What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-01 compared with 2023-02-24 · 453 added, 434 removed, 251 unchanged (78% of the section changed)

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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.

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

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.

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.

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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.

Leslie will also be appointed to the Board

of Directors effective March 1, 2024.

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 in South Plainfield, New Jersey exceeded a NJDEP standard that

became effective in 2021.

Prior to 2021, the Company began design for

construction of an enhanced treatment process at the Park Avenue Wellfield Treatment 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.

The Company must comply with several other requirements of

the ACO or face penalties.

In November 2021, the Company was served with two

PFOA-related class action lawsuits seeking restitution for medical, water replacement and other claimed related costs.

These lawsuits

are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.

The Company’s insurance

provider has acknowledged coverage of potential liability which may result from these lawsuits.

In May 2022, the Company impleaded 3M

Company (3M) as a third-party defendant in one of these class action lawsuits.

The Company has has also initiated a separate lawsuit against

3M seeking to hold 3M accountable for introduction of perfluoroalkyl substances (PFAS), which include PFOA, into the Company’s water

supply at its Park Avenue Wellfield facility.

Capital Construction

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

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;

● 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.

Capital Construction Program

The Company’s multi-year

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plans to invest approximately $75 million in 2024 in connection with this plan for projects that include, but are not limited to:

● Completion of construction of a facility to provide an enhanced treatment process at the Company’s

largest wellfield in South Plainfield, New Jersey to comply with new state water quality regulations relative to PFAS, and integrate surge

protection to mitigate spikes in water pressures along with enhancements to corrosion control and chlorination processes;

● 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 Company and customer owned lead and galvanized service lines;

● Interconnecting Tidewater’s Angola and Meadows Districts which will provide redundant capacity and

storage for both districts;

● Improvements to Pinelands Water’s Well Station #2;

● 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;

● Various water main replacements and improvements.

Sale of Subsidiary

In January 2022, Middlesex

closed on the Delaware Public Service Commission (DEPSC) approved sale of 100% of the common stock

of its subsidiary Tidewater Environmental Services, Inc.

for $6.4 million in cash and other consideration, resulting in a $5.2 million

pre-tax gain.

The Company will continue to own and operate its regulated water utilities in Delaware as well as its non-regulated

operations and maintenance contract business.

Coronavirus (COVID-19) Pandemic

In January 2023, the United States Secretary of Health

and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic with an announced

end to the nationwide health emergency on May 11, 2023.

While the Company’s operations and

capital construction program have not been materially disrupted to date from the pandemic, the COVID-19 impact on economic conditions

nationally continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in

In New Jersey, the declared COVID-19 State of Emergency Order ended in March 2022.

Delaware, the declared COVID-19 State of Emergency Order ended in July 2021 .

The New Jersey

Board of Public Utilities (the NJBPU) and the DEPSC have approved the tracking of COVID-19

related incremental costs for potential recovery in customer rates in future rate proceedings.

Neither jurisdiction has established a

timetable or definitive formal procedures for seeking cost recovery .

The Company has

increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of

COVID-19 on customers.

The Company has not deferred any COVID-19 related incremental costs.

will continue to monitor the effects of COVID-19 and evaluate its impact on the Company’s results of operations, financial condition

and liquidity.

Strategy for Growth

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

Our strategy for profitable growth is focused on the following key

● Invest in projects, products and services that complement our core water and wastewater competencies;

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● Operation of municipal and industrial water and wastewater systems on a contract basis which meet our risk profile.

Middlesex – In December 2021, Middlesex’s

petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in

an expected increase in annual operating revenues of $27.7 million.

The approved tariff rates were designed to recover increased operating

costs, as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%.

was implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January

As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for

recovery of increased purchased water costs between base rate case filings, was reset to zero.

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.

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.

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 PWAC tariff rate to recover additional costs of $2.7 million for the purchase of treated water from

a non-affiliated regulated water utility.

