment Dates
Record Dates Payment Dates
Common
FEB 15
MAY 15
AUG 15
NOV 15
MAR 1
JUN 3
SEP 3
DEC 2
Preferred
JAN 12
APR 15
JUL 15
OCT 15
FEB 1
MAY 1
AUG 1
NOV 1
*Subject to approval by Board of Directors.
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