The increase, effective October 1, 2022, is on an interim basis and subject to refund with interest,

pending final resolution expected in the second quarter of 2022.

In March 2021, the NJBPU approved Middlesex’s

annual petition to reset its PWAC tariff rate to recover additional costs of $1.1 million for the purchase of treated water from a non-affiliated

regulated water utility.

The new PWAC rate became effective April 4, 2021.

Tidewater – On August 31, 2022,

the DEPSC issued an Order requiring Tidewater to reduce its base rates charged to general metered and private fire customers by 6%, effective

for service rendered on and after September 1, 2022.

In June 2022, the Delaware Division of the Public Advocate had filed a petition with

the DEPSC requesting that Tidewater’s rates be reduced based on the claim that Tidewater had been earning above its authorized rate

The rate reduction is expected to reduce annual revenues by approximately $2.2 million.

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.

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 March 2021, Tidewater was notified by the DEPSC

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Consequently, Tidewater

reset its Distribution System Improvement Charge (DSIC) rate to zero effective April 1, 2021 and refunded approximately $1.0 million to

customers principally in the form of an account credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.

DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return on, qualifying capital improvements

made between base rate proceedings.

Pinelands - In September 2022, Pinelands Water

and Pinelands Wastewater filed separate petitions with the NJBPU seeking permission to increase base rates by approximately $0.6 million

and $0.4 million per year, respectively.

These requests were necessitated by capital infrastructure investments both companies have made,

or have committed to make, and increased operations and maintenance costs.

We cannot predict whether the NJBPU will ultimately approve,

deny, or reduce the amount of the requests.

A decision by the NJBPU in both matters is expected in the first quarter of 2023.

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

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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.

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.

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

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.

The agreement expires on December 31, 2029.

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 2023.

As operating costs are anticipated to increase in 2023 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.

The DEPSC issued an Order requiring Tidewater to reduce

its base rates charged to general metered and private fire customers by 6% (for further discussion of the impact of this on the Company,

see Rates, Tidewater above).

Our investments in system infrastructure continue to grow significantly and our operating costs are

anticipated to increase in 2023 and 2024 in a variety of categories.

These factors, among others, will likely require Middlesex and Tidewater

to file base rate increase requests as early as the second quarter of 2023.

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.

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 the 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

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

million for the 2023-2025 capital investment program, including approximately $22 million for PFAS-related treatment upgrades, $18 million

for Lead and Copper Rule compliance in the Middlesex System, $34 million on the RENEW Program, which is our ongoing initiative to replace

water mains in the Middlesex System and $8 million for construction of elevated storage tanks in our Tidewater and Middlesex Systems.

$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

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and Non-Regulated.

Our Regulated segment contributed approximately 93% of total revenues for the year ended December 31, 2022 and 91%

for each of the years ended December 31, 2021 and 2020 and approximately 95% of net income for the year ended December 31, 2022 and 93%

of net income for each of the years ended December 31, 2021, and 2020.

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;

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.

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31, 2023 increased $3.8 million from the same period in 2022 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 base 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;

● All other revenue categories decreased $0.1 million.

● 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) ;

● 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, 2022 increased $5.4 million from the same period in 2021 due to the following factors:

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;

● 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 ) ;

● All other operation and maintenance expense categories increased $0.1 million.

● 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;

● All other operation and maintenance expense categories decreased $0.3 million.

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 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.

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

Gain on Sale of Subsidiary

Middlesex recognized a $5.2 million gain on the sale

of its regulated Delaware wastewater subsidiary in January 2022.

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

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 Allowance for Funds Used During Construction (AFUDC) resulting from a reduced level of capital projects

under construction.

31, 2023 decreased $1.2 million from the same period in 2022 primarily due to lower actuarially-determined retirement benefit plans non-service

Interest Charges

Interest charges for the year ended December 31,

increased $1.3 million from the same period in 2021 due to higher long-term and short-term debt outstanding in 2022 as compared to 2021

and higher average interest rates in 2022 as compared to 2021.

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 for the year ended December 31, 2023

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

Partially offsetting these increases were greater income tax benefits associated with increased repair expenditures on tangible

property in the Middlesex system.

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

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.

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

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Depreciation expense

Gain on Sale of Subsidiary

Operating income

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31, 2022 increased $19.3 million from the same period in 2021 due to the following factors:

● Middlesex System revenues decreased by $0.4 million due to lower water demand from general meter service

and wholesale customers, offset by an increase in the PWAC tariff rate effective April 4, 2021 (see Rates, Middlesex above for

further discussion);

● Tidewater System revenues increased $1.7 million due to additional customers and higher customer demand

for water, partially offset by $1.0 million due to the DSIC revenue refund (for further information, see Rates, Tidewater above

for further discussion ) ;

● Non-regulated revenues increased $0.3 million, primarily due to USA’s contract to operate and maintain

Highland Park’s water and wastewater systems, which commenced July 1, 2020;

● 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;

● All other revenue categories decreased $0.1 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the year ended

December 31, 2021 increased $2.9 million from the same period in 2020 due to the following factors:

● Higher weather-related water main break activity in our Middlesex system during the winter months resulted

in $0.5 million of additional non-labor costs;

● Labor costs increased $0.9 million due to wage increases and lower allocation of labor to capital projects;

● Increased business insurance premiums resulted in $0.3 million of additional costs;

● Increased Avalon and Highland Park billable supplemental service expenses increased $0.5 million;

● Outside services and consultant costs increased $0.2 million due to higher regulatory and corporate activity,

including compliance with America’s Water Infrastructure Act of 2018;

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;

● Information technology costs increased $0.2 million due to greater software licensing fees;

● 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 ) ;

● All other operation and maintenance expense categories increased $0.1 million.

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31, 2022 increased $1.9 million from the same period in 2021 due to a higher level of utility plant in service.

Other taxes for the year ended December 31, 2021 increased

$0.2 million from the same period in 2020 primarily due to higher payroll taxes on increased labor costs.

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

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

2021 increased $1.6 million from the same period in 2020 primarily due to lower actuarially-determined retirement benefit plans non-service

expense offset by lower AFUDC on a lower average level of capital construction projects under construction.

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.

Interest Charges

Interest charges for the year ended December 31,

increased $0.6 million from the same period in 2020 due to higher long-term and short-term debt outstanding in 2021 as compared to 2020

partially offset by lower average interest rates on short term borrowings year-over-year.

The benefit from income taxes for the year ended December

31, 2021 increased by $1.4 million from the same period in 2020 primarily due to lower pre-tax income .

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 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

Net Income and Earnings Per Share

Net income for the year ended December 31, 2021 decreased

$1.9 million as compared with the same period in 2020.

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

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Diluted earnings per share were $2.39 and $2.07 for the years ended December 31, 2022 and 2021, respectively

In anticipation of this expected decrease, in 2021, Middlesex filed and settled a base rate increase request with the NJBPU, with rate

increases becoming effective on January 1, 2022 and January 1, 2023 (for further discussion of Middlesex’s rate increase, see Rates,

Middlesex above).

(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:

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, 2022, cash flows from

operating activities increased $28.3 million to $61.4 million.

The increase in cash flows from operating activities primarily resulted

from higher operating revenues from Middlesex’s January 1, 2022 rate increase and the timing of payments

to vendors and to income tax authorities.

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.

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, 2022, cash flows used

in investing activities increased $8.8 million to $88.2 million, which was attributable to higher utility plant expenditures partially

offset by cash received from the sale of Middlesex’s regulated wastewater subsidiary in January 2022 .

For further discussion on the Company’s future

capital expenditures and expected funding sources, see “ Capital Expenditures and Commitments ” below.

For the 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, 2022, cash flows provided

by financing activities decreased $12.3 million to $27.1 million.

The decrease in cash flows provided by financing activities is due to

a decrease in net long-term borrowings, lower net customer advances and contributions and higher

common stock dividends offset by higher proceeds from the issuance of common stock and higher short-term borrowing.

For further discussion on the Company’s short-term

and long-term debt, see “ Sources of Liquidity ” below.

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.

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 2023-2025.

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.

Distribution/Network System

Production System

Information Technolgy (IT) Systems

Information Technology (IT) Systems

Total Estimated Capital Expenditures

Our estimated capital expenditures for the items listed

above are primarily comprised of the following:

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

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RENEW is our ongoing initiative to replace water mains in the Middlesex System.

In connection with RENEW, we expect to spend approximately $12 million in 2023, and $11 million in each of 2024 and 2025.

spend approximately $8 million in 2023 and 2024 for construction of elevated storage tanks in our Tidewater and Middlesex systems.

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

million of expenditures in 2023 for PFAS treatment upgrades in our Middlesex system.

● 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.

$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,

The actual amount and timing of capital expenditures

is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project

scheduling and continued refinement of project scope and costs and, could be impacted if significant effects of the COVID-19 pandemic

further arise and continue for an extended period of time.

To pay for our capital program in 2023, we estimate we will utilize some

or all of the following:

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;

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of Liquidity-Short-term Debt ” below);

● Proceeds from the Delaware State Revolving Fund (SRF).

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 ”

● Proceeds from the sale and issuance of FMBs in private placement offerings (see discussion under “ Sources

of Liquidity-Long-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);

● Proceeds from common stock sales through the Investment Plan (see discussion under “ Sources of

Liquidity-Common Stock ” below);

● Proceeds from a common stock sale (see discussion under “ Sources of Liquidity-Common Stock ”

● Proceeds from common stock sales through the Middlesex Water Company Investment Plan (the Investment Plan)

(see discussion under “ Sources of Liquidity-Common Stock ” below).

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, 2022 were $55.5 million, at a weighted average interest rate of 5.17%.

The weighted average daily amounts of borrowings outstanding

under the credit lines and the weighted average interest rates on those amounts were $28.9 million and $23.7 million at 3.34% and 1.12

% for the years ended December 31, 2022 and 2021, respectively.

Long-term Debt - Subject to regulatory approval,

the Company periodically issues long-term debt to fund investments in utility plant.

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.

The interest rate on the Company’s current construction loan borrowings is near zero percent.

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

The term of the long-term loans currently offered through the NJIB is up to thirty years.

Under the Delaware SRF program,

borrowers typically enter into a long-term note agreement for a term not to exceed twenty years and submit requisitions for cost

reimbursements for up to two years after the agreement is executed.

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

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service payments over the life of these loans.

The NJIB has changed the SRF program for project funding

priority ranking, the proportions of interest free loans and market interest rate loans and overall loan limits on interest free loan

balances to investor-owned water utilities.

Under the new guidelines, the principal balance having a stated interest rate of zero percent

(0%) is 25% of the loan balance with the remaining portion of 75% having a market based interest rate.

This is limited to the first $10.0

million of the loan.

Loan amounts above $10.0 million do not participate in the 0% rate program, but do participate at the market based

interest rate.

As a result of all these changes, the Company’s future capital funding plan currently does not include participating

in the NJIB SRF program.

In November 2022, Middlesex filed a petition with

the NJBPU for approval to borrow up to $300.0 million, in one or more negotiated

transactions in the form of notes and/or FMBs through loans from the New Jersey SRF Program, the New Jersey Economic Development Authority,

private placement and other financial institutions as needed in

order to fund portions of its capital program and for other funding requirements.

The Company expects to issue debt securities in a series of one or more transaction offerings over a multi-year period to align with the

Company’s construction timetable.

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 2020, Middlesex received

approval from the NJBPU to borrow up to $100 million, in one or more private placement transactions through December 31, 2023 to help

fund Middlesex’s multi-year capital construction program.

In connection with this approval:

● In March 2023, Middlesex expects to close on a $40.0 million, 5.24% private placement of FMBs with a 2043

maturity date designated as Series 2023A.

Proceeds will be used to reduce the Company’s outstanding balances under its lines of

● 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 November 2020, Middlesex closed on a $40.0 million, 2.90% private placement of FMBs with a 2050 maturity

date designated as Series 2020A.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit and for

the Company’s 2020 capital program.

In February 2023, Tidewater filed three applications

with the DEPSC seeking approval to borrow up to $10.2 million in total at an interest rate of 2.0% as set by the Delaware SRF Program

for construction of several water transmission projects.

If approved by the DEPSC, Tidewater expects to close on these loans in April

2023 and construct the projects in 2023 and 2024.

Under the Delaware SRF Program, borrowers submit reimbursement requisitions during the

construction period.

Once the proceeds are received, Tidewater will record the debt obligation.

Tidewater expects to file an application with

the DEPSC in late February 2023 seeking approval to borrow up to $20.0 million from CoBank, ACB (CoBank) with a term of up to 25

years and an interest rate to be determined at the loan’s closing.

If approved by the DEPSC, Tidewater expects to close on this loan

in April 2023 with the ability to draw the funds in one or more transactions until December 31, 2023.

The interest rate will be set

at the time of the individual draw.

Proceeds from the loan would be used to pay off Tidewater’s outstanding balances under its

lines of credit and for other general corporate purposes.

In December 2021, Tidewater closed on the DEPSC approved

$5.0 million Delaware SRF Program loan and began receiving disbursements in January 2022.

Tidewater has borrowed $2.6 million under this

loan with expected borrowings to continue through mid-2023.

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% with a 2046 maturity date.

Proceeds from the loan were used to pay off its

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 November 2022, Pinelands Water and Pinelands

Wastewater filed petitions with the NJBPU for approval to borrow up to $4.9 million each from CoBank with terms up to 25 years and

with interest rates to be determined at the loans’ closings.

If approved by the NJBPU, Pinelands expects to close on these

loans in the second quarter of 2023.

Proceeds from the loan would be used to pay off Pinelands’ outstanding Note Payable

balances and partially fund future capital expenditures.

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.

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.

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.

from the loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate

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

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.

Middlesex has filed

a petition with the NJBPU seeking to increase the number of authorized shares under the Investment Plan by 0.7 million shares.

1, 2023, the Company will begin offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan.

The discount offering will continue until 200,000 shares are purchased at the discounted price or December 1, 2023, whichever event occurs

The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment

or by dividend reinvestment.

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

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 for a regulated water utility, Middlesex may offer for sale additional shares of its

common stock.

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.

In October 2022, Middlesex filed a petition with the NJBPU for

approval to issue and sell up to 1.0 million shares of its common stock.

A decision on the matter is expected in the second quarter of

Common stock offerings will occur as needed to maintain a balanced capital structure and continue on a parallel path with future

debt offerings.

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

Contractual Obligations

In the course of normal business activities, the Company

enters into a variety of contractual obligations and commercial commitments.

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

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financial statements.

The table below presents our known contractual obligations for the periods

specified as of December 31, 2022.

The table below presents our known contractual obligations for the

periods specified as of December 31, 2023.

Payment Due by Period

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Commercial Office Leases

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 2022, the Company contributed $2.8 million to its retirement

benefit plans and expects to contribute approximately $2.9 million in 2023.

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.

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.

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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

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.

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.

we have recorded costs and obligations, which will be amortized over various future periods.

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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.

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 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

The primary assumptions used for determining future retirement benefit

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● Mortality - The Company utilizes the Society of Actuaries’ mortality table (Pri-2012) (Mortality

Improvement Scale MP-2021 for the 2022 valuation);

Improvement Scale MP-2021);

● 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, 2022 are as follows:

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:

Other Benefits Plan

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Long-term Rate of Return

For the 2022 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 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

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.

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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

The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority

of our First Mortgage Bonds, which have final maturity dates ranging from 2023 to 2059.

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

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

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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.

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

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis